FILE NO. 33-62243
Securities and Exchange Commission
Washington, D.C. 20549-1004
to
Amendment No. 2
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Fidelity Defined Trusts
Series 1
B. Name of Depositor: National Financial Services Corporation
C. Complete address of Depositors principal executive offices:
82 Devonshire Street C8A
Boston, MA 02109-3614
D. Name and complete address of agents for service:
National Financial Services Corporation Chapman And Cutler
Attention: David J. Pearlman Attention: Mark J. Kneedy
82 Devonshire Street C8A 111 West Monroe Street
Boston, MA 02109-3614 Chicago, Illinois 60603
E. Title and amount of securities being registered: An indefinite number
of Units pursuant to Rule 24f-2 promulgated under the Investment Company
Act of 1940, as amended
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee (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.
* previously paid
______________________________________________________________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a) may determine.
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
trusts 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 trusts 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 trusts securities ) Public Offering of Units
by states )
36. Suspension of sales of trusts ) *
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. Trustees lien ) Trust Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trusts ) Trust Expenses
securities )
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Tax Status
VII. Financial and Statistical Information
54. Trusts securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent Certified
1(c) to Form S-6) ) Public Accountants
Statements of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
<TABLE>
<S> <C> <C>
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The investor is advised to
read and retain this FIDELITY
Prospectus for future DEFINED TRUSTS
reference. SERIES 1
Units of the Trusts are not Laddered Government
deposits or obligations of, Series 1, Short Treasury
or guaranteed by, any bank, Portfolio
and Units are not federally Laddered Government
insured or otherwise Series 2, Short/Intermediate
protected by the Federal Treasury Portfolio
Deposit Insurance Rolling Government Series 1,
Corporation and involve Short Treasury Portfolio
investment risk including PROSPECTUS
loss of principal. JANUARY 3, 1996
---------------------------- (FIDELITY INVESTMENTS LOGO)
SPONSOR: NATIONAL FINANCIAL 82 Devonshire Street, Boston, MA 02109
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.
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 as is
consistent with current income 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/HER FINANCIAL REPRESENTATIVE OR THE TRUSTEE TO AVOID WITHHOLDING ON HIS/HER
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 as is consistent with current income and
current monthly distributions of interest through an investment in a portfolio
of U.S. Treasury Obligations that are backed by the full faith and credit of the
United States Government. The Trust has been designed to maintain a short
dollar-weighted average maturity, no greater than 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 dollar-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.
2
<PAGE>
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 $500,000 or 50,000
Units and will be applied on whichever basis is more favorable to the investor.
The minimum amount which an investor may purchase of a Trust is $5,000.
REINVESTMENT. Certain Unitholders may be eligible to elect for distributions of
principal and/or interest to be automatically invested, without a sales charge,
in shares of certain mutual funds managed by Fidelity Management & Research
Company, an affiliate of the Sponsor. Please ask your financial consultant
regarding the availability of distribution reinvestment.
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening of
business on the Initial Date of Deposit, the Estimated Long-Term Return and the
Estimated Current Return, if applicable, for each Trust were as set forth in
"Essential Information." 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 any reinvestment
(in the case of a Rolling Government Series), redemption, 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 the 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.
3
<PAGE>
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. See "Risk Factors" in each Trust section and "Trust
Information--Risk Factors."
4
<PAGE>
FIDELITY DEFINED TRUSTS SERIES 1
ESSENTIAL INFORMATION
AT THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: JANUARY 3, 1996
<TABLE>
<S> <C>
SPONSOR AND EVALUATOR: NATIONAL FINANCIAL SERVICES CORPORATION
TRUSTEE: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
</TABLE>
The income, expense and distribution data set forth below has been calculated
for Unitholders purchasing less than 50,000 Units of a Trust. Unitholders
purchasing 50,000 Units or more of a Trust will receive a slightly higher return
because of the reduced sales charge for larger purchases.
<TABLE>
<CAPTION>
LADDERED LADDERED ROLLING
GOVERNMENT GOVERNMENT GOVERNMENT
SERIES 1 SERIES 2 SERIES 1
---------- ---------- ----------
<S> <C> <C> <C>
Public Offering Price per Unit (1) (2)............ $ 10.2664 $ 10.2912 $ 10.2110
Principal Amount of Securities per Unit........... $ 10.0000 $ 10.0000 $ 10.0000
Estimated Current Return based on Public
Offering Price (3) (4) (5)....................... 5.45% 5.43% 5.61%
Estimated Long-Term Return (3) (4) (5)............ 4.29% 4.83% 4.37%
Estimated Normal Annual Distribution per Unit..... $ 0.55920 $ 0.55908 $ 0.57288
Principal Amount of Securities.................... $ 500,000 $ 500,000 $ 400,000
Number of Units................................... 50,000 50,000 40,000
Fractional Undivided Interest per Unit............ 1/50,000 1/50,000 1/40,000
Calculation of Public Offering Price:
Aggregate Offering Price of Securities......... $ 505,620 $ 505,557 $ 402,315
Aggregate Offering Price of Securities per
Unit......................................... $ 10.1124 $ 10.1111 $ 10.0579
Plus Sales Charge per Unit (3)................. $ 0.1540 $ 0.1801 $ 0.1531
Public Offering Price per Unit (1) (2)........... $ 10.2664 $ 10.2912 $ 10.2110
Redemption Price per Unit......................... $ 10.1062 $ 10.1045 $ 10.0517
Sponsor's Initial Repurchase Price per Unit....... $ 10.1124 $ 10.1111 $ 10.0579
Excess of Public Offering Price per Unit over
Redemption Price per Unit........................ $ 0.1602 $ 0.1867 $ 0.1593
Excess of Public Offering Price per Unit over
Sponsor's Initial Repurchase Price per Unit...... $ 0.1540 $ 0.1801 $ 0.1531
Calculation of Estimated Net Annual
Interest Income per Unit:
Estimated Annual Interest...................... $ 0.58000 $ 0.57750 $ 0.59375
Less: Estimated Annual Expense................. $ 0.02080 $ 0.01840 $ 0.02090
Estimated Net Annual Interest.................. $ 0.55920 $ 0.55910 $ 0.57285
Estimated Daily Rate of Net Interest..............
Accrual per Unit (if applicable)................. $0.001553 $0.001553 $0.001591
Estimated Average Life of Securities.............. 2.07 years 3.39 years 0.62 years
Minimum Principal Value of the Trust under which
Trust Agreement may be terminated (7)
</TABLE>
5
<PAGE>
ESSENTIAL INFORMATION--(CONTINUED)
Evaluations for purposes of sale, purchase or redemption of Units are made as of
the close of business of the Sponsor (currently 4:15 p.m. Eastern Time) next
following receipt of an order for a sale or purchase of Units or receipt by the
Trustee of Units tendered for redemption.
<TABLE>
<CAPTION>
LADDERED LADDERED ROLLING
GOVERNMENT GOVERNMENT GOVERNMENT
SERIES 1 SERIES 2 SERIES 1
---------- ---------- ----------
<S> <C> <C> <C>
Trustee's Annual Fee per $1,000 principal amount
of Securities (8)................................ $ 1.19 $ 1.17 $ 1.20
Estimated net annual interest income per Unit
during the first year............................ 0.55920 0.55910 0.57285
Interest Payments (9):
First Payment per Unit, representing days........ 0.04970 0.04969 0.05092
Estimated Normal Monthly Distribution per Unit... 0.04660 0.04659 0.04774
Estimated Normal Annual Distribution per Unit.... 0.55920 0.55908 0.57288
Sales Charge (6):
As a percentage of Public Offering Price per
Unit........................................... 1.500% 1.750% 1.500%
As a percentage of net amount invested........... 1.523% 1.781% 1.523%
As a percentage of net amount invested in
earning assets................................. 1.523% 1.781% 1.523%
Date of Trust Agreements.......................... 1/3/96 1/3/96 1/3/96
First Settlement Date............................. 1/8/96 1/8/96 1/8/96
Mandatory Termination Date........................ 1/31/00 5/31/02 1/31/00
Maximum Evaluator's Annual Evaluation Fee
per $1,000 Principal Amount of Securities........ $ 0.10 $ 0.10 $ 0.10
Maximum Sponsor's Annual Surveillance Fee
per $1,000 Principal Amount of Securities........ $ 0.10 $ 0.10 $ 0.10
Estimated Annual Organizational Expenses
per Unit (10).................................... $ 0.54 $ 0.32 $ 0.54
</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."
6
<PAGE>
(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 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. The estimated cash
flows to Unitholders for the Trusts are either set forth under "Estimated
Cash Flows to Unitholders" for each Trust or are available upon request at
no charge from the Sponsor.
(6) The sales charge as a percentage of the net amount invested in earning
assets will increase as accrued interest increases. Transactions subject to
quantity discounts (see "Trust Information--Public Offering of
Units--Public Offering Price") will have reduced sales charges, thereby
reducing all percentages in the table.
(7) The minimum principal value of each Trust under which the Trust Agreement
may be terminated is 20% of the total aggregate principal amount of
securities deposited in each Portfolio during the initial offering period.
(8) The Trustee's annual fee includes $0.07 per Unit which is paid to the
Sponsor in return for its providing certain bookkeeping and administrative
services to its customers. See "Trust Information--Trust Expenses."
(9) Unitholders will receive interest distributions monthly. The Record Date is
the 10th day of the month, commencing February, 1996 and the distribution
date is the 20th day of the month, commencing February, 1996.
(10) Each Trust (and therefore the Unitholders of the respective Trust) will
bear all or a portion of its organizational costs (including costs of
preparing the registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange Commission
and states, the initial audit of the Trust portfolios, legal fees and the
initial fees and expenses of the Trustee but not including the expenses
incurred in the preparation and printing of brochures and other advertising
materials and other selling expenses) as is common for mutual funds. Total
organizational expenses will be amortized over a five year period or over
the life of a Trust if the term of such Trust is less than five years. See
"Trust Information--Trust Expenses" and "Statements of Financial
Condition." Historically, the sponsors of unit investment trusts have paid
all of the costs of establishing such trusts.
7
<PAGE>
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 "Fidelity Defined Trusts", "the Fidelity Advisor Defined
Trusts" or the "Trusts." Each Trust is divided into "Units" representing equal
shares of the underlying assets of such Trust. Laddered Government Series 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". Each of the Trusts
is separate and is designated by a different series number. Each of the Trusts
was created under the laws of the State of New York pursuant to a trust
indenture dated the Initial Date of Deposit (the "Trust Agreements") between
National Financial Services Corporation (the "Sponsor") and The Chase Manhattan
Bank (National Association), (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; "U.S. Treasury Obligations" shall mean the obligations (and contracts)
included in the Treasury Portfolios.
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
- ---------------
*Reference is made to the Trust Agreements, and any statements contained herein
are qualified in their entirety by
the provisions of the Trust Agreements.
8
<PAGE>
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.
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.
9
<PAGE>
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO AND 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 as is consistent with current income and
investment flexibility by staggering the return of principal over a
predetermined period of time (a strategy referred to as "laddered maturities").
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 1, Short Treasury Portfolio has dollar
weighted average maturity of 2.07 years.
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. Laddered Government Series 2, Short/Intermediate Portfolio has dollar
weighted average maturity of 3.39 years.
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 a portfolio backed by the full faith and credit of
the United States. In addition, many investors may benefit from the exemption
from state and local personal income taxes that will pass through the Trust to
Unitholders in all states. Each Trust has been created as a grantor trust
10
<PAGE>
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 TERM TREASURY PORTFOLIO
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: JANUARY 3, 1996
<TABLE>
<CAPTION>
FACE COST OF BONDS
AMOUNT DESCRIPTION COUPON MATURITY TO TRUST (1)
- --------- ----------------------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
$ 100,000 U.S. Treasury Note 6.250% of 1/31/97 $101,105
100,000 U.S. Treasury Note 5.500% of 7/31/97 100,504
100,000 U.S. Treasury Note 5.625% of 1/31/98 100,840
100,000 U.S. Treasury Note 5.250% of 7/31/98 100,060
100,000 U.S. Treasury Note 6.375% of 1/15/99 103,111
- --------- -----------
$ 500,000 $505,620
======== ===========
</TABLE>
11
<PAGE>
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY
PORTFOLIO AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: JANUARY
3, 1996
<TABLE>
<CAPTION>
AGGREGATE COST OF BONDS
PRINCIPAL DESCRIPTION COUPON MATURITY TO TRUST (1)
- --------- ---------------------------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
$ 100,000 U.S. Treasury Note 6.125% of 5/31/97 $101,238
100,000 U.S. Treasury Note 6.125% of 5/15/98 102,019
80,000 U.S. Treasury Note 6.750% of 5/31/99 83,565
20,000 U.S. Treasury STRIPs (2) 0.000% of 5/15/99 16,773
90,000 U.S. Treasury Note 6.250% of 5/31/00 93,084
10,000 U.S. Treasury STRIPs (2) 0.000% of 5/15/00 7,950
70,000 U.S. Treasury Note 8.000% of 5/15/01 78,378
30,000 U.S. Treasury STRIPs (2) 0.000% of 5/15/01 22,550
- --------- -----------
$ 500,000 $505,557
======== ===========
</TABLE>
(1) Some Securities may be represented by contracts to purchase such Securities.
During the initial offering period, evaluations of Securities are made on
the basis of current offering side evaluations of the Securities. The
aggregate offering price is greater than the aggregate bid price of the
Securities, which is the basis on which Redemption Prices will be determined
for purposes of redemption of Units after the initial offering period. Other
information regarding the Securities in the Trusts, at the opening of
business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TRUST TO SPONSOR SPONSOR TO TRUST SECURITIES
- --------------------------------------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Laddered Government Series 1............. $505,539 $ 81 $29,000 $505,309
Laddered Government Series 2............. $505,557 $ (1) $28,875 $505,227
</TABLE>
(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.
12
<PAGE>
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 as is consistent with current income and current
monthly distributions of interest through an investment in a portfolio of U.S.
Treasury Obligations that are backed by the full faith and credit of the United
States government. Rolling Government Series 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 dollar-weighted
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 are 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
would 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
13
<PAGE>
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 Sponsor will direct the Trustee to purchase the
most currently available 1-year U.S. Treasury security at par. If no obligations
are available at par, the Sponsor will select obligations with a price as close
as possible to par. To preserve the Trust's par values, there will be a bias
favoring discounts, when available. Therefore, discounted obligations will be
selected so long as the discount is not more than three times the smaller
premium obligation available. That is, assuming no maturity date differences, if
there is an obligation available at a price of $100.125, no alternative
obligation will be selected at less than $99.625. If obligations mature at
different dates within the one month permissible, in determining which
obligation to purchase the Sponsor 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 be computed as
of the 10th day of the month and distributions to the Unitholders as of the
related Record Date will be made on the 20th day of such month. After the
Extension Period, the pro rata share of cash in the Principal Account will also
be computed as described above. Proceeds from the disposition of any of the
Securities or amounts representing principal on the Securities received after
such Record Date and prior to the following Distribution Date will be held in
the Principal Account and not distributed until the next Distribution Date. The
Trustee is not required to pay interest on funds held in the Principal or
Interest Account (but may itself earn interest thereon and therefore benefits
from the use of such funds) nor to make a distribution from the Principal
Account unless the amount available for distribution shall equal at least $1.00
per 100 Units. See "Trust Information--Unitholders--Distributions to
Unitholders."
TAX STATUS
Rolling Government Series 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 as is consistent
with current income and current monthly distributions of interest provided by an
investment backed by the full faith and credit of the United States. In
addition, investors will benefit from the exemption from state and local
personal income taxes that will pass through the Trust to Unitholders in 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."
14
<PAGE>
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 TERM TREASURY PORTFOLIO
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT: JANUARY 3, 1996
<TABLE>
<CAPTION>
AGGREGATE COST OF BONDS
PRINCIPAL DESCRIPTION COUPON MATURITY TO TRUST (1)
- --------- ---------------------- ------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 100,000 U.S. Treasury Note 5.125% of 3/31/96 $100,031
100,000 U.S. Treasury Note 6.000% of 6/30/96 100,409
100,000 U.S. Treasury Note 6.500% of 9/30/96 100,930
100,000 U.S. Treasury Note 6.125% of 12/31/96 100,945
- --------- ---------
$ 400,000 $402,315
========= =========
</TABLE>
- ------------
(1) Some Securities may be represented by contracts to purchase such Securities.
During the initial offering period, evaluations of Securities are made on
the basis of current offering side evaluations of the Securities. The
aggregate offering price is greater than the aggregate bid price of the
Securities, which is the basis on which Redemption Prices will be determined
for purposes of redemption of Units after the initial offering period.
15
<PAGE>
Other information regarding the Securities in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
ANNUAL
COST OF PROFIT OR INTEREST BID SITE
SECURITIES (LOSS) TO INCOME VALUE OF
TRUST TO SPONSOR SPONSOR TO TRUST SECURITIES
- --------------------------------------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Rolling Government Series 1.............. $402,375 $(60) $23,750 $402,067
</TABLE>
16
<PAGE>
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 and Rolling Government Series 1, Short Treasury Portfolio) as
of the opening of business, January 3, 1996. The statements of condition and
portfolios are the responsibility of the Trustee. Our responsibility is to
express an opinion on such financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of Securities owned at January 3, 1996 and a letter of credit
deposited to purchase Securities by correspondence with The Chase Manhattan
Bank, N.A., 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fidelity Defined Trusts Series
1 (Laddered Government Series 1, Short Treasury Portfolio, Laddered Government
Series 2, Short/Intermediate Treasury Portfolio and Rolling Government Series 1,
Short Treasury Portfolio) as of the opening of business, January 3, 1996, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 3, 1996
17
<PAGE>
FIDELITY DEFINED TRUSTS SERIES 1
STATEMENTS OF CONDITION
AT THE OPENING OF BUSINESS ON JANUARY 3, 1996,
THE INITIAL DATE OF DEPOSIT
<TABLE>
<CAPTION>
LADDERED LADDERED ROLLING
GOVERNMENT GOVERNMENT GOVERNMENT
SERIES 1 SERIES 2 SERIES 1
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT IN SECURITIES
Contracts to purchase Securities (1).............. $505,620 $505,557 $402,315
Organizational Costs (2).......................... 48,183 48,183 48,183
Accrued interest to Initial Date of Deposit on
underlying Securities (1) (3)................... 12,492 3,092 3,052
---------- ---------- ----------
Total......................................... $566,295 $556,832 $453,550
========== ========== ==========
Number of Units...................................
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities--
Accrued Organizational Costs (2)................ $ 48,183 $ 48,183 $ 48,183
Accrued interest payable to Sponsor (1) (3)..... 12,492 3,092 3,052
Interest of Unitholders--
Cost to investors (4)........................... 513,320 514,562 408,440
Less: Gross underwriting commission (4)......... (7,700) (9,005) (6,125)
---------- ---------- ----------
Net interest to Unitholders (1) (3) (4)......... 505,620 505,557 402,315
---------- ---------- ----------
Total......................................... $566,295 $556,832 $453,550
========== ========== ==========
</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
Kenny S&P Evaluation Services on the bases set forth under "Trust
Information--Public Offering of Units--Public Offering Price" based on
prices as of the opening of business on January 3, 1996. The contracts to
purchase Securities are collateralized by an irrevocable letter of credit of
$1,500,000 which has been deposited with the Trustee. Of this amount,
$1,413,471 relates to the offering price of Securities to be purchased and
$19,974 relates to accrued interest on such Securities to the expected dates
of delivery.
(2) Each Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs which will be deferred and amortized over five years or
over the life of the Trust if the term of such Trust is less than five
years. Organizational costs have been estimated based on a projected size of
$30,000,000 for each Trust. To the extent a Trust is larger or smaller, the
estimate will vary.
(3) The Trustee will advance to each Trust the amount of net interest accrued to
the First Settlement Date for distribution to the Sponsor as the Unitholder
of Record.
(4) The aggregate public offering price includes a sales charge for the Trust as
set forth under "Essential Information", assuming all single transactions
involve less than 50,000 Units. For single transactions involving 50,000 or
more Units the sales charge is reduced (see "Trust Information--Public
Offering of Units--Public Offering Price") resulting in an equal reduction
in both the Cost to investors and the Gross underwriting commission while
the Net interest to Unitholders remains unchanged.
18
<PAGE>
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) must not cause the Units of such Trust to
cease to be rated AAA by the appropriate rating agency if the Units were so
rated on the Initial Date of Deposit. Whenever a Replacement Security is
acquired for a Trust, the Trustee shall, within five days thereafter, notify all
Unitholders of the Trust of the acquisition of the Replacement Security and
shall, on the next monthly distribution date which is more than 30 days
thereafter, make a pro rata distribution of the amount, if any, by which the
cost to the Trust of the Failed Security exceeded the cost of the Replacement
Security. With the exception of a Rolling Government Series, once all of the
Securities in a Trust are acquired, the Trustee will have no power to vary the
investments of such Trust, i.e., the Trustee will have no managerial power to
take advantage of market variations to improve a Unitholder's investment.
A-1
<PAGE>
If the right of limited substitution described in the preceding paragraphs is
not utilized to acquire Replacement Securities, the Sponsor will refund the
sales charge attributable to such Failed Securities to all Unitholders of the
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 occurrence of
certain extraordinary circumstances or, in the case of the Rolling Government
Series, in connection with a reinvestment of principal. See "Trust
Information--Investment Supervision." Certain of the Securities may be subject
to optional call or mandatory redemption pursuant to sinking fund provisions, in
each case prior to their stated maturity. 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
A-2
<PAGE>
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 not so backed. The U.S. Treasury Obligations are not rated but in the
opinion of the Sponsor have credit characteristics comparable to those of
securities rated "AAA" by nationally recognized rating agencies.
An investment in Units of a Trust which contains U.S. Treasury Obligations
should be made with an understanding of the risks which an investment in fixed
rate debt obligations may entail, including the risk that the value of the
Securities and hence the Units will decline with increases in interest rates.
The high inflation of prior years, together with the fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in interest rates
and, thus, in the value of fixed rate debt obligations generally. The Sponsor
cannot predict whether such fluctuations will continue in the future.
General. Certain of the Securities in certain of the Trusts may have been
acquired at a market discount from par value at maturity. The coupon interest
rates on 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
A-3
<PAGE>
reduced, other things being equal. Investors should also note that the value of
securities purchased at a market discount will increase in value faster than
securities purchased at a market premium if interest rates decrease. Conversely,
if interest rates increase, the value of securities purchased at a market
discount will decrease faster than securities purchased at a market premium. In
addition, if interest rates rise, the prepayment risk of higher yielding,
premium securities and the prepayment benefit for lower yielding, discount
securities will be reduced. See "Trust Information--Tax Status." Market discount
attributable to interest changes does not indicate a lack of market confidence
in the issue. Neither the Sponsor nor the Trustee shall be liable in any way for
any default, failure or defect in any of the Securities.
Certain of the Securities in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the premium
securities at the time they were purchased and deposited in the Trusts were
higher than the current market interest rates for newly issued securities of
comparable rating and type. If such interest rates for newly issued and
otherwise comparable securities decrease, the market premium of previously
issued securities will be increased, and if such interest rates for newly issued
comparable securities increase, the market premium of previously issued
securities will be reduced, other things being equal. The current returns of
securities trading at a market premium are initially higher than the current
returns of comparable securities of a similar type issued at currently
prevailing interest rates because premium securities tend to decrease in market
value as they approach maturity. Because part of the purchase price is thus
returned not at maturity but through current income payments, early redemption
of a premium bond at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally will, and
redemption pursuant to sinking fund provisions may, occur at times when the
redeemed Securities have an offering side valuation which represents a premium
over par or, for original issue discount Securities, a premium over the accreted
value. To the extent that the Securities were deposited in the Trusts at a price
higher than the price at which they are redeemed, this will represent a loss of
capital when compared to the original Public Offering Price of the Units.
Because premium securities generally pay a higher rate of interest than
securities priced at or below par, the effect of the redemption of premium
securities would be to reduce Estimated Net Annual Unit Income by a greater
percentage than the par amount of such securities bears to the total par amount
of Securities in a Trust. Although the actual impact of any such redemptions
that may occur will depend upon the specific Securities that are redeemed, it
can be anticipated that the Estimated Net Annual Unit Income will be
significantly reduced after the dates on which such Securities are eligible for
redemption. See "Portfolio" for each Trust for the earliest scheduled call date
and the initial redemption price for each Security.
Certain of the Securities in certain of the Trusts may be "zero coupon" bonds,
i.e., an original issue discount bond that does not provide for the payment of
current interest. Zero coupon bonds are purchased at a deep discount because the
buyer receives only the right to receive a final payment at the maturity of the
bond and does not receive any periodic
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interest payments. The effect of owning deep discount bonds which do not make
current interest payments (such as the zero coupon bonds) is that a fixed yield
is earned not only on the original investment but also, in effect, on all
discount earned during the life of such obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to reinvest the
income on such obligation at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are securities of comparable quality which pay
interest currently. A Trust may be required to sell zero coupon bonds prior to
maturity (at their current market price which is likely to be less than their
par value) in the event that all the Securities in the portfolio other than the
zero coupon bonds are called or redeemed in order to pay expenses of a Trust or
in case a Trust is terminated. For the Federal tax consequences of original
issue discount securities such as the zero coupon bonds, see "Trust
Information--Tax Status."
Litigation. To the best of the Sponsor's knowledge, there is no litigation
pending as of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trusts. At any
time after the Initial Date of Deposit, litigation may be instituted on a
variety of grounds with respect to the Securities. The Sponsor is unable to
predict whether any such litigation may be instituted, or if instituted, whether
such litigation might have a material adverse effect on the Trusts.
RATING OF UNITS
Standard & Poor's has rated the Units of the Treasury Portfolios "AAA." This is
the highest rating assigned by Standard & Poor's. Capacity to pay interest and
repay principal is very strong. Standard & Poor's has been compensated by the
Sponsor for its services in rating Units of the Trusts.
A Standard & Poor's rating (as described by Standard & Poor's) on the units of
an investment trust (hereinafter referred to collectively as "units" or "trust")
is a current assessment of creditworthiness with respect to the investments held
by such trust. This assessment takes into consideration the financial capacity
of the issuers and of any guarantors, insurers, lessees, or mortgagors with
respect to such investments. The assessment, however, does not take into account
the extent to which trust expenses or portfolio asset sales for less than the
trust's purchase price will reduce payment to the Unitholder of the interest and
principal required to be paid on the portfolio assets. In addition, the rating
is not a recommendation to purchase, sell, or hold units, inasmuch as the rating
does not comment as to market price of the units or suitability for a particular
investor. Trusts rated "AAA" are composed exclusively of assets that are rated
"AAA" by Standard & Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain short-term
investments. Standard & Poor's defines its "AAA" rating for
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such assets as the highest rating assigned by Standard & Poor's to a debt
obligation. Capacity to pay interest and repay principal is very strong.
RETIREMENT PLANS
Units of the Trusts may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received under each of the foregoing plans
are deferred from federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering placing an investment in a Trust on account of any such plan should
review specific tax laws related thereto and should consult their attorneys or
tax advisor. The Trusts will waive the $5,000 minimum investment requirement for
qualified retirement plans. The minimum investment is $250 for tax-deferred
plans such as IRA accounts. Fees and charges with respect to such plans may
vary. Consult your financial Adviser regarding eligibility requirements.
TAX STATUS
Grantor Trust
The following discussion applies only to Laddered Government Series 1 and
Laddered Government Series 2, 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, liquidation, redemption, or payment at maturity)
or when the Unitholder redeems or sells his Units. The cost of the Units to
a Unitholder on the date such Units are purchased is allocated among the
Securities held in a Trust (in accordance with the proportion of the fair
market values of such Securities) in order to determine his tax basis for
his pro rata portion in each Security. Unitholders must reduce the tax basis
of their Units for their share of accrued interest received, if any, on
Securities delivered after the date on which the Unitholders pay for their
Units and,
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consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing the proceeds
of such sale or redemption with the adjusted basis of the Units. If the
Trustee disposes of Securities, gain or loss is recognized to the Unitholder
(subject to various non-recognition provisions of the Code). The amount of
any such gain or loss is measured by comparing the Unitholder's pro rata
share of the total proceeds from such disposition with his basis for his
fractional interest in the asset disposed of. The basis of each Unit and of
each Security which was issued with original issue discount must be
increased by the amount of accrued original issue discount and the basis of
each Unit and of each Security which was purchased by a Trust at a premium
must be reduced by the annual amortization of bond premium which the
Unitholder has properly elected to amortize under Section 171 of the Code.
The tax basis reduction requirements of the Code relating to amortization of
bond premium may, under some circumstances, result in the Unitholder
realizing a taxable gain when his Units are sold or redeemed for an amount
equal to or less than his original cost. A Trust may contain certain "zero
coupon" Securities (the "Stripped Treasury Securities") that are treated as
bonds that were originally issued at an original issue discount provided,
pursuant to a Treasury Regulation (the "Regulation") issued on December 28,
1992, that the amount of original issue discount determined under Section
1286 of the Code is not less than a de minimis amount as determined
thereunder. Because the Stripped Treasury Securities represent interests in
"stripped" U.S. Treasury bonds, a Unitholder's initial cost for his pro rata
portion of each Stripped Treasury Security held by a Trust (determined at
the time he acquires his Units, in the manner described above) shall be
treated as its "purchase price" by the Unitholder. Original issue discount
is effectively treated as interest for federal income tax purposes, and the
amount of original issue discount in this case is generally the difference
between the bond's purchase price and its stated redemption price at
maturity. A Unitholder will be required to include in gross income for each
taxable year the sum of his daily portions of original issue discount
attributable to the Stripped Treasury Securities held by a Trust as such
original issue discount accrues and will, in general, be subject to federal
income tax with respect to the total amount of such original issue discount
that accrues for such year even though the income is not distributed to the
Unitholders during such year to the extent it is not less than a de minimis
amount as determined under the Regulation. To the extent that the amount of
such discount is less than the respective de minimis amount, such discount
shall be treated as zero. In general, original issue discount accrues daily
under a constant interest rate method which takes into account the
semi-annual compounding of accrued interest. In the case of the Stripped
Treasury Securities, this method will generally result in an increasing
amount of income to the Unitholders each year.
Limitations on Deductibility of Trust Expenses by Unitholders--Each Unitholder's
pro rata share of each expense paid by a Trust is deductible by the Unitholder
to the same extent as
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though the expense had been paid directly by him. It should be noted as a result
of the Tax Reform Act of 1986 certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business expenses
may be deductible by an individual only to the extent they exceed 2% of such
individual's adjusted gross income. Unitholders may be required to treat certain
expenses of a Trust as miscellaneous itemized deductions subject to this
limitation.
Premium--If a Unitholder's tax basis of his pro rata portion in any Securities
held by a Trust exceeds the amount payable by the issuer of the Security with
respect to such pro rata interest upon the maturity of the Security, such excess
would be considered "premium" which may be amortized by the Unitholder at the
Unitholder's election as provided in Section 171 of the Code.
Original Issue Discount--Certain of the Securities in a Trust may have been
acquired with "original issue discount." In the case of any Securities in a
Trust acquired with "original issue discount" that exceeds a "de minimis" amount
as specified in the Code, such discount is includable in taxable income of the
Unitholders on an accrual basis computed daily, without regard to when payments
of interest on such Securities are received. The Code provides a complex set of
rules regarding the accrual of original issue discount. These rules provide that
original issue discount generally accrues on the basis of a constant compound
interest rate over the term of the Securities. Unitholders should consult their
tax advisers as to the amount of original issue discount as it accrues.
Special original issue discount rules apply if the purchase price of the
Security by a Trust exceeds its original issue price plus the amount of original
issue discount which would have previously accrued based upon its issue price
(its "adjusted issue price"). Similarly, these special rules would apply to a
Unitholder if the tax basis of his pro rata portion of a Security issued with
original issue discount exceeds his pro rata portion of its adjusted issue
price. Unitholders should also consult their tax advisers regarding these
special rules.
