As filed with the Securities and Exchange Commission on August 25, 1995
Securities and Exchange Commission
Washington, D.C. 20549
Form N-8B-2
File No.
Registration Statement of Unit Investment Trust
Pursuant to Section 8(b) of the
Investment Company Act of 1940
Fidelity Unit Investment Trusts
(and Subsequent Trusts and Similar Series of Trusts)
Not the Issuer of Periodic payment plan certificates
I. Organization and General Information
1. (a) Furnish name of the trust and the Internal Revenue Service Employer
Identification Number. (According to security designation or otherwise, if
the trust does not have or does not transact business under any other
designation.)
Fidelity Unit Investment Trusts.
The Trust has no Internal Revenue Service
Employer Identification Number
(b) Furnish title of each class or series of securities issued by the
Trust.
Certificate of Ownership
- evidencing -
An Undivided Interest
- in the -
Fidelity Defined Trusts, Series 1
2. Furnish name and principal business address and zip code and the
Internal Revenue Service Employer Identification Number of each depositor
of the trust.
National Financial Services Corporation (04-2785576)
World Trade Center
164 Northern Avenue ZT3
Boston, MA 02210
3. Furnish name and principal business address and zip code and the
Internal Revenue Service Employer Identification Number of each custodian
or trustee of the trust indicating for which class or series of securities
each custodian or trustee is acting.
United States Trust Company of New York, 45 Wall Street, New York, New
York, 10005.
Internal Revenue Service Employer Identification
Number is: 13-5459866
or
The Chase Manhattan Bank, N.A., Box 2051, New York, New York 10081.
Internal Revenue Service Employer Identification
Number is: 13-2633612
is the Trustee of the trust acting for the series of securities mentioned
in the answer to Item 1(b) herein.
4. Furnish name and principal business address and zip code and the
Internal Revenue Service Employer Identification Number of each principal
underwriter currently distributing securities of the trust.
None at the date hereof. It is expected that a group of underwriters will
be formed to distribute securities of the trust. The Manager of such group
will be Fidelity Brokerage Services, Inc. (04-2653569), World Trade Center,
164 Northern Avenue, ZT3, Boston, Massachusetts 02210.
5. Furnish name of state or other sovereign power, the laws of which govern
with respect to the organization of the trust.
State of New York.
6. (a) Furnish the date of execution and termination of any indenture or
agreement currently in effect under the terms of which the trust was
organized and issued or proposes to issue securities. (If individual
indentures or agreements are entered into with security holders, so state
and furnish the date of the first such indenture or agreement.)
The form of Trust Indenture and Agreements proposed to be entered into
between National Financial Services Corporation, as Depositor and
Evaluator, and United States Trust Company of New York or The Chase
Manhattan Bank, N.A., as Trustee, under the terms of which the trusts for
series 1 and subsequent series will be created and the securities for
series 1 and subsequent series described in Item l(b) will be issued, is
filed as Exhibit A(l) hereto. It is expected that the Trust Indenture and
Agreements for series 1 and subsequent series will be entered into
immediately prior to the filing of an amendment of the Registration
Statement on Form S-6 under the Securities Act of 1933 filed for each
series of Fidelity Defined Trusts, and the securities comprising the
portfolio will be listed in the Trust Indenture and Agreement and in the
Prospectus, and said securities will not be selected until at or about the
date of their deposit. The Trust Indenture and Agreement provides (or will
provide) that in no event shall the trust continue beyond December 31 of
the year following the fiftieth anniversary of the execution of the Trust
Indenture and Agreement.
(b) Furnish the dates of execution and termination of any indenture or
agreement currently in effect pursuant to which the proceeds of payments on
securities issued or to be issued by the trust are held by the custodian or
trustee.
None, except as set forth in Item 6(a).
7. Furnish in chronological order the following information with respect to
each change of name of the trust since January 1, 1930. If the name has
never been changed, so state.
Former Name : Approximate Date of Change
None.
8. State the date on which the fiscal year of the trust ends.
December 31.
MATERIAL LITIGATION
9. Furnish a description of any pending legal proceedings, material with
respect to the security holders of the trust by reason of the nature of the
claim or the amount thereof, to which the trust, the depositor, or the
principal underwriter is a party or of which the assets of the trust are
the subject, including the substance of the claims involved in such
proceeding and the title of the proceeding. Furnish a similar statement
with respect to any pending administrative proceeding commenced by a
governmental authority or any such proceeding or legal proceeding known to
be contemplated by a governmental authority. Include any proceeding which,
although immaterial itself, is representative of, or one of, a group which
in the aggregate is material.
None.
II. General Description of the Trust and Securities of the Trust
GENERAL INFORMATION CONCERNING THE SECURITIES OF THE TRUST AND THE RIGHTS
OF HOLDERS
10. Furnish a brief statement with respect to the following matters for
each class or series of securities issued by the trust:
(a) Whether the securities are of the registered or bearer type.
Registered.
(b) Whether the securities are of the cumulative or distributive type.
Distributive.
(c) The rights of security holders with respect to withdrawal or
redemption.
See answer to subdivision (d).
(d) The rights of security holders with respect to conversion, transfer,
partial redemption, and similar matters.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Market for Units," "Unitholders" and "Redemption of Units."
(e) If the trust is the issuer of periodic payment plan certificates, the
substance of the provisions of any indenture or agreement with respect to
lapses or defaults by security holders in making principal payments, and
with respect to reinstatement.
Not applicable.
(f) The substance of the provisions of any indenture or agreement with
respect to voting rights, together with the names of any persons other than
security holders given the right to exercise voting rights pertaining to
the trust's securities or the underlying securities and the relationship of
such persons to the trust.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Trust Administration-Amendment and Termination" and
"Unitholders-Rights of Unitholders."
(g) Whether security holders must be given notice of any change in:
(1) the composition of the assets in the trust.
Yes.
(2) the terms and conditions of the securities issued by the trust.
Yes.
(3) the provisions of any indenture or agreement of the trust.
Yes.
(4) the identity of the depositor, trustee or custodian.
Yes.
(h) Whether the consent of security holders is required in order for action
to be taken concerning any change in:
(1) the composition of the assets of the trust.
No.
(2) the terms and conditions of the securities issued by the trust.
No.
(3) the provisions of any indenture or agreement of the trust.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Administration -Amendment and Termination."
(4) the identity of the depositor, trustee or custodian.
No.
(i) Any other principal feature of the securities issued by the trust or
any other principal right, privilege or obligation not covered by
subdivisions (a) to (g) or by any other items in this form.
None.
INFORMATION CONCERNING THE SECURITIES UNDERLYING THE TRUST'S SECURITIES
11. Describe briefly the kind or type of securities comprising the unit of
specified securities in which security holders have an interest.
The Trust will consist of common stocks, preferred stocks, bonds, notes,
other fixed income securities, other evidences of indebtedness,
certificates of participation, mortgage-backed securities or other
obligations issued or guaranteed by the United States of America or by any
agency or instrumentality thereof (plus Contract Obligations, Replacement
Securities, Replacement Contract Obligations, additional Securities and
Substitute Securities, if any, as defined in Exhibit A(l)(a) hereto)
(collectively referred to herein as the "Securities") all undistributed
interest received or accrued thereon and any undistributed cash realized
from the sale, redemption or other disposition of the Securities deposited
in the Trust. Certain series of the Trust may elect to qualify for
"regulated investment company" treatment under the Internal Revenue Code of
1954, as amended (the "Code") by designating such election in the
applicable Trust Indenture for such series; otherwise series of the Trust
will be structured so that they are not associations taxable as
corporations under the Code.
12. If the trust is the issuer of periodic payment plan certificates and if
any underlying securities were issued by another investment company,
furnish the following information for each such company:
(a) Name of company.
(b) Name and principal business address of depositor.
(c) Name and principal business address of trustee or custodian.
(d) Name and principal business address of principal underwriter.
(e) The period during which the securities of such company have been the
underlying securities.
Not applicable.
INFORMATION CONCERNING LOADS, FEES, CHARGES AND EXPENSES
13. (a) Furnish the following information with respect to each load, fee,
expense or charge to which (1) principal payments, (2) underlying
securities, (3) distributions, (4) cumulated or reinvested distributions or
income, and (5) redeemed or liquidated assets of the trust's securities are
subject:
(A) the nature of such load, fee, expense or charge;
(B) the amount thereof;
(C) the name of the person to whom such amounts are paid and his
relationship to the trust;
(D) the nature of the services performed by such person in consideration
for such load, fee, expense or charge.
Reference is made to the statements in Exhibit D filed herewith under the
captions, "Public Offering of Units-Public Offering Price; -Public
Distribution of Units; - Profits of Sponsor," "Trust Expenses" and
"Distribution Reinvestment."
(b) For each installment payment type of periodic payment plan certificate
of the trust, furnish the following information with respect to sales load
and other deductions from principal payments.
Not applicable.
(c) State the amount of total deductions as a percentage of the net amount
invested for each type of security issued by the trust. State each
different sales charge available as a percentage of the public offering
price and as a percentage of the net amount invested. List any special
purchase plans or methods established by rule or exemptive order that
reflect scheduled variations in, or elimination of, the sales load and
identify each class of individuals or transactions to which such plans
apply.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Public Offering of Units-Public Offering Price; -Public
Distribution of Units; - Profits of Sponsor" and "Essential Information."
(d) Explain fully the reasons for any difference in the price at which
securities are offered generally to the public, and the price at which
securities are offered for any class of transactions to any class or group
of individuals, including officers, directors, or employees of the
depositor, trustee, custodian or principal underwriters.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Public Offering of Units-Public Offering Price; -Public
Distribution of Units; - Profits of Sponsor" and "Essential Information."
(e) Furnish a brief description of any loads, fees, expenses or charges
not covered in Item 13(a) which may be paid by security holders in
connection with the trust or its securities.
Reference is made to the answer to Item 13(a) and to the statements in
Exhibit D filed herewith under the caption "Unitholders."
(f) State whether the depositor, principal underwriter, custodian or
trustee, or any affiliated person of the foregoing may receive profits or
other benefits not included in answer to Item 13(a) or 13(d) through the
sale or purchase of the trust's securities or interests in such securities,
or underlying securities or interests in underlying securities, and
describe fully the nature and extent of such profits or benefits.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Public Offering of Units - Profits of Sponsor" and "Distribution
Reinvestment ."