Market Discount--If a Unitholder's tax basis in his pro rata portion of
Securities is less than the allocable portion of such Security's stated
redemption price at maturity (or, if issued with original issue discount, the
allocable portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a straight line
basis, unless the Unitholder elects to calculate accrued market discount under a
constant yield method. The market discount rules do not apply to Stripped
Treasury Securities because they are stripped debt instruments subject to
special original issue discount rules discussed above. Unitholders should
consult their own tax advisers regarding whether an election should be made and
as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on
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the Securities, on the sale, maturity or disposition of such Securities by a
Trust, and on the sale by a Unitholder of Units, unless a Unitholder elects to
include the accrued market discount in taxable income as such discount accrues.
If a Unitholder does not elect to annually include accrued market discount in
taxable income as it accrues, deductions for any interest expense incurred by
the Unitholder which is incurred to purchase or carry his Units will be reduced
by such accrued market discount. In general, the portion of any interest expense
which was not currently deductible would ultimately be deductible when the
accrued market discount is included in income.
Computation of the Unitholder's Tax Basis--The tax basis of a Unitholder with
respect to his interest in a Security is increased by the amount of original
issue discount (and market discount, if the Unitholder elects to include market
discount, if any, on the Securities held by a Trust in income as it accrues)
thereon properly included in the Unitholder's gross income as determined for
Federal income tax purposes and reduced by the amount of any amortized premium
which the Unitholder has properly elected to amortize under Section 171 of the
Code. A Unitholder's tax basis in his Units will equal his tax basis in his pro
rata portion of all of the assets of a Trust.
Recognition of Taxable Gain or Loss Upon Disposition of Obligations by a Trust
or Disposition of Unit--A Unitholder will recognize taxable capital gain (or
loss) when all or part of his pro rata interest in a Security is disposed of in
a taxable transaction for an amount greater (or less) than his tax basis
therefor. Any gain recognized on a sale or exchange and not constituting a
realization of accrued "market discount," and any loss will generally be capital
gain or loss except in the case of a dealer or financial institution. As
previously discussed, gain realized on the disposition of the interest of a
Unitholder in any Security deemed to have been acquired with market discount
will be treated as ordinary income to the extent the gain does not exceed the
amount of accrued market discount not previously taken into income. Any capital
gain or loss arising from the disposition of a Security by a Trust or the
disposition of Units by a Unitholder will be short-term capital gain (or loss)
unless the Unitholder has held his Units for more than one year in which case
such capital gain or loss will be long-term. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28 percent. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed. The tax cost
reduction requirements of the Code relating to amortization of bond premium may
under some circumstances, result in the Unitholder's realizing taxable gain when
his Units are sold or redeemed for an amount equal to or less than his original
cost.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed of
his entire pro rata interest in all Trust assets including his pro rata portion
of all of the Securities represented by the Unit. This may result in a portion
of the gain, if any, on such sale being taxable as ordinary income under the
market discount rules (assuming no election was
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made by the Unitholder to include market discount in income as it accrues) as
previously discussed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates on
ordinary income while capital gains remain subject to a 28 percent maximum
stated rate for taxpayers other than corporations. Because some or all capital
gains are taxed at a comparatively lower rate under the Tax Act, the Tax Act
includes a provision that recharacterizes capital gains as ordinary income in
the case of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
Foreign Investors--A Unitholder who is a foreign investor (i.e., an investor
other than a U.S. citizen or resident of a U.S. corporation, partnership, estate
or trust) will not be subject to United States federal income taxes, including
withholding taxes, on interest income (including any original issue discount)
on, or any gain from the sale or other disposition of, his pro rata interest in
any Security or the sale of his Units provided that (i) the interest income or
gain is not effectively connected to the conduct by the foreign investor of a
trade or business within the United States, (ii) with respect to any gain, the
foreign investor (if an individual) is not present in the United States for 183
days or more during his taxable year, (iii) the foreign investor provides all
certification which may be required of his or her status (foreign investors may
contact the Sponsor to obtain a Form W-8 which must be filed with the Trustee
and refiled every three calendar years thereafter) and (iv) further provided
that the exemption from withholding for U.S. federal income taxes for interest
on any U.S. Securities shall apply to the extent the Securities were issued
after July 18, 1984. Foreign investors should consult their tax advisers with
respect to United States tax consequences of ownership of Units. On December 7,
1995 the U.S. Treasury Department released proposed legislation that, if
adopted, could affect the United States federal income taxation of such
non-United States Unitholders and the portion of the Trust's income allocable to
non-United States Unitholders.
In the opinion of Carter, Ledyard & Milburn, special counsel to the Trusts for
New York tax matters each Trust is not an association taxable as a corporation
and the income of each Trust will be treated as the income of the Unitholders
under the existing income tax laws of the State and City of New York.
General--Each Unitholder (other than a foreign investor who has properly
provided the certifications described above) will be requested to provide the
Unitholder's taxpayer identification number to the Trustee and to certify that
the Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by a
Trust to such Unitholder will be subject to back-up withholding.
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The foregoing discussion relates only to United States federal income taxes and
applies only to the Laddered Government Series which are described in this
Prospectus; Unitholders may be subject to state and local taxation in other
jurisdictions (including a foreign investor's country of residence). Unitholders
should consult their tax advisers regarding potential state, local, or foreign
taxation with respect to the Units and the tax treatment of Securities acquired
at an original issue discount or market discount and premium, if any.
Regulated Investment Company
The following discussion applies only to the Rolling Government Series, which is
structured to qualify as a regulated investment company for federal tax
purposes. In the opinion of Chapman and Cutler, counsel or the Sponsor, under
existing law:
The Rolling Government Series Trust is an association taxable as a corporation
under the Code and intends to qualify on a continuing basis for and elect tax
treatment as a "regulated investment company" under the Code. If the Trust so
qualifies and timely distributes to Unitholders 90% or more of its taxable
income (without regard to its net capital gain, i.e., the excess of its net
long-term capital gain over its net short-term capital loss), it will not be
subject to federal income tax on the portion of its taxable income (including
any net capital gain) that it distributes to Unitholders. In addition, to the
extent the Trust timely distributes to Unitholders at least 98% of its taxable
income (including any net capital gain), it will not be subject to the 4% excise
tax on certain undistributed income of "regulated investment companies." The
Trust intends to timely distribute its taxable income (including any net capital
gain) to avoid the imposition of federal income tax or the excise tax.
Distributions of the entire net investment income of the Trust is required by
the Indenture.
Distributions from the Trust (other than its net capital gain), to the extent of
the earnings and profits of such Trust, will be taxable as ordinary income to
Unitholders. To the extent that distributions to a Unitholder in any year exceed
the Trust's current and accumulated earnings and profits, they will be treated
as a return of capital and will reduce the Unitholder's basis in his or her
Units and, to the extent that they exceed his or her basis, will be treated as a
gain from the sale of his or her Units as discussed below. Distributions from
the Trust will not be eligible for the 70% dividends received deduction for
corporations.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December, payable to Unitholders
of record on a specified date in one of those months and paid during January of
the following year will be treated as having been distributed by the Trust (and
received by the Unitholders) on December 31 of the year such distributions are
declared.
Distributions of the Trust's net capital gain which the Trust properly
designates as capital gain dividends will be taxable to Unitholders thereof as
long-term capital gains, regardless
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of the length of time the Units have been held by a Unitholder. Distributions in
partial liquidation, reflecting the proceeds of prepayments, redemptions,
maturities or sales of Securities from the Trust (exclusive of net capital gain)
will not be taxable to Unitholders of such Trust to the extent that they
represent a return of capital for tax purposes. The portion of distributions
which represents a return of capital will, however, reduce a Unitholder's basis
in his Units, and to the extent they exceed the basis of his Units will be
taxable as a capital gain. A Unitholder may recognize a taxable gain (or loss)
when his or her Units are sold or redeemed. Such gain or loss generally will
constitute either a long-term or short-term capital gain or loss depending upon
the length of time the Unitholder has held his Units. Any loss of Units held six
months or less will be treated as long-term capital loss to the extent of any
long-term capital gains dividends received (or deemed to have been received) by
the Unitholder with respect to such Units during the six month period or less
that the Unitholder owns the Units. For taxpayers other than corporations, net
capital gains are presently subject to a maximum stated marginal rate of 28%.
However, it should be noted that legislative proposals are introduced from time
to time that affect tax rates and could affect relative differences at which
ordinary income and capital gains are taxed. A capital loss is long-term if the
asset is held for more than one year and short-term if held for one year or
less.
The Tax Act raised tax rates on ordinary income while capital gains remain
subject to a 28% maximum stated rate for taxpayers other than corporations.
Because some or all capital gains are taxed at a comparatively lower rate under
the Act, the Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after April
30, 1993. Unitholders and prospective investors should consult with their tax
advisors regarding the potential effect of this provision on their investment in
Units.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Trust as long as the Units
of such Trust are held by or for 500 or more persons at all times during the
taxable year or another exception is met. In the event the Units of the Trust
are held by fewer than 500 persons, additional taxable income may be realized by
the individual (and other noncorporate) Unitholders in excess of the
distributions received from the Trust.
If a Security has been purchased by the Trust at a market discount (i.e., for a
purchase price less than its stated redemption price at maturity (or if issued
with original issue discount, its "revised issue price")) unless the amount of
market discount is "de minimis" as specified in the Code, each payment of
principal on the Security will generally constitute ordinary income to the Trust
to the extent of any accrued market discount unless the Trust elects to include
the accrued market discount in taxable income as it accrues.
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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.
Additional Units of the Trust may be issued after the Initial Date of Deposit in
respect of additional Securities deposited in the Trust by the Sponsor. Because
of possible market interest rate fluctuations, the purchase price to the Trust
of the additional Securities may differ from the purchase price of the
Securities in the Trust on the Initial Date of Deposit. If interest rates
decline and such additional Securities are purchased at a higher price than the
Securities originally deposited, then the amounts includable in the taxable
income of the Trust in proportion to the asset value of the Trust will be
reduced for all Unitholders thereof, not just the Unitholders of such additional
Units. Conversely, if interest rates rise and such additional Securities are
purchased at a lower price than the Securities originally deposited, then the
amounts includable in the taxable income of the Trust in proportion to the asset
value of the Trust will be increased for all Unitholders thereof, not just the
Unitholders of such additional Units.
Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the Unitholder has not
been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding.
Each Unitholder of the Trust shall receive an annual statement describing the
tax status of the distributions paid by the Trust. The forgoing discussion
relates only to the federal income tax status of the Trust and to the tax
treatment of distributions by the Trust to United States Unitholders.
Foreign Investors--A Unitholder who is a foreign investor (i.e., an investor
other than a United States citizen or resident or a United States corporation,
partnership, estate or trust) should be aware that, generally, subject to
applicable tax treaties, distributions from the Trust, which constitute
dividends for Federal income tax purposes (other than dividends which the Trust
designates as capital gain dividends) will be subject to United States income
taxes, including withholding taxes. However, distributions received by a foreign
investor from the Trust that are designated by the Trust as capital gain
dividends should not be subject to United States Federal income taxes, including
withholding taxes, if all of the following conditions are met (i) the capital
gain dividend is not effectively connected with the conduct by the foreign
investor in a trade or business within the United States, (ii) the foreign
investor (if an individual) is not present in the United States for 183 days or
more during his or her taxable year, and (iii) the foreign investor provides all
certification which may be required of his status (foreign investors may contact
the Sponsor to obtain a Form W-8 which must be filed with the Trustee and
refiled every three calendar years thereafter). Foreign investors should consult
their tax advisors with respect to United States tax consequences of ownership
of Units. Units in the Trust and Trust distributions may also be
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subject to state and local taxation and Unitholders should consult their tax
advisors in this regard.
Distributions reinvested into additional Units of the Trust will be taxed to a
Unitholder in the manner described above (i.e., as ordinary income, long-term
capital gain or as a return of capital).
DISTRIBUTION REINVESTMENT
Certain Unitholders of the Trusts may elect to have distributions of principal
(including capital gains, if any) or interest or both automatically invested
without charge in shares of certain mutual funds which are registered in such
Unitholder's state of residence and are advised by Fidelity Management &
Research Company an affiliate of the Sponsor (the "Fidelity Funds"). Ask your
financial consultant regarding the availability of distribution reinvestment.
If individuals indicate they wish to participate in the Reinvestment Program but
do not designate a reinvestment fund, the Trustee will contact such individuals
to determine which reinvestment fund they wish to elect. Since the portfolio
securities and investment objectives of the Fidelity Funds generally will differ
significantly from that of the Trusts, Unitholders should carefully consider the
consequences before selecting such Fidelity Funds for reinvestment. Detailed
information with respect to the investment objectives and the management of the
Fidelity Funds is contained in their respective prospectuses, which can be
obtained from the Sponsor upon request. An investor should read the prospectus
of the reinvestment fund selected prior to making the election to reinvest.
Unitholders who desire to have such distributions automatically reinvested
should inform their investment professional at the time of purchase or should
file with the Trustee a written notice of election.
Unitholders who are receiving distributions in cash may elect to participate in
distribution reinvestment by filing with the Trustee an election to have such
distributions reinvested without charge. Such election, and any changes thereof,
must be received by the Trustee at least ten days prior to the Record Date
applicable to any distribution in order to be in effect for such Record Date.
Any such election shall remain in effect until a subsequent notice is received
by the Trustee. See "Trust Information--Unitholders--Distributions to
Unitholders."
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each Trust
were as set forth in the "Essential Information." Estimated Current Return is
calculated by dividing the estimated net annual interest income per Unit by the
Public Offering Price. The estimated net annual interest income per Unit will
vary with changes in fees and expenses of the
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Trustee, the Sponsor and the Evaluator and with reinvestment (in the case of the
Rolling Government Series), maturity, exchange or sale of the Securities while
the Public Offering Price will vary with changes in the offering price of the
underlying Securities and accrued interest; therefore, there is no assurance
that the present Estimated Current Return will be realized in the future.
Estimated Long-Term Return is calculated using a formula which (i) considers the
relative weighting, the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated
retirements or average life of all of the Securities in a Trust, and (ii) takes
into account a compounding factor and the expenses and sales charge associated
with each Trust Unit. Since the market values and estimated retirements of the
Securities and the expenses of a Trust will change, there is no assurance that
the present Estimated Long-Term Return will be realized in the future. Estimated
Current Return and Estimated Long-Term Return are expected to differ because the
calculation of Estimated Long-Term Return reflects the estimated date and amount
of principal returned while Estimated Current Return calculations include only
net annual interest income and Public Offering Price.
In order to acquire certain of the Securities contracted for by a Trust, it may
be necessary for the Sponsor or Trustee to pay on the dates for delivery of such
Securities amounts covering accrued interest on such Securities which exceed the
amount which will be made available in the letter of credit furnished by the
Sponsor on the Initial Date of Deposit. The Trustee has agreed to pay any
amounts necessary to cover any such excess and will be reimbursed therefor,
without interest, when funds become available from interest payments on the
Securities deposited in that Trust.
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
A-15
<PAGE>
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>
LESS THAN $500,000 $500,000 TO $999,999 $1,000,000 AND UP
---------------------- ---------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
SERIES PRICE INVESTED PRICE INVESTED PRICE INVESTED
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Laddered Government
Series, Short Treasury
Portfolio.............. 1.500% 1.523% 1.250% 1.266% 1.000% 1.010%
Laddered Government
Series, Short/
Intermediate Treasury
Portfolio.............. 1.750% 1.781% 1.500% 1.523% 1.250% 1.266%
Rolling Government
Series, Short Treasury
Portfolio.............. 1.500% 1.523% 1.250% 1.266% 1.000% 1.010%
</TABLE>
As indicated above, in connection with secondary market transactions the sales
charge is based upon the dollar weighted average maturity of a Trust and is
determined in accordance with the tables set forth below. For purposes of this
computation, Securities will be deemed to mature on their expressed maturity
dates unless: (a) the Securities have been called for redemption or funds or
securities have been placed in escrow to redeem them on an earlier call date, in
which case such call date will be deemed to be the date upon which they mature;
or (b) such Securities are subject to a "mandatory tender," in which case such
mandatory tender will be deemed to be the date upon which they mature. The
effect of this method of sales charge computation will be that different sales
charge rates will be applied to a Trust based upon the dollar weighted average
maturity of such Trust's portfolio, in accordance with the following schedules.
In connection with secondary market transactions, the sales charge per Unit for
each Trust will be set forth in the following table:
<TABLE>
<CAPTION>
LESS THAN $500,000 $500,000 TO $999,999 $1,000,000 AND UP
----------------------- ----------------------- -----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
AMOUNT INVESTED PRICE INVESTED PRICE INVESTED PRICE INVESTED
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Less than 2 years.... 1.250% 1.266% 1.000% 1.010% 0.750% 0.756%
2 to 3 years......... 1.500% 1.523% 1.250% 1.266% 1.000% 1.010%
3 to 5 years......... 1.750% 1.781% 1.500% 1.523% 1.250% 1.266%
</TABLE>
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the same
purchaser from the same
A-16
<PAGE>
broker or dealer and for this purpose purchases of Units of a Trust will be
aggregated with concurrent purchases of Units of any other unit investment trust
that may be offered by the Sponsor. Additionally, Units purchased in the name of
a spouse or child (under 21) of such purchaser will be deemed to be additional
purchases by such purchaser. The reduced sales charges will also be applicable
to a trust or other fiduciary purchasing for a single trust estate or single
fiduciary account. The Sponsor intends to permit officers, directors and
employees of the Sponsor and at the discretion of the Sponsor registered
representatives of selling firms to purchase Units of a Trust without a sales
charge, although a transaction processing fee may be imposed on such trades.
Had Units of a Trust been available for sale at the opening of business on the
Initial Date of Deposit, the Public Offering Price would have been as shown
under "Essential Information." The Public Offering Price per Unit of a Trust on
the date of this Prospectus or on any subsequent date will vary from the amount
stated under "Essential Information" in accordance with fluctuations in the
prices of the underlying Securities and the amount of accrued interest on the
Units. The aggregate bid and offering side evaluations of the Securities shall
be determined (i) on the basis of current bid or offering prices of the
Securities, (ii) if bid or offering prices are not available for any particular
Security, on the basis of current bid or offering prices for comparable bonds,
(iii) by determining the value of Securities on the bid or offer side of the
market by appraisal, or (iv) by any combination of the above.
The foregoing evaluations and computations shall be made as of the evaluation
time stated under "Essential Information," on each business day commencing with
the Initial Date of Deposit of the Securities, effective for all sales made
during the preceding 24-hour period.
The interest on the Securities deposited in a Trust, less the related estimated
fees and expenses, is estimated to accrue in the annual amounts per Unit set
forth under "Essential Information." The amount of net interest income which
accrues per Unit may change as Securities mature or are redeemed, exchanged or
sold, or as the expenses of a Trust change or the number of outstanding Units of
a Trust changes.
Although payment is normally made three business days following the order for
purchase, payments may be made prior thereto. A person will become the owner of
Units on the First Settlement Date or any date of settlement thereafter provided
payment has been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used on the Sponsor's
business and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. If a Unitholder desires to
have certificates representing Units purchased, such certificates (if available)
will be delivered as soon as possible following his written request therefor.
For information with respect to redemption of Units purchased, but as to which
certificates requested have not been received, see "Trust
Information--Redemption" below.
A-17
<PAGE>
Accrued Interest. Accrued interest is the accumulation of unpaid interest on a
security from the last day on which interest thereon was paid. Interest on
Securities generally is paid semi-annually, although a Trust accrues such
interest daily. Because of this, a Trust always has an amount of interest earned
but not yet collected by the Trustee. For this reason, with respect to sales
settling subsequent to the First Settlement Date, the Public Offering Price of
Units will have added to it the proportionate share of accrued interest to the
date of settlement. Unitholders will receive on the next distribution date of a
Trust the amount, if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise have
to be paid in addition to the Public Offering Price in the sale of Units to the
public, the Trustee will advance the amount of accrued interest as of the First
Settlement Date and the same will be distributed to the Sponsor as the
Unitholder of record as of the First Settlement Date. Consequently, the amount
of accrued interest to be added to the Public Offering Price of Units will
include only accrued interest from the First Settlement Date to the date of
settlement, less any distributions from the Interest Account subsequent to the
First Settlement Date.
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trusts and distributed to Unitholders. Therefore, there
will always remain an item of accrued interest that is added to the value of the
Units. If a Unitholder sells or redeems all or a portion of his 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
A-18
<PAGE>
Securities and the fact that the Public Offering Price includes a sales charge),
the amount realized by a Unitholder upon any redemption of Units may be less
than the price paid for such Units.
Public Distribution of Units. The Sponsor intends to qualify the Units for sale
in a number of states. Units will be sold through dealers who are members of the
National Association of Securities Dealers, Inc. and through others. Sales may
be made to or through dealers and others at prices which represent discounts or
agency commissions from the Public Offering Price as set forth below. Certain
commercial banks are making Units of the 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 and agency commissions set forth below from time to time.
In addition to such discounts and agency commissions, the Sponsor may, from time
to time, pay or allow an additional discount or agency commission, in the form
of cash or other compensation, to dealers and others employing registered
representatives who sell, during a specified time period, a minimum dollar
amount of Units of a Trust and other unit investment trusts created by the
Sponsor. The difference between the discount or agency commission and the sales
charge will be retained by the Sponsor.
The primary market concessions and agency commissions for each Trust are as
follows:
<TABLE>
<CAPTION>
LESS THAN $500,000 TO $1,000,000
SERIES $500,000 $999,999 AND UP
- ------------------------------------------------------- --------- ----------- ----------
<S> <C> <C> <C>
Laddered Government Series, Short Treasury Portfolio... .95% .75% .50%
Laddered Government Series, Short/Intermediate Treasury
Portfolio............................................ 1.10% .90% .70%
Rolling Government Series, Short Treasury Portfolio.... .95% .75% .50%
</TABLE>
The secondary market concessions and agency commissions for each Trust are as
follows:
<TABLE>
<CAPTION>
LESS THAN $500,000 TO $1,000,000
AVERAGE MATURITY $500,000 $999,999 AND UP
- ------------------------------------------------------- --------- ----------- ----------
<S> <C> <C> <C>
Less than 2 years...................................... .750% .500% .400%
2 to 3 years........................................... 1.00% .750% .600%
3 to 5 years........................................... 1.10% 1.00% .750%
</TABLE>
The Sponsor reserves the right to reject, in whole or in part, any order for the
purchase of Units.
A-19
<PAGE>
Profits of Sponsor. The Sponsor will receive gross sales charges equal to the
percentage of the Public Offering Price of the Units as stated under "Public
Offering Price" and will pay a fixed portion of such sales charges to dealers
and agents. In addition, the Sponsor may realize a profit or a loss resulting
from the difference between the purchase prices of the Securities to the Sponsor
and the cost of such Securities to a Trust, which is based on the offering side
evaluation of the Securities. See "Portfolio" for each Trust. The Sponsor may
also realize profits or losses with respect to Securities deposited in a Trust
which were acquired from underwriting syndicates of which the Sponsor was a
member. An underwriter or underwriting syndicate purchases securities from the
issuer on a negotiated or competitive bid basis, as principal, with the motive
of marketing such securities to investors at a profit. The Sponsor may realize
additional profits or losses during the initial offering period on unsold Units
as a result of changes in the daily evaluation of the Securities in a Trust.
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the Sponsor
intends to, and certain of the dealers may, maintain a market for Units of the
Trusts offered hereby and to continuously offer to purchase said Units at
prices, determined by the Evaluator, based on the aggregate bid prices of the
underlying Securities in such Trusts, together with accrued interest to the
expected dates of settlement. To the extent that a market is maintained during
the initial offering period, the prices at which Units will be repurchased will
be based upon the aggregate offering side evaluation of the Securities in the
Trusts. The aggregate bid prices of the underlying Securities in each Trust are
expected to be less than the related aggregate offering prices (which is the
evaluation method used during the initial public offering period). Accordingly,
Unitholders who wish to dispose of their Units should inquire of their bank or
broker as to current market prices in order to determine whether there is in
existence any price in excess of the Redemption Price and, if so, the amount
thereof.
The offering price of any Units resold by the Sponsor will be in accord with
that described in the currently effective Prospectus describing such Units. Any
profit or loss resulting from the resale of such Units will belong to the
Sponsor. The Sponsor may suspend or discontinue purchases of Units of any Trust
if the supply of Units exceeds demand, or for other business reasons.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market described
above may cause Units to be redeemed by the Trustee by making a written request
to the Trustee, and, in the case of Units evidenced by a certificate, by
tendering such certificate to the Trustee, properly endorsed or accompanied by a
written instrument or instruments of transfer in a form satisfactory to the
Trustee. Unitholders must sign the request, and such certificate or
A-20
<PAGE>
transfer instrument, exactly as their names appear on the records of the Trustee
and on any certificate representing the Units to be redeemed. If the amount of
the redemption is $25,000 or less and the proceeds are payable to the
Unitholder(s) of record at the address of record, no signature guarantee is
necessary for redemptions by individual account owners (including joint owners).
Additional documentation may be requested, and a signature guarantee is always
required, from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other guarantee
program in addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. A certificate should only be sent by registered or certified mail for
the protection of the Unitholder. Since tender of the certificate is required
for redemption when one has been issued, Units represented by a certificate
cannot be redeemed until the certificate representing such Units has been
received by the purchasers.
Redemption shall be made by the Trustee on the third business day following the
day on which a tender for redemption is received (the "Redemption Date") by
payment of cash equivalent to the Redemption Price for such Trust, determined as
set forth below under "Computation of Redemption Price," as of the evaluation
time stated under "Essential Information," next following such tender,
multiplied by the number of Units being redeemed. Any Units redeemed shall be
cancelled and any undivided fractional interest in the Trust extinguished. The
price received upon redemption might be more or less than the amount paid by the
Unitholder depending on the value of the Securities in the Trust at the time of
redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the Unitholder only when filing a tax return. Under normal circumstances the
Trustee obtains the Unitholder's tax identification number from the selling
broker. However, any time a Unitholder elects to tender Units for redemption,
such Unitholder should make sure that the Trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing interest shall be withdrawn from the
Interest Account for such Trust, to the extent that funds are available for such
purpose, then from the Principal Account. All other amounts paid on redemption
shall be withdrawn from the Principal Account for such Trust. The Trustee is
empowered to sell Securities for a Trust in order to make funds available for
the redemption of Units of such Trust. Such sale may be required when Securities
would not otherwise be sold and might result in lower
A-21
<PAGE>
prices than might otherwise be realized. To the extent Securities are sold, the
size and diversity of a Trust will be reduced.
Securities will be sold by the Trustee so as to maintain, as closely as
practicable, the original percentage relationship between the principal amounts
of the Securities in such Trusts. The Securities to be sold for purposes of
redeeming Units will be selected from a list supplied by the Sponsor. The
Securities will be chosen for this list by the Sponsor on the basis of such
market and credit factors as it may determine are in the best interests of such
Trusts. Provision is made under the related Trust Agreements for the Sponsor to
specify minimum face amounts in which blocks of Securities are to be sold in
order to obtain the best price available. While such minimum amounts may vary
from time to time in accordance with market conditions, it is anticipated that
the minimum face amounts which would be specified would range from $25,000 to
$100,000. Sales may be required at a time when the Securities would not
otherwise be sold and might result in lower prices than might otherwise be
realized. Moreover, due to the minimum principal amount in which U.S. Treasury
Obligations may be required to be sold, the proceeds of such sales may exceed
the amount necessary for payment of Units redeemed. To the extent not used to
meet other redemption requests in such Trusts, such excess proceeds will be
distributed pro rata to all remaining Unitholders of record of such Trusts,
unless reinvested in substitute Securities. 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"
A-22
<PAGE>
next occurring after the tendering of a Unit for redemption and on any other
business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash deposited in the
Trust to purchase Securities not applied to the purchase of such Securities; (2)
the aggregate value of each issue of the Securities (including "when issued"
contracts, if any) held in the Trust as determined by the Evaluator on the basis
of bid prices therefor; and (3) interest accrued and unpaid on the Securities in
the Trust as of the date of computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust and for which no deductions have
been previously made for the purpose of additions to the Reserve Account
described under "Trust Information--Trust Expenses"; (2) an amount representing
estimated accrued expenses of the Trust, including but not limited to fees and
expenses of the Trustee (including legal and auditing fees and any insurance
costs), the Evaluator, the Sponsor and bond counsel, if any; (3) cash held for
distribution to Unitholders of record, or required for redemption of Units
tendered, as of the business day prior to the evaluation being made; and (4)
other liabilities incurred by the Trust; and
C. finally dividing the results of such computation by the number of Units of
the Trust outstanding as of the date thereof.
UNITHOLDERS
Ownership of Units. Ownership of Units of a Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation statement
sent to the Underwriter and broker.
Units are transferable by making a written request to the Trustee and, in the
case of Units evidenced by a certificate, by presenting and surrendering such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer 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
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
A-23
<PAGE>
each such transfer or interchange. The Trustee at the present time does not
intend to charge for the normal transfer or interchange of certificates.
Destroyed, stolen, mutilated or lost certificates will be replaced upon delivery
to the Trustee of satisfactory indemnity (generally amounting to 3% of the
market value of the Units), affidavit of loss, evidence of ownership and payment
of expenses incurred.
Distributions to Unitholders. Interest received by each Trust, including any
portion of the proceeds from a disposition of Securities which represents
accrued interest, is credited by the Trustee to the Interest Account for such
Trust. All other receipts are credited by the Trustee to a separate Principal
Account for the Trust. The Trustee normally has no cash for distribution to
Unitholders until it receives interest payments on the Securities in the Trust.
Since interest usually is paid semi-annually, during the initial months of the
Trusts the Interest Account of each Trust, consisting of accrued but uncollected
interest and collected interest (cash), will be predominantly the uncollected
accrued interest that is not available for distribution. On the dates set forth
under "Essential Information" for each Trust, the Trustee will commence
distributions, in part from funds advanced by the Trustee.
Thereafter, assuming the Trust retains its original size and composition, after
deduction of the fees and expenses of the Trustee, the Sponsor and Evaluator and
reimbursements (without interest) to the Trustee for any amounts advanced to a
Trust, the Trustee will normally distribute on each Interest Distribution Date
(the twentieth of the month) or shortly thereafter to Unitholders of record of
such Trust on the preceding Record Date (which is the tenth day of each month).
Unitholders of the Trusts will receive an amount substantially equal to
one-twelfth of such holders' pro rata share of the estimated net annual interest
income to the Interest Account of such Trust. Since interest on Securities in
the Trusts is payable at varying intervals, usually in semi-annual installments,
and distributions of income are made to Unitholders at different intervals from
receipt of interest, the interest accruing to a Trust may not be equal to the
amount of money received and available for distribution from the Interest
Account. Therefore, on each Distribution Date the amount of interest actually
deposited in the Interest Account of a Trust and available for distribution may
be more or less than the interest distribution made. In order to eliminate
fluctuations in interest distributions resulting from such variances, the
Trustee is authorized by the Trust Agreements to advance such amounts as may be
necessary to provide interest distributions of approximately equal amounts. The
Trustee will be reimbursed, without interest, for any such advances from funds
available in the Interest Account for such Trust. However, interest earned at
any point in time will be greater than the amount actually received by the
Trustee and distributed to the Unitholders. Therefore, there will always remain
an item of accrued interest that is added to the daily value of the Units. If
Unitholders of a Trust sell or redeem all or a portion of their Units, they will
be paid their proportionate share of the accrued interest of such Trust to, but
not including, the third business day after the date of a sale or to the date of
tender in the case of a redemption.
A-24
<PAGE>
Because the period of time between the First Settlement Date and the first
Interest Distribution Date may be longer or shorter than a full period, the
first distribution may be a partial distribution.
Unitholders of a Treasury Portfolio which contains Stripped Treasury Securities
should note that Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities obtains only the right to receive a future
fixed payment on the security and not any rights to periodic interest payments
thereon. Purchasers of these Securities acquire, in effect, discount obligations
that are economically identical to the "zero-coupon bonds" that have been issued
by corporations. Zero coupon bonds are debt obligations which do not make any
periodic payments of interest prior to maturity and accordingly are issued at a
deep discount. Under 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 includible income in earlier periods and a corresponding larger amount in
later periods. For federal income tax purposes, the inclusion will be on a basis
that reflects the effective compounding of accrued but unpaid interest
effectively represented by the discount. Although this treatment is similar to
the "interest" method described above, the "interest" method may differ to the
extent that generally accepted accounting principles permit or require the
inclusion of interest on the basis of a compounding period other than the
semi-annual period. See "Trust Information--Tax Status."
Persons who purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date following their
purchase of Units.
The Trustee will distribute on each Distribution Date or shortly thereafter, to
each Unitholder of record of a Trust on the preceding Record Date, an amount
substantially equal to such Unitholder's pro rata share of the cash balance, if
any, in the Principal Account of such Trust computed as of the close of business
on the preceding Record Date. However, no distribution will be required if the
balance in the Principal Account is less than $1.00 per 100 Units. The Trustee
will make a distribution to Unitholders of all principal relating to maturing
U.S. Treasury Obligations in a Trust, as set forth above, unless such principal
is to be reinvested in connection with a Rolling 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'
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<PAGE>
report will be furnished by the Trustee to any Unitholder of such Trust upon
written request. Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each person who at any time during
the calendar year was a Unitholder of a Trust a statement, covering the calendar
year, setting forth for the applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities;
2. The amount paid for purchases of New Securities;
3. The amount paid from the Interest Account representing accrued interest of
any Units redeemed;
4. The deductions from the Interest Account for applicable taxes, if any, fees
and expenses (including auditing fees) of the Trustee, the Sponsor, the
Evaluator, and, if any, of bond counsel;
5. Any amounts credited by the Trustee to the Reserve Account;
6. The net amount remaining after such payments and deductions, expressed both
as a total dollar amount and a dollar amount per Unit outstanding on the last
business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the sale, maturity, liquidation or redemption of any of the
Securities and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
2. The amount paid from the Principal Account representing the principal of any
Units redeemed;
3. The amount paid for purchases of New Securities, Replacement Securities or
Reinvestment Securities;
4. The deductions from the Principal Account for payment of applicable taxes, if
any, fees and expenses (including auditing fees) of the Trustee, the Sponsor,
the Evaluator, and, if any, of bond counsel;
5. Any amounts credited by the Trustee to the Reserve Account;
6. The net amount remaining after distributions of principal and deductions,
expressed both as a dollar amount and as a dollar amount per Unit outstanding on
the last business day of the calendar year; and
C. The following information:
1. A list of the Securities as of the last business day of such calendar year;
2. The number of Units outstanding on the last business day of such calendar
year;
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<PAGE>
3. The Redemption Price based on the last evaluation made during such calendar
year;
4. The amount actually distributed during such calendar year from the Interest
and Principal Accounts separately stated, expressed both as total dollar amounts
and as dollar amounts per Unit outstanding on the Record Dates for each such
distribution.
Rights of Unitholders. A Unitholder may at any time prior to the termination of
the Trust tender Units to the Trustee for redemption. The death or incapacity of
any Unitholder will not operate to terminate a Trust or entitle legal
representatives or heirs to claim an accounting or to bring any action or
proceeding in any court for partition or winding up of a Trust. No Unitholder
shall have the right to control the operation and management of any Trust in any
manner, except to vote with respect to the amendment of the Trust Agreements or
termination of any Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trusts by the purchase, sale or
substitution of Securities, except in the circumstances noted herein. Thus, with
the exception of the redemption or maturity of Securities in accordance with
their terms (and reinvestments made in connection with the Rolling Government
Series), the assets of the Trusts will remain unchanged under normal
circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value of which
has been affected by certain adverse events including institution of certain
legal proceedings or the occurrence of other market factors, including advance
refunding, so that in the opinion of the Sponsor the retention of such
Securities in a Trust would be detrimental to the interest of the Unitholders.
In addition, the Sponsor will instruct the Trustee to dispose of certain
Securities and to take such further action as may be needed from time to time to
ensure that the Rolling Government Series continues to satisfy the
qualifications of a regulated investment company, including the requirements
with respect to diversification under Section 851 of the Internal Revenue Code.
The proceeds from any such sales, exclusive of any portion which represents
accrued interest, will be credited to the Principal Account of such Trust for
distribution to the Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of Securities to issue new obligations in exchange or substitution for
any of such Securities pursuant to a refunding financing plan, except that the
Sponsor may instruct the Trustee to accept or reject such an offer or to take
any other action with respect thereto as the Sponsor may deem proper if (i) the
issuer is in default with respect to such Securities or (ii) in the written
opinion of the Sponsor the issuer will probably default with respect to such
Securities in the reasonably foreseeable future. Any obligation so received in
exchange or substitution will be held by the Trustee subject to the terms and
conditions of the Trust Agreement to the same extent as Securities originally
deposited thereunder. Within five days after deposit of obligations in exchange
or substitution for underlying Securities,
A-27
<PAGE>
the Trustee is required to give notice thereof to each Unitholder, identifying
the Securities eliminated and the Securities substituted therefor. The Trustee
may sell Securities, designated by the Sponsor, from a Trust for the purpose of
redeeming Units of such Trust tendered for redemption and the payment of
expenses.
TRUST ADMINISTRATION
The Trustee. The Trustee is The Chase Manhattan Bank (National Association), a
national banking association with its principal executive office at 1 Chase
Manhattan Plaza, New York, New York 10081 and its unit investment trust office
at 770 Broadway, New York, New York 10003. Unitholders who have questions
regarding the Trusts may call the Customer Service Help Line at 1-800-887-6926.
The Trustee 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. If the Trustee becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities or shall
fail to meet standards for its performance established by the Sponsor, the
Sponsor may remove the Trustee and appoint a successor trustee as provided in
the Trust Agreements. Notice of such removal and
A-28
<PAGE>
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
A-29
<PAGE>
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 December Record
Date preceding any annual period. The Sponsor will receive a portion of the
sales commissions paid in connection with the purchase of Units and will share
in profits, if any, related to the deposit of Securities in the Trusts.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Securities in a Trust at any time during
the period. In no event shall the Trustee be paid
A-30
<PAGE>
less than $2,000 per Trust in any one year. Funds that are available for future
distributions, redemptions and payment of expenses are held in accounts which
are non-interest bearing to Unitholders and are available for use by the Trustee
pursuant to normal trust procedures; however, the Trustee is also authorized by
the Trust Agreements to make from time to time certain non-interest bearing
advances to the Trusts.
During the first year the Trustee has agreed to lower its fees and absorb
expenses by the amount set forth under "Essential Information." The Trustee's
fee will not be increased in future years in order to make up this reduction in
the Trustee's fee. The Trustee's fee is payable on or before each Distribution
Date. The Trustee has agreed to pay the Sponsor that portion of the Trustee's
annual fee as set forth under "Essential Information" in return for the Sponsor
providing certain bookkeeping and administrative services to its own customers.
For evaluation of Securities in each Trust, the Evaluator shall receive a fee,
payable monthly, calculated on the basis of that annual rate set forth under
"Essential Information," based upon the largest aggregate principal amount of
Securities in such Trust at any time during such monthly period. The fee may
exceed the actual costs of providing evaluation services for these trusts, but
in no event will the total amount received for evaluation services rendered to
unit investment trust of which NFSC acts as Sponsor in any calendar year exceed
the aggregate cost to the Evaluator of supplying such services in such years.
The Trustee's and Evaluator's fees are deducted first from the Interest Account
of a Trust to the extent funds are available and then from the Principal
Account. Such fees may be increased without approval of Unitholders by amounts
not exceeding a proportionate increase in the Consumer Price Index entitled "All
Services Less Rent of Shelter," published by the United States Department of
Labor, or any equivalent index substituted therefor. In addition, the Trustee's
fee may be periodically adjusted in response to fluctuations in short-term
interest rates (reflecting the cost to the Trustee of advancing funds to a Trust
to meet scheduled distributions).
Expenses incurred in establishing the Trusts, including the cost of the initial
preparation of documents relating to the Trusts, federal and state registration
fees, the initial fees and expenses of the Trustee, legal expenses and any other
non-material out-of-pocket expenses, will be paid by the Trusts and amortized
over the lesser of five years or the life of the Trusts. The following
additional charges are or may be incurred by the Trusts: (i) fees for the
Trustee's extraordinary services; (ii) expenses of the Trustee (including legal
and auditing expenses (not to exceed $.50 per 100 Units) and insurance costs for
an Insured 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,
A-31
<PAGE>
liability or expense incurred in acting in that capacity without gross
negligence, bad faith or willful misconduct; and (vii) expenditures incurred in
contacting Unitholders upon termination of the Trusts. The fees and expenses set
forth herein are payable out of the appropriate Trust and, when owing to the
Trustee, are secured by a lien on such Trust. Fees or charges relating to a
Trust shall be allocated to each Trust in the same ratio as the principal amount
of such Trust bears to the total principal amount of all Trusts. Fees or charges
relating solely to a particular Trust shall be charged only to such Trust.
Fees and expenses of the Trusts shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from the
Principal Accounts. The Trustee may withdraw from the Principal Account or the
Interest Account of any Trust such amounts, if any, as it deems necessary to
establish a reserve for any taxes or other governmental charges or other
extraordinary expenses payable out of the Trust. Amounts so withdrawn shall be
credited to a separate account maintained for a Trust known as the Reserve
Account and shall not be considered a part of the Trust when determining the
value of the Units until such time as the Trustee shall return all or any part
of such amounts to the appropriate account.
THE SPONSOR
NFSC is a registered broker and dealer and a member of The New York Stock
Exchange, Inc., and various other national and regional exchanges. As a
securities broker and dealer, NFSC is engaged in various securities trading,
brokerage and clearing activities serving a diverse group of domestic
corporations, institutional and individual investors, and brokers and dealers.
NFSC is a wholly owned subsidiary of Fidelity Global Brokerage Group, Inc. NFSC
was incorporated in Massachusetts, June 3, 1981. Fidelity Global Brokerage
Group, Inc. is a wholly owned subsidiary of FMR Corp. ("FMR"). Edward C. Johnson
3d owns approximately 12% and Abigail P. Johnson owns approximately 24.5% of the
issued and outstanding shares of the Voting Common Stock of FMR. Members of the
Edward C. Johnson 3d family and trusts for their benefit control up to 49% of
the voting shares of FMR.
Fidelity Management & Research Company, a subsidiary of FMR, is the management
arm of Fidelity Investments, which was established in 1946. It provides a number
of mutual funds and other clients with investment research and portfolio
management services. It maintains a large staff of experienced investment
personnel and a full complement of related support facilities. It is now
America's largest mutual fund manager and as of September 30, 1995, it manages
more than $335 billion in assets in over 22 million individual shareholder
accounts.
If at any time the Sponsor shall fail to perform any of its duties under the
Trust Agreements or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the Trustee to be reasonable and not
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<PAGE>
exceeding such reasonable amounts as may be prescribed by the Securities and
Exchange Commission, or (b) terminate the Trust Agreements and liquidate the
Trusts as provided therein, or (c) continue to act as Trustee without
terminating the Trust Agreements.
The foregoing financial information with regard to the Sponsor relates to the
Sponsor only and not to these Trusts. Such information is included in this
Prospectus only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations with respect to the Trusts. More comprehensive financial information
can be obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to federal
tax law have been passed upon by Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, as special counsel to the Sponsor. Carter, Ledyard &
Milburn has acted as Special Counsel to the Trusts with respect to certain New
York State and City tax matters affecting the Laddered Government Series 1 and
2.
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.
A-33
<PAGE>
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
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
- -------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Feb-96 $ 4.97 $ 4.97
Mar-96 to Jan-97 $ 4.66 $ 4.66
Feb-97 $ 4.32 $ 200.00 $ 204.32
Mar-97 to Jul-97 $ 3.64 $ 3.64
Aug-97 $ 3.34 $ 200.00 $ 203.34
Sep-97 to Jan-98 $ 2.74 $ 2.74
Feb-98 $ 2.43 $ 200.00 $ 202.43
Mar-98 to Jul-98 $ 1.82 $ 1.82
Aug-98 $ 1.54 $ 200.00 $ 201.54
Sep-98 to Dec-98 $ 0.97 $ 0.97
Jan-99 $ 1.13 $ 200.00 $ 201.13
</TABLE>
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 2
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
- -------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Feb-96 $ 4.97 $ 4.97
Mar-96 to May-97 $ 4.66 $ 4.66
Jun-97 $ 4.32 $ 200.00 $ 204.32
Jul-97 to May-98 $ 3.66 $ 3.66
Jun-98 $ 2.82 $ 200.00 $ 202.82
Jul-98 to May-99 $ 2.66 $ 2.66
Jun-99 $ 2.36 $ 200.00 $ 202.36
Jul-99 to May-00 $ 1.77 $ 1.77
Jun-00 $ 1.47 $ 200.00 $ 201.47
Jul-00 to May-01 $ 0.86 $ 0.86
Jun-01 $ 1.00 $ 200.00 $ 201.00
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
-----
<S> <C>
SUMMARY..................................................................... 3
ESSENTIAL INFORMATION....................................................... 5
THE TRUSTS.................................................................. 8
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO AND LADDERED
GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO................ 10
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO....................... 13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......................... 17
STATEMENTS OF CONDITION..................................................... 18
TRUST INFORMATION........................................................... A-1
General Information....................................................... A-1
Risk Factors.............................................................. A-3
Rating of Units........................................................... A-5
Retirement Plans.......................................................... A-6
Tax Status................................................................ A-6
Distribution Reinvestment................................................. A-14
Interest, Estimated Long-Term Return and Estimated Current Return......... A-14
Public Offering of Units.................................................. A-15
Market For Units.......................................................... A-20
Redemption of Units....................................................... A-20
Unitholders............................................................... A-23
Investment Supervision.................................................... A-27
Trust Administration...................................................... A-28
Trust Expenses............................................................ A-30
The Sponsor............................................................... A-32
Legal Opinions............................................................ A-33
Independent Certified Public Accountants.................................. A-33
ESTIMATED CASH FLOWS TO UNITHOLDERS......................................... B-1
</TABLE>
------------------------
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS MADE.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUSTS, THE TRUSTEE, OR THE SPONSOR. THE TRUSTS ARE REGISTERED AS UNIT
INVESTMENT TRUSTS UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION
DOES NOT IMPLY THAT THE TRUSTS OR THE UNITS HAVE BEEN GUARANTEED, SPONSORED,
RECOMMENDED OR APPROVED BY THE UNITED STATES OR ANY STATE OR ANY AGENCY OR
OFFICER THEREOF.
------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services
and legal counsel
The following exhibits:
1.1 Form of Trust Agreement for Fidelity Defined Trusts, Series 1 among
National Financial Services Corporation as Depositor, Evaluator and
Portfolio Supervisor and The Chase Manhattan Bank (National Association) as
Trustee.
1.1.1 Form of Standard Terms and Conditions of Trust for Fidelity Defined
Trusts, Series 1 and certain subsequent series among National Financial
Services Corporation as Depositor, Evaluator and Portfolio Supervisor and
The Chase Manhattan Bank (National Association) as Trustee.
1.4 Copy of Articles of Incorporation of National Financial Services
Corporation, Depositor.
1.5 Copy of By-Laws of National Financial Services Corporation, Depositor.
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1.1 filed
herewith on page 2 and incorporated herein by reference).
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of securities being
registered.
3.3 Opinion of Counsel as to New York income tax status of securities being
registered.
3.4 Opinion of Counsel as to advancement of funds by Trustee.
4.1 Consent of Rating Agency.
4.2 Consent of Independent Certified Public Accountants.
4.3 Consent of Kenny S&P Evaluation Services.
6.1 List of Directors and Officers of National Financial Services
Corporation, Depositor.
7.1 Powers of Attorney executed by the Directors and Officers of National
Financial Services Corporation, Sponsor, listed on page S-3 of this
Registration Statement (incorporated by reference to the initial
Registration Statement on Form S-6 [File No. 33-62243] filed on behalf of
Fidelity Defined Trusts, Series 1).
Ex-27 Financial Data Schedules.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Fidelity Defined Trusts, Series 1 has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and State of Massachusetts
on the 3rd day of January, 1996.
Fidelity Defined Trusts, Series 1
(Registrant)
By: National Financial Services Corporation
(Depositor)
David J. Pearlman
Assistent Clerk
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on
January 3, 1996.
Signature Title
James H. Messenger President, Chief Executive Officer
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 and Accounting Officer
David J. Pearlman
(Attorney-in-fact)*
_______________________________
*An executed copy of the related powers of attorney were filed as Exhibit
7.1 to the initial Registration Statement for Fidelity Defined Trusts,
Series 1 as filed on August 29, 1995 (File No. 33-62243) and the same is
hereby incorporated herein by this reference.
Exhibit 1.1
Fidelity Defined Trusts, Series 1
Trust Agreement
Dated: January 3, 1996
This Trust Agreement among National Financial Services Corporation, as
Depositor, Evaluator and Portfolio Supervisor and The Chase Manhattan Bank
(National Association), as Trustee, sets forth certain provisions in full
and incorporates other provisions by reference to the document entitled
Standard Terms and Conditions of Trust for Fidelity Defined Trusts Series 1
effective January 3, 1996 (herein called the Standard Terms and Conditions
of Trust), and such provisions as are set forth in full and such provisions
as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections of
the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, the Evaluator and Portfolio
Supervisor agree as follows:
Part I
Standard Terms And Conditions Of Trust
Subject to the provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had
been set forth in full in this instrument.
Part II
Special Terms And Conditions Of Trust
The following special terms and conditions are hereby agreed to:
(a) The Securities defined in Section1.01(5) listed in Schedule A hereto
have been deposited in trust under this Trust Agreement.
(b) The fractional undivided interest in and ownership of the Trust Fund
represented by each Unit for a Trust is the amount set forth under the
caption Essential Information - Fractional Undivided Interest per Unit in
the Prospectus.
(c) The number of units in a Trust referred to in Section2.03 is set forth
under the caption Essential Information - Number of Units in the
Prospectus.
(d) The First Settlement Date for each Trust is the date set forth under
Essential Information-First Settlement Date in the Prospectus.
(e) The Trustees compensation shall be computed according to the following
schedule, determined on the basis of the largest principal amount of
Securities held by the Trust during the period for which the compensation
is computed; provided , however, that until the Depositor informs the
Trustee that no further deposits of additional Securities will be made
pursuant to Section 2.01(b), such compensation shall be computed on the
basis of the principal amount of Securities held as of the Record Date
preceding the date on which the compensation is paid (or the Initial Date
of Deposit, as appropriate):
rate per $1,000 principal Principal amount of Securities held
amount of Securities by the Trust
Laddered 1 Laddered 2 Rolling 1
$.1.31 $1.29 $1.32 $0 - $25,000,000
$1.19 $1.17 $1.20 $25,000,001 -$45,000,000
$.1.07 $1.05 $1.08 $45,000,001 and higher
(f) Notwithstanding the provision of section 3.05 of the Standard Terms
and Conditions of Trust, the first Monthly Record Dare shall be February
10, 1996.
In Witness Whereof, National Financial Services Corporation and The Chase
Manhattan Bank (National Association) have each caused this Trust Agreement
to be executed and the respective corporate seal to be hereto affixed and
attested by authorized officers; all as of the day, month and year first
above written.
National Financial Services Corporation, Depositor
By
The Chase Manhattan Bank (National Association), Trustee
By
National Financial Services Corporation, Evaluator
By
National Financial Services Corporation, Portfolio Supervisor
By
Schedule A To The Trust Agreement
Securities Initially Deposited
In
Fidelity Defined Trusts, Series 1
(Note: Incorporated herein and made a part hereof is the Portfolio as set
forth for each Trust in the Prospectus.)
Standard Terms and Conditions of Trust
For
Fidelity Defined Trusts Series1
and certain subsequent Series
Effective: January3, 1996
Between
National Financial Services Corporation
Depositor, Evaluator and Portfolio Supervisor
The Chase Manhattan Bank
(National Association)
Trustee
STANDARD TERMS AND CONDITIONS OF TRUST
FOR
FIDELITY DEFINED TRUSTS SERIES1
and certain subsequent Series
Effective: January 3, 1996
These Standard Terms and Conditions of Trust effective January 3, 1996 are
executed between National Financial Services Corporation, as Depositor,
Evaluator and Portfolio Supervisor and The Chase Manhattan Bank (National
Association), as Trustee.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, the Evaluator and the Portfolio
Supervisor agree as follows:
INTRODUCTION
These Standard Terms and Conditions of Trust, effective January 3, 1996,
shall be applicable to Fidelity Defined Trusts Series 1 and certain
subsequent Series established after the date of effectiveness hereof, as
provided in this paragraph. For Fidelity Defined Trusts Series1 and
certain subsequent Series established after the date of effectiveness
hereof to which these Standard Terms and Conditions of Trust, effective
January 3, 1996, are to be applicable, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor shall execute a Trust Agreement,
incorporating by reference these Standard Terms and Conditions of Trust,
effective January 3, 1996, and designating any exclusion from or exception
to such incorporation by reference for the purposes of that Series or
variation of the terms hereof for the purposes of that Series and
specifying for that Series and for each Trust in such Series (i) the
Securities deposited in trust, (ii) the fractional undivided interest
represented by each Unit, (iii) the number of Units of the Trust, (iv) the
First Settlement Date and (v) the Trustees rate of compensation.
Whereas, the form of the Certificates shall be substantially as follows and
shall indicate the Series number and the name of the Trust, as set forth in
the Trust Agreement:
Certificate of Ownership
Evidencing an Undivided
Interest In
FIDELITY DEFINED TRUSTS
See Reverse For
Certain Definitions
This is to certify that
is the owner and registered
holder of this Certificate evidencing
the ownership of
of fractional undivided interest in the above-named Trust created pursuant
to the Indenture, a copy of which is available at the office of the
Trustee. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Indenture to which the holder of this
Certificate by virtue of the acceptance hereof assents and is bound. This
Certificate is transferable and interchangeable by the registered owner in
person or by his duly authorized attorney at the Trustees office upon
surrender of this Certificate properly endorsed or accompanied by a written
instrument of transfer and any other documents that the Trustee may require
for transfer, in form satisfactory to the Trustee, and payment of the fees
and expenses provided in the Indenture.
Witness the facsimile signature of the Depositor and the manual signature
of an authorized signatory of the Trustee.
Dated:
National Financial Services
Corporation, Depositor The Chase Manhattan Bank (National Association),
Trustee
By:______________________________ By:
Authorized Signatory
CONTROL NO.
FORM OF ASSIGNMENT
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT- ____ Custodian ______
TEN ENT -as tenants by the entireties
(Cust) (Minor)
JT TEN -as joint tenants with right Under Uniform Gifts
to Minors Act
of survivorship and not
as tenants in common ______________________________
State
Additional abbreviations may also be used though not in the above list.
For Value Received, ________________________________ hereby sell, assign
and transfer ____________ Units represented by this Certificate unto
_____________________________
Social Security or Other Identifying Number of Assignee
must be provided
___________________________________________________________________________
and does hereby irrevocably constitute and appoint
_____________________________________________________, attorney, to
transfer said Units on the books of the Trustee, with full power and
substitution in the premises.
Dated: _____________________________________________
Notice: The signature to this assignment must correspond with the name as
written upon the face of the Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature(s) Guaranteed by
_________________________________
Firm or Bank
_________________________________
Authorized Signature
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
Now, Therefore, in consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the Evaluator and
the Portfolio Supervisor agree as follows:
ARTICLEI
DEFINITIONS
SECTION 1.01. Whenever used in this Indenture the following words and
phrases, unless the context clearly indicates otherwise, shall have the
following meanings:
(1) DEPOSITOR shall mean National Financial Services Corporation and its
successors in interest, or any successor depositor appointed as hereinafter
provided.
(2) TRUSTEE shall mean The Chase Manhattan Bank, N.A., or any successor
trustee appointed as hereinafter provided.
(3) EVALUATOR shall mean National Financial Services Corporation and its
successors in interest, or any successor evaluator appointed as hereinafter
provided.
(4) PORTFOLIO SUPERVISOR shall mean National Financial Services
Corporation and its successors in interest, or any successor Portfolio
Supervisor appointed as hereinafter provided.
(5) SECURITIES shall mean such of the interest-bearing corporate debt
obligations (the CORPORATE BONDS); taxable, mortgage-backed securities of
the modified pass-through type guaranteed by the Government National
Mortgage Association and backed by the full faith and credit of the United
States (the GINNIE MAES or GINNIE MAE SECURITIES); and/or U.S. Treasury
bonds which may include zero-coupon Treasury obligations, I.E., Treasury
obligations which accrue but do not pay interest currently, are sold at a
discount from principal value and represent an obligation to receive the
principal value thereof at a future date (the TREASURY OBLIGATIONS);
including delivery statements relating to when, as and if issued and/or
regular-way contracts, if any, for the purchase of certain securities and
certified or bank check(s) or letter(s) of credit sufficient in amount or
availability required for such purchase, deposited in irrevocable trust and
listed in ScheduleA of the Trust Agreement, and any obligations received in
exchange, substitution or replacement for such obligations pursuant to
Sections 3.08 and 3.14 hereof, as may from time to time continue to be held
as a part of the Trust Fund. Only zero-coupon Treasury Obligations which,
if certificated, are or may be registered and held by the Trustee in book
entry form on the registration books of a bank or clearing house which it
is authorized to use as custodian of assets of a unit investment trust
pursuant to the Investment Company Act of 1940 shall be eligible for
deposit in any Trust.
(6) CERTIFICATE shall mean any one of the certificates executed by the
Trustee and the Depositor evidencing ownership of an undivided fractional
interest in a Trust.
(7) DATE OF DEPOSIT shall mean the date upon which the Trust is created.
(8) CONTRACT SECURITIES shall mean Securities which are to be acquired by
the Fund pursuant to contracts, including (i) Securities listed in
ScheduleA to the Trust Agreement and (ii) Securities which the Depositor
has contracted to purchase for the Fund pursuant to Section 3.14 hereof.
(9) TRUST FUND or FUND shall mean the collective Trusts created by the
Trust Agreement, which shall consist of the Securities held pursuant and
subject to the Indenture, together with all undistributed interest received
or accrued thereon, any undistributed cash realized from the sale,
redemption, liquidation or maturity thereof or the proceeds of insurance,
if any, received in respect thereof. Such amounts as may be on deposit in
the Reserve Account hereinafter established shall be excluded from the
Trust Fund.
(10) TRUST or TRUSTS shall mean the separate trust or trusts created by
the Trust Agreement, the Securities constituting the portfolio of which are
listed in Schedule A attached hereto. INSURED TRUST shall mean a Trust
in a Fund which has obtained Insurance, as such term is defined in Section
1.01(11).
(11) TRUST AGREEMENT shall mean the Trust Agreement for the particular
series of the Fund into which the Indenture is incorporated.
(12) INSURANCE shall mean the contract or policy of insurance obtained
by certain Trusts of the Fund guaranteeing the payment when due of the
principal of and interest on the Corporate Bonds held pursuant and subject
to this Indenture, together with the proceeds, if any, thereof payable to
or received by the Trustee for the benefit of such Trusts and the
Unitholders thereof except that Insurance shall not include the individual
policies of insurance on the Corporate Bonds in certain trusts which
policies have been obtained by the issuers of such Corporate Bonds or by
the underwriters, the Depositor or others prior to the date of the Trust
Agreement (the PRE-INSURED BONDS ).
(13) INSURER shall mean any provider of insurance obtained by a Trust
and issuing the contract or policy of Insurance obtained by certain Trusts
of the Fund protecting such Trusts and the Unitholders thereof against
nonpayment when due of the principal of and interest on any Corporate Bond
held by the Trustee as part of the Fund.
(14) UNIT in respect of any Trust shall mean the fractional undivided
interest in and ownership of the Trust equal initially to the fraction
specified in Essential Information in the Prospectus, the numerator of
which is one and the denominator of which shall be (1) increased by the
number of any additional Units issued pursuant to Section 2.03 hereof and
(2) decreased by the number of any such Units redeemed as provided in
Section 5.02.
(15) INDENTURE shall mean these Standard Terms and Conditions of Trust
as originally executed or, if amended as hereinafter provided, as so
amended, together with the Trust Agreement creating a particular series of
the Fund.
(16) PROSPECTUS shall mean the prospectus relating to the Trust Fund
filed with the Securities and Exchange Commission pursuant to Rule 497(b)
under the Securities Act of 1933, as amended, and dated the date of the
Trust Agreement.
(17) BUSINESS DAY shall mean any day other than a Saturday, Sunday or,
in the City of New York, a legal holiday or a day on which banking
institutions are authorized by law or executive order to close.
(18) Words importing singular number shall include the plural number in
each case and vice versa, and words importing persons shall include
corporations and associations, as well as natural persons.
(19) The words herein , hereby , herewith , hereof , hereinafter ,
hereunder , hereinabove , hereafter , heretofore and similar words or
phrases of reference and association shall refer to this Indenture in its
entirety.
(20) UNITHOLDER shall mean the registered holder of any Units of a Trust
as recorded on the books of the Trustee, and represented in either
certificated or uncertificated form, his or her legal representatives and
heirs and the successors of any corporation, partnership or other legal
entity which is a registered holder of any Units and as such shall be
deemed a beneficiary of a trust created by this Trust Agreement to the
extent of his PRO RATA share thereof.
ARTICLE II
DEPOSIT OF SECURITIES; ACCEPTANCE OF TRUST;
FORM AND ISSUANCE OF CERTIFICATES;
PORTFOLIO INSURANCE FOR THE INSURED TRUSTS; UNCERTIFICATED FORM; SEPARATE
TRUSTS
SECTION 2.01. DEPOSIT OF SECURITIES. (a) The Depositor, on the date of
the Trust Agreement, has deposited with the Trustee in trust the Securities
listed in Schedule A to the Trust Agreement in bearer form or duly endorsed
in blank or accompanied by all necessary instruments of assignment and
transfer in proper form to be held, managed and applied by the Trustee as
herein provided. The Depositor agrees to pay the total purchase price of
all the Securities and shall deliver the Securities listed on said Schedule
A to the Trustee which were represented by delivery statements at the time
of the execution and delivery of the Trust Agreement within 90 days after
said execution and delivery, or if the contract to buy such Securities
between the Depositor and seller is terminated by the seller thereof for
any reason beyond the control of the Depositor, the Depositor shall
forthwith take the remedial action specified in Section 3.14.
(b) From time to time following the Initial Date of Deposit, the Depositor
is hereby authorized, in its discretion, to assign, convey to and deposit
with the Trustee additional Securities, in bearer form or duly endorsed in
blank or accompanied by all necessary instruments of assignment and
transfer in proper form (or Contract Obligations relating to such
Securities), to be held, managed and applied by the Trustee as herein
provided. In lieu of additional Securities or Contract Obligations
representing additional Securities, the Depositor may deposit with the
Trustee cash (or a letter of credit) in an amount equal to the valuation
made in accordance with Section 4.01 for the date of such deposit of the
additional Securities not delivered or represented by Contract Obligations
together with instructions to purchase such additional Securities. Each
deposit of additional Securities shall be made pursuant to a Notice of
Deposit of Additional Securities from the Depositor to the Trustee. The
Depositor, in each case, shall ensure that each deposit of additional
Securities pursuant to this Section shall be, as nearly as is practicable,
in the identical ratio as the Percentage Ratio for such Securities as is
specified in the Prospectus for the Trust and the Depositor shall ensure
that such Securities are identical to those deposited on the Initial Date
of Deposit. The Depositor shall obtain an opinion of counsel satisfactory
to the Depositor as to the validity of each deposit of additional
Securities. The Depositor shall deliver the additional Securities which
were not delivered concurrently with the deposit of additional Securities
and which were represented by Contract Obligations within 10 calendar days
after such deposit of additional Securities (the ADDITIONAL SECURITIES
DELIVERY PERIOD ). If a contract to buy such Securities between the
Depositor and seller is terminated by the seller thereof for any reason
beyond the control of the Depositor or if for any other reason such
Securities are not delivered to the Trust by the end of the Additional
Securities Delivery Period for such deposit, the Trustee shall immediately
draw on the Letter of Credit, if any, in its entirety, apply the monies in
accordance with Section 2.01(d), and the Depositor shall forthwith take the
remedial action specified in Section 3.14. If the Depositor does not take
the action specified in Section 3.14 within 10 calendar days of the end of
the Additional Securities Delivery Period, the Trustee shall forthwith take
the action specified in Section 3.14. If the Depositor determines that
Securities for whose purchase cash was deposited with the Trustee cannot be
acquired, the Depositor may proceed pursuant to Section 3.14 in the same
manner as if such Securities were Special Securities. Instructions to
purchase additional Securities shall be in writing and shall specify the
name, CUSIP number, if any, aggregate amount of the Security to be
purchased and price. The Trustee shall have no responsibility or liability
for any loss or depreciation resulting from any purchase made pursuant to
the Depositor s instructions and in the absence thereof shall have no duty
to purchase any Securities. The Trustee shall have no responsibility for
maintaining the composition of the Trust portfolio. Cash delivered to the
Trustee for purchase of additional Securities pursuant to instructions of
the Depositor shall be on deposit with the Trustee and shall bear interest
for the benefit of the Trust at the Federal funds rate adjusted daily as
reported in the New York Times under the caption Key Rates less the cost
to the Trustee of protecting such cash in accordance with 12 C.F.R. Section
9.10 (or successor regulations), if the Trustee is then required to so
protect such cash.