(g) State the percentage that the aggregate annual charges and deductions
for maintenance and other expenses of the trust bear to the dividend and
interest income from the trust property during the period covered by the
financial statements filed herewith.
Not applicable.
INFORMATION CONCERNING THE OPERATIONS OF THE TRUST
14. Describe the procedure with respect to applications (if any) and the
issuance and authentication of the trust's securities, and state the
substance of the provisions of any indenture or agreement pertaining
thereto.
Reference is made to the statements in Exhibit D filed herewith under the
caption "The Trusts."
15. Describe the procedure with respect to the receipt of payments from
purchasers of the trust's securities and the handling of the proceeds
thereof, and state the substance of the provisions of any indenture or
agreement pertaining thereto.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Public Offering of Units - Profits of Sponsor."
16. Describe the procedure with respect to the acquisition of underlying
securities and the disposition thereof, and state the substance of the
provisions of any indenture or agreement pertaining thereto.
Reference is made to information provided in answer to Item 11 above and to
the statements in Exhibit D filed herewith under the captions "Trust
Administration," "Investment Supervision," "Distribution Reinvestment,"
"The Trusts," and "Portfolio."
17. (a) Describe the procedure with respect to withdrawal or redemption by
security holders.
(b) Furnish the names of any persons who may redeem or repurchase, or are
required to redeem or repurchase, the trust's securities or underlying
securities from security holders, and the substance of the provisions of
any indenture or agreement pertaining thereto.
(c) Indicate whether repurchased or redeemed securities will be cancelled
or may be resold.
Reference is made to the statements in answer to Item 10(d) above.
18. (a) Describe the procedure with respect to the receipt, custody and
disposition of the income and other distributable funds of the trust and
state the substance of the provisions of any indenture or agreement
pertaining thereto.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Trust Administration" and "Distribution Reinvestment."
(b) Describe the procedure, if any, with respect to the reinvestment of
distributions to security holders and state the substance of the provisions
of any indenture or agreement pertaining thereto.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Distribution Reinvestment."
(c) If any reserves or special funds are created out of income or
principal, state with respect to each such reserve or fund the purpose and
ultimate disposition thereof, and describe the manner of handling the same.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Unitholders-Distributions to Unitholders."
(d) Submit a schedule showing the periodic and special distributions which
have been made to security holders during the three years covered by the
financial statements filed herewith. State for each such distribution the
aggregate amount and amount per share. If distributions from sources other
than current income have been made, identify each such other source and
indicate whether such distribution represents the return of principal
payments to security holders. If payments other than cash were made,
describe the nature thereof, the account charged and the basis of
determining the amount of such charge.
Not applicable.
19. Describe the procedure with respect to the keeping of records and
accounts of the trust, the making of reports and the furnishing of
information to security holders, and the substance of the provision of any
indenture or agreement pertaining thereto.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Unitholders-Statements to Unitholders."
20. State the substance of the provisions of any indenture or agreement
concerning the trust with respect to the following:
(a) Amendments to such indenture or agreement.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Administration -Amendment and Termination."
(b) The extension or termination of such indenture or agreement.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Administration -Amendment and Termination."
(c) The removal or resignation of the trustee or custodian, or the failure
of the trustee or custodian to perform its duties, obligations and
functions.
See Item 20(d).
(d) The appointment of a successor trustee and the procedure if a successor
trustee is not appointed.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Trust Administration-The Trustee; -Limitations on Liability."
(e) The removal or resignation of the depositor, or the failure of the
depositor to perform its duties, obligations and functions.
See Item 20(f)
(f) The appointment of a successor depositor and the procedure if a
successor depositor is not appointed.
Reference is made to the statements in Exhibit D filed herewith under the
captions "The Sponsor."
21. (a) State the substance of the provisions of any indenture or agreement
with respect to loans to security holders.
Not applicable.
(b) Furnish a brief description of any procedure or arrangement by which
loans are made available to security holders by the depositor, principal
underwriter, trustee or custodian, or any affiliated person of the
foregoing. The following items should be covered:
(1) The name of each person who makes such agreements or arrangements with
security holders.
(2) The rate of interest payable on such loans.
(3) The period for which loans may be made.
(4) Costs or charges for default in repayment at maturity.
(5) Other material provisions of the agreement or arrangement.
Not applicable.
(c) If such loans are made, furnish the aggregate amount of loans
outstanding at the end of the last fiscal year, the amount of interest
collected during the last fiscal year allocated to the depositor, principal
underwriter, trustee or custodian or affiliated person of the foregoing and
the aggregate amount of loans in default at the end of the last fiscal year
covered by financial statements filed herewith.
Not applicable.
22. State the substance of the provisions of any indenture or agreement
with respect to limitations on the liabilities of the depositor, trustee or
custodian, or any other party to such indenture or agreement.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Administration-Limitations on Liability."
23. Describe any bonding arrangement for officers, directors, partners or
employees of the depositor or principal underwriter of the trust, including
the amount of coverage and the type of bond.
Broker's Blanket Bond in the amount of $75,000,000 issued by Fidvest
Limited, Federal Insurance Company, National Union Fire Insurance Company,
Gulf Insurance Company, Continental Insurance Co. and Lloyds of London.
24. State the substance of any other material provisions of any indenture
or agreement concerning the trust or its securities and a description of
any other material functions or duties of the depositor, trustee or
custodian not stated in Item 10 or Items 14 to 23, inclusive.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Administration-The Evaluator," "Trust Expenses" and
"Investment Supervision."
III. Organization, Personnel and Affiliated Persons of Depositor
ORGANIZATION AND OPERATIONS OF DEPOSITOR
25. State the form of organization of the depositor of the trust, the name
of the state or other sovereign power under the laws of which the depositor
was organized and the date of organization.
Reference is made to the statements in Exhibit D under the caption "The
Sponsor."
26. (a) Furnish the following information with respect to all fees received
by the depositor of the trust in connection with the exercise of any
functions or duties concerning securities of the trust during the period
covered by the financial statements filed herewith.
Not applicable, as no fees have been received by the depositor of the trust
in connection with the exercise of any functions or duties concerning
securities of the trust.
(b) Furnish the following information with respect to any fee or any
participation in fees received by the depositor from any underlying
investment company or any affiliated person or investment advisor of such
company:
(1) The nature of such fee or participation.
(2) The name of the person making payment.
(3) The nature of the services rendered in consideration for such fee or
participation.
(4) The aggregate amount received during the last fiscal year covered by
the financial statements filed herewith.
Not applicable, as no fees have been received by the depositor of the trust
from any underlying investment company or any affiliated person or
investment advisor of such company.
27. Describe the general character of the business engaged in by the
depositor including a statement as to any business other than that of
depositor of the trust. If the depositor acts or has acted in any capacity
with respect to any investment company or companies other than the trust,
state the name or names of such company or companies, their relationship,
if any, to the trust, and the nature of the depositor's activities
therewith. If the depositor has caused to act in such named capacities,
state the date of and circumstances surrounding such cessation.
Reference is made to the statements in Exhibit D filed herewith under the
caption "The Sponsor," "Trust Administration-The Evaluator," "Investment
Supervision" and "Trust Expenses."
OFFICIALS AND AFFILIATED PERSONS OF DEPOSITOR
28. (a) Furnish as at latest practicable date the following information
with respect to the depositor of the trust, with respect to each officer,
director, or partner of the depositor, and with respect to each natural
person directly or indirectly owning, controlling or holding with power to
vote 5% or more of the outstanding voting securities of the depositor.
Reference is made to the statement in Exhibit D filed herewith under the
caption "The Sponsor."
(b) Furnish a brief statement of the business experience during the last
five years of each officer, director or partner of the depositor.
The Board of Directors of National Financial Services Corporation is
composed of the following members:
Reference is made to Exhibit E(10) filed herewith.
29. Furnish as at latest practicable date the following information with
respect to each company which directly or indirectly owns, controls or
holds with power to vote 5% or more of the outstanding voting securities of
the depositor.
Reference is made to the statements in Exhibit D filed herewith under "The
Sponsor."
CONTROLLING PERSONS
30. Furnish as at latest practicable date the following information with
respect to any person, other than those covered by Items 28, 29 and 42, who
directly or indirectly controls the depositor.
Reference is made to the statement in Exhibit D filed herewith under the
caption "The Sponsor."
COMPENSATION OF OFFICERS AND DIRECTORS OF DEPOSITOR
COMPENSATION OF OFFICERS OF DEPOSITOR
31. Furnish the following information with respect to the remuneration for
services paid by the depositor during the last fiscal year covered by
financial statements filed herewith:
(a) directly to each of the officers or partners of the depositor directly
receiving the three highest amounts of remuneration.
(b) directly to all officers or partners of the depositor as a group
exclusive of persons whose remuneration is included under Item 31(a),
stating separately the aggregate amount paid by the depositor itself and
the aggregate amount paid by all the subsidiaries.
(c) indirectly or through subsidiaries to each of the officers or partners
of the depositor.
Not applicable.
COMPENSATION OF DIRECTORS
32. Furnish the following information with respect to the remuneration for
services, exclusive of remuneration reported under Item 31, paid by the
depositor during the last fiscal year covered by financial statements filed
herewith:
(a) The aggregate direct remuneration to directors;
(b) Indirectly or through subsidiaries to directors.
Not applicable.
COMPENSATION TO EMPLOYEES
33. (a) Furnish the following information with respect to the aggregate
amount of remuneration for services of all employees of the depositor
(exclusive of persons whose remuneration is reported in Items 31 and 32)
who received remuneration in excess of $10,000 during the last fiscal year
covered by financial statements filed herewith from the depositor and any
of its subsidiaries.
(b) Furnish the following information with respect to the remuneration for
services paid directly during the last fiscal year covered by financial
statements filed herewith to the following classes of persons (exclusive of
those persons covered by Item 33(a)): (1) Sales managers, branch managers,
district managers and other persons supervising the sale of registrant's
securities; (2) Salesmen, sales agents, canvassers and other persons making
solicitations but not in supervisory capacity; (3) Administrative and
clerical employees; and (4) Others (Specify). If a person is employed in
more than one capacity, classify according to predominant type of work.
Not applicable.
COMPENSATION TO OTHER PERSONS
34. Furnish the following information with respect to the aggregate amount
of compensation for services paid any person (exclusive of persons whose
remuneration is reported in Items 31, 32 and 33), whose aggregate
compensation in connection with services rendered with respect to the trust
in all capacities exceeded $10,000 during the last fiscal year covered by
financial statements filed herewith from the depositor and any of its
subsidiaries.