(c) In connection with the deposits described in Section 2.01 (a) and (b),
the Depositor has, in the case of Section 2.01(a) deposits, and, prior to
the Trustee accepting a Section 2.01(b) deposit, will, deposit cash and/or
Letter(s) of Credit in an amount sufficient to purchase the Contract
Obligations (the PURCHASE AMOUNT ) relating to Securities which are not
actually delivered to the Trustee at the time of such deposit, the terms of
which unconditionally allow the Trustee to draw on the full amount of the
available Letter of Credit. The Trustee may deposit such cash or cash
drawn on the Letter of Credit in a non-interest bearing account for the
Trust.
(d) In the event that the purchase of Contract Obligations pursuant to any
contract shall not be consummated in accordance with said contract or if
the Securities represented by a Contract Obligation are not delivered to
the Trust in accordance with Section 2.01(a) or 2.01(b) and the monies, or,
if applicable, the monies drawn on the Letter of Credit, deposited by the
Depositor are not utilized for Section 3.14 purchases of New Securities,
such funds, to the extent of the purchase price of Failed Contract
Obligations for which no Replacement Security was acquired pursuant to
Section 3.14, plus all amounts described in the next succeeding two
sentences, shall be credited to the Principal Account and distributed
pursuant to Section 3.05 to Unitholders of record as of the Record Date
next following the failure of consummation of such purchase. The Depositor
shall cause to be refunded to each Unitholder his PRO RATA portion of the
sales charge levied on the sale of Units to such Unitholder attributable to
such Failed Contract Obligation. The Depositor shall also pay to the
Trustee, for distribution to the Unitholders, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) to the date
the Depositor notifies the Trustee that no Replacement Security will be
purchased or, in the absence of such notification, to the expiration date
for purchase of a Replacement Security specified in Section 3.14. Any
amounts remaining from monies drawn on the Letter of Credit which are not
used to purchase New Securities or are not used to provide refunds to
Unitholders shall be paid to the Depositor.
(e) The Trustee is hereby irrevocably authorized to effect registration or
transfer of the Securities in fully registered form to the name of the
Trustee or to the name of its nominee.
(f) In connection with and at the time of any deposit of additional
Securities pursuant to Section 2.01(b), the Depositor shall exactly
replicate Cash (as defined below) received or receivable by the Trust as of
the date of such deposit. For purposes of this paragraph, Cash means, as
to the Principal Account, cash or other property (other than Securities) on
hand in the Principal Account or receivable and to be credited to the
Principal Account as of the date of the deposit (other than amounts to be
distributed solely to persons other than holders of Units created by the
deposit) and, as to the Income Account, cash or other property (other than
Securities) received by the Trust as of the date of the deposit or
receivable by the Trust in respect of distributions declared but not
received as of the date of the deposit, reduced by the amount of any cash
or other property received or receivable on any Security allocable (in
accordance with the Trustee s calculation of the monthly distribution from
the Income Account pursuant to Section 3.05) to a distribution made or to
be made in respect of a Record Date occurring prior to the deposit. Such
replication will be made on the basis of a fraction, the numerator of which
is the number of Units created by the deposit and the denominator of which
is the number of Units which are outstanding immediately prior to the
deposit.
SECTION 2.02. ACCEPTANCE OF TRUST. The Trustee hereby declares it holds
and will hold each Trust as Trustee in trust upon the trusts herein created
for the use and benefit of the Unitholders, subject to the terms and
conditions of this Indenture.
SECTION 2.03. ISSUE OF CERTIFICATES. The Trustee hereby acknowledges
receipt of the deposit referred to in Section 2.01 and simultaneously with
the receipt of said deposit has executed and delivered to or on the order
of the Depositor, Certificates substantially in the form above recited or
has recorded on the books of each Trust for the account of the Depositor
the ownership of Units representing the ownership of the number of Units of
each Trust Fund specified in Part II of the Trust Agreement. The Trustee
hereby agrees that on the date of any Notice of Deposit of Additional
Securities pursuant to Section 2.01 of the Indenture, it shall acknowledge
that the additional Securities identified therein have been deposited with
it by recording on its books the ownership, by the Depositor or such other
person or persons as may be indicated by the Depositor, of the aggregate
number of Units to be issued in respect of such additional Securities so
deposited, and shall, if so requested, execute documentation substantially
in the form above recited representing the ownership of an aggregate number
of those Units.
SECTION 2.04. FORM OF CERTIFICATES. Each Certificate referred to in
Section 2.03 is, and each Certificate hereafter issued shall be, in
substantially the form hereinabove recited, numbered serially for
identification, in fully registered form, transferable only on the books of
the Trustee as herein provided, executed either manually or in facsimile by
an authorized signatory of the Trustee and in facsimile by the President or
one of the Vice Presidents of the Depositor and dated the date of execution
and delivery by the Trustee.
SECTION 2.05. UNCERTIFICATED FORM. Units may also be held in
uncertificated form. Upon the issuance of Units in uncertificated form,
the Trustee shall provide to the registered owner within two business days
after the issuance, an initial transaction statement which sets forth a
description of the Fund, the number of Units issued, the name, address and
taxpayer identification number, if any, of the Unitholders and the date the
issuance was registered or setting forth those items as are required by
Article 8 of the Uniform Commercial Code currently in effect in the State
of New York. Unitholders evidenced by Certificates may at any time elect
to have their Units held in uncertificated form by surrendering their
Certificates to the Trustee for cancellation. At such time, an appropriate
notation will be made in the registration books of the Trust to indicate
that the Units formerly evidenced by such cancelled Certificates are Units
held in uncertificated form. The Trustee shall, at the request of the
holder of any Units held in uncertificated form, issue a new Certificate to
evidence such Units and at such time make appropriate notation in the
registration books of the Trust. If the Prospectus so provides, Units will
be held (i) solely in uncertificated form or (ii) held in uncertificated
form unless the Unitholder submits a written request to the Trustee for the
issuance of a Certificate.
SECTION 2.06. PORTFOLIO INSURANCE FOR THE INSURED TRUSTS. Concurrently
with the delivery to the Trustee of the Securities in each Insured Trust
listed in Schedule A to the Trust Agreement, the Insurer has delivered to
and deposited with the Trustee a unit investment trust insurance portfolio
policy to protect each Insured Trust and the Unitholders thereof against
nonpayment of principal and interest when due on any Corporate Bond or
Corporate Bonds (except for Pre-Insured Corporate Bonds) while held by the
Trustee in the portfolio of such Trust.
The Trustee shall take all action deemed necessary or advisable in
connection with the Insurance to continue such Insurance in full force and
effect and shall pay all premiums due thereon, including the initial
premium, all in such manner as in its sole discretion shall appear to
result in the most protection and least expense to such Trust.
Under the terms of the policy, the Insurance may not be cancelled by the
Insurer. The Trustee shall make the deduction and payment of premiums at
the time and in the manner prescribed in Section 3.05 of this Indenture in
order to continue in force the coverage thus provided. The Insurer s right
to the payment of premiums from Trust funds held by the Trustee in
accordance with the terms of the policy is absolute (except when payment is
withheld in good faith by the Trustee in the event of dispute over the
amount thereof), but no failure on the part of the Trustee to make such
payment of principal or installment thereof to the Insurer shall result in
a cancellation of the Insurance or otherwise affect the right of any
Unitholder under the policy to have any amounts of principal and interest
paid by the Insurer to the Trustee to be held as part of an Insured Trust
when the same are not paid when due by the issuer of a Corporate Bond or
Corporate Bonds held by the Trustee as part of such Insured Trust.
With each payment of premium or installment thereof, the Trustee shall
notify the Insurer of all Corporate Bonds (except for Pre-Insured Bonds)
which during the expiring premium period were redeemed from or sold by each
Insured Trust.
At all times during the existence of an Insured Trust, the insurance policy
shall provide for payment by the Insurer to the Trustee of any amounts of
principal and interest due, but not paid, by the issuer of a Corporate Bond
(except for Pre-Insured Corporate Bonds which are not covered by
Insurance). The Trustee shall promptly notify the Insurer of any
nonpayment or of any written notice directed to and received by the Trustee
of threatened nonpayment of principal or interest and the Insurer shall
within 30 days after receipt of such notice make payment to the Trustee of
all amounts of principal and interest at that time due, but not paid.
Payments of principal and interest assumed by the Insurer under the policy
shall be made as required by the related Corporate Bond or Corporate Bonds,
except in the event of a sale of any such Corporate Bond or Corporate Bonds
by the Trustee under Section 3.07, 5.02 or 6.04, or a termination of this
Indenture and the respective Insured Trust created hereby under Section
8.02, prior to the final maturity of such Corporate Bond or Corporate
Bonds, in each of which events, upon notice from the Trustee, the Insurer
shall promptly make payment of the accrued interest on such Corporate Bond
or Corporate Bonds to the Trustee and shall be relieved of further
obligation to the Trustee thereon.
Upon the making of any payment referred to in the preceding paragraphs, the
Insurer shall succeed to the rights of the Trustee under the Corporate Bond
or Corporate Bonds involved to the extent of the payments made at that
time, or any time subsequent thereto, and shall continue to make all
payments required by the terms of such Corporate Bond or Corporate Bonds to
the extent that funds are not provided therefor by the issuer thereof.
Upon the payment of any amounts by the Insurer, occasioned by the
nonpayment thereof by the issuer, the Trustee shall execute and deliver to
the Insurer any receipt, instrument or document required to evidence the
right of the Insurer in the Corporate Bond or Corporate Bonds involved to
payment of principal and/or interest thereon to the extent of the payments
made by the Insurer to the Trustee.
With respect to Pre-Insured Corporate Bonds in the respective Trusts of the
Fund, the Trustee shall promptly notify the respective insurance company of
any nonpayment of principal or interest on such Pre-Insured Corporate Bonds
and if the respective insurance company should fail to make payment to the
Trustee within 30 days after receipt of such notice, the Trustee shall take
all action against the respective insurance company and/or issuer as
instructed by the Depositor to collect all amounts of principal and
interest at that time due, but not collected.
The Trustee shall also take such action required under Section 5.02 hereof
with respect to the acquisition of Permanent Insurance, as defined in such
Section 5.02, in connection with the sale of Corporate Bonds from an
Insured Trust.
SECTION 2.07. SEPARATE TRUSTS. The Trusts created by this Indenture are
separate and distinct trusts for all purposes and the assets of one Trust
may not be commingled with the assets of any other nor shall the expenses
of any Trust be charged against the other. The Certificates representing
the ownership of an undivided fractional interest in one Trust shall not be
exchangeable for certificates representing the ownership of an undivided
fractional interest in any other.
ARTICLE III
ADMINISTRATION OF FUND
SECTION 3.01. INITIAL COST. The expenses incurred in establishing a
Trust, including the cost of the initial preparation and typesetting of the
registration statement, prospectuses (including preliminary prospectuses),
the indenture, and other documents relating to a Trust, printing of
Certificates, Securities and Exchange Commission and state blue sky
registration fees, the costs of the initial valuation of the portfolio and
audit of a Trust, the initial fees and expenses of the Trustee, and legal
and other non-material out-of-pocket expenses related thereto, but not
including the expenses incurred in the printing of preliminary prospectuses
and final prospectuses, expenses incurred in the preparation and printing
of brochures and other advertising materials and any other selling expenses
shall be borne by the Trust. To the extent the funds in the Interest and
Principal Accounts of the Trust shall be insufficient to pay the expenses
borne by the Trust specified in this Section 3.01, the Trustee shall
advance out of its own funds and cause to be deposited and credited to the
Interest Account such amount as may be required to permit payment of such
expenses. The Trustee shall be reimbursed for such advance on each Record
Date from funds on hand in the Income Account or, to the extent funds are
not available in such Account, from the Principal Account, in the amount
deemed to have accrued as of such Record Date as provided in the following
sentence (less prior payments on account of such advances, if any), and the
provisions of Section 6.04 with respect to the reimbursement of
disbursements for Trust expenses, including, without limitation, the lien
in favor of the Trustee therefor, shall apply to the payment of expenses
made pursuant to this Section. For purposes of the preceding sentence and
the addition provided in clause (d) of the first sentence of Section 5.01,
the expenses borne by the Trust pursuant to this Section shall be deemed to
have been paid upon the date of the Trust Agreement and to accrue at a
daily rate over the time period specified for their amortization by the
Depositor pursuant to Section 5.01; PROVIDED, HOWEVER, that nothing herein
shall be deemed to prevent, and the Trustee shall be entitled to full
reimbursement for, any advances made pursuant to this Section no later than
the termination of the Trust. For purposes of calculating the accrual of
organizational expenses under this Section 3.01, the Trustee shall rely on
the written estimates provided by the Depositor pursuant to Section 5.01.
SECTION 3.02. INTEREST ACCOUNT. The Trustee shall collect the interest on
the Securities in each Trust as such becomes payable (including all
interest accrued but unpaid prior to the date of deposit of the Securities
in trust and including that part of the proceeds of the sale, liquidation,
redemption or maturity of any Securities or insurance thereon, if any,
which represents accrued interest thereon, monies representing penalties
for failure to make timely payments on Securities or liquidated damages for
default or breach of any condition or term of the Securities) and credit
such interest to a separate account for each Trust to be known as the
INTEREST ACCOUNT .
SECTION 3.03. PRINCIPAL ACCOUNT. (a) The Securities in each Trust and all
moneys (except moneys held by the Trustee pursuant to subsection (b)
hereof) other than amounts credited to the Interest Account, received by
the Trustee in respect of the Securities in each Trust, including insurance
thereon, if any, shall be credited to a separate account for each Trust to
be known as the PRINCIPAL ACCOUNT .
(b) Moneys and/or irrevocable letters of credit required to purchase
Contract Securities or to purchase Securities pursuant to the Depositor's
written instructions, or deposited to secure such purchases, are hereby
declared to be held specially by the Trustee for such purchases and shall
not be deemed to be part of the Principal Account until (i) the Depositor
fails to timely purchase a Contract Security and has not given the Failed
Contract Notice (as defined in Section 3.14) at which time the moneys
and/or letters of credit attributable to the Contract Security not
purchased by the Depositor shall be credited to the Principal Account; or
(ii) the Depositor has given the Trustee the Failed Contract Notice at
which time the moneys and/or letters of credit attributable to failed
contracts referred to in such Notice shall be credited to the Principal
Account; PROVIDED, HOWEVER, that if the Depositor also notifies the Trustee
in the Failed Contract Notice that it has purchased or entered into a
contract to purchase a New Security (as defined in Section 3.14), the
Trustee shall not credit such moneys and/or letters of credit to the
Principal Account unless the New Security shall also have failed or is not
delivered by the Depositor within two business days after the settlement
date of such New Security, in which event the Trustee shall forthwith
credit such moneys and/or letters of credit to the Principal Account. The
Trustee shall in any case forthwith credit to the Principal Account, to the
extent of moneys, or moneys then available under any letter of credit,
deposited by the Depositor, and/or cause the Depositor to deposit in the
Principal Account, the difference, if any, between the purchase price of
the failed Contract Security and the purchase price of the New Security,
together with any sales charge and accrued interest applicable to such
difference (or applicable to the failed Contract Security if no New
Security is deposited) and distribute such moneys to Unitholders pursuant
to Section 3.05.
(c) Moneys in the Principal Account available for reinvestment pursuant to
Section 3.14 are deemed to be held specifically by the Trustee for
distribution by the Trustee in accordance with this Indenture following
notification that such moneys shall not be reinvested.
The Trustee shall give prompt written notice to the Depositor and the
Evaluator of all amounts credited to or withdrawn from the Principal
Account and the balance in such Account after giving effect to such credit
or withdrawal.
SECTION 3.04. RESERVE ACCOUNT. From time to time, the Trustee shall
withdraw from the cash on deposit in the Interest Account or the Principal
Account of the appropriate Trust such amounts as it, in its sole
discretion, shall deem requisite to establish a reserve for any applicable
taxes or other governmental charges that may be payable out of the Trust.
Such amounts so withdrawn shall be credited to a separate account for each
Trust which shall be known as the RESERVE ACCOUNT . The Trustee shall not
be required to distribute to the Unitholders any of the amounts in the
Reserve Account; PROVIDED, HOWEVER, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary for the
payment of any applicable taxes or other governmental charges, then it
shall promptly deposit such amounts in the account from which withdrawn, or
if the Trust Fund shall have terminated or shall be in the process of
termination, the Trustee shall distribute same in accordance with Section
8.02(d) and (e) to each Unitholder such holder s interest in the Reserve
Account.
SECTION 3.05. DISTRIBUTION. Unless otherwise provided in the Prospectus,
the Trustee, as of the FIRST SETTLEMENT DATE , as defined in Part II of
the Trust Agreement, shall advance from its own funds and shall pay to the
Unitholders of the respective Trusts then of record the amount of interest
received or accrued to such date on the Securities deposited in the
respective Trusts, net of a proportionate amount of Trust expenses
attributable to the period between the date of the Trust Agreement and the
First Settlement Date. The Trustee shall be entitled to reimbursement,
without interest, for such advancements from interest received by the
respective Trusts before any further distributions shall be made from the
Interest Account to Unitholders of the respective Trusts. Subsequent
distributions shall be made as hereinafter provided.
As of the tenth day of each month of each year commencing with the first
such day after the date of the Trust Agreement, the Trustee shall with
respect to each Trust:
(a) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to itself
individually the amounts that it is at the time entitled to receive
pursuant to Section 6.04;
(b) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to the
Evaluator the amount that it is at the time entitled to receive pursuant to
Section 4.03;
(c) deduct from the Interest Account or, to the extent funds are not
available in such Account, from the Principal Account and pay to counsel,
as hereinafter provided for, an amount equal to unpaid fees and expenses,
if any, of such counsel pursuant to Section 3.09, as certified to by the
Depositor; and
(d) deduct from the Interest Account or to the extent funds are not
available in such Account, from the Principal Account and pay to the
Portfolio Supervisor the amount that it is entitled to receive pursuant to
Section 3.15.
As of the tenth day of each month of each year commencing with the first
such day after the date of the Trust Agreement, the Trustee with respect to
each Insured Trust shall deduct from the Interest Account or, to the extent
funds are not available in such Account, from the Principal Account and pay
to the Insurer the amount of any premium to which it is at the time
entitled to receive pursuant to Section 2.06.
The share of the balance in the Interest Account to be distributed to a
Unitholder shall be computed as of the tenth day of each month, commencing
with the first such day after the date of the Trust Agreement (the MONTHLY
RECORD DATE ). The Trustee shall distribute by mail to each Unitholder of
record as of the close of business on such Monthly Record Date at the post
office address appearing on the registration books of the Trustee such
Unitholder s PRO RATA share of the balance of the Interest Account as
computed herein on or shortly after the twentieth day of the month of
computation to the Unitholder of record on such date of computation (the
MONTHLY DISTRIBUTION DATE ).
The computation of the pro rata share of the Interest Account shall be made
as follows:
(i) With respect to Trusts holding Securities other than Ginnie Maes, such
amount shall be equal to the estimated amount of interest accrued on the
Securities from and including the immediately preceding Monthly Record Date
(or First Settlement Date, as appropriate) through but not including the
Monthly Record Date on which such calculation is made, less (i) the
estimated costs and expenses attributable to such period (ii) interest
attributable to such period paid or payable in connection with redemption
of Units and (iii) amounts previously advanced by the Trustee pursuant to
this Section 3.05 which are now deemed to be uncollectible, divided by the
number of Units outstanding on such Monthly Record Date.
In the event the amount on deposit in the Interest Account on a Monthly
Distribution Date is not sufficient for the payment of the amount of
interest to be distributed on the basis of the aforesaid computation, the
Trustee shall advance out of its own funds and cause to be deposited in and
credited to the Interest Account such amount as may be required to permit
payment of the monthly interest distribution to be made on such monthly
distribution date and shall be entitled to be reimbursed, without interest,
out of interest received by the Fund on the first computation day following
the date of such advance on which such reimbursement may be made without
reducing the amount in the Interest Account to an amount less than that
required for the next ensuing monthly interest distribution except where
advances were made by the Trustee on Securities which have defaulted or on
which any payment has been recovered from the Trustee by a trustee in
bankruptcy and the interest on which cannot currently be collected is then
uncollectible (either from the issuer of the Securities or the Insurer), in
which case the Trustee may reimburse itself for such advances and reduce,
if necessary, the amount of the interest distribution.
(ii) With respect to Trusts holding Ginnie Maes, such amount shall be the
Unitholder s share of the balance of the Income Account on the Monthly
Record Date; provided, however, that the Trustee shall include in such
balance interest receivable by the Trust on the Securities prior to the
next following Monthly Distribution Date. The amount of the distribution
shall be appropriately adjusted in the event the amount received varies
from the amount anticipated to be receivable.
Distributions of amounts represented by the cash balance in the Principal
Account for each Trust shall be computed as of each Monthly Record Date
commencing with the first such day after the date of the Trust Agreement.
With respect to a Trust holding Ginnie Maes, the Trustee shall include in
the cash balance of the Principal Account principal receivable by the Trust
on the Securities prior to the next following Monthly Distribution Date,
provided, however, that the amount of the distribution shall be
appropriately adjusted in the event the amount received varies from the
amount anticipated to be receivable. With respect to any Trust to which
paragraph (c) of Section 3.14 is applicable, the cash balance of the
Principal Account shall not include amounts permitted to be reinvested in
Reinvestment Securities pursuant to such paragraph until the Depositor
otherwise notifies the Trustee in writing. On the next following Monthly
Distribution Date, or within a reasonable period of time thereafter, the
Trustee shall distribute by mail to each Unitholder of record at the close
of business on the Monthly Record Date at his post office address such
holder s PRO RATA share of the cash balance of the Principal Account as
thus computed. The Trustee shall not be required to make a distribution
from the Principal Account unless the cash balance on deposit therein
available for distribution shall be sufficient to distribute at least that
amount set forth in the related Prospectus.
If the Depositor (i) fails to replace any failed Special Security (as
defined in Section 3.14), or (ii) is unable or fails to enter into any
contract for the purchase of any New Security in accordance with Section
3.14, the Depositor shall pay to the Trustee and the Trustee shall
distribute, to the extent of the monies credited to the Principal Account
pursuant to Section 3.03(b) or supplied by the Depositor pursuant to this
Section to all Unitholders of Units in the respective Trust the principal
and accrued interest (at the coupon rate of the relevant Security to the
date the Depositor is notified of the failure) and sales charge
attributable to such Special Securities at the next monthly distribution
date which is more than thirty days after the expiration of the Purchase
Period (as defined in Section 3.14) or at such earlier time or in such
manner as the Trustee in its sole discretion deems to be in the best
interest of the Unitholders.
If any contract for a New Security in replacement of a Special Security
shall fail, the Depositor shall pay to the Trustee and the Trustee shall
distribute to the extent of the monies credited to the Principal Account
pursuant to Section 3.03(b) or supplied by the Depositor pursuant to this
Section, the principal and accrued interest (at the coupon rate of the
relevant Special Security to the date the Depositor is notified of the
failure) and sales charge attributable to the Special Security to the
Unitholders of Units in the respective Trust at the next monthly
distribution date which is more than thirty days after the date on which
the contract in respect of such New Security failed or at such earlier time
or in such earlier manner as the Trustee in its sole discretion determines
to be in the best interest of the Unitholders.
If, at the end of the Purchase Period, less than all moneys attributable to
a failed Special Security have been applied or allocated by the Trustee
pursuant to a contract to purchase New Securities, the Trustee shall
distribute the remaining moneys to Unitholders of Units in the respective
Trust at the next monthly distribution date which is more than thirty days
after the end of the Purchase Period or at such earlier time thereafter as
the Trustee in its sole discretion deems to be in the best interest of the
Unitholders.
The amounts to be so distributed to each Unitholder of a Trust shall be
that PRO RATA share of the balance of the Interest and Principal Accounts
of such Trust, computed as set forth above, as shall be represented by the
Units registered on the books of the Trustee in the name of such
Unitholder.
In the computation of each such share, fractions of less than one cent
shall be omitted. After any such distribution provided for above, any cash
balance remaining in the Interest Account or the Principal Account of a
Trust shall be held in the same manner as other amounts subsequently
deposited in each of such Accounts, respectively.
For the purpose of distribution as herein provided, the holders of record
on the registration books of the Trustee at the close of business on each
Record Date shall be conclusively entitled to such distribution, and no
liability shall attach to the Trustee by reason of payment to any such
registered Unitholder of record. Nothing herein shall be construed to
prevent the payment of amounts from the Interest Account and the Principal
Account of a Trust to individual Unitholders by means of one check, draft
or other proper instrument, PROVIDED that the appropriate statement of such
distribution shall be furnished therewith as provided in Section 3.06
hereof.
SECTION 3.06. DISTRIBUTION STATEMENTS. With each distribution from the
Interest or Principal Accounts of a Trust, the Trustee shall set forth,
either in the instrument by means of which payment of such distribution is
made or in an accompanying statement, the amount being distributed from
each such account expressed as a dollar amount per Unit of such Trust.
Within a reasonable period of time after the last business day of each
calendar year, the Trustee shall furnish to each person who at any time
during such calendar year was a Unitholder of a Trust a statement setting
forth, with respect to such calendar year and with respect to such Trust:
(A) as to the Interest Account:
(1) the amount of interest received on the Securities (including amounts
representing interest received upon any disposition of Securities,
penalties for failure to make timely payments on Securities or liquidated
damages for default on breach of any condition or term of the Securities),
(2) the amounts paid for purchases of New Securities pursuant to Section
3.14 and for redemptions pursuant to Section 5.02,
(3) the deductions for applicable taxes and fees and expenses of the
Trustee, the Evaluator, the Portfolio Supervisor, and counsel, and
(4) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last Business Day of such calendar year;
(B) as to the Principal Account:
(1) payments of principal on Securities, if any,
(2) the dates of the sale, maturity, liquidation or redemption of any of
the Securities and the net proceeds received therefrom, excluding any
portion thereof credited to the Interest Account,
(3) the amount paid for purchases of New Securities, Replacement
Securities or Reinvestment Securities pursuant to Section 3.14 and for
redemptions pursuant to Section 5.02,
(4) the deductions for payment of applicable taxes and fees and expenses
of the Trustee and counsel, and
(5) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last Business Day of such 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 Unit Value based on the last Trust Fund evaluation made during
such calendar year,
(4) the amounts 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 such distributions, and
(5) such other information as the Trustee may deem appropriate.
The registered owner of Units held in uncertificated form shall be sent by
the Trustee at periodic intervals no less frequent than once each year and
at any time upon the reasonable written request of the registered owner a
dated written statement containing the following information:
(1) a description of the Fund of which the uncertificated Unit is a part,
(2) the name, address and taxpayer identification number, if any, of the
registered owner, and
(3) the number of Units registered in the name of the registered owner on
the date of the statement.
SECTION 3.07. SALE OF SECURITIES. If necessary, in order to maintain the
sound investment character of a Trust, the Depositor, which may rely on the
recommendation of the Portfolio Supervisor, may direct the Trustee to sell
or liquidate Securities in such Trust at such price and time and in such
manner as shall be determined by the Depositor, PROVIDED that the Depositor
or Portfolio Supervisor has determined that any one or more of the
following conditions exist:
(a) that there has been a DEFAULT on such Securities in the payment of
principal or interest, or both, when due and payable;
(b) that any action or proceeding has been instituted at law or equity
seeking to RESTRAIN or ENJOIN the payment of principal or interest on any
such Securities, or that there exists any other legal question or
impediment affecting such Securities or the payment of debt service on the
same;
(c) that there has occurred any breach of covenant or warranty in any
resolution, ordinance, trust indenture or other document, which would
adversely affect either immediately or contingently the payment of debt
service on such Securities, or their general credit standing, or otherwise
impair the sound investment character of such Securities;
(d) that there has been a default in the payment of principal of or
interest on any other outstanding obligations of an issuer of such
Securities;
(e) that the price of any such Securities has declined as a result of
credit factors, so that in the opinion of the Depositor, as evidenced in
writing to the Trustee, the retention of such Securities would be
detrimental to the Trust Fund and to the interest of the Unitholders;
(f) that, in the case of Trusts containing Treasury Obligations or Ginnie
Mae Securities, there has been a default in payment of interest or
principal of other obligations guaranteed or backed by the full faith and
credit of the United States of America;
(g) that, in the case of Trusts containing Ginnie Mae Securities, an offer
is made by the Government National Mortgage Association to refinance or
refund any of the Securities;
(h) that such Securities are the subject of an advanced refunding (for the
purposes of this Section 3.07(h), an advanced refunding shall mean when
refunding securities are issued and the proceeds thereof are deposited in
an irrevocable trust to retire the Securities on or before their redemption
date);
(i) that as of any Record Date any of the Securities are scheduled to be
redeemed and paid prior to the next succeeding Monthly Distribution Date;
PROVIDED, HOWEVER, that as the result of such redemption the Trustee will
receive funds in an amount sufficient to enable the Trustee to include in
the next distribution from the Principal Account at least the minimum
principal distribution set forth in the Prospectus; or
(j) that the sale of Securities is necessary or advisable (1) in order to
maintain the qualification of the Trust as a Regulated Investment Company
in the case of a Trust which has elected to qualify as such, or (2) to make
distributions from a Trust in order to avoid the incurrence of excise
taxes.
If the Trust is an Insured Trust, the Depositor shall also consider whether
any insurance that may be applicable to the Corporate Bonds cannot be
relied upon to provide the principal and interest protections intended to
be afforded by such insurance.
In the event the Depositor has directed the Trustee to sell a Corporate
Bond from an Insured Trust, the Trustee shall exercise its right (if
applicable) to purchase a policy providing for permanent insurance (a
PERMANENT INSURANCE POLICY ) if the Depositor determines that such purchase
and payment of related premium will result in a net realization for the
Insured Trust greater than would the sale of the Corporate Bond without the
purchase of a Permanent Insurance Policy with respect to such Corporate
Bond and shall pay an amount equal to the premium payable for such
Permanent Insurance Policy to the Insurer at the time and in the manner
required by such Permanent Insurance Policy. Such premium shall be payable
only from the proceeds of the sale of such Corporate Bonds.
Upon receipt of such direction from the Depositor, upon which the Trustee
shall rely, the Trustee shall proceed to sell or liquidate the specified
Securities in accordance with such direction; PROVIDED, HOWEVER, that the
Trustee shall not sell or liquidate any Securities upon receipt of a
direction from the Depositor that it has determined that the conditions in
subdivision (i) above exist, unless the Trustee shall receive on account of
such sale or liquidation the full principal amount of such Securities, plus
the premium, if any, and the interest accrued and to accrue thereon to the
date of the redemption of such Securities.
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of any sale made pursuant to any such direction
or by reason of the failure of the Depositor to give any such direction,
and in the absence of such direction the Trustee shall have no duty to sell
or liquidate any Securities under this Section 3.07 except to the extent
otherwise required by Section 3.10 of this Indenture.
SECTION 3.08. REFUNDING SECURITIES. In the event that an offer shall be
made by an obligor of any of the Securities in a Trust to issue new
obligations in exchange and substitution for any issue of Securities
pursuant to a plan for the refunding or refinancing of such Securities, the
Depositor shall instruct the Trustee in writing to reject such offer and
either to hold or sell such Securities, except that if (i) the issuer is in
default with respect to such Securities, or (ii) in the opinion of the
Depositor, given in writing to the Trustee, the issuer will probably
default with respect to such Securities in the reasonably foreseeable
future, the Depositor shall instruct the Trustee in writing to accept or
reject such offer or take any other action with respect thereto as the
Depositor may deem proper. Nevertheless, if such an obligation is received
by a Trust, it shall either be sold by the Trustee or held in such Trust
pursuant to the direction of the Depositor (who may rely on the advice of
the Portfolio Supervisor). Any obligation so received in exchange shall be
deposited hereunder and shall be subject to the terms and conditions of
this Indenture to the same extent as the Securities originally deposited
hereunder. Within five days after such deposit, notice of such exchange
and deposit shall be given by the Trustee to each Unitholder of such Trust,
including an identification of the Securities eliminated and the securities
substituted therefor.
SECTION 3.09. COUNSEL. The Depositor may employ from time to time as it
may deem necessary a firm of attorneys for any legal services that may be
required in connection with the disposition of underlying securities
pursuant to Section 3.07 or the substitution of any securities for
underlying securities as the result of any refunding permitted under
Section 3.08. The fees and expenses of such counsel shall be paid by the
Trustee from the Interest and Principal Accounts of the applicable Trust as
provided for in Section 3.05(d) hereof.
SECTION 3.10. NOTICE AND SALE BY TRUSTEE. If at any time the principal of
or interest on any of the Securities shall be in default and not paid or
provision for payment thereof shall not have been duly made within 30 days,
either pursuant to the Insurance, if any, or otherwise, the Trustee shall
notify the Depositor thereof. If within 30 days after such notification
the Depositor has not given any instruction to sell or hold or has not
taken any other action in connection with such Securities, the Trustee
shall sell such Securities forthwith, and the Trustee shall not be liable
or responsible in any way for depreciation or loss incurred by reason of
such sale.
SECTION 3.11. TRUSTEE NOT REQUIRED TO AMORTIZE. Nothing in this
Indenture, or otherwise, shall be construed to require the Trustee to make
any adjustments between the Interest and Principal Accounts by reason of
any premium or discount in respect of any of the Securities.
SECTION 3.12. LIABILITY OF DEPOSITOR. The Depositor shall be under no
liability to the Unitholders for any action taken or for refraining from
the taking of any action in good faith pursuant to this Indenture or for
errors in judgment, but shall be liable only for its own willful
misfeasance, bad faith or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties
hereunder. The Depositor may rely in good faith on any paper, order,
notice, list, affidavit, receipt, opinion, endorsement, assignment, draft
or any other document of any kind PRIMA FACIE properly executed and
submitted to it by the Trustee, counsel or any other persons pursuant to
this Indenture and in furtherance of its duties.
SECTION 3.13. NOTICE TO DEPOSITOR. In the event that the Trustee shall
have been notified at any time of any action to be taken or proposed to be
taken by holders of the Securities (including but not limited to the making
of any demand, direction, request, giving of any notice, consent or waiver
or the voting with respect to any amendment or supplement to any indenture,
resolution, agreement or other instrument under or pursuant to which the
Securities have been issued) the Trustee shall promptly notify the
Depositor and shall thereupon take such action or refrain from taking any
action as the Depositor shall in writing direct; PROVIDED, HOWEVER, that if
the Depositor shall not within five Business Days of the giving of such
notice to the Depositor direct the Trustee to take or refrain from taking
any action, the Trustee shall take such action as it, in its sole
discretion, shall deem advisable. Neither the Depositor nor the Trustee
shall be liable to any person for any action or failure to take action with
respect to this Section 3.13.
.
(a) If any contract in respect of Contract Securities in a Trust other than
a contract to purchase a New Security (as defined below), including those
purchased on a when, as and if issued basis, shall have failed due to any
occurrence, act or event beyond the control of the Depositor or the Trustee
(such failed Contract Securities being herein called the SPECIAL
SECURITIES ), the Depositor shall notify the Trustee (such notice being
herein called the FAILED CONTRACT NOTICE ) of its inability to deliver the
failed Special Security to the Trustee after it is notified that the
Special Security will not be delivered by the seller thereof to the
Depositor. Prior to, or simultaneously with, giving the Trustee the Failed
Contract Notice, or within a maximum of twenty days after giving such
Notice (such twenty-day period being herein called the PURCHASE PERIOD ),
the Depositor shall, if possible, purchase or enter into the contract, if
any, to purchase an obligation to be held as a Security hereunder (herein
called the NEW SECURITY ) as part of the Fund in replacement of the failed
Special Security, subject to the satisfaction of all of the following
conditions in the case of each purchase or contract to purchase:
(1) The New Securities (i) shall have a fixed maturity date (whether or
not entitled to the benefits of any sinking, redemption, purchase of
similar fund) substantially similar to, but not exceeding the date of
maturity of the Special Securities they replace, (ii) must be purchased at
a price that results in a current return as of the Date of Deposit at least
equal to that of the Special Securities they replace, (iii) must be
purchased at a price that results in a yield to maturity as of the Date of
Deposit of the Trust at least equal to that of the Special Securities they
replace, (iv) shall be payable as to principal and interest in United
States currency, (v) shall not be when, as and if issued Securities, (vi)
in the case of Trusts containing Ginnie Mae Securities, shall be taxable
mortgage-backed securities of the modified pass-through type which maintain
as far as practicable the original percentage relationship between the
principal amounts of Ginnie Maes of specified interest rates and ranges of
maturity in the Trust and (vii) shall be issued after July 18, 1984.
(2) Each New Security shall be rated at least BBB or better in the case
of the Insured Trusts and A or better in the case of other Trusts by
Standard & Poor s Corporation or Baa or better in the case of the Insured
Trusts and A or better in the case of other Trusts by Moody s Investors
Service, Inc., or comparably rated by any other nationally recognized
credit rating service rating debt obligations which shall be designated by
the Depositor and shall be satisfactory to the Trustee.
(3) The principal amount of the New Securities (exclusive of accrued
interest) shall not exceed the principal attributable to the Special
Securities.
(4) With respect to the Insured Trusts, each New Security which is a
Corporate Bond shall be acceptable to the Insurer to be included under the
respective Trust s Insurance and will be so included upon acquisition by
the Trust or, in the case of a Trust in which all Securities are not
insured by a portfolio insurance policy but are Pre-Insured Bonds, shall be
a Pre-Insured Bond.
(5) The Depositor shall promptly furnish a notice to the Trustee (which
may be part of the Failed Contract Notice) in respect of the New Securities
purchased or to be purchased that shall (i) identify the New Securities,
(ii) state that the contract to purchase, if any, entered into by the
Depositor is satisfactory in form and substance, and (iii) state that the
foregoing conditions of clauses (1) through (4) have been satisfied with
respect to the New Securities.
Upon satisfaction of the foregoing conditions with respect to any New
Security, the Depositor shall pay the purchase price for the New Security
from its own resources or, if the Trustee has credited any moneys and/or
letters of credit attributable to the failed Special Security to the
Principal Account of such Trust, the Trustee shall pay the purchase price
of the New Security upon directions from the Depositor from the moneys
and/or letters of credit so credited to the Principal Account. If the
Depositor has paid the purchase price and, in addition, the Trustee has
credited moneys of the Depositor to the Principal Account of such Trust,
the Trustee shall forthwith return to the Depositor the portion of such
moneys that is not properly distributable to Unitholders pursuant to
Section 3.05.
Whenever a New Security is acquired by the Depositor pursuant to the
provisions of this Section 3.14, the Trustee shall, within five days
thereafter, mail to all holders of Units of the respective Trust notice of
such acquisition, including an identification of the failed Special
Security and the New Security acquired. Notwithstanding anything to the
contrary in this Section 3.14, no substitution of New Securities will be
made unless the Depositor has received an opinion of counsel that such
substitution will not adversely affect the federal, state or local income
tax status of the Trust, if the principal amount of such New Securities
when added to all previously purchased New Securities in the Trust exceeds
15% of the principal amount of Securities initially deposited in the Trust.
(b) If the Trust has elected to be taxed as a Regulated Investment Company,
the Depositor may in writing from time to time direct the Trustee to
purchase, or to enter into contracts (which the Depositor shall have
approved as satisfactory in form and substance) to purchase, obligations to
be held as Securities hereunder as a part of the Trust Fund (the
REPLACEMENT SECURITIES ) in respect of the moneys held in the Principal
Account representing the proceeds of Securities sold pursuant to Section
3.07 or proceeds from the sale of Securities pursuant to Section 5.02 to
the extent that such proceeds are not required for the purpose of
redemption of Units, subject to the satisfaction of the following
conditions in the case of each such purchase or contract to purchase:
(1) the Replacement Securities are substantially similar to the Securities
from which the proceeds in the Principal Account are derived;
(2) the Depositor has received an opinion of counsel that such purchase
will not adversely affect the status of the Trust under the Investment
Company Act of 1940; and
(3) the Depositor has given such written direction to the Trustee five
business days prior to the Monthly Record Date preceding the Distribution
Date on which such moneys would otherwise be distributed.
(c) If the Trust has elected to be taxed as a Regulated Investment Company
and if the Prospectus for the Trust specifies that the reinvestment of
principal is permitted, from the Date of Deposit for such Trust until such
time as the Depositor notifies the Trustee in writing that such action is
impractical (the REINVESTMENT PERIOD ), the Trustee shall, as directed by
the Depositor, enter into contracts (which the Depositor shall have
approved as satisfactory in form and substance) to purchase obligations to
be held as Securities hereunder as part of such Trust (the REINVESTMENT
SECURITIES ) and shall pay for the same with the moneys held in the
Principal Account representing the payment or prepayment of principal on
the underlying Securities to the extent that such proceeds are not required
for the purpose of redemption of Units or other charges to the Principal
Account then pending. In giving such direction, the Depositor shall
determine that the Reinvestment Securities to be acquired pursuant to such
contracts are substantially similar to the Securities upon which the
principal used to purchase such Reinvestment Securities was received.
The Trustee may purchase the Reinvestment Securities for deposit in the
Trust Fund directly from market makers in such Securities or may retain the
Depositor or other brokers to purchase the Reinvestment Securities and pay
them usual and customary brokerage commissions for such transactions.
Funds remaining in the Principal Account subsequent to a purchase of
Reinvestment Securities will remain in such Account until such time as they
can be invested into additional Reinvestment Securities. During the
reinvestment period, amounts in the Principal Account which the Depositor
determines and so notifies the Trustee in writing or via facsimile are (a)
unable to be invested into Reinvestment Securities or (b) are required to
be distributed for regulated investment company tax purposes shall be
distributed on the next Monthly Distribution Date, to Unitholders of record
on the related Monthly Record Date.
At such time that the Depositor shall determine that the reinvestment of
cash from the Principal Account into Reinvestment Securities shall no
longer be practical, the Depositor shall notify the Trustee, in writing,
that the Reinvestment Period is terminated. Upon termination of the
Reinvestment Period, unreinvested amounts remaining in the Principal
Account and amounts subsequently credited to the Principal Account shall be
distributed in accordance with Section 3.05.
(d) The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any purchase made pursuant to
any direction of the Depositor provided in this Section 3.14, and in the
absence of such direction the Trustee shall have no duty to make any
purchase. The Depositor shall not be liable for errors of judgment in
respect of this Section 3.14; PROVIDED, HOWEVER, that this provision shall
not protect the Depositor against any liability to which it would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of its reckless disregard of
its obligations and duties hereunder.
SECTION 3.15. PORTFOLIO SUPERVISOR. As compensation for providing
portfolio supervisory services under this Indenture, the Portfolio
Supervisor shall receive against a statement or statements therefor
submitted to the Trustee on or before each Monthly Distribution Date an
aggregate annual fee in an amount which shall not exceed that amount set
forth in the Prospectus, times the number of Units outstanding as of the
December Record Date of the immediately preceding year except during the
year or years in which an initial offering period as determined in Section
4.01 of this Indenture occurs, in which case the fee for a month is based
on the number of Units outstanding as of each Record Date with respect to
the monthly period ending thereon (such annual fee to be pro rated for any
calendar year in which the Portfolio Supervisor provides services during
less than the whole of such year), but in no event shall such compensation
when combined with all compensation received from other series of the Fund
and other unit investment trusts sponsored by the Depositor for providing
such supervisory services in any calendar year exceed the aggregate cost to
the Portfolio Supervisor for providing such services. The statement or
statements submitted to the Trustee as hereinabove provided shall
constitute the Portfolio Supervisor s certification that the amounts
claimed as due do not exceed the amount payable in accordance with this
Section, and the Trustee shall have no liability for payments made in
reliance thereon. Such compensation may, from time to time, be adjusted
PROVIDED that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the Date of
Deposit of the Trust, in consumer prices for services as measured by the
United States Department of Labor Consumer Price Index entitled ALL
SERVICES LESS RENT OF SHELTER or similar index, if such index should no
longer be published. The consent or concurrence of the Trustee or any
Unitholder hereunder shall not be required for any such adjustment or
increase. Such compensation shall be charged by the Trustee, upon receipt
of invoice therefor from the Portfolio Supervisor, against the Interest and
Principal Accounts on or before the Distribution Date following the Monthly
Record Date on which such period terminates.
If the cash balance in the Interest and Principal Accounts shall be
insufficient to provide for amounts payable pursuant to this Section 3.15,
the Trustee shall have the power to sell (i) Securities from the current
list of Securities designated to be sold pursuant to Section 5.02 hereof,
or (ii) if no such Securities have been so designated, such Securities as
the Trustee may see fit to sell in its own discretion, and to apply the
proceeds of any such sale in payment of the amounts payable pursuant to
this Section 3.15.
Any moneys payable to the Portfolio Supervisor pursuant to this Section
3.15 shall be secured by a prior lien on the Trust Fund except that no such
lien shall be prior to any lien in favor of the Trustee under the
provisions of Section 6.04 herein.
Except as the context otherwise requires, the Portfolio Supervisor shall be
subject to the provisions of Section 4.05 herein in the same manner as it
would if it were the Evaluator.
ARTICLE IV
EVALUATION OF SECURITIES; EVALUATOR
SECTION 4.01. EVALUATION OF SECURITIES. The Evaluator shall determine
separately and promptly furnish to the Trustee and the Depositor upon
request the value of each issue of Securities of each Trust (treating
separate maturities of Securities as separate issues) as of the close of
trading on the New York Stock Exchange on the offering side of the market
on each Business Day on which such exchange is open for trading until such
time as the Evaluator and the Trustee have been informed by the Depositor
that the initial public offering of the Units of the respective Trusts has
been completed. After the initial public offering of the Units has been
completed (and on any day during the initial public offering on which the
Trustee has notified the Evaluator that a Unit has been tendered for
redemption), the Evaluator shall determine separately and promptly furnish
to the Trustee and the Depositor upon request the value of each issue of
Securities of a Trust (treating separate maturities of Securities as
separate issues) as of the close of trading on the New York Stock Exchange
on the bid side of the market on the days on which an evaluation of the
Trust is required by Section 5.01. Such evaluations shall be made (i) on
the basis of current bid or offering prices for the Securities of a Trust,
(ii) if bid or offering prices are not available for any Securities of a
Trust, on the basis of current bid or offering prices for comparable
securities, (iii) by determining the value of the Securities of a Trust on
the bid or offering side of the market by appraisal, or (iv) by any
combination of the above. Any evaluation of Corporate Bonds which includes
amounts attributable to Permanent Insurance, as defined in Section 5.02
hereof, shall, to the extent necessary, include a deduction for amounts
which would be payable as premiums to obtain Permanent Insurance if the
Trustee had exercised the right to obtain Permanent Insurance. For each
evaluation, the Evaluator shall also determine and furnish to the Trustee
and the Depositor the aggregate of (a) the value of all Securities of a
Trust on the basis of such evaluation, and (b) on the basis of the
information furnished to the Evaluator by the Trustee pursuant to Section
3.03, the amount of cash then held in the Principal Account of the
respective Trust which was received by the Trustee after the Record Date
preceding such determination less amounts required for payment of Units
tendered for redemption and payment of Trust expenses, and less any amounts
held in the Principal Account of the respective Trust for distribution to
Unitholders on a subsequent Distribution Date when a Record Date occurs
four Business Days or less after such determination. For the purposes of
the foregoing, the Evaluator may obtain current bid or offering prices for
the Securities from investment dealers or brokers (including the Depositor)
that customarily deal in the Securities and may value the Insurance on the
Corporate Bonds in such a manner as the Evaluator deems necessary for such
valuation.
In the case of Trusts which contain Ginnie Mae Securities, during the
period in any month prior to the time when the current outstanding
principal amount of any Security is publicly available the Evaluator will
base its evaluations and calculations as to such Security upon the average
prepayments experience with respect to such Security during the preceding
twelve months (or since the issuance of the Security is such Security has
been outstanding less than twelve months) applied to the principal amount
outstanding at the end of the second preceding month. (As used in this
Indenture, prepayment experience shall mean the percentage of reduction
in the principal amount of a Security).
SECTION 4.02. INFORMATION FOR UNITHOLDERS. For the purpose of permitting
Unitholders to satisfy any reporting requirements of applicable federal or
state tax law, the Evaluator shall make available to the Trustee and the
Trustee shall transmit to any Unitholder upon request any determinations
made by it pursuant to Section 4.01.
SECTION 4.03. COMPENSATION OF EVALUATOR. As compensation for its services
hereunder, the Evaluator shall receive against a statement therefor
submitted to the Trustee monthly on or before each Monthly Distribution
Date a fee as specified in the Prospectus for each evaluation of the
Securities; PROVIDED, HOWEVER that such fee may be increased without
approval of the Trustee or the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States
Department of Labor. In no event, however, shall such compensation when
combined with all compensation received from other series of the Fund and
other unit investment trusts sponsored by the Depositor for providing such
evaluation services in any calendar year exceed the aggregate cost to the
Evaluator for providing such services. The statement submitted to the
Trustee as hereinabove provided shall constitute the Evaluator s
certification that the amounts claimed as due do not exceed the amount
payable in accordance with this Section, and the Trustee shall have no
liability for payments made in reliance thereon.
SECTION 4.04. LIABILITY OF EVALUATOR. The Trustee, the Depositor and the
Unitholders may rely on any evaluation furnished by the Evaluator and shall
have no responsibility for the accuracy thereof. The determinations made
by the Evaluator hereunder shall be made in good faith upon the basis of
the best information available to it. The Evaluator shall be under no
liability to the Trustee, the Depositor or the Unitholders for errors in
judgment; PROVIDED, HOWEVER, that this provision shall not protect the
Evaluator against any liability to which it would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
SECTION 4.05. RESIGNATION AND REMOVAL OF EVALUATOR; SUCCESSOR. (a) The
Evaluator may resign and be discharged hereunder, by executing an
instrument in writing resigning as Evaluator and filing the same with the
Depositor and the Trustee, not less than 60 days before the date specified
in such instrument when, subject to Section 4.05(e), such resignation is to
take effect. Upon receiving such notice of resignation, the Depositor and
the Trustee shall use their best efforts to appoint a successor evaluator
having qualifications and at a rate of compensation satisfactory to the
Depositor and the Trustee. Such appointment shall be made by written
instrument executed by the Depositor and the Trustee, in duplicate, one
copy of which shall be delivered to the resigning Evaluator and one copy to
the successor evaluator. The Depositor or the Trustee may remove the
Evaluator at any time upon 30 days written notice and appoint a successor
evaluator having qualifications and at a rate of compensation satisfactory
to the Depositor and the Trustee. Such appointment shall be made by
written instrument executed by the Depositor and the Trustee, in duplicate,
one copy of which shall be delivered to the Evaluator so removed and one
copy to the successor evaluator. Notice of such resignation or removal and
appointment of a successor evaluator shall be mailed by the Trustee to each
Unitholder then of record.
(b) Any successor evaluator appointed hereunder shall execute, acknowledge
and deliver to the Depositor and the Trustee an instrument accepting such
appointment hereunder, and such successor evaluator without any further
act, deed or conveyance shall become vested with all the rights, powers,
duties and obligations of its predecessor hereunder with like effect as if
originally named Evaluator herein and shall be bound by all the terms and
conditions of this Indenture.
(c) In case at any time the Evaluator shall resign and no successor
evaluator shall have been appointed and have accepted appointment within 30
days after notice of resignation has been received by the Depositor and the
Trustee, the Evaluator may forthwith apply to a court of competent
jurisdiction for the appointment of a successor evaluator. Such court may
thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a successor evaluator.
(d) Any corporation into which the Evaluator hereunder may be merged or
with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Evaluator hereunder shall be a party,
shall be the successor evaluator under this Indenture without the execution
or filing of any paper, instrument or further act to be done on the part of
the parties hereto, anything herein, or in any agreement relating to such
merger or consolidation, by which the Evaluator may seek to retain certain
powers, rights and privileges theretofore obtaining for any period of time
following such merger or consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Evaluator and appointment of a
successor evaluator pursuant to this Section shall become effective upon
acceptance of appointment by the successor evaluator as provided in
subsection (b) hereof.
ARTICLE V
EVALUATION, REDEMPTION, PURCHASE, TRANSFER, INTERCHANGE,
REPLACEMENT OF CERTIFICATES OR UNITS HELD IN UNCERTIFICATED FORM
SECTION 5.01. EVALUATION. The Trustee shall make an evaluation of each
Trust as of the close of trading on the New York Stock Exchange on each
Business Day on which such exchange is open for trading. For each Trust,
and for all such purposes of determination of the aggregate price of the
Securities in a Trust, the close of trading on the New York Stock Exchange
shall be 4:00 p.m. Eastern time. Such evaluations shall take into account
and itemize separately (a) the cash on hand in each Trust (other than cash
declared held in trust to cover contracts to purchase securities) or moneys
in the process of being collected from matured interest coupons or
securities matured or called for redemption prior to maturity, (b) the
value of each issue of the Securities in the respective Trust as last
determined by the Evaluator pursuant to Section 4.01, (c) interest accrued
thereon not subject to collection and distribution, (d) amounts
representing organizational expenses paid from a Trust less amounts
representing accrued organizational expenses of such Trust, and (e) all
other assets of the respective Trust. For each such evaluation there shall
be deducted from the sum of the above (i) amounts representing any
applicable taxes or governmental charges payable out of the respective
Trust and for which no deductions shall have previously been made for the
purpose of addition to the Reserve Account, (ii) amounts representing
accrued expenses of such Trust including but not limited to unpaid fees and
expenses of the Trustee, the Evaluator, the Portfolio Supervisor, the
Depositor and counsel, in each case as reported by the Trustee to the
Depositor on or prior to the date of evaluation, and (iii) cash held for
distribution to Unitholders of record of the respective Trust, or required
for redemption of Units tendered, as of a date prior to the evaluation then
being made. In the case of Trusts which contain Ginnie Mae Securities,
during the period in any month prior to the time when the current
outstanding principal amount of any Security is publicly available the
Trustee will base its calculations as to the interest accrued on such
Security upon the average prepayments experience with respect to such
Security during the preceding twelve months ( or since the issuance of the
Security if such Security has been outstanding less than twelve months)
applied to the principal amount outstanding at the end of the second
preceding month, in each case as determined by the Evaluator upon which the
Trustee shall be authorized to rely and shall have no liability for any
error therein. (As used in this Indenture, PREPAYMENT EXPERIENCE shall
mean the percentage of reduction in the principal amount of a Security).
The value of the PRO RATA share of each Unit of the respective Trust
determined on the basis of any such evaluation shall be referred to herein
as the UNIT VALUE. Until the Depositor has informed the Trustee that
there will be no further deposits of Additional Securities pursuant to
Section 2.01(b), the Depositor shall provide the Trustee with written
estimates of (i) the total organizational expenses to be borne by the Trust
pursuant to Section 3.01, (ii) the total number of Units to be issued in
connection with the initial deposit and all anticipated deposits of
additional Securities and (iii) the period or periods over which such
expenses are to be amortized and the aggregate amount of expense to be
amortized during each such period. For purposes of calculating the Trust
Evaluation and Unit Value, the Trustee shall treat all such anticipated
expenses as having been paid and all liabilities therefor as having been
incurred, and all Units as having been issued, in each case on the date of
the Trust Agreement, and, in connection with each such calculation, shall
take into account a pro rata portion of such expense and liability based on
the actual number of Units issued as of the date of such calculation. In
the event the Trustee is informed by the Depositor of a revision in its
estimate of total expenses or total Units or period of amortization and
upon the conclusion of the deposit of additional Securities, the Trustee
shall base calculations made thereafter on such revised estimates or actual
expenses or period of amortization, respectively, but such adjustment shall
not affect calculations made prior thereto and no adjustment shall be made
in respect thereof.
The Trustee shall make an evaluation of the Securities deposited in each
Trust as of the time said Securities are deposited under this Indenture.
Such evaluation shall be made on the same basis as set forth in Section
4.01, and shall be based upon the offering prices of said Securities. The
Trustee, in lieu of making the evaluation required hereby, may use an
evaluation obtained by the Depositor and in so doing shall not be liable or
responsible, under any circumstances whatever, for the accuracy or
correctness thereof, or for any error or omission therein. Such
determination of the offering price of the Securities of each Trust on the
Date of Deposit determined as herein provided shall be included in Schedule
A attached to the Trust Agreement.
SECTION 5.02. REDEMPTIONS BY TRUSTEE; PURCHASES BY DEPOSITOR. Any Units
tendered for redemption by a Unitholder or his duly authorized attorney to
the Trustee at its unit investment trust office in the City of New York,
duly endorsed or accompanied by proper instruments of transfer with
signatures guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signatures guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by the
Trustee, shall be redeemed by the Trustee on the third business day
following the day on which tender for redemption is made (being herein
called the REDEMPTION DATE ). Subject to payment by such Unitholder of
any tax or other governmental charges which may be imposed thereon, such
redemption is to be made by payment on the Redemption Date of cash
equivalent to the Unit Value, determined by the Trustee as of the close of
trading on the New York Stock Exchange, on the date of tender; PROVIDED
that accrued interest is paid to the Redemption Date, multiplied by the
number of Units tendered for redemption (herein called the REDEMPTION
PRICE ). Units received for redemption by the Trustee on any day after the
close of trading on the New York Stock Exchange (4:00 p.m. Eastern time)
will be held by the Trustee until the next day on which the New York Stock
Exchange is open for trading and will be deemed to have been tendered on
such day for redemption at the Redemption Price computed on that day.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption for Units of a Trust
or postpone the date of payment of the Redemption Price for more than three
business days following the day on which tender for redemption is made (i)
for any period during which the New York Stock Exchange is closed other
than customary weekend and holiday closings or during which trading on the
New York Stock Exchange is restricted; (ii) for any period during which an
emergency exists as a result of which disposal by such Trust of the
Securities is not reasonably practicable or it is not reasonably
practicable fairly to determine in accordance herewith the value of the
Securities; or (iii) for such other period as the Securities and Exchange
Commission may by order permit, and shall not be liable to any person or in
any way for any loss of damage which may result from any such suspension or
postponement.
Not later than the close of business on the day of tender of Units for
redemption by a Unitholder other than the Depositor, the Trustee shall
notify the Depositor of such tender. The Depositor shall have the right to
purchase such Units by notifying the Trustee of its election to make such
purchase as soon as practicable thereafter but in no event subsequent to
12:00 p.m. Eastern time on the next Business Day after the day on which
such Units were tendered for redemption. Such purchase shall be made by
payment for such Units by the Depositor on the Redemption Date of an amount
equal to the Redemption Price which would otherwise be payable by the
Trustee to such Unitholder.
Any Units so purchased by the Depositor may at the option of the Depositor
be tendered to the Trustee for redemption at the corporate trust office of
the Trustee in the manner provided in the first paragraph of this Section
5.02.
If the Depositor does not elect to purchase any Units of a Trust tendered
to the Trustee for redemption, or if Units are being tendered by the
Depositor for redemption, that portion of the Redemption Price which
represents interest shall be withdrawn from the Interest Account of such
Trust to the extent available. The balance paid on any redemption,
including accrued interest, if any, shall be withdrawn from the Principal
Account of such Trust to the extent that funds are available for such
purpose. If such available balance shall be insufficient, the Trustee
shall sell such of the Securities held in such Trust currently designated
for such purposes by the Depositor as the Trustee in its sole discretion
shall deem necessary. Given the minimum principal amount in which certain
Securities may be required to be sold, the proceeds of such sales may
exceed the amount necessary for payment of Units redeemed. Such excess
proceeds shall be distributed PRO RATA to all remaining Unitholders of
record of such Trust Fund unless (i) the Trust has elected to be taxed as a
Regulated Investment Company and (ii) the Depositor shall have notified the
Trustee no later than five Business Days prior to the next following Record
Date that such excess proceeds shall be reinvested as provided in Section
3.14; however, the Trustee shall not be required to make a distribution
from the Principal Account of the Trust Fund unless the cash balance on
deposit therein available for distribution shall be sufficient to
distribute at least the amount set forth in the related Prospectus. In the
event that funds are withdrawn from the Principal Account for payment of
accrued interest, the Principal Account shall be reimbursed for such funds
so withdrawn when sufficient funds are next available in the Interest
Account.
The Depositor shall maintain with the Trustee a current list of Securities
held in each Trust designated to be sold and the minimum par amount thereof
for the purpose of redemption of Units of each Trust tendered for
redemption and not purchased by the Depositor, and for payment of expenses
hereunder, PROVIDED that if the Depositor shall for any reason fail to
maintain such a list, the Trustee, in its sole discretion, may designate a
current list of Securities for such purposes. The net proceeds of any
sales of Securities from such list representing principal shall be credited
to the Principal Account of such Trust and the proceeds of such sales
representing accrued interest shall be credited to the Interest Account of
such Trust. With respect to Trusts in which all of the underlying
Securities have Insurance (the "INSURED TRUSTS"), the Depositor shall also
designate on such list of Securities designated to be sold, the Securities
upon the sale of which the Trustee shall obtain permanent insurance (the
PERMANENT INSURANCE ) from an Insurer, PROVIDED that if the Depositor shall
for any reason fail to make such designation, the Trustee in its sole
discretion, shall make such designation if it deems such designation to be
in the best interests of Unitholders. The Trustee is hereby authorized to
pay and shall pay out of the proceeds of the sale of the Securities which
are covered by Permanent Insurance, any premium for such Permanent
Insurance and the net proceeds after such deduction shall be credited to
the Principal Account and the net proceeds representing accrued interest
shall be credited to the Interest Account.
Sales of Securities shall be made in such manner as the Trustee shall
determine will bring the best price obtainable for the Trust Fund,
provided, however, that sales shall be made in such manner, as the Trustee
shall determine, as will provide the Trustee with funds in an amount
sufficient and at the time necessary in order for it to pay the Redemption
Price of Units tendered for redemption, regardless of whether or not a
better price could be obtained if the Securities were sold without regard
for the day on which the proceeds of such sale would be received. The
Trustee shall not be liable or responsible in any way for depreciation or
loss incurred by reason of any sale of Securities made pursuant to this
Section 5.02.
Certificates evidencing Units and the amount recorded in the registration
books of the Trust representing Units held in uncertificated form redeemed
pursuant to this Section 5.02 shall be canceled by the Trustee and the Unit
or Units evidenced by such Certificates or evidenced by such records in the
registration books of the Trust for Units held in uncertificated form shall
be terminated by such redemptions.
When directed by the Depositor, the Trustee shall employ the Depositor as
its agent for the purpose of executing sales of Securities. The Depositor
will verify the Trustee s ownership of any Security prior to entering into
a contract for its sale. The Trustee shall have no liability for loss or
depreciation resulting from the Depositor s negligence or misconduct as
such agent.