Not applicable.
IV. Distribution and Redemption of Securities
DISTRIBUTION OF SECURITIES
35. Furnish the names of the states in which sales of the trust's
securities (A) are currently being made, (B) are presently proposed to be
made, and (C) have been discounted, indicating by appropriate letter the
status with respect to each state.
(A) No sales of the Trust's securities are currently being made.
(B) Reference is made to the statements in Exhibit D filed herewith under
the caption "Public Offering of Units-Public Distribution of Units."
(C) None.
36. If sales of the trust's securities have at any time since January 1,
1936, been suspended for more than a month, describe briefly the reasons
for such suspension.
Not applicable.
37. (a) Furnish the following information with respect to each instance
where, subsequent to January 1, 1937, any federal or state governmental
officer, agency, or regulatory body denied authority to distribute
securities of the trust, excluding a denial which was merely a procedural
step prior to any determination by such officer, etc. and which denial was
subsequently rescinded.
(1) Name of officer, agency or body.
(2) Date of denial.
(3) Brief statement of reason given for denial.
Not applicable.
(b) Furnish the following information with regard to each instance where
subsequent to January 1, 1937, the authority to distribute securities of
the trust has been revoked by any federal or state governmental officer,
agency or regulatory body.
(1) Name of officer, agency or body.
(2) Date of revocation.
(3) Brief statement of reason given for revocation.
Not applicable.
38. (a) Furnish a general description of the method of distribution of
securities of the trust.
(b) State the substance of any current selling agreement between each
principal underwriter and the trust or the depositor, including a statement
as to the inception and termination dates of the agreement, any renewal and
termination provisions, and any assignment provisions.
(c) State the substance of any current agreements or arrangements of each
principal underwriter with dealers, agents, salesman, etc., with respect to
commissions and overriding commissions, territories, franchises,
qualifications and revocations. If the trust is the issuer of periodic
payment plan certificates, furnish schedules of commissions and the bases
thereof. In lieu of a statement concerning schedules of commissions, such
schedules of commissions may be filed as Exhibit A(3)(C).
For information relating to Items 38(a), (b) and (c), reference is made to
the statements in Exhibit D filed herewith under the caption "Public
Offering of Units."
INFORMATION CONCERNING PRINCIPAL UNDERWRITER
39. (a) State the form of organization of each principal underwriter of
securities of the trust, the name of the state or other sovereign power
under the laws of which each underwriter was organized and the date of
organization.
Reference is made to the answer to Item 25 above.
(b) State whether any principal underwriter currently distributing
securities of the trust is a member of the National Association of
Securities Dealers, Inc.
See Item 39(a).
40. (a) Furnish the following information with respect to all fees
received by each principal underwriter of the trust from the sale of
securities of the trust and any other functions in connection therewith
exercised by such underwriter in such capacity or otherwise during the
period covered by the financial statements filed herewith.
Not applicable, as no fees have been received by the principal
underwriter of the Trust in connection with the exercise of any functions
concerning securities of the Trust during the period in question.
(b) Furnish the following information with respect to any fee or any
participation in fees received by each principal underwriter from any
underlying investment company or any affiliated person or investment
advisor of such company.
(1) The nature of such fee or participation.
(2) The name of the person making payment.
(3) The nature of the services rendered in consideration for such fee or
participation.
(4) The aggregate amount received during the last fiscal year covered by
the financial statements filed herewith.
Not applicable.
41. (a) Describe the general character of the business engaged in by each
principal underwriter, including a statement as to any business other than
the distribution of securities of the trust. If a principal underwriter
acts or has acted in any capacity with respect to any investment company or
companies other than the trust, state the name or names of such company or
companies, their relationship, if any, to the trust and the nature of such
activities. If a principal underwriter has ceased to act in such named
capacity, state the date of and the circumstances surrounding such
cessation.
Reference is made to the information provided in answer to Item 27 above.
(b) Furnish as at latest practicable date the address of each branch
office of each principal underwriter currently selling securities of the
trust and furnish the name and residence address of the person in charge of
such office.
Not applicable.
(c) Furnish the number of individual salesmen of each principal
underwriter through whom any of the securities of the trust were
distributed for the last fiscal year of the trust covered by the financial
statements filed herewith and furnish the aggregate amount of compensation
received by such salesmen in such year.
Not applicable.
42. Furnish as at latest practicable date the following information with
respect to each principal underwriter currently distributing securities of
the trust and with respect to each of the officers, directors or partners
of such underwriter.
Not applicable.
43. Furnish, for the last fiscal year covered by the financial statements
filed herewith, the amount of brokerage commissions received by any
principal underwriter who is a member of a national securities exchange and
who is currently distributing the securities of the trust or effecting
transactions for the trust in the portfolio securities of the trust.
Not applicable.
OFFERING PRICES OF ACQUISITION VALUATION OF SECURITIES OF THE TRUST
44. (a) Furnish the following information with respect to
the method of valuation used by the trust for the purpose of determining
the offering price to the public of securities issued by the trust or the
evaluation of shares or interests in the underlying securities acquired by
the holder of a periodic payment plan certificate.
(1) The source of quotations used to determine the value of portfolio
securities.
(2) Whether opening, closing, bid, asked or any other price is used.
(3) Whether price is as of the day of sale or as of any other time.
(4) A brief description of the methods used by registrant for determining
other assets and liabilities including accrual for expenses and taxes
(including taxes on unrealized appreciation).
(5) Other items which registrant adds to the net asset value in computing
offering price of its securities.
(6) Whether adjustments are made for fractions:
(i) before adding distributor's compensation (load) and
(ii) after adding distributor's compensation (load).
Reference is made to the information stated in answer to Item 10(d) above,
as well as to the statements in Exhibit D filed herewith under the caption
"Public Offering of Units-Public Offering Price."
(b) Furnish a specimen schedule showing the components of the offering
price of the trust's securities as at the latest practicable date.
Not applicable.
(c) If there is any variation in the offering price of the trust's
securities to any person or classes of persons other than underwriters,
state the nature and amount of such variation and indicate the person or
classes of persons to whom such offering is made.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Distribution Reinvestment ," "Public Offering of Units-Public
Offering Price."
45. Furnish the following information with respect to any suspension of the
redemption rights of the securities issued by the trust during the three
fiscal years covered by the financial statements filed herewith:
(a) By whose action redemption rights were suspended.
(b) The number of days' notice given to security holders prior to
suspension of redemption rights.
(c) Reason for suspension.
(d) Period during which suspension was in effect.
Not applicable.
REDEMPTION VALUATION OF SECURITIES OF THE TRUST
46. (a) Furnish the following information with respect to the method of
determining the redemption or withdrawal valuation of securities issued by
the trust:
(1) The source of quotations used to determine the value of portfolio
securities.
(2) Whether opening, closing, bid, asked or any other price is used.
(3) Whether price is as of the date of sale or as of any other time.
(4) A brief description of the methods used by registrant for determining
other assets and liabilities including accruals for expenses and taxes
(including taxes on unrealized appreciation).
(5) Other items which registrant deducts from the net asset value in
computing redemption value of its securities.
(6) Whether adjustments are made for fractions.
Reference is made to the statements in Exhibit D filed herewith under the
captions "Public Offering of Units-Public Offering Price," "Market for
Units," "Redemption-Computation of Redemption Price" and "Public Offering
of Units-Comparison of Public Offering Price and Redemption Price."
(b) Furnish a specimen schedule showing the components of the redemption
price to the holders of the Trust's securities as at the latest practicable
date.
Not applicable.
PURCHASE AND SALE OF INTERESTS IN UNDERLYING SECURITIES FROM AND TO
SECURITY HOLDERS
47. Furnish a statement as to the procedure with respect to the maintenance
of a position in the underlying securities or interests in the underlying
securities, the extent and nature thereof and the person who maintains such
a position. Include a description of the procedure with respect to the
purchase of underlying securities or interests in the underlying securities
from security holders who exercise redemption or withdrawal rights and the
sale of such underlying securities and interests in the underlying
securities to other security holders. State whether the method of
valuation of such underlying securities or interests in underlying
securities differs from that set forth in Items 44 and 46. If any item of
expenditure included in the determination of the evaluation is not or may
not be actually incurred or expended, explain the nature of such item and
who may benefit from the transaction.
Reference is made to information provided in answer to Items 10(d),
44 and 46 above.
V. Information Concerning the Trustee or Custodian
48. Furnish the following information as to each trustee or custodian of
the trust:
(a) Name and principal business address:
(b) Form of organization.
(c) State or other sovereign power under the laws of which the trustee or
custodian was organized.
(d) Name of governmental supervising or examining authority.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Administration-The Trustee."
49. State the basis for payment of fees or expenses of the trustee or
custodian for services rendered with respect to the trust and its
securities, and the aggregate amount thereof for the last fiscal year.
Indicate the person paying such fees or expenses. If any fees or expenses
are prepaid, state the unearned amount.
Reference is made to the statements in Exhibit D filed herewith under the
captions, "The Trusts," "Essential Information" and "Trust Expenses."
50. State whether the trustee or custodian or any other person has or may
create a lien on the assets of the trust and, if so, give full particulars,
outlining the substance of the provisions of any indenture or agreement
with respect thereto.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Trust Expenses."
VI. Information Concerning Insurance of Holders of Securities
51. Furnish the following information with respect to insurance of holders
of securities:
(a) The name and address of the insurance company.
(b) The types of policies and whether individual or group policies.
(c) The types of risks insured and excluded.
(d) The coverage of the policies.
(e) The beneficiaries of such policies and the uses to which the proceeds
of the policies must be put.
(f) The terms and manner of cancellation and of reinstatement.
(g) The method of determining the amount of premium to be paid by holders
of securities.
(h) The amount of aggregate premiums paid to the insurance company during
the last fiscal year.
(i) Whether any person other than the insurance company receives any part
of such premiums, the name of each such person and the amounts involved,
and the nature of the services rendered therefor.
(j) The substance of any other material provisions of any indenture or
agreement of the trust relating to insurance.
Not applicable.
VII. Policy of Registrant
52. (a) Furnish the substance of the provisions of any indenture or
agreement with respect to the conditions upon which and the method of
selection by which particular portfolio securities must or may be
eliminated from assets of the trust or must or may be replaced by other
portfolio securities. If an investment advisor or other person is to be
employed in connection with such selection, elimination or substitution,
state the name of such person, the nature of any affiliation to the
depositor, trustee or custodian and any principal underwriter, and the
amount of remuneration to be received for such services. If any particular
person is not designated in the indenture or agreement, describe briefly
the method of selection of such person.