Notwithstanding the foregoing, the Trustee is hereby authorized in its
discretion, but without obligation, in the event that the Depositor does
not elect to purchase any Unit tendered to the Trustee for redemption, or
in the event that a Unit is being tendered by the Depositor for redemption,
in lieu of redeeming such Unit, to sell such Unit in the
over-the-counter-market for the account of the tendering Unitholder at a
price which will return to the Unitholder an amount in cash, net after
deducting brokerage commissions, transfer taxes and other charges, equal to
or in excess of the Redemption Price which such Unitholder would otherwise
be entitled to receive on redemption pursuant to this Section 5.02. The
Trustee shall pay to the Unitholder the net proceeds of any such sale no
later than the day the Unitholder would otherwise be entitled to receive
payment of the Redemption Price hereunder.
SECTION 5.03. TRANSFER OR INTERCHANGE OF CERTIFICATES OR UNITS HELD IN
UNCERTIFICATED FORM. A Unit may be transferred by the registered holder
thereof by presentation and surrender of the Certificate or in the case of
Units held in uncertificated form, written transfer instructions in a form
satisfactory to the Trustee at the corporate trust office of the Trustee,
properly endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee and executed by the Unitholder
or his authorized attorney, whereupon a new registered Certificate or
Certificates or a new notation in the registration books of the Trust for
Units to be held in uncertificated form for the same number of Units of the
same Trust Fund executed by the Trustee and the Depositor will be issued in
exchange and substitution therefor. Certificates issued pursuant to this
Indenture are interchangeable for one or more other Certificates in an
equal aggregate number of Units of the same Trust and all Certificates
issued shall be issued in denominations of one Unit or any multiple thereof
as may be requested by the Unitholder. Unitholders may exchange their
Certificates for the same number of Units to be held in uncertificated form
as recorded in the registration books of the Trust. The Trustee may deem
and treat the person in whose name any Unit shall be registered upon the
books of the Trustee as the owner of such Unit for all purposes hereunder
and the Trustee shall not be affected by any notice to the contrary, nor be
liable to any person or in any way for so deeming and treating the person
in whose name any Unit shall be so registered.
Unitholders holding their Units in uncertificated form may at any time
request the Trustee to issue Certificates representing such Units. The
Trustee shall, upon receipt of such a request in a form satisfactory to it,
issue Certificates in denominations of one Unit or any multiple thereof as
may be requested by the Unitholders.
A sum sufficient to pay any tax or other governmental charge that may be
imposed in connection with any such transfer or interchange shall be paid
by the Unitholder to the Trustee. The Trustee may require a Unitholder to
pay a reasonable fee to be determined by the Trustee for each new
Certificate issued on any such transfer or interchange.
All Certificates cancelled pursuant to this Indenture shall be disposed of
by the Trustee without liability on its part.
SECTION 5.04. CERTIFICATES MUTILATED, DESTROYED, STOLEN OR LOST. In case
any Certificate shall become mutilated, destroyed, stolen or lost, the
Trustee shall execute and deliver a new Certificate in exchange and
substitution therefor upon the holder s furnishing the Trustee with proper
identification and satisfactory indemnity, complying with such other
reasonable regulations and conditions as the Trustee may prescribe and
paying such expenses as the Trustee may incur. Any mutilated Certificate
shall be duly surrendered and cancelled before any new Certificate shall be
issued in exchange and substitution therefor. Upon the issuance of any new
Certificate, a sum sufficient to pay any tax or other governmental charge
and the fees and expenses of the Trustee may be imposed. Any such new
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the related Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be
found at any time.
In the event the related Trust has terminated or is in the process of
termination, the Trustee may, instead of issuing a new Certificate in
exchange and substitution for any Certificate which shall have become
mutilated or shall have been destroyed, stolen or lost, make the
distributions in respect of such mutilated, destroyed, stolen or lost
Certificate (without surrender thereof except in the case of a mutilated
Certificate) as provided in Section 8.02 hereof if the Trustee is furnished
with such security or indemnity as it may require to save it harmless, and
in the case of destruction, loss or theft of a Certificate, evidence to the
satisfaction of the Trustee of the destruction, loss or theft of such
Certificate and of the ownership thereof.
ARTICLE VI
TRUSTEE
SECTION 6.01. GENERAL DEFINITION OF TRUSTEE S LIABILITIES, RIGHTS AND
DUTIES. The Trustee shall in its discretion undertake such action as it
may deem necessary at any and all times to protect each Trust and the
rights and interests of the Unitholders pursuant to the terms of this
Indenture; PROVIDED, HOWEVER, that the expenses and costs of such actions,
undertakings or proceedings shall be reimbursable to the Trustee from the
Interest and Principal Accounts of such Trust, and the payment of such
costs and expenses shall be secured by a prior lien on such Trust.
In addition to and notwithstanding the other duties, rights, privileges and
liabilities of the Trustee as otherwise set forth, the liabilities of the
Trustee are further defined as follows:
(a) All moneys deposited with or received by the Trustee hereunder related
to a Trust shall be held by it without interest in trust within the meaning
of the Investment Company Act of 1940, as part of the Trust Fund or the
Reserve Account of such Trust until required to be disbursed in accordance
with the provisions of this Indenture, and such moneys will be segregated
by separate recordation on the trust ledger of the Trustee so long as such
practice preserves a valid preference under applicable law, or if such
preference is not so preserved the Trustee shall handle such moneys in such
other manner as shall constitute the segregation and holding thereof in
trust within the meaning of the Investment Company Act of 1940.
(b) The Trustee shall be under no liability for any action taken in good
faith on any appraisal, paper, order list, demand, request, consent,
affidavit, notice, opinion, direction, evaluation, endorsement, assignment,
resolution, draft or other document whether or not of the same kind prima
facie properly executed, or for the disposition of moneys, Securities or
Units pursuant to this Indenture, or in respect of any evaluation which it
is required to make or is required or permitted to have made by others
under this Indenture or otherwise, except by reason of its own negligence,
lack of good faith or willful misconduct, PROVIDED that the Trustee shall
not in any event be liable or responsible for any evaluation made by the
Evaluator. The Trustee may construe any of the provisions of this
Indenture, insofar as the same may appear to be ambiguous or inconsistent
with any other provisions hereof, and any construction of any such
provisions hereof by the Trustee in good faith shall be binding upon the
parties hereto.
(c) The Trustee shall not be responsible for or in respect of the recitals
herein, the validity or sufficiency of this Indenture or for the due
execution hereof by the Depositor, the Portfolio Supervisor, or the
Evaluator, or for the form, character, genuineness, sufficiency, value or
validity of any Securities (except that the Trustee shall be responsible
for the exercise of due care in determining the genuineness of Securities
delivered to it pursuant to contracts for the purchase of such Securities)
or for or in respect of the validity or sufficiency of the Certificates or
the due execution thereof by the Depositor or for the policy of insurance,
including (without limiting the foregoing) the terms thereof, its due
execution and delivery or the payment by the Insurer of amounts due under,
or the performance by the Insurer of its obligations in accordance with,
the Insurance, if any, and the Trustee shall in no event assume or incur
any liability, duty or obligation to any Unitholder or the Depositor other
than as expressly provided for herein. The Trustee shall not be
responsible for or in respect of the validity of any signature by or on
behalf of the Depositor, the Portfolio Supervisor or the Evaluator or the
Insurer.
(d) The Trustee shall be under no obligation to appear in, prosecute or
defend any action which in its opinion may involve it in expense or
liability, unless as often as required by the Trustee it shall be furnished
with reasonable security and indemnity against such expense or liability,
and any pecuniary cost of the Trustee from such actions shall be deductible
from and a charge against the Interest and Principal Accounts of the
affected Trust or Trusts. The Trustee shall in its discretion undertake
such action as it may deem necessary at any and all times to protect the
Trust and the rights and interests of the Unitholders pursuant to the terms
of this Indenture; PROVIDED, HOWEVER, that the expenses and costs of such
actions, undertakings or proceedings shall be reimbursable to the Trustee
from the Interest and Principal Accounts, and the payment of such costs and
expenses shall be secured by a lien on the Trust prior to the interests of
Unitholders.
(e) The Trustee may employ agents, attorneys, accountants and auditors and
shall not be answerable for the default or misconduct of any such agents,
attorneys, accountants or auditors if such agents, attorneys, accountants
or auditors shall have been selected with reasonable care. The Trustee
shall be fully protected in respect of any action under this Indenture
taken or suffered in good faith by the Trustee, in accordance with the
opinion of counsel which may be counsel to the Depositor acceptable to the
Trustee. The fees and expenses charged by such agents, attorneys,
accountants and auditors shall constitute an expense of the Trustee,
reimbursable from the Interest and Principal Accounts of the affected Trust
as set forth in Section 6.04 hereof.
(f) If at any time the Depositor shall fail to undertake or perform any of
the duties which by the terms of this Indenture are required by it to be
undertaken or performed, or such Depositor shall become incapable of acting
or shall be adjudged a bankrupt or insolvent, or a receiver of such
Depositor or of its property shall be appointed, or any public officer
shall take charge or control of such Depositor or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then in any such case, the Trustee may, in its sole discretion: (1)
appoint a successor depositor who shall act hereunder in all respects in
place of such Depositor, which successor shall be satisfactory to the
Trustee, and which may be compensated at rates deemed by the Trustee to be
reasonable under the circumstances, by deduction ratably from the Interest
Accounts of the affected Trusts or, to the extent funds are not available
in such Account, from the Principal Accounts of the affected Trusts, but no
such deduction shall be made exceeding such reasonable amount as the
Securities and Exchange Commission may prescribe in accordance with Section
26(a)(2)(C) of the Investment Company Act of 1940, (2) terminate this
Indenture and the trust created hereby and liquidate the Trust Fund in the
manner provided in Section 8.02 or (3) continue to act as Trustee hereunder
without terminating this Indenture, acting in its own absolute discretion
without appointing any successor Depositor and receiving additional
compensation at rates determined as provided in clause (1) of this Section
6.01(f).
(g) If (i) the value of any Trust as shown by any evaluation by the
Trustee pursuant to Section 5.01 hereof shall be less than that amount set
forth in the Prospectus, or (ii) by reason of the Depositor s redemption of
Units of a Trust not theretofore sold constituting more than 60% of the
number of Units initially authorized, the net worth of the Trust is reduced
to less than 40% of the aggregate principal amount of Securities initially
deposited in such Trust, the Trustee may in its discretion, and shall when
so directed by the Depositor, terminate this Indenture and the trust
created hereby and liquidate such Trust, all in the manner provided in
Section 8.02.
(h) In no event shall the Trustee be liable for any taxes or other
governmental charges imposed upon or in respect of the Securities or upon
the interest thereon or upon it as Trustee hereunder or upon or in respect
of any Trust which it may be required to pay under any present or future
law of the United States of America or of any other taxing authority having
jurisdiction in the premises. For all such taxes and charges and for any
expenses, including counsel fees, which the Trustee may sustain or incur
with respect to such taxes or charges, the Trustee shall be reimbursed and
indemnified out of the Interest and Principal Accounts of the affected
Trust, and the payment of such amounts so paid by the Trustee shall be
secured by a prior lien on such Trust.
(i) No payment to a Depositor or to any principal underwriter (as defined
in the Investment Company Act of 1940) for the Trust or to any affiliated
person (as so defined) or agent of a Depositor or such underwriter shall be
allowed the Trustee as a expense except for payment of such reasonable
amounts as the Securities and Exchange Commission may prescribe as
compensation for performing bookkeeping and other administrative services
of a character normally performed by the Trustee.
(j) The Trustee, except by reason of its own negligence or willful
misconduct, shall not be liable for any action taken or suffered to be
taken by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture.
(k) The Trustee is authorized to appoint as co-trustee of any Trust a
trust company affiliated with the Trustee to perform the functions of
custodian and receiving and paying agent.
(l) The Trustee in its individual or any other capacity may become owner
or pledgee of, or be an underwriter or dealer in respect of, stocks, bonds
or other obligations issued by the same issuer (or an affiliate of such
issuer) or any obligor of any Securities at any time held as part of the
Trust and may deal in any manner with the same or with the issuer (or an
affiliate of the issuer) with the same rights and powers as if it were not
the Trustee hereunder.
(m) The Trust may include a letter or letters of credit for the purchase
of Contract Securities issued by the Trustee in its individual capacity for
the account of the Depositor, and the Trustee may otherwise deal with the
Depositor with the same rights and powers as if it were not the Trustee
hereunder.
SECTION 6.02. BOOKS, RECORDS AND REPORTS. The Trustee shall keep proper
books of record and account of all the transactions of each Trust under
this Indenture at its corporate trust office, including a record of the
name and address of, and the Certificates issued by each Trust and held by,
every Unitholder, and such books and records of each Trust shall be open to
inspection by any Unitholder of such Trust at all reasonable times during
the 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 or rule or regulation thereunder.
Unless the Depositor determines that such an audit is not required, the
accounts of the Trust shall be audited not less than annually by
independent public accountants designated from time to time by the
Depositor and the reports of such accountants shall be furnished by the
Trustee, upon request, to Unitholders. So long as the Depositor is making
a secondary market for Units, the Depositor shall bear the cost of such
annual audits to the extent such cost exceeds that amount set forth in the
related Prospectus.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of independent counsel to the Depositor or
no-action letters issued by or published interpretations of the staff of
the Securities and Exchange Commission, the Trustee shall pay, or reimburse
to the Depositor or others, from the Interest or Principal Account the
costs of the preparation of documents and information with respect to each
Trust required by law or regulation in connection with the maintenance of a
secondary market in units of each Trust. Such costs may include but are
not limited to accounting and legal fees, blue sky registration and filing
fees, printing expenses and other reasonable expenses related to documents
required under Federal and state securities laws.
SECTION 6.03. INDENTURE AND LIST OF SECURITIES ON FILE. The Trustee shall
keep a certified copy or duplicate original of this Indenture on file at
its corporate trust office available for inspection at all reasonable times
during the usual business hours by any Unitholder, together with a current
list of the Securities in each Trust.
SECTION 6.04. COMPENSATION. For services performed under this Indenture
the Trustee shall be paid an amount per annum at the rate as set forth in
the Trust Agreement. The Trustee s compensation shall accrue daily and be
computed on the basis of the greatest principal amount of Securities in
each Trust at any time during the period with respect to which such
compensation is being computed (such period being the period commencing
with the next preceding Record Date, or the initial date of deposit, as
appropriate, and running to, but not including, the Distribution Date on
which such computation is made) and shall be apportioned among the
respective plans of distribution in effect as of January 1 next preceding
such computation. The Trustee may periodically adjust the compensation
provided for pursuant to this paragraph in response to fluctuations in
short-term interest rates and average cash balances of the Trust accounts
(reflecting the cost to the Trustee of advancing funds to a Trust to meet
scheduled distributions and changes in anticipated earnings on cash
balances) and may, in addition, adjust such portion of its fee as is not
computed by reference to the cash balances in the Trust accounts in
accordance with the percentage of the total increase, after the Date of
Deposit of the Trust, in consumer prices for services as measured by the
United States Department of Labor Consumer Price Index entitled ALL
SERVICES LESS RENT OF SHELTER . The consent or concurrence of any
Unitholder hereunder shall not be required for any such adjustment or
increase. Such compensation shall be charged by the Trustee against the
Interest and Principal Accounts of each Trust on or before the Distribution
Date on which such period terminates; PROVIDED, HOWEVER, that such
compensation shall be deemed to provide only for the usual, normal and
proper functions undertaken as Trustee pursuant to this Indenture. The
Trustee shall charge the Interest and Principal Accounts relating to such
Trust for any and all expenses and disbursements incurred hereunder,
including insurance premiums, legal and auditing expenses, and for any
extraordinary services performed by the Trustee hereunder relating to such
Trust.
The Trustee shall be indemnified ratably by the affected Trust and held
harmless against any loss or liability accruing to it without negligence,
bad faith or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this Trust, including
the costs and expenses (including counsel fees) of defending itself against
any claim of liability in the premises. If the cash balances in the
Interest and Principal Accounts of the affected Trust shall be insufficient
to provide for amounts payable pursuant to this Section 6.04, the Trustee
shall have the power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02 hereof, or (ii)
if no such Securities have been so designated, such Securities of the
affected Trust as the Trustee may see fit to sell in its own discretion,
and to apply the proceeds of any such sale in payment of the amounts
payable pursuant to this Section 6.04. The Depositor and Trustee will
observe the procedures described in Section 5.02 with respect to the
purchase of Permanent Insurance in connection with any such sale of
Corporate Securities from an Insured Trust.
The Trustee shall not be liable or responsible in any way for depreciation
or loss incurred by reason of any sale of Securities made pursuant to this
Section 6.04. Any moneys payable to the Trustee pursuant to this Section
shall be secured by a prior lien on the affected Trust.
. The following provisions shall provide for the removal and resignation
of the Trustee and the appointment of any successor trustee:
(a) The Trustee or any trustee or trustees hereafter appointed may resign
and be discharged of the Trusts created by this Indenture, by executing an
instrument in writing resigning as Trustee of such Trusts and filing same
with the Depositor and (unless the Depositor shall have, concurrently with
such resignation, appointed a successor trustee) mailing a copy of a notice
of resignation to all Unitholders then of record, not less than 60 days
before the date specified in such instrument when, subject to Section
6.05(e), such resignation is to take effect. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor trustee as
hereinafter provided, by written instrument, in duplicate, one copy of
which shall be delivered to the resigning Trustee and one copy to the
successor trustee. In case at any time the Trustee shall not meet the
requirements set forth in Section 6.05 hereof, or shall become incapable of
acting, or if a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Trustee in an involuntary
case, or the Trustee shall commence a voluntary case, under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
any receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) for the Trustee or for any substantial part of its
property shall be appointed, or the Trustee shall generally fail to pay its
debts as they become due, or shall fail to meet such written standards for
the Trustee s performance as shall be established from time to time by the
Depositor, or if the Depositor determines in good faith that there has
occurred either (1) a material deterioration in the creditworthiness of the
Trustee or (2) one or more negligent acts on the part of the Trustee having
a materially adverse effect, either singly or in the aggregate, on the
Trust or on one or more Trusts of one or more Funds, such that the
replacement of the Trustee is in the best interests of the Unitholders, the
Depositor, upon 60 days prior written notice, may remove the Trustee and
appoint a successor trustee having qualifications and at a rate of
compensation satisfactory to the Depositor by written instrument, in
duplicate, one copy of which shall be delivered to the Trustee so removed
and one copy to the successor trustee. Notice of such resignation or
removal of a Trustee and appointment of a successor trustee shall be mailed
by the successor trustee, promptly after its acceptance of such
appointment, to each Unitholder then of record.
(b) Any successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Depositor and to the resigning or removed Trustee an
instrument accepting such appointment hereunder, and such successor trustee
without any further act, deed or conveyance shall become vested with all
the rights, powers and duties and obligations of its predecessor hereunder
with like effect as if originally named Trustee herein and shall be bound
by all the terms and conditions of this Indenture. Upon the request of
such successor trustee, the Depositor and the resigning or removed Trustee
shall, upon payment of any amounts due the resigning or removed Trustee, or
provision therefor to the satisfaction of such resigning or removed
Trustee, execute and deliver an instrument acknowledged by it transferring
to such successor trustee all the rights and powers of the resigning or
removed Trustee; and the resigning or removed Trustee shall transfer,
deliver and pay over to the successor trustee all Securities and moneys at
the time held by it hereunder, together with all necessary instruments of
transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained
by the resigning or removed Trustee in the administration hereof as may be
requested by the successor trustee, and shall thereupon be discharged from
all duties and responsibilities under this Indenture.
(c) In case at any time the Trustee shall resign and no successor trustee
shall have been appointed and have accepted appointment within 30 days
after notice of resignation has been received by the Depositor, the
retiring Trustee may forthwith apply to a court of competent jurisdiction
for the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(d) Any corporation into which any trustee hereunder may be merged or with
which it may be consolidated, or any corporation resulting from any merger
or consolidation to which any trustee hereunder shall be a party, shall be
the successor trustee under this Indenture without the execution or filing
of any paper, instrument or further act to be done on the part of the
parties hereto, anything herein, or in any agreement relating to such
merger or consolidation, by which any such trustee may seek to retain
certain powers, rights and privileges theretofore obtaining for any period
of time following such merger or consolidation, to the contrary
notwithstanding.
(e) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to this Section shall become effective upon
acceptance of appointment by the successor trustee as provided in
subsection (b) hereof.
SECTION 6.06. QUALIFICATIONS OF TRUSTEE. The Trustee shall be a
corporation organized and doing business under the laws of the United
States or any state thereof, which is authorized under such laws to
exercise corporate trust powers and having at all times an aggregate
capital, surplus and undivided profits of not less than $5,000,000.
ARTICLE VII
RIGHTS OF UNITHOLDERS
SECTION 7.01. BENEFICIARIES OF TRUST. By the purchase and acceptance or
other lawful delivery and acceptance of any Units, the Unitholder shall be
deemed to be a beneficiary of such Trust created by this Indenture and
vested with all right, title and interest in such Trust to the extent of
the Unit or Units set forth and evidenced by such Certificate or evidenced
by the records in the registration books of such Trust subject to the terms
and conditions of this Indenture, and of such Certificate or of the initial
transaction statements sent to Unitholders in uncertificated form.
SECTION 7.02. RIGHTS, TERMS AND CONDITIONS. In addition to the other
rights and powers set forth in the other provisions and conditions of this
Indenture, the Unitholders shall have the following rights and powers and
shall be subject to the following terms and conditions:
(a) A Unitholder may at any time prior to the evaluation time as of the
date on which the Trust is terminated tender his Unit or Units to the
Trustee for redemption in accordance with Section 5.02.
(b) The death or incapacity of any Unitholder shall not operate to
terminate this Indenture or a related Trust, nor entitle his legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court of competent jurisdiction for a partition or
winding up of the Trust Fund or a related Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
Each Unitholder expressly waives any right he may have under any rule of
law, of the provisions of any statute, or otherwise, to require the Trustee
at any time to account, in any manner other than as expressly provided in
this Indenture, in respect of the Securities or moneys from time to time
received, held and applied by the Trustee hereunder.
(c) No Unitholder shall have any right to vote or in any manner otherwise
control the operation and management of the Trust Fund, a related Trust, or
the obligations and management of the Trust Fund, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the
terms of the Certificates or in the initial transaction statement, be
construed so as to constitute the Unitholders from time to time as partners
or members of an association; nor shall any Unitholder ever be under any
liability to any third persons by reason of any action taken by the parties
to this Indenture, or any other cause whatsoever.
ARTICLE VIII
ADDITIONAL COVENANTS; MISCELLANEOUS PROVISIONS
SECTION 8.01. AMENDMENTS. This Indenture may be amended from time to time
by the Depositor and Trustee hereto or their respective successors, without
the consent of any of the Unitholders (a) to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision contained herein; or (b) to make
such other provision regarding matters or questions arising hereunder as
shall not adversely affect the interests of the Unitholders; PROVIDED,
HOWEVER, that the parties hereto may not amend this Indenture so as to (i)
increase the number of Units issuable hereunder above the amount issued
pursuant to Section 2.01, or such lesser amount as may be outstanding at
any time during the term of this Indenture, or (ii) subject to Sections
3.08 and 3.14, permit the deposit or acquisition hereunder of interest
bearing obligations or other securities either in addition to or in
substitution for any of the Securities.
Promptly after the execution of any such amendment, the Trustee shall
furnish written notification to all then outstanding Unitholders of the
substance of such amendment.
SECTION 8.02. TERMINATION. This Indenture and each Trust created hereby
shall terminate upon the maturity, redemption, sale or other disposition as
the case may be of the last Security held in such Trust hereunder unless
sooner terminated as hereinbefore specified, and may be terminated at any
time by the written consent of that percentage of the outstanding Units of
the respective Trust as set forth in the related Prospectus; PROVIDED that
in no event shall any Trust continue beyond the end of the calendar year
preceding the fiftieth anniversary of the execution of this Indenture (the
MANDATORY TERMINATION DATE ); and PROVIDED FURTHER, that in connection with
any such termination, it shall not be necessary for the Trustee to dispose
of any Security or Securities of the respective Trust if retention of such
Security or Securities of the respective Trust, until due, shall be deemed
to be in the best interests of Unitholders of the respective trust,
including but not limited to, situations in which a Security or Securities
are in default, situations in which a Security or Securities reflect a
deteriorated market price resulting from a fear of default, and situations
in which a Security or Securities mature after the Mandatory Termination
Date. The Depositor and Trustee will observe the procedures described in
Section 5.02 with respect to the purchase of Permanent Insurance in
connection with the disposition of Corporate Bonds from an Insured Trust.
Upon the date of termination the registration books of the Trustee shall be
closed.
Written notice of any termination, specifying the time or times at which
the Unitholders of such Trust may surrender their Units for cancellations
shall be given by the Trustee to each Unitholder at his address appearing
on the registration books of the Trustee. Within a reasonable period of
time after such termination, the Trustee shall fully liquidate the
Securities of such Trust then held, if any, and shall:
(a) deduct from the Interest Account of such Trust or, to the extent that
funds are not available in such Account of such Trust, from the Principal
Account of such Trust, and pay to itself individually an amount equal to
the sum of (i) its accrued compensation for its ordinary recurring
services, (ii) any compensation due it for its extraordinary services in
connection with such Trust, and (iii) any costs, expenses, indemnities or
advances in connection with such Trust as provided herein;
(b) deduct from the Interest Account of such Trust or, to the extent that
funds are not available in such Account, from the Principal Account of such
Trust, and pay accrued and unpaid fees of the Evaluator, the Portfolio
Supervisor and bond counsel in connection with such Trust, if any;
(c) deduct from the Interest Account of such Trust or the Principal
Account of such Trust any amounts which may be required to be deposited in
the Reserve Account to provide for payment of any applicable taxes or other
governmental charges and any other amounts which may be required to meet
expenses incurred under this Indenture in connection with such Trust;
(d) distribute to each Unitholder of such Trust, upon surrender for
cancellation of his Unit or Units, such holder s PRO RATA share of the
balance of the Interest Account of such Trust;
(e) distribute to each Unitholder of such Trust, upon surrender for
cancellation of his Unit or Units, such holder s PRO RATA share of the
balance of the Principal Account and, upon satisfaction of the conditions
provided in Section 3.04 hereof, the Reserve Account, of such Trust; and
(f) together with such distribution to each Unitholder as provided for in
(d) and (e), furnish to each such Unitholder a final distribution statement
as of the date of the computation of the amount distributable to
Unitholders, setting forth the data and information in substantially the
form and manner provided for in Section 3.06 hereof.
The amounts to be so distributed to each Unitholder shall be that PRO RATA
share of the balance of the total Interest and Principal Accounts of such
Trust as shall be represented by the Units therein evidenced by the
outstanding Unit or Units held of record by such Unitholder.
The Trustee shall be under no liability with respect to moneys held by it
in the Interest, Reserve and Principal Accounts of a Trust upon termination
except to hold the same in trust within the meaning of the Investment
Company Act of 1940, without interest until disposed of in accordance with
the terms of this Indenture.
In the event that all of the Unitholders of such Trust shall not surrender
their Units for cancellation within six months after the time specified in
the above mentioned written notice, the Trustee shall give a second written
notice to the remaining Unitholders to surrender their Units for
cancellation and receive the liquidation distribution with respect thereto.
If within one year after the second notice all the Units of such Trust
shall not have been surrendered for cancellation, the Trustee may take
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Unitholders concerning surrender of their Units and the cost
thereof shall be paid out of the moneys and other assets which remain in
trust hereunder.
SECTION 8.03. CONSTRUCTION. This Indenture is executed and delivered in
the State of New York, and all laws or rules of construction of such state
shall govern the rights of the parties hereto and the Unitholders and the
interpretation of the provisions hereof.
SECTION 8.04. REGISTRATION OF UNITS. The Depositor agrees and undertakes
on its own part to register the Units with the Securities and Exchange
Commission or other applicable governmental agency, Federal or state,
pursuant to applicable Federal or state statutes, if such registration
shall be required, and to do all things that may be necessary or required
to comply with this provision during the term of the Trust Fund created
hereunder, and the Trustee shall incur no liability or be under any
obligation or expenses in connection therewith, except as provided in
Section 3.01.
SECTION 8.05. WRITTEN NOTICE. Any notice, demand, direction or
instruction to be given to the Depositor hereunder shall be in writing and
shall be duly given if mailed or delivered to the Depositor, World Trade
Center, 164 Northern Avenue, ZT3, Boston, Massachusetts 02210, or at such
other address as shall be specified by the Depositor to the other parties
hereto in writing.
Any notice, demand, direction or instruction to be given to the Trustee
shall be in writing and shall be duly given if mailed or delivered to the
Unit Investment Trust offices of the Trustee, 770 Broadway, New York, New
York 10003, Attention: Unit Investment Trust Division, or such other
address as shall be specified by the Trustee to the other parties hereto in
writing.
Any notice, demand, direction or instruction to be given to the Evaluator
hereunder shall be in writing and shall be duly given if mailed or
delivered to the Evaluator at World Trade Center, 164 Northern Avenue, ZT3,
Boston, Massachusetts 02210, or at such other address as shall be specified
by the Evaluator to the other parties hereto in writing.
Any notice, demand, direction or instruction to be given to the Portfolio
Supervisor shall be in writing and shall be duly given if mailed or
delivered to the Portfolio Supervisor at World Trade Center, 164 Northern
Avenue, ZT3, Boston, Massachusetts 02210 hereto or such other address as
shall be specified by the Portfolio Supervisor to the other parties hereto
in writing.
Any notice to be given to the Unitholders shall be duly given if mailed by
first class mail with postage prepaid or delivered to each Unitholder at
the address of such holder appearing on the registration books of the
Trustee.
SECTION 8.06. SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary to
any express provision of law or contrary to policy of express law, though
not expressly prohibited, or against public policy, or shall for any reason
whatsoever be held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Indenture and shall in no way affect the
validity or enforceability of the other provisions of this Indenture or of
the Certificates or the rights of the holders thereof.
SECTION 8.07. DISSOLUTION OF DEPOSITOR NOT TO TERMINATE. The dissolution
of the Depositor for any cause whatsoever shall not operate to terminate
this Indenture or any Trust Fund insofar as the duties and obligations of
the Trustee are concerned.
In Witness Whereof, National Financial Services Corporation and United
States Trust Company of New York have each caused these Standard Terms and
Conditions of Trust to be executed by authorized officers all as of the
day, month and year first above written.