Reference is made to the information provided in answer to Item 16 above.
(b) Furnish the following information with respect to each transaction
involving the elimination of any underlying security during the period
covered by the financial statements filed herewith:
(1) Title of security.
(2) Date of elimination.
(3) Reasons for elimination.
(4) The use of the proceeds from the sale of the eliminated security.
(5) Title of security substituted, if any.
(6) Whether depositor, principal underwriter, trustee or custodian or any
affiliated person of the foregoing were involved in the transaction.
(7) Compensation or remuneration received by each such person directly or
indirectly as a result of the transaction.
Not applicable.
(c) Describe the policy of the trust with respect to the substitution and
elimination of the underlying securities of the trust with respect to:
(1) The grounds for elimination and substitution.
(2) The type of securities which may be substituted for any underlying
security.
(3) Whether the acquisition of such substituted security or securities
would constitute the concentration of investment in a particular industry
or group of industries or would conform to a policy of concentration of
investment in a particular industry or group of industries.
(4) Whether such substituted securities may be the securities of another
investment company, and
(5) The substance of the provisions of any indenture or agreement which
authorize or restrict the policy of the registrant in this regard.
Reference is made to the information provided in answer to Item 16 above.
(d) Furnish a description of any policy (exclusive of policies covered by
paragraphs (a) and (b) herein) of the trust which is deemed a matter of
fundamental policy and which is elected to be treated as such.
Reference is made to the information provided in answer to Item 16 above.
REGULATED INVESTMENT COMPANY
53. (a) State the taxable status of the trust.
Reference is made to the statements in Exhibit D filed herewith under the
caption "Tax Status."
(b) State whether the trust qualified for the last taxable year as a
regulated investment company as defined in Section 851 of the Internal
Revenue Code of 1954, and state its present intention with respect to such
qualifications during the current taxable year.
The trust was not in existence during the last taxable year; however some
series of the trust may elect to qualify as a regulated investment company
as defined in Section 851 of the Code. Certain other series will be
structured so that they are not associations taxable as corporations under
the Code.
VIII. Financial and Statistical Information
54. If the trust is not the issuer of periodic payment plan certificates
furnish the following information with respect to each class or series of
its securities:
Not applicable since information relates to registrant's past 10 fiscal
years.
(Items 55, 56, 57 and 58 inapplicable since they relate only to periodic
payment plan certificates.)
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF THE TRUST
1. Consent of Certified Public Accountants.
2. Statement of Financial Condition of the Trust.
FINANCIAL STATEMENTS OF THE DEPOSITOR
1. Financial Statements of the Depositor; National Financial Services
Corporation.
EXHIBITS
The following Exhibits are filed herewith:
EXHIBIT A(1)
Form of Indenture between National Financial Services Corporation, as
Depositor and Evaluator, and United States Trust Company of New York, as
Trustee.
EXHIBIT A(1)(A)
Form of Standard Terms and Conditions of Trust between National Financial
Services Corporation as Depositor and Evaluator, and United States Trust
Company of New York, as Trustee.
EXHIBIT A(5)
Form of Certificate of Beneficial Interest (included in Exhibit A(l)(a)
filed herewith).
EXHIBIT A(6)(A)
Certificate of Incorporation and By-laws, as amended, of National
Financial Services Corporation.
EXHIBIT D
Preliminary Prospectus.
EXHIBIT E(10)
Information regarding Members of the Board of Directors of National
Financial Services Corporation.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
National Financial Services Corporation, the Depositor of the Registrant,
has caused this Registration Statement to be duly signed on behalf of the
Registrant in the City of Boston, and Commonwealth of Massachusetts on the
21st day of August , 1995.
Fidelity Unit Investment Trusts
By: National Financial Services Corporation, Depositor
By: Shaugn Stanley
Chief Financial Officer
(SEAL)
Attest:
David J. Pearlman
Senior Legal Counsel
Commonwealth of Massachusetts)
SS:
County of Suffolk)
On this 21st day of August before me personally appeared Shaugn Stanley, to
me known, who, being by me duly sworn, said that he is the Chief Financial
Officer of National Financial Services Corporation, one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
Notary Public
OMB APPROVAL
UNITED STATES OMB Number: 3235-0123
SECURITIES AND EXCHANGE COMMISSION Expires: January 31, 1994
Washington, D.C. 20549 Estimated average burden
hours per response . . . 12.00
ANNUAL AUDITED REPORT SEC FILE NUMBER
FORM X-17A-5 8-26740
PART III
FACING PAGE
INFORMATION REQUIRED OF BROKERS AND DEALERS PURSUANT TO SECTION 17 OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 17A-5 THEREUNDER
REPORT FOR THE PERIOD BEGINNING 12/29/93 AND ENDING 12/27/94
MM/DD/YY MM/DD/YY
A. REGISTRANT IDENTIFICATION
NAME OF BROKER - DEALER:
National Financial Services Corporation OFFICIAL USE ONLY
__________________
FIRM ID. NO.
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
161 Devonshire Street
(No. and Street)
Boston Massachusetts 02110
City) (State) (Zip Code)
NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
Shaugn Stanley 617-563-3382
(Area Code - Telephone No.)
B. ACCOUNTANT IDENTIFICATION
INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report*
Deloitte & Touche LLP
(Name - if individual, state last, first, middle name)
Two World Financial Center New York NY 10281-1414
(Address) (City) (State) (Zip Code)
CHECK ONE:
X Certified Public Accountant
Public Accountant
Accountant not resident in United States or any of its possessions.
FOR OFFICIAL USE ONLY
*CLAIMS FOR EXEMPTION FROM THE REQUIREMENT THAT THE ANNUAL REPORT BE
COVERED BY THE OPINION OF AN INDEPENDENT PUBLIC ACCOUNTANT MUST BE
SUPPORTED BY A STATEMENT OF FACTS AND CIRCUMSTANCES RELIED ON AS THE BASIS
FOR THE EXEMPTION. SEE SECTION 240.17A-5(E)(2).
SEC 1410 (3-91)
NATIONAL FINANCIAL SERVICES CORPORATION AND SUBSIDIARY
(S.E.C. I.D. No. 8-26740)
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 27, 1994
AND
INDEPENDENT AUDITORS' REPORT
AND
SUPPLEMENTAL REPORT ON INTERNAL CONTROL STRUCTURE
* * * * *
Filed in accordance with Rule 17a-5(e)(3)
under the Securities Exchange Act of 1934
as a PUBLIC DOCUMENT.
INDEPENDENT AUDITORS' REPORT
National Financial Services Corporation:
We have audited the consolidated statement of financial condition of
National Financial Services Corporation and subsidiary as of December 27,
1994 that you are filing pursuant to Rule 17a-5 under the Securities
Exchange Act of 1934. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated statement of financial condition presents
fairly, in all material respects, the financial position of National
Financial Services Corporation and subsidiary at December 27, 1994 in
conformity with generally accepted accounting principles.
January 25, 1995
NATIONAL FINANCIAL SERVICES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 27, 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Cash $ 46,434
resale agreements (including $1,404,200
segregated under Federal regulations) 1,409,424
securities borrowed 667,381
receivable from brokers, dealers and clearing
organizations 202,996
receivable from customers 2,081,520
securities owned, at market value 154,998
memberships in exchanges, at cost 1,624
furniture, office equipment, and leasehold improvements,
at cost less accumulated depreciation and amortization
of $15,192 7,501 other assets (including $14,062
deferred tax benefit) 29,322
Total assets $ 4,601,200
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Short-term borrowings $ 162,382
Securities loaned 933,431
Payable to brokers, dealers and clearing organizations 252,530
Payable to customers 2,829,928
Securities sold but not yet purchased, at market value 32,564
Payable to affiliates (including income taxes payable) 49,803
Accrued expenses and other liabilities 29,897
Total liabilities 4,290,535
SHAREHOLDER'S EQUITY:
Common stock, $1 par value; authorized 250,000 shares;
issued and outstanding 100 shares -
Additional paid-in capital 198,736
Retained earnings 111,929
Total shareholder's equity 310,665
Total liabilities and shareholder's equity $ 4,601,200
See notes to consolidated statement of financial condition.
NATIONAL FINANCIAL SERVICES CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 27, 1994
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated statement of financial condition
includes the accounts of National Financial Services Corporation ("NFSC")
and its wholly-owned subsidiary, Integrity Fund, Inc., collectively
referred to as the Company. All material intercompany transactions and
balances have been eliminated.
DESCRIPTION OF BUSINESS - 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.
SECURITIES TRANSACTIONS - Proprietary inventory transactions, commission
revenues and related expenses are recorded on a settlement date basis which
is not materially different from trade date.
FURNITURE, OFFICE EQUIPMENT, AND LEASEHOLD IMPROVEMENTS - Depreciation of
furniture and office equipment is computed using the straight-line method,
generally over seven years. Amortization of leasehold improvements is
provided on a straight-line basis over the lesser of five years or the life
of the lease.
RESALE AND REPURCHASE AGREEMENTS - Resale and repurchase agreements are
treated as collateralized financing transactions and are recorded at their
contractual amounts including accrued interest. It is the Company's policy
to take possession of securities purchased under resale agreements with a
market value in excess of the principal amount loaned plus accrued interest
to collateralize these transactions. This collateral is valued daily and
the Company may require counterparties to deposit additional securities or
return securities pledged when appropriate. Resale agreements of
$1,404,200 are segregated for the exclusive benefit of customers pursuant
to Rule 15c3-3 under the Securities Exchange Act of 1934.
INCOME TAXES - The Company is part of an affiliated group (the "Group")
which files a consolidated Federal income tax return. Each entity is
charged or credited with an amount equal to its separate tax liability or
benefit as if it were filing on an individual company basis except that
losses and other tax benefits will be carried over indefinitely instead of
expiring under the normal Internal Revenue Code guidelines unless the
Group's net operating loss expires under such guidelines.
The Company utilizes the asset and liability method to calculate deferred
tax assets and liabilities. Deferred taxes are recognized based on the
differences between financial reporting and income tax bases of assets and
liabilities using enacted income tax rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Substantially all financial
instruments on the Company's consolidated statement of financial condition
are carried at fair value or at amounts which approximate fair value.
Assets, including cash, resale agreements, securities borrowed and
receivables, are carried at amounts which approximate fair value.
Securities owned and securities sold but not yet purchased are valued at
market value using quoted market prices for actual or similar instruments.
Short-term borrowings and other liabilities are carried at amounts which
approximate fair value.
2. CONCENTRATIONS OF CREDIT RISK
The Company provides investment, financing and related services to a
diverse group of domestic customers, including institutional and individual
investors, and brokers and dealers. The Company's exposure to credit risk
associated with these transactions is measured on an individual customer or
counterparty basis. To reduce the potential for risk concentration, credit
limits are established and continually monitored in light of changing
customer and market conditions. In the normal course of providing such
services, the Company requires collateral on a basis consistent with
industry practice or regulatory requirements. The type and amount of
collateral is continually monitored and counterparties are required to
provide additional collateral as necessary.
3. NET CAPITAL REQUIREMENTS
As a registered broker and dealer and member of The New York Stock
Exchange, Inc., the Company is subject to the Uniform Net Capital Rule
15c3-1 (the "Rule") under the Securities Exchange Act of 1934. The Company
has elected the alternative method permitted by the Rule which requires
that minimum net capital, as defined, be the greater of $250 or 2% of
aggregate debit items arising from customer transactions. At December 27,
1994, the Company had net capital of $252,559 which was 11.88% of aggregate
debit items and exceeded its minimum requirement by $210,051.
4. INCOME TAXES
The consolidated statement of financial condition includes a deferred tax
asset of $14,062. A valuation allowance pertaining to this asset was not
required. Deferred taxes are recorded based upon differences in bases of
assets and liabilities for financial reporting and tax purposes at December
27, 1994. The bases differences are primarily attributable to temporary
differences related to depreciation, reserves and deferred compensation.
There is no deferred tax liability.
5. TRANSACTIONS WITH AFFILIATED COMPANIES
The Company's ultimate parent company is FMR Corp. ("FMR").
The Company earns commissions for executing and clearing securities
transactions on a fully disclosed basis for its parent, Fidelity Brokerage
Services, Inc. ("FBSI") and the Fidelity Group ("Group") of mutual funds.
The Company earns fees from Group companies related to mutual fund
transactions and balances.
Various charges, such as interest, occupancy, administration, computer
processing, systems development and certain employee benefits, are
allocated to the Company by FBSI and other Group companies.
Receivables and payables resulting from transactions with Group companies
other than FBSI are settled directly with FMR. Payable to affiliates
represents the amounts due to FBSI and FMR based on the above transactions.
The amounts are non-interest bearing and settle in the normal course of
business.
6. EMPLOYEE BENEFIT PLANS
The Company participates in FMR's non contributory trusteed pension plan
covering substantially all employees. The Company also participates in
FMR's defined contribution profit sharing plan and retirement plans
covering substantially all eligible employees.
7. COMMITMENTS AND CONTINGENCIES
ASSETS PLEDGED AND OTHER SECURED TRANSACTIONS - In the normal course of
business, the Company executes, settles and finances customer,
correspondent and proprietary securities transactions. These activities
may expose the Company to off-balance sheet risk arising from the potential
that the customer or counterparty may fail to satisfy its obligations and
the collateral will be insufficient. In these situations, the Company may
be required to purchase or sell financial instruments at unfavorable market
prices to satisfy obligations to customers and counterparties.
Customer transactions include the sale of securities not yet purchased
(short sales) and the writing of options. The Company records customer
transactions on a settlement date basis, which is generally five business
days after trade date.
The Company seeks to control the risks associated with its customer
activities by requiring customers and correspondents to maintain margin
collateral in compliance with various regulatory and internal guidelines.
The Company monitors trade date customer exposure and collateral values
daily and requires customers to deposit additional collateral or reduce
positions when necessary.
In the normal course of business, the Company borrows and lends securities
to finance securities transactions and to facilitate the settlement
process. In loaning securities, the Company utilizes securities owned by
the Company, securities owned by customers collateralizing margin debt and
securities borrowed. In addition, security transactions are financed
through collateralized repurchase agreements.
When the Company borrows securities, it usually provides the counterparty
with collateral in the form of cash. When the Company lends securities, it
receives collateral in the form of cash at least equal to the market value
of securities loaned.
When the Company enters into resale and repurchase agreements, these
contracts generally are collateralized by U.S. government and government
agency securities. Repurchase agreements are collateralized by cash or
securities with a market value in excess of the Company's obligation under
the contract.
Liabilities to other brokers and dealers related to unsettled transactions
(e.g., securities failed to receive) are recorded at the amounts for which
the securities were acquired and are paid upon the receipt of securities
from the other brokers and dealers.
The Company seeks to control the risks associated with these transactions
by establishing and monitoring credit limits for significant counterparties
for each type of transaction and monitoring collateral and transaction
levels daily. The Company may require counterparties to deposit additional
collateral or return collateral pledged.
LEASES - The Company occupies office space under noncancellable leases
(including leases with an affiliate) expiring at various dates through
2004. Future minimum rentals under these leases are $6,583, $6,572,
$3,594, $371 and $41 for each of the years ending December 26, 1995 through
December 28, 1999 and $133 thereafter. Certain leases contain escalation
clauses and renewal options. Minimum rental commitments have not been
reduced by $1,735 of sublease rentals to be received in the future under
noncancellable subleases.
LITIGATION - In the normal course of business, the Company has been named
as a defendant in several legal actions and lawsuits which involve claims
for substantial amounts. Although the ultimate outcome of these actions
cannot be ascertained at this time, it is the opinion of management, after
consultation with counsel, that the resolution of such actions will not
have a material adverse effect on the consolidated financial statements.
OTHER - The Company has satisfied margin requirements with the Options
Clearing Corporation of $65,931 by obtaining unsecured letters of credit.
* * * * * *
January 25, 1995
National Financial Services Corporation
161 Devonshire Street
Boston, Massachusetts 02110
In planning and performing our audit of the consolidated financial
statements of National Financial Services Corporation and subsidiary (the
"Company") for the year ended December 27, 1994 on which we issued our
report dated January 25, 1995, we considered its internal control
structure, including procedures for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing an opinion
on the consolidated financial statements and not to provide assurance on
the internal control structure.
Also, as required by Rule 17a-5(g)(1) under the Securities Exchange Act of
1934, we have made a study of the practices and procedures (including tests
of compliance with such practices and procedures) followed by National
Financial Services Corporation that we considered relevant to the
objectives stated in Rule 17a-5(g): (1) in making the periodic computations
of aggregate debits and net capital under Rule 17a-3(a)(11) and the reserve
required by Rule 15c3-3(e); (2) in making the quarterly securities
examinations, counts, verifications and comparisons, and the recordation of
differences required by Rule 17a-13; (3) in complying with the requirements
for prompt payment for securities under Section 8 of Regulation T of the
Board of Governors of the Federal Reserve System; and (4) in obtaining and
maintaining physical possession or control of all fully paid and excess
margin securities of customers as required by Rule 15c3-3.
The management of the Company is responsible for establishing and
maintaining an internal control structure and the practices and procedures
referred to in the preceding paragraph. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures and of the practices and procedures referred to in the preceding
paragraph and to assess whether those practices and procedures can be
expected to achieve the Securities and Exchange Commission's (the
"Commission") above-mentioned objectives. Two of the objectives of an
internal control structure and the practices and procedures are to provide
management with reasonable, but not absolute, assurance that assets for
which the Company has responsibility are safeguarded against loss from
unauthorized use or disposition and that transactions are executed in
accordance with management's authorization and recorded properly to permit
the preparation of financial statements in conformity with generally
accepted accounting principles. Rule 17a-5(g) lists additional objectives
of the practices and procedures listed in the preceding paragraph.
National Financial Services Corporation
January 25, 1995
Page 2
Because of inherent limitations in any internal control structure or the
practices and procedures referred to above, errors or irregularities may
nevertheless occur and not be detected. Also, projection of any evaluation
of them to future periods is subject to the risk that they may become
inadequate because of changes in conditions or that the effectiveness of
their design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a condition in
which the design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to the
consolidated financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses as
defined above.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the
Commission to be adequate for its purposes in accordance with the
Securities Exchange Act of 1934 and related regulations, and that practices
and procedures that do not accomplish such objectives in all material
respects indicate a material inadequacy for such purposes. Based on this
understanding and on our study, we believe that the Company's practices and
procedures were adequate at December 27, 1994 to meet the Commission's
objectives.
This report is intended solely for the information and use of management,
the Securities and Exchange Commission, The New York Stock Exchange, Inc.
and other regulatory agencies that rely on Rule 17a-5(g) under the
Securities Exchange Act of 1934 in their regulation of registered brokers
and dealers, and should not be used for any other purpose.
Yours truly,
Fidelity Defined Trusts, Series 1
Trust Agreement
Dated: ______________, 1995
This Trust Agreement among National Financial Services Corporation, as
Depositor, Evaluator and Portfolio Supervisor and United States Trust
Company of New York, 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 _____________, 1995 (herein called the "Standard Terms and
Conditions of Trust"), and such provisions as are set forth in full and
such provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are to Articles
and Sections of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, the Evaluator and Portfolio
Supervisor agree as follows:
Part I
Standard Terms And Conditions Of Trust
Subject to the Provisions of Part II hereof, all the provisions contained
in the Standard Terms and Conditions of Trust are herein incorporated by
reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had
been set forth in full in this instrument.
Part II
Special Terms And Conditions Of Trust
The following special terms and conditions are hereby agreed to:
(a) The Securities defined in Section 1.01(5) listed in Schedule A hereto
have been deposited in trust under this Trust Agreement.
(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
captions "Summary of Essential Information - Fractional Undivided Interest
in the Trust per Unit" in the Prospectus.
(c) The number of units in a Trust referred to in Section 2.03 is set
forth under the caption "Summary of Essential Information - Number of
Units" in the Prospectus.
(d) The First General Record Date and the amount of the second
distribution of funds from the Interest Account for a Trust shall be the
record date for the Interest Account and the amount set forth under
"Essential Information" for such Trust in the Prospectus.
(e) The "First Settlement Date" for each Trust is the date set forth under
"Essential Information-First Settlement Date" in the Prospectus.