National Financial Services
Corporation, Depositor, Evaluator and
Portfolio Supervisor
By
The Chase Manhattan Bank (National Association), Trustee
By
Vice President
TABLE OF CONTENTS
Section Heading Page
Preamble 1
Form of Certificate 2
Article II Deposit of Securities; Acceptance of Trust; Form and Issuance of
Certificates; Portfolio Insurance for the Insured Trusts; Uncertificated
Form; Separate Trusts 6
Section 2.01. Deposit of Securities 6
Section 2.02. Acceptance of Trust 9
Section 2.03. Issue of Certificates 9
Section 2.04. Form of Certificates 9
Section 2.05. Uncertificated Form 9
Section 2.06. Portfolio Insurance for the Insured Trusts 10
Section 2.07. Separate Trusts 11
Article III Administration of Fund 11
Section 3.01. Initial Cost 11
Section 3.02. Interest Account 12
Section 3.03. Principal Account 12
Section 3.04. Reserve Account 13
Section 3.05. Distribution 13
Section 3.06. Distribution Statements 16
Section 3.07. Sale of Securities 18
Section 3.08. Refunding Securities 20
Section 3.09. Counsel 20
Section 3.10. Notice and Sale by Trustee 21
Section 3.11. Trustee Not Required to Amortize 21
Section 3.12. Liability of Depositor 21
Section 3.13. Notice to Depositor 21
Section 3.14. Limited Replacement of Special Securities; Replacement
Securities; Reinvestment of Principal 21
Section 3.15. Portfolio Supervisor 24
Article IV Evaluation of Securities; Evaluator 25
Section 4.01. Evaluation of Securities 25
Section 4.02. Information for Unitholders 26
Section 4.03. Compensation of Evaluator 26
Section 4.04. Liability of Evaluator 27
Section 4.05. Resignation and Removal of Evaluator 27
Article V Evaluation, Redemption, Purchase, Transfer, Interchange,
Replacement of Certificates or Units Held in Uncertificated Form 28
Section 5.01. Evaluation 28
Section 5.02. Redemptions by Trustee 29
Section 5.03. Transfer or Interchange of Certificates or Units Held in
Uncertificated Form 32
Section 5.04. Certificates Mutilated, Destroyed, Stolen or Lost 33
Article VI Trustee 33
Section 6.01. General Definition of Trustee s Liabilities, Rights and
Duties 33
Section 6.02. Books, Records and Reports 36
Section 6.03. Indenture and List of Securities on File 37
Section 6.04. Compensation 37
Section 6.05. Removal and Resignation of Trustee; Successor 38
Section 6.06. Qualifications of Trustee 40
Article VII Rights of Unitholders 40
Section 7.01. Beneficiaries of Trust 40
Section 7.02. Rights, Terms and Conditions 40
Article VIII Additional Covenants; Miscellaneous Provisions 41
Section 8.01. Amendments 41
Section 8.02. Termination 41
Section 8.03. Construction 43
Section 8.04. Registration of Units 43
Section 8.05. Written Notice 43
Section 8.06. Severability 44
Section 8.07. Dissolution of Depositor Not to Terminate 44
Signature Page 45
SCHEDULE A
SECURITIES INITIALLY DEPOSITED
FIDELITY DEFINED TRUSTS, SERIES 1
(Note: For the purposes of Schedule A, the Schedule may be completed using
the column headings shown below or a printed copy of the Portfolio for
each Trust as the same appears in the Prospectus pertaining to Fidelity
Defined Trusts, Series 1 and appropriately designated Schedule A may be
attached hereto.)
Principal
Amount Full Name of Date of Coupon Cost to Fund
Deposited Obligation Maturity Rate Rating
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, SECRETARY
ONE ASHBURTON PLACE, BOSTON, MA 02108
FEDERAL IDENTIFICATION
NO. 4-2732935
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General
Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
We, Frank J. Somma Executive Vice President, and
Arthur S. Loring Clerk
NATIONAL FINANCIAL SERVICES CORPORATION
(Name of Corporation)
located at 161 Devonshire Street, Boston, MA 02109
do hereby certify that a following amendment to the articles of
organization of the corporation was duly adopted by unanimous written
consent on September 29, 1983, by vote of
100 shares of Common Stock out of 100 shares outstanding
(Class of Stock)
shares of out of shares outstanding, and
(Class of Stock)
shares of out of shares outstanding,
(Class of Stock)
CROSS OUT being at least a majority of each class outstanding and
INAPPLICABLE entitled to vote thereon:1 [two thirds of each class
CLAUSE outstanding and entitled to vote thereon and of each class or
series of stock whose rights are adversely affected thereby.]2
VOTED: That Article 5. be amended in its entirety as set forth below:
That Paragraphs 5.1 through 5.14 be deleted and Paragraphs 5.15 and 5.16
be substituted as Paragraphs 5.1 and 5.2.
Note: If the space provided under any Amendment or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions
to more than one Amendment may be continued on a single sheet so long as
each Amendment requiring each such addition is clearly indicated.
1 For amendments adopted pursuant to Chapter 156B, Section 70
2 For amendments adopted pursuant to Chapter 156B, Section 71
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The
General Laws unless these articles specify, in accordance with the vote
adopting the amendment, a later effective date not more than thirty days
after such filing, in which event the amendment will become effective on
such later date.
IN WITNESS WHEREOF OF UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this Sixth day of September, in the year 1983.
Executive Vice President
Clerk
THE COMMONWEALTH OF MASSACHUSETTS
SECRETARY OF THE COMMONWEALTH
STATE HOUSE, BOSTON, MASSACHUSETTS 02133
WILLIAM FRANCIS GALVIN
SECRETARY OF THE
COMMONWEALTH
June 16, 1995
TO WHOM IT MAY CONCERN:
I hereby certify that according to the records of this office
NATIONAL FINANCIAL SERVICES CORPORATION
is a domestic corporation organized on JUNE 3, 1981, under the General Laws
of the Commonwealth of Massachusetts.
I further certify that there are no proceedings presently pending under
the Massachusetts General Laws Chapter 156B section 101 for said
corporations dissolutions; that articles of dissolution have not been filed
by said corporation; that, the corporation has filed all annual reports,
and paid all fees with respect to such reports, and so far as appears of
record said corporation has legal existence and is no good standing with
this office.
In testimony of which,
I have hereunto affixed the
Great Seal of the Commonwealth
on the date first above written.
Secretary of the Commonwealth
*This is not a tax clearance. Certificates certifying that all taxes due
and payable by the corporation have been paid or provided for are issued by
the Department of Revenue.
DIFFERENCES BETWEEN THE EDGAR AND PRINTED VERSIONS
The following text under "Articles of Amendment" has been surrounded by [
] in the EDGAR version to represent the "crossed out" text in the printed
version.
[two thirds of each class outstanding and
entitled to vote thereon and of each class or series of
stock whose rights are adversely affected thereby.]
BY-LAWS
of
NATIONAL FINANCIAL SERVICES CORPORATION
ARTICLE I
Articles of Organization
The name and purposes of the Corporation shall be as set forth in the
Articles of Organization. These By-Laws, the powers of the Corporation and
of its Directors and stockholders, and all matters concerning the conduct
and regulation of the business of the Corporation shall be subject to such
provisions in regard thereto, if any, as are set forth in the Articles of
Organization; and the Articles of Organization, as from time to time
amended, are hereby made a part of these By-Laws. All references in these
By-Laws to the Articles of Organization shall be construed to mean the
Articles of Organization of the Corporation as from time to time amended.
ARTICLE II
Annual Meeting of Stockholders
The annual meeting of stockholders shall be held on the third Wednesday in
April in each year at such hour as may be fixed by vote of the Board of
Directors or, if the Board shall not fix such hour, as may be determined by
the President and set forth in the notice thereof, unless that day be a
legal holiday at the site of the meeting, in which case the meeting shall
be held at the same hour on the next succeeding business day at the site of
the meeting. Purposes for which an annual meeting is to be held, in
addition to those prescribed by law, by the Articles of Organization and by
these By-Laws, may be specified by the President, or by a vote of a
majority of the Directors then in office, or by one or more stockholders
who are entitled to vote and who hold in the aggregate at least ten percent
(10%) of the capital stock entitled to vote at the meeting.
If such annual meeting is omitted on the day herein provided therefor, a
special meeting of stockholders may be held in place thereof and any
business transacted or elections held at such special meeting shall have
the same effect as if transacted or held at the annual meeting, and, in
such case, all references in these By-Laws, except in this Article II and
in Article IV, to the annual meeting of stockholders shall be deemed to
refer to such special meeting. Any such special meeting shall be called,
and the purposes thereof shall be specified in the notice thereof, as
provided in Article III.
ARTICLE III
Special Meetings of Stockholders
A special meeting of stockholders may be called at any time by the
President or by a majority of the Directors then in office. A special
meeting of stockholders shall be called by the Clerk, or in the case of the
death, absence, incapacity or refusal of the Clerk, by any other officer,
upon written application of one or more stockholders who hold in the
aggregate at least ten percent (10%) of the capital stock entitled to vote
at the meeting. Such call shall state the time, place and purpose of the
meeting.
ARTICLE IV
Place of Stockholders' Meetings
The annual meeting of stockholders and any special meeting of
stockholders, by whomever called, shall be held at the principal office of
the Corporation in Massachusetts, or at such other place in Massachusetts
or within the continental limits of the United States of America as may be
determined by the Board of Directors (or, in the event such meeting shall
have been called upon the application of stockholders, by such
stockholders) and stated in the notice thereof. Any adjourned session of
any annual or special meeting of stockholders shall be held within the
continental limits of the United States at such place as is designated in
the vote of adjournment.
ARTICLE V
Notice of Stockholders' Meetings
A written notice of each annual or special meeting of stockholders,
stating the place, date and hour thereof, and the purpose or purposes for
which the meeting is to be held, shall be given at least seven (7) days
before the meeting to each stockholder entitled to vote thereat, and to
each stockholder who, under the Articles of Organization or these By-Laws,
is entitled to such notice, by leaving such notice with him or at his
residence, or usual place of business, or by mailing it, postage prepaid,
addressed to such stockholder at his address as it appears in the records
of the Corporation. Such notice shall be given by the Clerk, by any other
officer, or by a person designated either by the Clerk or by the person or
persons calling the meeting, or by the Board of Directors. No notice of
the time, place or purposes of any annual or special meeting of
stockholders shall be required to be given to a stockholder if a written
waiver of such notice is executed before or after the meeting by such
stockholder, or by his attorney thereunto authorized, and filed with the
records of the meeting.
ARTICLE VI
Quorum of Stockholders
At any meeting of stockholders, a quorum for the election of any Director
or officer, or for the consideration of any question, shall consist of a
majority in interest of all stock issued, outstanding and entitled to vote
at such election, or upon such question, respectively; except that if two
or more classes of stock are entitled to vote as separate classes upon any
question, then, in the case of each such class, a quorum for the
consideration of such question shall consist of a majority in interest of
all stock of that class issued, outstanding and entitled to vote; and
except in any case where a larger quorum is required by law, by the
Articles of Organization or by these By-Laws. Stock owned by the
Corporation, if any, shall not be deemed outstanding for this purpose. In
any case, any meeting may be adjourned from time to time by a majority of
the votes properly cast upon the question, whether or not a quorum is
present, and the meeting may be held as adjourned without further notice.
When a quorum is present at any meeting, a plurality of the votes properly
cast for any office shall elect to such office, except where a larger vote
is required by law, by the Articles of Organization or by these By-Laws,
and a majority of the votes properly cast upon any other question (or if
two or more classes of stock are entitled to vote as separate classes upon
such question, then, in the case of each such class, a majority of the vote
of such class properly cast upon the question), except in any case where a
larger vote is required by law, by the Articles of Organization or by these
By-Laws, shall decide the matter.
ARTICLE VII
Proxies and Voting
Except as may be provided in the Articles of Organization, with respect to
two or more classes or series of stock, stockholders entitled to vote shall
have one vote for each share of stock entitled to vote owned by them and a
proportionate vote for each factional share. No ballot shall be required
for such election unless requested by a stockholder present or represent at
the meeting and entitled to vote in the election. The Corporation shall
not, directly or indirectly, vote upon any share of its own stock.
Stockholders entitled to vote may vote either in person or by proxy in
writing dated not more than six (6) months before the meeting named
therein, which proxies shall be filed with the Clerk of the meeting, or any
adjournment thereof, before being voted. Such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting, but shall not
be valid after the final adjournment of such meeting.
Any action to be taken by stockholders may be taken without a meeting if
all stockholders entitled to vote on the matter consent to the action by a
writing or writings filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
The Chairman of the Board, if there be one, or in his absence the
President, or in the absence of both the Chairman and the President a
vice-president, shall call meetings of the stockholders to order and shall
act as chairman thereof. The Clerk of the Corporation, if present, shall
record the proceedings of all meetings of stockholders and, in his absence,
the presiding officer may appoint a clerk pro tempore of the meeting.
ARTICLE VIII
Board of Directors
The Board of Directors shall consist of not fewer than three, nor more
than nine, Directors. Directors shall be elected annually (by ballot if so
requested by any stockholder entitled to vote) at the annual meeting of
stockholders by such stockholders as have the right to vote at such
election. The number of Directors for each corporate year shall initially
be fixed by vote at the meeting at which they are elected, and if not so
fixed shall be the number of Directors immediately prior to such meeting.
Any such action which may by law, the Articles of Organization or these
By-Laws be taken by a majority of the Board of Directors then in office may
be taken by the sole Director when and if the Corporation has only one
Director.
At any time during any year the number of the Board of Directors may be
increased by vote of a majority of the Directors then in office. At any
time during any year, the whole number of Directors may be increased or
reduced by the stockholders at a meeting called for the purpose and, in the
case of a reduction, the particular directorships which shall terminate
shall be determined by the stockholders, in each case by vote of a majority
of the stock outstanding and entitled to vote for the election of
Directors, or, in the case of a reduction which involves the termination of
the directorship of an incumbent Director, by such larger vote, if any, as
would be re required to remove such incumbent from office.
Each newly-created directorship resulting from any increase in the number
of Directors may be filled in the manner provided in Article XIX.
No Director need be a stockholder except as may be otherwise provided by
law, by the Articles of Organization or these By-Laws. Each Director shall
hold office until the next annual meeting of stockholders and until his
successor is elected and qualified, or until he sooner dies, resigns or is
removed.
ARTICLE IX
Powers of Directors
The business, property and affairs of the Corporation shall be managed by,
and be under the control and direction of, the Board of Directors, which
shall have and may exercise all the powers of the Corporation except such
as are conferred upon the stockholders or other officers by law, by the
Articles of Organization or by these By-Laws.
Except as may be otherwise specifically provided by law or by vote of the
stockholders, the Board of Directors is expressly authorized to issue, from
time to time, all or any portion or portions of the capital stock of the
Corporation of any class, which may have been authorized but not issued or
otherwise reserved for issue, to such person or persons and for such
consideration (but not less than the par value thereof in case of stock
having par value), whether cash, tangible or intangible property, good
will, services or expenses, as they may deem best, without first offering
(for subscription or sale) such authorized but unissued stock to any
present or future stockholders of the Corporation, and generally in their
absolute discretion to determine the terms and manner of any disposition of
such authorized but unissued stock.
The Board of Directors may delegate from time to time to any committee,
officer or agent such powers and authority as the law, the Articles of
Incorporation and these By-Laws may permit. The Board of Directors in its
discretion may appoint and remove and determine the compensation and duties
in addition to those fixed by law, the Articles of Incorporation and these
By-Laws, of all the officers, representatives, agents, employees, and
servants of the Corporation. The Board of Directors shall have power to
fix a reasonable compensation or fee for the attendance of their members at
meetings of the Board. The Board of Directors shall have the power, from
time to time, to fix and determine and to vary the amount of working
capital of the Corporation and to direct and determine the use and
disposition of any surplus or net profits of the Corporation and to direct
and determine the use and disposition of any surplus or net profits of the
Corporation over and above the amount contributed as, or constituting,
capital paid in. The Board of Directors, in its discretion, shall, from
time to time, declare what, if any, dividends shall be paid on the stock of
the Corporation out of the remaining surplus or net profits, and any
dividend so declared shall be payable at such time or times as the Board
shall determine.
ARTICLE X
Committees of Directors
The Board of Directors, by vote of a majority of the Directors then in
office, may at any time elect from its own number an executive committee
and/or one or more other committees, to consist of not less than two
members, and may from time to time designate or alter, within the limits
permitted by this Article X, the duties and powers of such committees or
change their membership, and may at any time abolish such committees or any
of them.
Any committee shall be vested with such powers of the Board of Directors
as the Board may determine in the vote establishing such committee or in a
subsequent vote of a majority of directors then in office, provided,
however, that no such committee shall have any power prohibited by law, or
the Articles of Organization, or the power
(a) to change the principal office of the Corporation;
(b) to amend or authorize the amendment of the Articles of Organization
or
these By-Laws;
(c) to issue stock;
(d) to establish and designate series of stock, and fix and determine the
relative
rights and preferences of any series of stock;
(e) to elect officers required by law, the Articles of Organization or
these
By-Laws to be elected by stockholders or Directors, and to fill vacancies
in
any such office;
(f) to change the number of the Board of Directors and to fill vacancies
in the
Board of Directors;
(g) to remove officers or Directors from office;
(h) to authorize the payment of dividend or distribution to stockholders;
(i) to authorize the reacquisition for value of stock of the Corporation;
(j) to authorize a merger or consolidation of the Corporation or a sale
or other
disposition of all or substantially all the property and business of the
Corporation; or
(k) to authorize the liquidation or dissolution of the Corporation;
and provided further, that the fact that a particular power appears in the
foregoing enumeration of powers denied to committees of the Board of
Directors shall not be construed to over-ride by implication any other
provision of the Articles of Organization or these By-Laws limiting or
denying to the Board of Directors the right to exercise such power.
Each member of a committee shall hold office until the first meeting of
the Board of Directors following the next annual meeting of stockholders
(or until such other time as the Board of Directors may determine, either
in the vote establishing the committee or at the election of such member)
and until his successor is elected and qualified, or until he sooner dies,
resigns, is removed, is replaced by change of membership or becomes
disqualified by ceasing to be a Director, or until the committee is sooner
abolished by the Board of Directors.
A majority of the members of any committee then in office, but not fewer
than two, shall constitute a quorum for the transaction of business, but
any meeting may be adjourned from time to time by a majority of the votes
cast upon the question, whether or not a quorum is present, and the meeting
may be held as adjourned without further notice. Each committee may make
rules not inconsistent herewith for the holding and conduct of its
meetings, but unless otherwise provided in such rules its meetings shall be
held and conducted in the same manner as nearly as may be as is provided in
these By-Laws for meetings of the Board of Directors. The Board of
Directors shall have the power to rescind any vote or resolution of any
committee; provided, however, that no rights of third parties shall be
impaired by such rescission.
ARTICLE XI
Meetings of the Board of Directors;
Action without a Meeting
Regular meetings of the Board of Directors may be held without call or
notice at such places and at such times as the Board may from time to time
determine; provided, however, that reasonable notice of such determination
and of any changes therein is given to each member of the Board then in
office. A regular meeting of the Board of Directors for the purpose of
electing officers and agents may be held without call or notice immediately
after and at the same place as the annual meeting of stockholders, and, if
held upon due call or notice for such other and further purposes as may be
specified in such call or notice.
Special meetings of the Board of Directors may be held at any time and at
any place when called by the President, the Treasurer, the Chairman of the
Board, if there be one, or two or more Directors, reasonable notice thereof
being given to each Director by the Secretary, or, if there be no
Secretary, by the Clerk, or, in the case of death, absence, incapacity or
refusal of the Secretary (or the Clerk, as the case may be), by the officer
or Directors calling the meeting. In any case, it shall be deemed
sufficient notice to a Director to send notice by mail at least forty-eight
(48) hours, or by telegram at least twenty-four (24) hours, before the
meeting, addressed to him at his usual or last known business or residence
address; or to give notice to him in person, either by telephone or by
handing him a written notice, at least twenty-four (24) hours before the
meeting.
Notwithstanding the foregoing, notice of a meeting need not be given to
any Director if a written waiver of notice, executed by him before or after
the meeting, is filed with the records of the meeting, or to any Director
who attends the meeting without protesting prior thereto, or at its
commencement, the lack of notice to him.
Members of the Board of Directors or any Committee designated thereby may
participate in a meeting of the Board or such committee by means of a
conference telephone or similar communication equipment by means of which
all persons participating in the meeting can hear each other at the same
time, and participation by such means shall constitute presence in person
at such meeting.
Any action required or permitted to be taken at any meeting of the
Directors may be taken without a meeting if a written consent thereto is
signed by all the Directors and such written consent is filed with the
records of the meetings of the Directors. Such consent shall be treated as
a vote at a meeting for all purposes. Such consent may be executed in one
or more counterparts and not every Director need sign the same counterpart.
ARTICLE XII
Quorum of Directors
At any meeting of the Board of Directors, a quorum for any election, or
for the consideration of any question, shall consist of a majority of the
Directors then in office, but any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice. When a quorum is present at any meeting, the votes of a majority
of the Directors present shall be requisite and sufficient for election to
any office, and a majority of the Directors present shall decide any
question brought before such meeting except in any case where a larger vote
is required by law, by the Articles of Organization or by these By-Laws.
ARTICLE XIII
Officers and Agents
The officers of the Corporation shall be a President, a Treasurer, a
Clerk, and such other officers, which may include a Chairman of the Board,
a Secretary, a Controller, one or more Vice Presidents, Assistant
Treasurers, Assistant Clerks, or Assistant Controllers, as the Board of
Directors may, in its discretion, elect or appoint. The Corporation may
also have such agents, if any, as the Board of Directors may, in its
discretion, appoint. The President need not be a Director. The Clerk
shall be a resident of Massachusetts unless the Corporation has a resident
agent appointed for the purpose of receiving service of process. So far as
is permitted by law, any two or more offices may be held by the same
person.
Subject to law, to the Articles of Organization and the other provisions
of these By-Laws, each officer shall have, in addition to the duties and
powers herein set forth, such duties and powers as are commonly incident to
his office and as the Board of Directors may from time to time designate.
The President, Treasurer, and Clerk (and the Secretary and Chairman of the
Board, if, as the case may be, there be one) shall be elected annually by
the Board of Directors at its first meeting following the annual meeting of
stockholders, by the vote of a majority of the full Board of Directors.
Such other officers of the Corporation as may be created in accordance with
these By-Laws may be filled at such meeting by vote of a majority of the
full Board of Directors or any other time by vote of a majority of the
Directors then in office.
Each officer shall (subject to Article XVIII of these By-Laws) hold office
until the first meeting of the Board of Directors following the next annual
meeting of stockholders and until his successor is elected or appointed and
qualified, or until he sooner dies, resigns, is removed, or becomes
disqualified. Each agent shall retain his authority at the pleasure of the
Board of Directors.
Any officer, employee, or agent of the Corporation may be required, as and
if determined by the Board of Directors, to give bond for the faithful
performance of his duties.
ARTICLE XIV
President and Vice Presidents; Chairman of the Board
The President shall be the chief executive officer of the Corporation and
shall have general charge and supervision of the business, property and
affairs of the Corporation and such other powers and duties as the Board of
Directors may prescribe, subject to the control of the Board of Directors,
unless otherwise provided by law, the Articles of Organization, these
By-Laws or by specific vote of the Board of Directors. Unless a Chairman
of the Board shall have been elected, the President shall preside at all
meetings of stockholders and of the Board of Directors at which he is
present except as otherwise voted by the Board of Directors.
Any Vice President shall have such duties and powers as shall be
designated from time to time by the Board of Directors or by the President,
and, in any case, shall be responsible to and shall report to the
President. In the absence or disability of the President, the Vice
President or, if there be more than one, the Vice Presidents in the order
of their seniority or as otherwise designated by the Board of Directors,
shall have the powers and duties of the President.
The Chairman of the Board, if there be one, shall be a member of the Board
of Directors and shall preside at its meetings and at the meetings of the
stockholders. He shall keep himself informed of the administration of the
affairs of the Corporation, shall advise and counsel with the President,
and, in the President's absence, with other officers of the Corporation,
and shall perform such other duties as may from time to time be assigned to
him by the Board of Directors.
ARTICLE XV
Treasurer and Assistant Treasurer
The Treasurer shall be the chief financial officer of the Corporation and
shall be in charge of its funds and the Board of Directors, and shall have
such duties and powers as are commonly incident to the office of a
corporate treasurer and such other duties and powers as may be prescribed
from time to time by the Board of Directors or by the President. If no
Controller is elected, the Treasurer shall also have the duties and powers
of the Controller as provided in these By-Laws. The Treasurer shall be
responsible to and shall report to the Board of Directors, but in the
ordinary conduct of the Corporation's business, shall be under supervision
of the President.
Any Assistant Treasurer shall have such duties and powers as shall be
prescribed from time to time by the Board of Directors or by the Treasurer,
and shall be responsible to and shall report to the Treasurer. In the
absence or disability of the Treasurer, the Assistant Treasurer or, if
there be more than one, the Assistant Treasurers in their order of
seniority or as otherwise designated by the Board of Directors shall have
the powers and duties of the Treasurer.
ARTICLE XVI
Controller
If a Controller is elected, he shall be the chief accounting officer of
the Corporation and shall be in charge of its books of account and
accounting records and of its accounting procedures, and shall have such
duties and powers as are commonly incident to the office of a corporate
controller and such other duties and powers as may be prescribed from time
to time by the Board of Directors or by the President. The Controller
shall be responsible to and shall report to the Board of Directors, but in
the ordinary conduct of the Corporation's business, shall be under the
supervision of the President.
Any Assistant Controller shall have duties and powers as shall be
prescribed from time to time by the Board of Directors or by the
Controller, and shall be responsible to and shall report to the Controller.
If the absence or disability of the Controller, the Assistant Controller
or, if there be more than one, Assistant Controllers in the order of
seniority or as otherwise designated by the Board of Directors, shall have
the powers and duties of the Controller.
ARTICLE XVII
Clerk, Secretary; Assistant Clerk and Assistant Secretary
The Clerk shall record all proceedings of the stockholders in books to be
kept therefor, and shall have custody of the Corporation's records,
documents and valuable papers. In the absence of the Clerk from any such
meeting, the Secretary, if any, may act as temporary clerk, and shall
record the proceedings thereof in the aforesaid books, or a temporary clerk
may be chosen by vote of the meeting.
The Clerk shall also keep, or cause to be kept, the stock transfer records
of the Corporation which shall contain a complete list of the names and
addresses of all stockholders and the amount of stock held by each.
Unless the Board of Directors shall otherwise designate, the Clerk or, in
his absence, the Assistant Clerk, if any, shall have custody of the
corporate seal and be responsible for affixing it to such documents as may
be required to be sealed.
The Clerk shall have such other duties and powers as are commonly incident
to the office of a corporate clerk, and such other duties and powers as may
be prescribed from time to time by the Board of Directors or by the
President.
If no Secretary is elected, the Clerk shall also record all proceedings of
the Board of Directors and of any meetings of any committees of the Board,
and, in his absence from any such meeting, a temporary clerk shall be
chosen who shall record the proceedings thereof.
The Secretary shall attend all meetings of the Board of Directors and
shall record the proceedings thereat in books provided for that purpose
which shall be open during business hours to the inspection of any
Director. He shall notify the Directors of the meetings in accordance with
these By-Laws and shall have and may exercise such other powers and duties
as the Board of Directors may prescribe. In the absence of the Secretary
at a meeting of the Board of Directors, a temporary secretary shall be
chosen.
Any Assistant Clerk and any Assistant Secretary shall have such duties and
powers as shall from time to time be designated by the Board of Directors
or the Clerk or the Secretary, respectively, and shall be responsible to
and shall report to the Clerk and the Secretary, respectively.
ARTICLE XVIII
Resignations and Removals
Any Director or officer may resign at any time by delivering his
resignation in writing to the President, the Clerk or the Secretary, or to
a meeting of the Board of Directors. The stockholders may, by vote of a
majority in interest of the stock issued and outstanding and entitled to
vote at an election of Directors, remove any Director or Directors from
office with or without cause; provided, however, that the Directors of a
class elected by a particular class of stockholders may be removed only by
the vote of the holders of a majority of the shares of such class. The
Board of Directors may, by vote of the majority of the Directors in office,
remove any Director from office with cause, or remove any officer from
office, with or without cause. The Board of Directors may, at any time by
vote of a majority of the Directors present and voting, terminate or modify
the authority of any agent. No Director or officer resigning and (except
where a right to receive compensation for a definite future period shall be
expressly provided in a written agreement with the Corporation, duly
approved by the Board of Directors) no Director or officer removed shall
have any right to any compensation as such Director or officer for any
period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month, by the
year or otherwise. Any Director or officer may be removed for cause only
after reasonable noticed and opportunity to be heard before the body
proposing to remove him.
ARTICLE XIX
Vacancies
Any vacancy in the Board of Directors, however occurring, including a
vacancy resulting from the enlargement of the Board, and any vacancy in any
other office, may be filled by the stockholders or, in the absence of
stockholder action, by a majority of the Directors then in office.
If the office of any member of any committee or of any other office
becomes vacant, the Board of Directors may elect or appoint a successor or
successors by vote of a majority of the Directors then in office.
Each successor as a Director or officer shall hold office for the
unexpired term and until his successor shall be elected or appointed and
qualified, or until he sooner dies, resigns, is removed or becomes
disqualified.
The Board of Directors shall have and may exercise all its powers,
notwithstanding the existence of one or more vacancies in its number as
fixed by either the stockholders or the Directors.
ARTICLE XX
Capital Stock
The authorized amount of the capital stock and the par value, if any, of
the shares shall be as fixed in the Articles of Organization. At all times
when there are two or more classes of stock, the several classes of stock
shall conform to the description and terms, and have the respective
preferences, voting powers, restrictions and qualifications set forth in
the Articles of Organization.
ARTICLE XXI
Certificate of Stock
Each stockholder shall be entitled to a certificate of the capital stock
of the Corporation owned by him, in such form as shall, in conformity to
law, be prescribed from time to time by the Board of Directors. Such
certificate shall be signed by either the President or a Vice President,
and by either the Treasurer or an Assistant Treasurer, and may, but need
not be, sealed with the corporate seal; but when any such certificate is
signed by a transfer agent or by a registrar other than a Director,
officer, or employee of the Corporation, the signature of the President or
a Vice President and of the Treasurer or an Assistant Treasurer of the
Corporation, or either or both such signatures and such seal upon such
certificate, may be facsimile. If any officer who has signed, or whose
facsimile signature has been placed on, any such certificate shall have
ceased to be such officer before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if he
were such officer at the time of issue.
Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to law, the Articles of Organization, these By-Laws,
or any agreement to which the Corporation is a party, shall have the
restriction noted conspicuously on the certificate, and shall also set
forth, on the face or back, either the full text of the restriction or a
statement of the existence of such restriction and (except if such
restriction is imposed by law) a statement that the Corporation will
furnish a copy thereof to the holder of such certificate upon written
request and without charge. Every certificate issued when the Corporation
is authorized to issue more than one class or series of stock shall set
forth on its face or back either the full text of the preferences, voting
powers, qualifications, and special and relative rights of the shares of
each class and series authorized to be issued, or a statement of the
existence of such preferences, powers, qualifications and rights, and a
statement that the Corporation will furnish a copy thereof to the holder of
such certificate upon written request and without charge.
ARTICLE XXII
Transfer of Shares of Stock
Subject to the restrictions, if any, stated or noted on the stock
certificates, shares of stock may be transferred on the books of the
Corporation only by surrender to the Corporation, or its transfer agent, of
the certificate therefor, properly endorsed or accompanied by a written
assignment or power of attorney properly executed, with all requisite stock
transfer stamps affixed, and with such proof of the authenticity and
effectiveness of the signature as the Corporation or its transfer agent
shall reasonably require. Except as may be otherwise required by law, the
Articles of Organization or these By-Laws, the Corporation shall have the
right to treat the person registered on the stock transfer books as the
owner of any shares of the Corporation's stock as the owner-in-fact thereof
for all purposes, including the payment of dividends, liability for
assessments, the right to vote with respect thereto and otherwise, and
accordingly shall not be bound to recognize any attempted transfer, pledge
or other disposition thereof, or any equitable or other claim with respect
thereto, whether or not it shall have actual or other notice thereof, until
such shares shall have been transferred on the Corporation's books in
accordance with these By-Laws. It shall be the duty of each stockholder to
notify the Corporation of his post office address.
ARTICLE XXIII
Transfer Agents and Registrars; Further Regulations
The Board of Directors may appoint one or more banks, trust companies or
corporations doing a corporate trust business, in good standing under the
laws of the United States or any state therein, to act as the Corporation's
transfer agent and/or registrar for shares of capital stock, and the Board
may make such other and further regulations, not inconsistent with
applicable law, as it may deem expedient concerning the issue, transfer and
registration of capital stock and stock certificates of the Corporation.
ARTICLE XXIV
Loss of Certificates
In the case of the alleged loss, destruction, or wrongful taking of a
certificate of stock, a duplicate certificate may be issued in place
thereof upon receipt by the Corporation of such evidence of loss and such
indemnity bond, with or without surety, as shall be satisfactory to the
President and the Treasurer, or otherwise upon such terms, consistent with
law, as the Board of Directors may prescribe.
ARTICLE XXV
Record Date
The Directors may fix in advance a time, which shall not be more than
sixty days before the date of any meeting of stockholders or the date for
the payment of any dividend or day on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record
date for determining the stockholders having the right to notice of and to
vote at, such meeting and any adjournment thereof, or the right to receive
such dividend or distribution, or the right to give such consent or
dissent, and in such case, only stockholders of record on such record date
shall have such right, notwithstanding any transfer of stock on the books
of the Corporation after the record date; or, without fixing such record
date, the Directors may, for any such purposes, close the transfer books
for all or any part of such period.