In Witness Whereof, National Financial Services Corporation and United
States Trust Company of New York 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 ______________________________
United States Trust Company Of New York, Trustee
(Seal)
By ______________________________
Attest:
__________________________
National Financial Services Corporation, Evaluator
By ______________________________
National Financial Services Corporation, Portfolio Supervisor
By ______________________________
Schedule A To 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 Series 1
and certain subsequent Series
EFFECTIVE: AUGUST __, 1995
BETWEEN
National Financial Services Corporation
Depositor, Evaluator and Portfolio Supervisor
United States Trust Company of New York
Trustee
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 8
Section 2.03. Issue of Certificates 8
Section 2.04. Form of Certificates 9
Section 2.05. Uncertificated Form 9
Section 2.06. Portfolio Insurance for the Insured Trusts 9
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 19
Section 3.09. Counsel 20
Section 3.10. Notice and Sale by Trustee 20
Section 3.11. Trustee Not Required to Amortize 20
Section 3.12. Liability of Depositor 20
Section 3.13. Notice to Depositor 20
Section 3.14. Limited Replacement of Special Securities; Replacement
Securities; Reinvestment of Principal 21
Section 3.15. Portfolio Supervisor 23
Article IV Evaluation of Securities; Evaluator 24
Section 4.01. Evaluation of Securities 24
Section 4.02. Information for Unitholders 25
Section 4.03. Compensation of Evaluator 25
Section 4.04. Liability of Evaluator 26
Section 4.05. Resignation and Removal of Evaluator 26
Article V Evaluation, Redemption, Purchase, Transfer, Interchange,
Replacement of Certificates or Units Held in Uncertificated Form 27
Section 5.01. Evaluation 27
Section 5.02. Redemptions by Trustee 28
Section 5.03. Transfer or Interchange of Certificates or Units Held in
Uncertificated Form 30
Section 5.04. Certificates Mutilated, Destroyed, Stolen or Lost 31
Article VI Trustee 31
Section 6.01. General Definition of Trustee's Liabilities, Rights and
Duties 31
Section 6.02. Books, Records and Reports 34
Section 6.03. Indenture and List of Securities on File 35
Section 6.04. Compensation 35
Section 6.05. Removal and Resignation of Trustee; Successor 36
Section 6.06. Qualifications of Trustee 37
Article VII Rights of Unitholders 37
Section 7.01. Beneficiaries of Trust 37
Section 7.02. Rights, Terms and Conditions 37
Article VIII Additional Covenants; Miscellaneous Provisions 38
Section 8.01. Amendments 38
Section 8.02. Termination 39
Section 8.03. Construction 40
Section 8.04. Registration of Units 40
Section 8.05. Written Notice 40
Section 8.06. Severability 41
Section 8.07. Dissolution of Depositor Not to Terminate 41
Signature Page 42
STANDARD TERMS AND CONDITIONS OF TRUST
FOR
FIDELITY DEFINED TRUSTS SERIES 1
and certain subsequent Series
Effective: August __, 1995
These Standard Terms and Conditions of Trust effective August __, 1995 are
executed between National Financial Services Corporation, as Depositor,
Evaluator and Portfolio Supervisor and United States Trust Company of New
York, 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 August __, 1995,
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 Series 1 and
certain subsequent Series established after the date of effectiveness
hereof to which these Standard Terms and Conditions of Trust, effective
August __, 1995, 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 August __, 1995, 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 General Record Date and the amount of the second distribution from
the Interest Account and (v) the First Settlement Date.
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 Trustee's 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 United States Trust Company
of New York, 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
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.
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:
ARTICLE I
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 United States Trust Company of New York, 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 Schedule A 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
Schedule A 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 the
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 out-of-pocket expenses related thereto, but not including the
expenses incurred in the printing of preliminary prospectuses and
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 provided
in the Prospectus; 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 of such expenses 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.
Unless otherwise provided in the Prospectus, the second distribution of
funds from the Interest Accounts of the respective Trusts shall be in the
amount specified in Part II of the Trust Agreement and shall be made on the
twentieth day of the month after the "FIRST GENERAL RECORD DATE", as
defined in Part II of the Trust Agreement, to all Unitholders of record of
the respective Trusts as of the First General Record Date.
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
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 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.
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) 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 prior to
the Monthly Record Date on which such moneys would otherwise be
distributed.
(c) If the Prospectus for a 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 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 and (ii) the total number of Units to be
issued in connection with the initial deposit and all anticipated deposits
of additional Securities. 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 and upon the conclusion of the
deposit of additional Securities, the Trustee shall base calculations made
thereafter on such revised estimates or actual expenses, 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 prepared by the Evaluator 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. The Trustee's
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: (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 as set forth in the
Prospectus. 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 from time to time adjust its compensation as set forth
above, PROVIDED that 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". 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. The Depositor may remove the Trustee at any time, with
or without cause, upon 30 days' written notice and appoint a successor
trustee having qualifications and at a rate of compensation satisfactory to
the Depositor. The Depositor may remove the Trustee and appoint a
successor trustee 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
United States Trust Company of New
York, Trustee
By
Vice President
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
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.
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
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.
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.
FIDELITY DEFINED TRUSTS SERIES 1
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
FIDELITY.EPS
LADDERED GOVERNMENT SERIES-Laddered Government Series 1, Short Treasury
Portfolio and Laddered Government Series 2, Short/Intermediate Treasury
Portfolio were each formed for the purpose of providing safety of capital
and investment flexibility through an investment in a portfolio of U.S.
Treasury Obligations with laddered maturity levels that are backed by the
full faith and credit of the United States Government. Interest Income
distributed by each Treasury Portfolio is exempt from state personal income
taxes in all states. Each Treasury Portfolio is available to non-resident
aliens and the income from such Trusts, provided certain conditions are
met, will be exempt from withholding for U.S. federal income tax for such
foreign investors. A FOREIGN INVESTOR MUST PROVIDE A COMPLETED W-8 FORM TO
HIS FINANCIAL REPRESENTATIVE OR THE TRUSTEE TO AVOID WITHHOLDING ON HIS
ACCOUNT. Units of the Trust are rated "AAA" by Standard & Poor's, a
Division of The McGraw-Hill Companies ("Standard & Poor's").
ROLLING GOVERNMENT SERIES-Rolling Government Series 1, Short Treasury
Portfolio was formed to obtain safety of capital and current monthly
distributions of interest through an investment in a portfolio of U.S.
Treasury Obligations that are backed by the full faith and credit of the
United States Government. The Trust has been designed to maintain a short
average maturity, no greater than 8 months. This Trust seeks to reduce Unit
price fluctuations due to changing interest rates by reinvesting
approximately four times a year until January, 1998 the proceeds of
maturing U.S. Treasury Obligations into additional U.S. Treasury
Obligations with maturities of approximately one year so that the Trust
will maintain a portfolio with a weighted average maturity of approximately
0.63 years for most of the Trust's life. Units of the Trust are rated "AAA"
by Standard & Poor's.
Rolling Government Series 2, GNMA Portfolio was formed for the purpose of
obtaining safety of capital and current monthly distributions of interest
through investment in a portfolio primarily consisting of taxable
mortgage-backed securities of the fully modified pass-through type, the
payments of principal and interest on which are fully guaranteed by the
Government National Mortgage Association ("GNMA"). In an effort to minimize
the effect of principal payments and prepayments during the period when, in
t he opinion of the Sponsor, such reinvestment is practical (the
""Reinvestment Period"), the Sponsor will direct the Trustee to reinvest
all distributions of principal into additional GNMA securities which are
similar as to maturity and interest rates as the GNMA securities upon which
the principal was received. The Sponsor currently expects the Reinvestment
Period to last two years from the Initial Date of Deposit. Units of the
Trust are rated "AAA" by Standard & Poor's.
INVESTMENT GRADE SERIES-Investment Grade Series 1, Intermediate Insured
Utility Portfolio primarily consists of a fixed portfolio of corporate debt
obligations ("Bonds") issued after July 18, 1984 by utility companies and
was created to provide a high level of current income. Insurance
guaranteeing the scheduled payment of principal and interest on all of the
Bonds in such Trust has been obtained directly by the issuer of such Bonds
or by the Sponsor from MBIA Insurance Corporation or other insurers. See
"Trust Information-Insurance on the Bonds" and "Investment Grade Series 1,
Intermediate Insured Utility Portfolio-Portfolio." THE INSURANCE DOES NOT
RELATE TO THE UNITS OFFERED HEREBY OR TO THEIR MARKET VALUE. As a result of
such insurance, the Units of the Trust have received a rating of "AAA" by
Standard & Poor's.
Investment Grade Series 2, Corporate Portfolio was formed for the purpose
of providing a high level of current income through investment in a fixed
portfolio consisting primarily of investment grade corporate debt
obligations issued afterJuly 18, 1984.
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK INCLUDING
LOSS OF PRINCIPAL.
SPONSOR: NATIONAL FINANCIAL SERVICES CORPORATION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future
reference.
THE DATE OF THIS PROSPECTUS IS , 1995.
SUMMARY
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of a Trust during
the initial offering period is equal to a pro rata share of the offering
prices of the Securities in such Trust plus or minus a pro rata share of
cash, if any, in the Principal Account held or owned by such Trust, plus
accrued interest plus that sales charge indicated under "Essential
Information." The secondary market Public Offering Price per Unit will be
based upon a pro rata share of the bid prices of the Securities in each
Trust plus or minus a pro rata share of cash, if any, in the Principal
Account held or owned by such Trust, plus accrued interest plus the
applicable sales charge indicated under "Trust Information-Public Offering
of Units-Public Offering Price." The sales charge is reduced on a graduated
scale for sales involving at least $100,000 or 10,000 Units and will be
applied on whichever basis is more favorable to the investor. The minimum
purchase for each Trust is $1,000.
REINVESTMENT. Each Unitholder of a Trust offered herein may elect to have
distributions of principal or interest or both automatically invested
without charge in shares of certain mutual funds advised by Fidelity
Management & Research Company. See "Trust Information-Distribution
Reinvestment."
ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of the opening
of business on the Initial Date of Deposit, the Estimated Long-Term Return
and the Estimated Current Return, if applicable, for each Trust were as set
forth in "Essential Information." The Estimated Current Return is
calculated by dividing the estimated net annual interest income per Unit by
the Public Offering Price. The estimated net annual interest income per
Unit will vary with changes in fees and expenses of the Trustee, the
Sponsor and Evaluator and with principal prepayment (in the case of GNMA
Securities), any reinvestment (in the case of a Rolling Government Series),
redemption (in the case of an Investment Grade Series), maturity and
exchange or sale of Securities while the Public Offering Price will vary
with changes in the offering price of the underlying Securities and with
changes in the accrued interest; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. Estimated
Long-Term Return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements or
average lives of all of the Securities in the applicable Trust, including
the reinvestment of Securities in a Rolling Government Series, and (2)
takes into account the expenses and sales charge associated with each Trust
Unit. Since the market values and estimated retirements or average lives of
the Securities and the expenses of a Trust will change, there is no
assurance that the present Estimated Long-Term Return will be realized in
the future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only net annual interest
income and Public Offering Price.