ARTICLE XXVI
Seal
The seal of the Corporation shall, subject to alteration by the Board of
Directors, consist of a flat-faced circular die with the word
"Massachusetts", together with the name of the Corporation and the year of
incorporation, cut or engraved thereon. An impression of the seal
impressed upon the original copy of these By-Laws shall be deemed
conclusively to be the seal adopted by the Board of Directors.
ARTICLE XXVII
Execution of Papers
Except as the Board of Directors may generally or in particular cases
otherwise authorize or direct, all deeds, leases, transfers, contracts,
proposals, bonds, notes, checks, drafts and other obligations made,
accepted or endorsed by the Corporation shall be signed or endorsed on
behalf of the Corporation by its Chairman, if there be one, its President,
any one of its Vice Presidents or by its Treasurer.
When so authorized by the Board of Directors, any officer or agent of the
Corporation may effect loans and advances at any time for the Corporation
secured by mortgage or pledge of the Corporation's property or otherwise,
and may do every act and thing necessary or proper in connection therewith.
Such authority may be general or confined to specific instances, provided,
however, any instrument or other document required to be executed by the
Corporation in connection with such loans or advances shall be executed in
accordance with the preceding paragraph.
ARTICLE XXVIII
Fiscal Year
Except as from time to time provided by the Board of Directors, the fiscal
year of the Corporation shall end on the December 31 of each year.
ARTICLE XXIX
Indemnification of Directors, Officers, Employees or Others
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation)
and whether or not made or commenced prior to the adoption of this Article
and whether or not based on any act or omission antedating such adoption,
by reason of the fact that he is or was a director, officer, trustee,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
in which this Corporation directly or indirectly owns shares or of which it
is a creditor, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of
the Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor, whether or not made or commenced prior to the adoption of
this Article and whether or not based on any action or omission antedating
such adoption, by reason of the fact that he is or was a director, officer,
trustee, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise in which this Corporation directly or indirectly owns shares or
of which it is a creditor, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in the best interests of the Corporation.
(c) To the extent that a director, officer, trustee, employee or agent of
the Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in paragraphs (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
trustee, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in paragraphs (a) and (b).
Such determination shall be made (1) by the Board of Directors by a
majority vote of quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by vote of the
stockholders of the Corporation holding a majority of its outstanding
voting stock.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Directors in a specific case upon receipt of an undertaking by or on
behalf of the director, officer, trustee, employee or agent to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director, officer,
trustee, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, trustee, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise in which this
Corporation directly or indirectly owns shares or of which it is a
creditor, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this Article.
(h) For the purposes of this Article, references to "the Corporation"
include all constituent corporations absorbed in a consolidation or merger
as well as the resulting or surviving corporation so that any person who is
or was a director, officer, trustee, employee or agent of such a
constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, trustee, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise in which this Corporation directly or indirectly owns shares or
of or which it is a creditor, shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
ARTICLE XXX
Voting Stock in Other Corporations
Unless otherwise ordered by the Board of Directors, the Chairman, if there
be one, the President or the Treasurer shall have full power and authority
on behalf of the Corporation to attend and to act and to vote at any
meetings of stockholders of any corporation in which this Corporation may
hold stock, and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such stock and which, as
the owner thereof, the Corporation might have possessed and exercised if
present. The Board of Directors, by resolution from time to time, or, in
the absence thereof, the Chairman, if there be one, the President or the
Treasurer may confer like powers upon any other person or persons as
attorneys and proxies of the Corporation.
ARTICLE XXXI
Corporate Records
The original or attested copies of the Articles of Organization, By-Laws,
and records of all meetings of the incorporators and stockholders, and the
stock and transfer records which shall contain the names of all
stockholders and the record address and the amount of stock held by each,
shall be kept in Massachusetts either at the principal office of the
Corporation or at an office of its transfer agent or of the Clerk. Said
copies and records need not all be kept in the same office. They shall be
available at all reasonable times for inspection by any stockholder for any
proper purpose, but not to secure a list of the stockholders for the
purpose of selling said list, or copies thereof, or of using the same for a
purpose other than in the present interest of the applicant, as a
stockholder, relative to the affairs of the Corporation.
ARTICLE XXXII
Offices
The principal office of the Corporation in Massachusetts shall be
initially at 82 Devonshire Street, Boston, Massachusetts, and may be
changed at any time and from time to time by order of the Board of
Directors, and upon the filing of a certificate of such change in
accordance with the Massachusetts Business Corporation Law. The
Corporation may have such other offices, within or without Massachusetts,
as the Board of Directors may direct or the business of the Corporation
require.
ARTICLE XXXIII
Amendments
These By-Laws may be altered, amended or repealed, in whole or in part at
any time by vote of the stockholders. The Board of Directors, by a
majority vote of Directors at the time in office, may alter, amend or
repeal these By-Laws in whole or in part, except with respect to any
provision hereof which by law, the Articles of Organization or these
By-Laws requires action by the stockholders; provided that not later than
the time of giving notice of the meeting of stockholders next following the
alteration, amendment or repeal of these By-Laws, in whole or in part,
notice thereof, stating the substance of such action shall be given to all
stockholders entitled to vote on amending these By-Laws. By-Laws adopted
by the Directors may be amended by the stockholders.
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
January 3, 1996
National Financial Services Corporation
82 Devonshire Street C8A
Boston, Massachusetts 02109-3614
Re: Fidelity Defined Trusts, Series 1
Gentlemen:
We have served as counsel for National Financial Services Corporation, as
Sponsor and Depositor (the Depositor ) of Fidelity Defined Trusts, Series
1 (the Fund ) in connection with the preparation, execution and delivery
of a Trust Agreement dated January 3, 1996and a Standard Terms and
Conditions of Trust dated January 3, 1996 (collectively, the Indenture )
each of which are between National Financial Services Corporation, as
Depositor, Evaluator and Portfolio Supervisor and The Chase Manhattan Bank
(National Association) as Trustee, pursuant to which the Depositor has
delivered to and deposited the Securities listed in Schedule A to the Trust
Agreement with the Trustee and pursuant to which the Trustee has issued to
or on the order of the Depositor a certificate or certificates representing
units of fractional undivided interest in and ownership of the Fund created
under said Trust Agreement.
In connection therewith, we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable
us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Indenture and the execution and
issuance of certificates evidencing the Units in the Fund have been duly
authorized; and
2. the certificates evidencing the Units in the Fund when duly executed
and delivered by the Depositor and the Trustee in accordance with the
aforementioned Indenture, will constitute valid and binding obligations of
the Fund and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-62243) relating to the Units referred
to above, to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/cjw
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EXHIBIT 3.2
[CHAPMAN AND CUTLER LETTERHEAD]
January 3, 1996
National Financial Services Corporation
82 Devonshire Street C8A
Boston, Massachusetts 02109-3614
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
Re: Fidelity Defined Trusts, Series 1
Gentlemen:
We have acted as counsel for National Financial Services Corporation,
Depositor of Fidelity Defined Trusts, Series 1 (the "Fund"), in connection with
the issuance of units of fractional undivided interests in Laddered Government
Series 1, Short Treasury Portfolio and Laddered Government Series 2,
Short/Intermediate Treasury Portfolio (the "Trusts") of said Fund, under a Trust
Agreement dated January 3, 1996 and a Standard Terms and Conditions of Trust
dated January 3, 1996 (collectively, the "Indenture") among National Financial
Services Corporation, as Depositor, Evaluator and Portfolio Supervisor and The
Chase Manhattan Bank (National Association), as Trustee.
In this connection, we have examined the Registration Statement, the form
of Prospectus proposed to be filed with the Securities and Exchange Commission,
the Indenture and such other instruments and documents as we have deemed
pertinent. The opinions expressed herein assume that each Trust will be
administered, and investments by a Trust from proceeds of subsequent deposits,
if any, will be made, in accordance with the terms of the Indenture. Each Trust
holds Treasury Obligations and may include "stripped" U.S. Treasury bonds (the
"Stripped Treasury Securities") (collectively "the Securities") as such term is
defined in the Prospectus.
Based upon the foregoing and upon an investigation of such matters of law
as we consider to be applicable, we are of the opinion that, under existing
Federal income tax law:
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(i) Each Trust is not an association taxable as a corporation but will
be governed by the provisions of Subchapter J (relating to Trusts) of Chapter 1,
Internal Revenue Code of 1986 (the "Code").
(ii) Each Unitholder will be considered the owner of a pro rata portion
of each Security in each Trust and will be considered to have received the
interest on his pro rata portion of each Security when interest on such Security
is received by the respective Trust. Each Unitholder will also be required to
include in taxable income for federal income tax purposes, original issue
discount with respect to his interest in any Security held by each Trust which
was issued with original issue discount at the same time and in the same manner
as though the Unitholder were the direct owner of such interest. Original issue
discount will be treated as zero with respect to the Securities if it is "de
minimis" within the meaning of Section 1273 of the Code and, based upon a
Treasury Regulation (the "Regulation") which was issued on December 28, 1992
regarding the stripped bond rules of the Code, original issue discount with
respect to a Stripped Treasury Security will be treated as zero if it is "de
minimis" as determined thereunder.
(iii) Each Unitholder will be considered the owner of a pro rata portion
of each asset in each Trust. The total cost to a Unitholder of his Units,
including sales charges, is allocated among his pro rata portion of each asset
held by each Trust (in proportion to the fair market values thereof on the
valuation date closest to the date the Unitholder purchases Units) in order to
determine his initial tax basis for his pro rata portion of each asset held by
each Trust. The Stripped Treasury Securities are treated as bonds that were
originally issued at an original issue discount. Because the Stripped Treasury
Securities represent interests in "stripped" U.S. Treasury bonds, a Unitholder's
initial cost for his pro rata portion of each Stripped Treasury Security held
by the Trust (determined at the time he acquires his Units, in the manner
described above) shall be treated as its "purchase price" by the Unitholder.
Under the special rules relating to stripped bonds, original issue discount
applicable to the Stripped Treasury Securities is effectively treated as
interest for Federal income tax purposes and the amount of original issue
discount in this case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A Unitholder will be required
to include in gross income for each taxable year the sum of his daily portions
of original issue discount attributable to the Stripped Treasury Securities held
by a Trust as such original issue discount accrues and will in general be
subject to Federal income tax with respect to the total amount of such original
issue discount that accrues for such year even though the income is not
distributed to the Unitholders during such year to the extent it is greater than
or equal to the "de minimis" amount described below. To the extent the amount of
such discount is less than the respective "de minimis" amount, such discount
shall be treated as zero. In general, original issue discount accrues daily
under a constant interest rate method which takes into account the semi-annual
compounding of accrued interest. In the case of Stripped Treasury Securities
this method will generally result in an
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increasing amount of income to the Unitholders each year. A Unitholder's tax
basis for his pro rata portion of each asset held by a Trust may be subject to
adjustment as discussed in paragraph (v) hereof.
(iv) The Unitholder's aliquot share of the total proceeds received on the
disposition of, or principal paid with respect to, a Security held by a Trust
will constitute ordinary income (which will be treated as interest income for
most purposes) to the extent it does not exceed the accrued market discount on
such Security that has not previously been included in taxable income by such
Unitholder. A Unitholder may generally elect to include market discount in
income as such discount accrues. In general, market discount is the excess, if
any, of the Unitholder's pro rata portion of the outstanding principal balance
of a Security over the Unitholder's initial tax cost for such pro rata portion,
determined at the time such Unitholder acquires his Units. However, market
discount with respect to any Security will generally be considered zero if it
amounts to less than 0.25% of the obligation's stated redemption price at
maturity times the number of years to maturity. The market discount rules do not
apply to Stripped Treasury Securities because they are stripped debt instruments
subject to special original issue discount rules as discussed above. If a
Unitholder sells his Units, gain, if any, will constitute ordinary income to the
extent of the aggregate of the accrued market discount on the Unitholder's pro
rata portion of each Security that is held by a Trust that has not previously
been included in taxable income by such Unitholder. In general, market discount
accrues on a ratable basis unless the Unitholder elects to accrue such discount
on a constant interest rate basis. However, no opinion is expressed herein
regarding the precise manner in which market discount accrues. The deduction by
a Unitholder for any interest expense incurred to purchase or carry Units will
be reduced by the amount of any accrued market discount that has not yet been
included in taxable income by such Unitholder. In general, the portion of any
interest expense which is not currently deducible would be ultimately deductible
when the accrued market discount is included in income.
(v) As discussed in paragraph (iv) hereof, if a Unitholder sells his
Units, gain, if any, will constitute ordinary income to the extent of the
aggregate of the accrued market discount (which has not previously been included
in such Unitholder' taxable income) with respect to a Unitholder's pro rata
portion of each Security held by a Trust. Any other gains (or losses) will be
capital gains (or losses) except in the case of a dealer or a financial
institution, and will be long-term if the Unitholder has held his Units for more
than one year. A Unitholder will recognize taxable gains (or losses) (a) upon
redemption or sale of his Units, (b) if the Trustee disposes of an asset or (c)
upon receipt by the Trustee of payments of principal on the Securities. The
amount of any such gain (or loss) is measured by comparing the Unitholder's pro
rata share of the total proceeds from the transaction with his adjusted tax
basis in his Units or his pro rata interest in the asset as the case may be, and
then reducing such gain, if any, to the extent characterized as ordinary income
resulting from accrued market
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discount as discussed above. A Unitholder's tax basis in his Units and his pro
rata portion of each of the underlying assets of a Trust may be adjusted to
reflect the accrual of market discount (if the Unitholder has elected to include
such discount in income as it accrues), original issue discount and amortized
bond premium, if any. The tax cost reduction requirements of said Code relating
to amortization of bond premium may, under some circumstances, result in the
Unitholder realizing a taxable gain when his Units are sold or redeemed for an
amount equal to his original cost. In addition, Unitholders must reduce the tax
basis of their Units and their pro rata portion of the underlying assets of each
Trust for their share of accrued interest received by such Trust, if any, on
Securities delivered after the Unitholders pay for their Units to the extent
that such interest accrued on such Securities during the period from the
Unitholder's settlement date to the date such Securities are delivered to such
Trust and, consequently, such Unitholders may have an increase in taxable gain
or reduction in capital loss upon the disposition of such Units or such
Securities.
(vi) The Code provides that "miscellaneous itemized deductions" are
allowable only to the extent that they exceed two percent of an individual
taxpayer's adjusted gross income. Miscellaneous itemized deductions subject to
this limitation under present law include fees of the Trustee and the Evaluator
but does not include amortizable bond premium on Securities held by a Trust.
The Code provides a complex set of rules governing the accrual of original
issue discount, including special rules relating to "stripped" debt instruments
such as the Stripped Treasury Securities. These rules provide that original
issue discount generally accrues on the basis of a constant compound interest
rate over the term of the security. Special rules apply if the purchase price of
a Treasury Obligation exceeds its original issue price plus the amount of
original issued discount which would have previously accrued, based upon its
issue price (its "adjusted issue price"). Similarly, these special rules would
apply to a Unitholder if the tax basis of his pro rata portion of a Treasury
Obligation issued with original issue discount exceeds his pro rata portion of
its adjusted issue price. In addition, as discussed above, the Regulation
provides that the amount of original issue discount on a stripped bond is
considered zero if the actual amount of original issue discount on such stripped
bond as determined under Section 1286 of the Code is less that a "de minimis"
amount, which, the Regulation provides, is the product of (i) 0.25 percent of
the stated redemption price at maturity and (ii) the number of full years from
the date the stripped bond is purchased (determined separately for each new
purchaser thereof) to the final maturity date of the bond.
For taxable years beginning after December 31, 1986 and before January 1,
1996, certain corporations may be subject to the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code. Interest received from, and
gains recognized from the disposition of, a Security by a Trust or the sale of
Units by a
<PAGE>
Law Offices of
CHAPMAN AND CUTLER
-5-
Unitholder will be included by such corporations in the computation of the
Superfund Tax.
The "Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent maximum
stated rate for taxpayers other than corporations. Because some or all capital
gain are taxed at a comparatively lower rate under the Tax Act, the Tax Act
includes a provision that recharacterizes capital gains a ordinary income in the
case of certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993.
A Unitholder who is a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or trust) will
not be subject to United States Federal income taxes, including withholding
taxes on interest income (including any original issue discount) on, or any gain
from the sale or other disposition of his pro rata interest in any Security held
by a Trust or the sale of his Units provided that all of the following
conditions are met:
(i) the interest income or gain is not effectively connected with the
conduct by the foreign investor of a trade or business within the United States;
(ii) with respect to any gain, the foreign investor (if an individual) is
not present in the United States for 183 days or more during his or her taxable
year;
(iii) the Security was issued after July 18, 1984; and
(iv) the foreign investor provides all certification which may be
required of his status and of the matters contained in clauses (i) and (ii)
above.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state of local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-62243) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Very truly yours,
/s/ Chapman and Cutler
----------------------
CHAPMAN AND CUTLER
<PAGE>
EXHIBIT 3.3
[CARTER, LEDYARD & MILBURN LETTERHEAD]
January 3, 1996
The Chase Manhattan Bank
(National Association), as Trustee of
Fidelity Defined Trusts, Series 1
770 Broadway - 6th Floor
New York, New York 10003
Attn.: Mr. Paul J. Holland
Vice President
Re: Fidelity Defined Trusts, Series 1:
Laddered Government Series 1, Short Treasury Portfolio
Laddered Government Series 2, Short/Intermediate Treasury Portfolio
Dear Sirs:
We are acting as special counsel with respect to New York tax matters for
Fidelity Defined Trusts, Series 1, with respect to two trusts thereunder,
Laddered Government Series 1, Short Treasury Portfolio and Laddered Government
Series 2, Short/Intermediate Treasury Portfolio (each, a "Trust"), which will be
established under a certain Standard Terms and Conditions of Trust and a related
Trust Agreement each dated as of today (collectively, the "Indenture") between
National Financial Services Corporation, as Depositor, Evaluator and Portfolio
Supervisor (the "Depositor"), and The Chase Manhattan Bank (National
Association), as Trustee (the "Trustee"). Pursuant to the terms of the
Indenture, units of fractional undivided interest in the Trust (the "Units")
will be issued in the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified copies, or
copies otherwise identified to our satisfaction, of such documents as we have
deemed necessary or appropriate for the purpose of this opinion. In giving this
opinion, we have relied upon the two opinions, each
<PAGE>
The Chase Manhattan Bank
(National Association)
-2-
dated today and addressed to the Trustee, of Chapman and Cutler, counsel for the
Depositor, with respect to the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as a
corporation under New York law, and accordingly will not be subject to the New
York State franchise tax or the New York City general corporation tax.
2. Under the income tax laws of the State and City of New York, the
income of the Trust will be considered the income of the holders of the Units.
We consent to the filing of this opinion as an exhibit to the Registration
Statement (No. 33-62243) filed with the Securities and Exchange Commission with
respect to the registration of the sale of the Units and to the references to
our name under the captions "Tax Status" and "Legal Opinions" in such
Registration Statement and the preliminary prospectus included therein.
Very truly yours,
/s/ Carter, Ledyard & Milburn
-----------------------------
SFL:dbc
<PAGE>
EXHIBIT 3.4
[CARTER, LEDYARD & MILBURN LETTERHEAD]
January 3, 1996
The Chase Manhattan Bank
(National Association), as Trustee of
Fidelity Defined Trusts, Series 1
770 Broadway - 6th Floor
New York, New York 10003
Attn.: Mr. Paul J. Holland
Vice President
Re: Fidelity Defined Trusts, Series 1
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank (National
Association) ("Chase") in connection with the execution and delivery of a
Standard Terms and Conditions of Trust and a related Trust Agreement each dated
as of today (collectively, the "Indenture") and between National Financial
Services Corporation, as Depositor, Evaluator and Portfolio Supervisor (the
"Depositor"), and Chase, as Trustee (the "Trustee"), establishing Fidelity
Defined Trusts, Series 1, which comprises Laddered Government Series 1, Short
Treasury Portfolio, Laddered Government Series 2, Short/Intermediate Treasury
Portfolio, and Rolling Government Series 1, Short Treasury Portfolio (each, a
"Trust"), and the execution by Chase, as Trustee under the Indenture, of a
certificate or certificates evidencing ownership of a number of units
constituting the entire interest in the respective Trust (such certificate or
certificates and such aggregate units being herein called "Certificates" and
"Units"), each of which Units represents an undivided interest in the Trust,
which consists of United States Treasury Obligations (including confirmations of
contracts for the purchase of certain obligations not yet delivered and cash,
cash equivalents or an irrevocable letter of credit in the amount required for
such purchase upon the receipt of such obligations), such obligations being
defined in the Indenture as Securities and referenced in the schedules to the
Indenture.
<PAGE>
The Chase Manhattan Bank
(National Association)
-2-
We have examined the Indenture, the Closing Memorandum delivered today
by the parties to the Indenture (the "Closing Memorandum"), the form of
Certificate and such other documents as we have deemed necessary in order to
render this opinion. Based on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing national banking
association authorized to exercise trust powers.
2. The Indenture has been duly executed and delivered by Chase and,
assuming due execution and delivery by the Depositor, constitutes the valid and
legally binding obligation of Chase.
3. The Certificates are in proper form for execution and delivery by
Chase, as Trustee.
4. Chase, as Trustee, has duly executed and delivered to or upon the
order of the Depositor a Certificate or Certificates evidencing ownership of the
Units, registered in the name of the Depositor. Upon receipt of confirmation of
the effectiveness of the registration statement for the sale of the Units filed
with the Securities and Exchange Commission under the Securities Act of 1933,
the Trustee may deliver such other Certificates, in such names and
denominations as the Depositor may request, to or upon the order of the
Depositor as provided in the Closing Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust amounts as
may be necessary to provide periodic interest distributions of approximately
equal amounts, and may be reimbursed, without interest, for any such advances
from funds in the interest account, as provided in the Indenture.
In rendering for foregoing opinion, we have not considered, among other
things, whether the Securities have been duly authorized and delivered.
Very truly yours,
/s/ Carter, Ledyard & Milburn
-----------------------------
SFL:dbc
Exhibit 3.1
Consent of Independent Auditors
We consent to the use of our report dated January 3, 1996, accompanying the
financial statements of the Fidelity Defined Trusts Series 1 (Laddered
Government Series 1, Short Treasury Portfolio, Laddered Government Series
2, Short /Intermediate Treasury Portfolio, and Rolling government Series 1,
Short Treasury Portfolio) included herein and to the reference to our firm
as experts under the heading "Independent Certified Public Accountants" in
the prospectus which is part of this registration statement.
Deloitte & Touche LLP
January 3, 1996
New York, New York
J.J. KENNY DAVID J. BOYLE
65 BROADWAY ASSISTANT MANAGER
NEW YORK, N.Y. 10006 UNIT INVESTMENT
TRUST SERVICES
STANDARD & POOR'S
A Division of the McGraw Hill Companies
Fidelity January 3, 1996
Capital Markets
World Trade Center
164 Northern Avenue
Boston, Massachusetts 02110
Re: Fidelity Rolling Government Series 1, Short Term Treasury Portfolio
Gentlemen:
Weare enclosing a list of bonds appearing in the portfolio of the above new
series.
The offering prices listed herein reflect Kenny S&P Evaluation Services'
evaluation of the market value and are in accordance withthe valuation
method set forth in the current prospectus, as of the above date.
Very truly yours,
KENNY S&P EVALUATION SERIVICES
a division of J.J. Kenny Co. Inc.
By____________________________
David Boyle
J.J. KENNY DAVID J. BOYLE
65 BROADWAY ASSISTANT MANAGER
NEW YORK, N.Y. 10006 UNIT INVESTMENT
TRUST SERVICES
STANDARD & POOR'S
A Division of the McGraw Hill Companies
Fidelity January 3, 1996
Capital Markets
World Trade Center
164 Northern Avenue
Boston, Massachusetts 02110
Re: Fidelity Laddered Government Series 1, Short Term Treasury Portfolio
Gentlemen:
We are enclosing a list of bonds appearing in the portfolio of the above
new series.
The offering prices listed herein reflect Kenny S&P Evaluation Services'
evaluation of the market value and are in accordance with the valuation
method set forth in the current prospectus, as of the above date.
Very truly yours,
KENNY S&P EVALUATION SERVICES
a division of J.J. Kenny Co. Inc.
By____________________________
David Boyle
JJ. KENNY FRANK A. CICCOTTO JR.E
65 BROADWAY VICE PRESIDENT
NEW YORK, N.Y. 10006 TAX EXEMPT EVALUATIONS
STANDARD & POOR'S
A Division of the McGraw Hill Companies
Fidelity January 3, 1996
Capital Markets
World Trade Center
164 Northern Avenue
Boston, Massachusetts 02110
Re: Fidelity Laddered Government Series 2, Short?Intermediate Term Treasury
Portfolio
Gentlemen:
We have examined the Registration Statement File No. 33-62243 for the above
captioned trust. We hereby acknowledge that Kenny S&P Evaluation Services,
a division of J.J. Kenny Co., Inc, is currently acting as the evaluator for
the trust. We Hereby consent to the use in the Registration Statement of
the references to Kenny S&P Evaluation Services, a division of J.J., Kenny
Co., Inc as evaluator.
tIn addition, we hereby confirm that the ratings indicated in the
Registration Statement for the respective bonds comprising the trust
portfolio are the ratings indicated in our KENNYBASE database as of the
date of the evaluation report.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Very truly yours,
Frank A. Ciccotto Jr.
Standard & Poor s
25 Broadway
New York, NY 10004-1064
December 6, 1995
Chapman & Cutler
111 West Monroe Street
Chicago, IL 60603
Re: Fidelity Defined Trusts Series 1 consisting of Laddered Government
Series 1, Short Treasury Portfolio Laddered Government Series 2,
Short/Intermediate Treasury Portfolio and Rolling Government
Series 1, Short Treasury Portfolio
Pursuant to your request for a Standard & Poor s rating on the units of the
above-captioned Trust, SEC 33-62243, we have reviewed the information
presented to us and have assigned a AAA rating to the units of the Trust
and a AAA rating to the securities contained in the Trust. The ratings
are direct reflections of the portfolios of the Trust, which will be
composed solely of U. S. Treasury Debt Obligations fully guaranteed as to
principal and interest by the full faith and credit of the United States.
You have permission to use the name of Standard & Poor s and the
above-assigned ratings in connection with your dissemination of information
relating to these units, provided that it is understood that the ratings
are not market ratings nor recommendations to buy, hold, or sell the
units of the trusts or the securities contained in the Trust. Further, it
should be understood the rating on the units does not take into account the
extent to which Trust expenses or portfolio asset sales for less than the
Trust s purchase price will reduce payment to the unit holders of the
interest and principal required to be paid on the portfolio assets.
Standard & Poor s reserves the right to advise its own clients,
subscribers, and the public of the ratings. Standard & Poor s relies on
the sponsor and its counsel, accountants, and other experts for the
accuracy and completeness of the information submitted in connection with
the ratings. Standard & Poor s does not independently verify the truth or
accuracy of any such information.
This letter evidences our consent to the use of the name of Standard & Poor
s Ratings Services, a division of The McGraw-Hill Companies, Inc. in
connection with the rating assigned to the units in the registration
statement or prospectus relating to the units or the Trust. However, this
letter should not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name of Standard
& Poor s Ratings Services, a division of the McGraw-Hill Companies, Inc. in
connection with the ratings assigned to the securities contained in the
Trust. You are hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Please be certain to send us a copy of your final prospectus as soon as it
becomes available. Should we not receive it within a reasonable time after
the closing or should it not conform to the representations made to us, we
reserve the right to withdraw the rating.
We are pleased to have had the opportunity to be of service to you. If we
can be of further help, please do not hesitate to call upon us.
Sincerely,
Sanford B. Bragg
NFSC OFFICERS AND DIRECTORS
Jeffrey R. Larsen has served as Chief Legal Officer for National
Financial Services Corporation since 1990.
Robert P. Mazzarella has served as a Director of NFSC since 1991. He is
the President of National Financial Correspondent Services.
James H. Messenger has served as President, Chief Executive Officer, Chief
Operations Officer, and Director of National Financial Services Corporation
since 1990.
Sherif A. Nada is a Director of NFSC. He is the President of Fidelity
Capital Markets. Prior to joining FCM in 1991, he was with Salomon
Brothers.
Mercedes E. Neff has served as Senior Vice President and Treasurer of
National Financial Services Corporation since 1992. Prior to joining NFSC,
she was an Assistant Treasurer at Shearson Lehman Brothers.
Roger T. Servison has been a Director of NFSC since 1994. Since 1991 he
has been an Officer with Fidelity Brokerage Services, Inc., and Fidelity
Distributors Corp., and the President of Strategic Advisors, Inc. From
August 1990 to June 1991 he was the President of Monarch Securities, Inc.
Prior to 1991, he was a Senior Vice President for FMR Corp.
Shaugn S. Stanley has been the Chief Financial Officer for NFSC since 1993.
Prior to joining NFSC, he was a Vice President with Rauscher Pierce
Refsnes, Inc.
Gordon R. Watson has served as a Director of NFSC since 1990.
Fred Knapp has been a Director of NFSC since 1991.
Memorandum
File No. 33-62243
The Prospectus and the Indenture filed with Amendment No. 2 to the
Registration Statement on Form S-6 have been revised to reflect information
regarding the execution of the Indenture and the deposit of securities on
January 3, 1996 and to set forth certain statistical data based thereon.
In addition, there are a number of other changes described below.
The Prospectus
Pages 4-6 The following information for each Trust appears:
The total number of units of each Trust.
The Public Offering Price at the opening of business on the Initial Date
of Deposit.
The initial annual fee of the Trustee.
The first and second distributions and record dates.
The estimated long-term returns and estimated current returns (if
applicable) to Unitholders as of the opening of business on the Initial
Date of Deposit.
Estimated net annual unit income.
Pages 9-13 The following information for each Trust appears on the pages
indicated:
Summary data regarding the composition of the portfolio of each Trust.
The portfolio for each Trust.
Page 14 The Report of Independent Certified Public Accountants has been
completed.
Page 15 The Statements of Condition have been completed.
Page A-24 Estimated Cash Flows to Unit holders have been completed.
The Trust Agreement and Standard Terms and Conditions of Trust
The Trust Agreement has been conformed to reflect the execution thereof.
Chapman and Cutler
January 3, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Amendment
Number 2 to Form S-6 and is qualified in its entirety by reference to such
Amendment Number 2 to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> LADDERED GOVERNMENT, SHORT TREASURY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-03-1996
<PERIOD-END> JAN-03-1996
<INVESTMENTS-AT-COST> 505,620
<INVESTMENTS-AT-VALUE> 505,620
<RECEIVABLES> 12,492
<ASSETS-OTHER> 48,183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 566,295
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,675
<TOTAL-LIABILITIES> 60,675
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 505,620
<SHARES-COMMON-STOCK> 50,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 505,620
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Amendment
Number 2 to Form S-6 and is qualified in its entirety by reference to such
Amendment Number 2 to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> LADDERED GOVERNMENT, SHORT/INTERMEDIATE
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-03-1996
<PERIOD-END> JAN-03-1996
<INVESTMENTS-AT-COST> 505,557
<INVESTMENTS-AT-VALUE> 505,557
<RECEIVABLES> 3,092
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 556,832
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,275
<TOTAL-LIABILITIES> 51,275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 505,557
<SHARES-COMMON-STOCK> 50,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 505,557
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Amendment
Number 2 to Form S-6 and is qualified in its entirety by reference to such
Amendment Number 2 to Form S-6.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> ROLLING TREASURY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-03-1996
<PERIOD-END> JAN-03-1996
<INVESTMENTS-AT-COST> 402,315
<INVESTMENTS-AT-VALUE> 402,315
<RECEIVABLES> 3,052
<ASSETS-OTHER> 48,183
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 453,550
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,235
<TOTAL-LIABILITIES> 51,235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 402,315
<SHARES-COMMON-STOCK> 40,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 402,315
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