MARKET FOR UNITS. After the initial offering period, the Sponsor while
under no obligation to do so, intends to maintain a market for the Units
and to offer to repurchase such Units at prices subject to change at any
time which are based on the aggregate bid side evaluation of the Securities
in a Trust plus accrued interest.
RISK FACTORS. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other
factors, the inability of the issuer or an insurer to pay the principal of
or interest on a security when due, the general condition of the relevant
securities market, economic recession, volatile interest rates, early call
provisions and changes to the tax status of the Securities. Rolling
Government Series 2 is subject to the additional risk that the GNMA
securities which make up the Trust may be prepaid more quickly than
expected and that, during the reinvestment period, the Sponsor may be
unable to reinvest principal into additional Securities. Investment Grade
Series 1 is subject to the additional risks associated with utility
companies including the possibility of increased federal, state or local
regulations, the inability to adequately raise rates and the effects of
energy conservation. See "Risk Factors" in each Trust section and "Trust
Information-Risk Factors."
FIDELITY DEFINED TRUSTS SERIES 1
ESSENTIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON THE INITIAL DATE OF DEPOSIT
SPONSOR AND EVALUATOR: NATIONAL FINANCIAL SERVICES CORPORATION
TRUSTEE: UNITED STATES TRUST COMPANY OF NEW YORK
The income, expense and distribution data set forth below has been
calculated for Unitholders purchasing less than 10,000 Units of a Trust.
Unitholders purchasing 10,000 Units or more of a Trust will receive a
slightly higher return because of the reduced sales charge for larger
purchases.
<TABLE>
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<S> <C> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING ROLLING INVESTMENT INVESTMENT
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GRADE GRADE
SERIES 1 SERIES 2 SERIES 1 SERIES 2 SERIES 1 SERIES 2
Public Offering Price per Unit (1) (2) $ $ $ $ $ $
Principal Amount of Securities per Unit $ $ $ $ $ $
Estimated Current Return based on Public
Offering Price (3) (4) (5) (6)
Estimated Long-Term
Return (3) (4) (5) (6)
Estimated Normal Annual Distribution
per Unit (6) $ $ $ $ $ $
Principal Amount of Securities $ $ $ $ $ $
Number of Units
Fractional Undivided Interest per Unit
Calculation of Public Offering Price:
Aggregate Offering Price of Securities $ $ $ $ $ $
Aggregate Offering Price of
Securities per Unit $ $ $ $ $ $
Plus Sales Charge per Unit (7) $ $ $ $ $ $
Public Offering Price per Unit (1) (2) $ $ $ $ $ $
Redemption Price per Unit $ $ $ $ $ $
Sponsor's Initial Repurchase Price
per Unit $ $ $ $ $ $
Excess of Public Offering Price per Unit
over Redemption Price per Unit $ $ $ $ $ $
Excess of Public Offering Price per Unit
over Sponsor's Initial Repurchase Price
per Unit $ $ $ $ $ $
Calculation of Estimated Net Annual
Interest Income per Unit (6):
Estimated Annual Interest $ $ $
Less: Estimated Annual Expense $ $ $ $
Estimated Net Annual Interest $ $
Estimated Daily Rate of Net Interest
Accrual per Unit (if applicable) $ $ $ $
Estimated Average Life of Securities
Type of GNMA Securities
Minimum Principal Value of the Trust
under which Trust Agreement may be
terminated (8) $ $ $ $ $ $
</TABLE>
Evaluations for purposes of sale, purchase or redemption of Units are made
as of the close of business of the Sponsor (currently 3:15 p.m. Central
Time) next following receipt of an order for a sale or purchase of Units or
receipt by the Trustee of Units tendered for redemption.
ESSENTIAL INFORMATION-(CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
LADDERED LADDERED ROLLING ROLLING INVESTMENT INVESTMENT
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GRADE GRADE
SERIES 1 SERIES 2 SERIES 1 SERIES 2 SERIES 1 SERIES 2
Trustee's Annual Fee per $1,000 principal
amount of Securities (9)
Reduction of Trustee's fee per Unit during
the first year (6)
Estimated annual interest income per Unit
during the first year (6)
Interest Payments (10):
First Payment per Unit, representing
days
Estimated Normal Monthly Distribution
per Unit
Estimated Normal Annual Distribution
per Unit
Sales Charge (7):
As a percentage of Public Offering Price
per Unit
As a percentage of net amount invested
As a percentage of net amount invested
in earning assets
Date of Trust Agreements , 1995
First Settlement Date , 1995
Mandatory Termination Date
Maximum Evaluator's Annual Evaluation
Fee per $1,000 Principal Amount of
Securities
Maximum Sponsor's Annual Surveillance
Fee per $1,000 Principal Amount of
Securities
Estimated Annual Organizational Expenses
per Unit (11)
</TABLE>
(1) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. For purchases
settling on the First Settlement Date, no accrued interest will be added to
the Public Offering Price.
(2) Many unit investment trusts issue a number of units such that each
unit represents approximately $1,000 principal amount of underlying
securities. The Sponsor, on the other hand, in determining the number of
Units for each Trust has elected not to follow this format but rather to
provide that number of Units which will establish as close as possible as
of the Initial Date of Deposit a Principal Amount of Securities per Unit of
$10.
(3) The Estimated Current Return and Estimated Long-Term Return are
increased for transactions entitled to a reduced sales charge. See "Trust
Information-Public Offering of Units-Public Offering Price."
(4) The Estimated Current Returns are calculated by dividing the estimated
net annual interest income per Unit by the Public Offering Price. The
estimated net annual interest income per Unit will vary with changes in
fees and expenses of the Trustee, the Sponsor and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and with changes in the accrued
interest; therefore, there is no assurance that the present Estimated
Current Returns indicated above will be realized in the future. The
Estimated Long-Term Returns are calculated using a formula which (1) takes
into consideration, and determines and factors in the relative weightings
of, the market values, yield (which take into account the amortization of
premiums and the accretion of discounts) and the expected retirement dates
of all of the Securities in the applicable Trust (or in the case of a GNMA
Portfolio, the estimated average life of all the Securities in such
Portfolio) and (2) takes into account the expenses and sales charge
associated with each Trust Unit. Since the market values and estimated
retirement dates of the Securities and expenses of each Trust will change,
there is no assurance that the present Estimated Long-Term Returns as
indicated above will be realized in the future. The Estimated Current
Returns and Estimated Long-Term Returns are expected to differ because the
calculation of the Estimated Long-Term Returns reflects the estimated date
and amount of principal returned while the Estimated Current Return
calculations include only net annual interest income and Public Offering
Price.
(5) This figure is based on estimated per Unit cash flows. Estimated cash
flows will vary with changes in fees and expenses, with changes in current
interest rates and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Securities and, in the case of a
GNMA Portfolio, with changes in the average life assumptions of the GNMA
pools. The estimated cash flows to Unitholders for the Trusts are either
set forth under "Estimated Cash Flows to Unitholders" for each Trust or are
available upon request at no charge from the Sponsor.
(6) Estimated Annual Interest amounts are expressed in dollar amounts
except for GNMA Portfolios, which are expressed as percentages due to the
prepayment risk associated with GNMA Securities. During the first year, the
Trustee has agreed to reduce its fee (and to the extent necessary pay
expenses of the Trusts) in the amounts stated above. The Trustee has agreed
to the foregoing to cover all or a portion of the interest on any
Securities accruing prior to their expected dates of delivery, since
interest will not accrue to the benefit of Unitholders of a Trust until
such Securities are actually delivered to the Trust. The estimated net
annual interest income per Unit will remain as indicated. See "The Trusts"
and "Trust Information-Interest, Estimated Long-Term Return and Estimated
Current Return."
(7) The sales charge as a percentage of the net amount invested in earning
assets will increase as accrued interest increases. Transactions subject to
quantity discounts (see "Trust Information-Public Offering of Units-Public
Offering Price") will have reduced sales charges, thereby reducing all
percentages in the table.
(8) The minimum principal value of a GNMA Portfolio under which the Trust
Agreement may be terminated is 40% of the total aggregate principal amount
of securities deposited in each Portfolio during the primary offering
period. The minimum principal value of each other Trust under which the
Trust Agreement may be terminated is 20% of the initial aggregate principal
amount of securities deposited in each Portfolio.
(9) See "Trust Information-Trust Expenses."
(10) Unitholders will receive interest distributions monthly. The Record
Date is the 10th day of the month, commencing , 1995,
and the distribution date is the 20th day of the month, commencing
, 1995.
(11) Each Trust (and therefore the Unitholders of the respective Trust)
will bear all or a portion of its organizational costs (including costs of
preparing the registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange Commission
and states, the initial audit of the Trust portfolios and the initial fees
and expenses of the Trustee but not including the expenses incurred in the
preparation and printing of brochures and other advertising materials and
other selling expenses) as is common for mutual funds. Total organizational
expenses will be amortized over a five year period or over the life of a
Trust if the term of such Trust is less than five years. See "Trust
Information-Trust Expenses" and "Statements of Financial Condition."
Historically, the sponsors of unit investment trusts have paid all of the
costs of establishing such trusts.
THE TRUSTS
Fidelity Defined Trusts Series 1 consists of the underlying separate unit
investment trusts set forth above. The various trusts are collectively
referred to herein as the "Trusts." Each Trust is divided into "Units"
representing equal shares of the underlying assets of such Trust. Laddered
Government Series 1, Short Treasury Portfolio, Laddered Government Series
2, Short/Intermediate Treasury Portfolio and Rolling Government Series 1,
Short Treasury Portfolio are collectively referred to herein as the
"Treasury Portfolios", Rolling Government Series 2, GNMA Portfolio is
referred to herein as the "GNMA Portfolio", Investment Grade Series 1,
Intermediate Insured Utility Portfolio is referred to herein as the
"Insured Utility Portfolio" and Investment Grade Series 2, Corporate
Portfolio is referred to herein as the "Corporate Portfolio." Each of the
Trusts is separate and is designated by a different series number. Each of
the Trusts was created under the laws of the State of New York pursuant to
a trust indenture dated the Initial Date of Deposit (the "Trust
Agreements") between National Financial Services Corporation (the
"Sponsor") and United States Trust Company of New York (the "Trustee").*
As used herein, the terms defined below shall have the following meanings:
"Securities" and "Bonds" shall mean the obligations initially deposited in
the Trusts described under "Portfolio" for each Trust (including all
contracts to purchase such obligations accompanied by an irrevocable letter
of credit sufficient to perform such contracts initially deposited in the
Trusts) and any additional obligations deposited in the Trusts following
the Initial Date of Deposit; "GNMA Securities" and "Ginnie Maes" shall mean
the obligations (and contracts for the purchase thereof) included in the
GNMA Portfolios; "U.S. Treasury Obligations" shall mean the obligations
(and contracts) included in the Treasury Portfolios; "Utility Bonds" shall
mean the obligations (and contracts) included in the Insured Utility
Portfolio; and "Corporate Bonds" shall mean the obligations (and contracts)
included in the Corporate Portfolio.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee that
aggregate principal amount of Securities or contracts for the purchase
thereof for deposit in the Trust Funds as set forth under "Essential
Information." Of such principal amount, the amount specified in "Essential
Information" was deposited in each Trust. In exchange for the Securities so
deposited, the Trustee delivered to the Sponsor documentation evidencing
the ownership of that number of Units for each Trust as indicated under "
Essential Information." Each Trust initially consists of delivery
statements (i.e., contracts) to purchase obligations. The Sponsor has a
limited right of substitution for such Securities in the event of a failed
contract. See "Trust Information-General Information."
Additional Units of each Trust may be issued from time to time following
the Initial Date of Deposit by depositing in such Trust additional
Securities or contracts for the purchase thereof together with irrevocable
letters of credit or cash. As additional Units are issued by a Trust as a
result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of
Securities into a Trust following the Initial Date of Deposit, provided
that such additional deposits will be in principal amounts which will
maintain the same original percentage relationship among the principal
amounts of the Securities in such Trust established on the initial deposit
of the Securities. Thus, although additional Units will be issued, each
Unit will continue to represent the same principal amount of each Security,
and the percentage relationship among the principal amount of each Security
in the related Trust will remain the same.
* Reference is made to the Trust Agreements, and any statements contained
herein are qualified in their entirety by the provisions of the Trust
Agreements.
Each Unit initially offered represents that undivided interest in the
appropriate Trust indicated under "Essential Information." To the extent
that any Units are redeemed by the Trustee or additional Units are issued
as a result of additional Securities being deposited by the Sponsor, the
fractional undivided interest in a Trust represented by each unredeemed
Unit will increase or decrease accordingly, although the actual interest in
such Trust represented by such fraction will remain unchanged. Units will
remain outstanding until redeemed upon tender to the Trustee by
Unitholders, which may include the Sponsor, or until the termination of the
Trust Agreement.
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the portfolio and hence of the Units
will decline with increases in interest rates. The value of the underlying
Securities will fluctuate inversely with changes in interest rates. The
uncertain economic conditions of recent years, together with the monetary
policies and fiscal measures adopted to attempt to deal with them, have
resulted in wide fluctuations in interest rates and, thus, in the value of
fixed rate debt obligations generally and long-term obligations in
particular. The Sponsor cannot predict the degree to which such
fluctuations will continue in the future.
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO
THE TRUST PORTFOLIO
Laddered Government Series 1, Short Treasury Portfolio and Laddered
Government Series 2, Short/Intermediate Treasury Portfolio were both formed
for the purpose of providing safety of capital and investment flexibility
by staggering the return of principal over a predetermined period of time
(a strategy referred to as "laddered maturities"). Each portfolio consists
of U.S. Treasury Obligations that are backed by the full faith and credit
of the United States government. Each Trust Portfolio was also formed for
the purpose of providing protection against changes in interest rates and
also passing through to Unitholders in all states the exemption from state
personal income taxes afforded to direct owners of U.S. obligations. The
value of the Units, the estimated current return and estimated long-term
return to new purchasers will fluctuate with the value of the Securities
included in a portfolio which will generally increase or decrease inversely
with changes in interest rates.
In selecting U.S. Treasury Obligations for deposit in the Trusts the
following factors, among others were, considered by the Sponsor: (a) the
types of such obligations available; (b) the prices and yields of such
obligations relative to other comparable obligations, including the extent
to which such obligations are traded at a premium or at a discount from
par; and (c) the maturities of such obligations.
Laddered Government Series 1, Short Treasury Portfolio consists of a
portfolio of U.S. Treasury Obligations with differing maturity levels,
designed to return approximately 20% of the principal amount of the Trust
semi-annually over the three year life of the Trust, commencing at the end
of the first year of the Trust.
Laddered Government Series 2, Short/Intermediate Portfolio consists of a
portfolio of U.S. Treasury Obligations with differing maturity levels,
designed to return approximately 20% of the principal amount of the Trust
annually over the six year life of the Trust, commencing at the end of the
second year of the Trust.
TAX STATUS
The Trusts may be appropriate investments for investors who desire to
participate in a portfolio of taxable, fixed income securities offering the
safety of capital provided by an investment backed by the full faith and
credit of the United States. In addition, many investors may benefit from
the exemption from state and local personal income taxes that will pass
through the Trust to Unitholders in virtually all states. Each Trust has
been created as a grantor trust for federal tax reasons. For additional
information concerning each Trusts status as a grantor trust see "Trust
Information-Tax Status-Grantor Trust."
RISK FACTORS
The Securities are direct obligations of the United States and are backed
by its full faith and credit although the Units of the Trusts are not so
backed. The Securities are not rated but in the opinion of the Sponsor have
credit characteristics comparable to those of securities rated "AAA" by
nationally recognized rating agencies.
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the Securities and hence the Units
will decline with increases in interest rates. The high inflation of prior
years, together with the fiscal measures adopted to attempt to deal with
it, have resulted in wide fluctuations in interest rates and, thus, in the
value of fixed rate debt obligations generally. The Sponsor cannot predict
whether such fluctuations will continue in the future. For a discussion of
other considerations associated with an investment in Units, see "Trust
Information-General Information" and "Trust Information-Risk
Factors-General."
LADDERED GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
COST OF
FACE SECURITIES
AMOUNT COUPON MATURITIES TO TRUST(1)
$ $
$ $
LADDERED GOVERNMENT SERIES 2, SHORT/INTERMEDIATE TREASURY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
COST OF
FACE SECURITIES
AMOUNT COUPON MATURITIES TO TRUST(1)
$ $
$ $
(1) Some Securities may be represented by contracts to purchase such
Securities. During the initial offering period, evaluations of Securities
are made on the basis of current offering side evaluations of the
Securities. The aggregate offering price is greater than the aggregate bid
price of the Securities, which is the basis on which Redemption Prices will
be determined for purposes of redemption of Units after the initial
offering period. Other information regarding the Securities in the Trusts,
at the opening of business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TRUST TO SPONSOR SPONSOR TO TRUST SECURITIES
Laddered Government Series 1 $ $ $ $
Laddered Government Series 2 $ $ $ $
(2) This Security has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Securities
which pay no interest are normally described as "zero coupon" bonds. Over
the life of Securities purchased at a deep discount the value of such
Securities will increase such that upon maturity the holders of such
securities will receive 100% of the principal amount thereof.
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
THE TRUST PORTFOLIO
Rolling Government Series 1, Short Treasury Portfolio was formed for the
purpose of providing safety of capital and current monthly distributions of
interest through an investment in a portfolio of U.S. Treasury Obligations
that are backed by the full faith and credit of the United States
government. Rolling Government Series 1, Short Treasury Portfolio was also
formed for the purpose of passing through to Unitholders in all states the
exemption from state personal income taxes afforded to direct owners of
U.S. obligations. The Trust also seeks to provide an extendible investment
by quarterly reinvesting, until approximately January 1998 (the "Extension
Period"), the proceeds of maturing Securities into new U.S. Treasury
securities ("Extension Securities") with maturities of approximately one
year. This reinvestment strategy is designed to produce a higher overall
yield than shorter-term investments with less price volatility than
longer-term investments. The Trust has been designed to maintain a short
average maturity, no greater than 8 months. The value of the Units, the
estimated current return and estimated long-term return to new purchasers
will fluctuate with the value of the Securities included in a portfolio
which will generally increase or decrease inversely with changes in
interest rates.
In selecting U.S. Treasury Obligations for deposit in the Trust, the
following factors, among others were, considered by the Sponsor: (a) the
types of such obligations available; (b) the prices and yields of such
obligations relative to other comparable obligations, including the extent
to which such obligations are traded at a premium or at a discount from
par; and (c) the maturities of such obligations.
EXTENSIONS. The initial portfolio consists of U.S. Treasury Obligations
with "laddered" maturities of approximately six months to 15 months.
Therefore, approximately 25% of the initial portfolio matures every three
months. The Sponsor is authorized to direct the reinvestment of the
proceeds of each maturing Security into Extension Securities (an
"Extension"). Extensions of approximately 25% of the portfolio at each
maturity of Securities will continue through the Extension Period and,
assuming the Trust does not terminate prior thereto, it is anticipated that
there will be eight Extensions until principal distributions commence in
1998.
"Extension Securities" means Securities (i) issued by the U.S. Treasury;
(ii) with a fixed maturity date that is within one month of the first
anniversary of the maturity date of the Security the proceeds of which are
being reinvested in the Extension Security; (iii) purchased at par or, in
order of preference, at a discount to, or premium over, par as close to par
as practicable; (iv) that could not cause Units of the Trust to cease to be
rated in the category AAA by Standard & Poor's; and (v) that are not when,
as and if issued obligations. The purchase of Extension Securities shall
not disqualify the Trust as a "regulated investment company" under the
Internal Revenue Code.
The guidelines under which the Trust will purchase Extension Securities
take into account price and maturity date. Whenever a U.S. Treasury
security in the Trust's portfolio matures, the Trust's buyers will purchase
the most currently available 1-year U.S. Treasury security at par. If no
obligations are available at par, the buyer will select obligations with a
price as close as possible to par. To preserve the Trust's par values,
there will be a bias favoring discounts, when available. Therefore,
discounted obligations will be selected so long as the discount is not more
than three times the smaller premium available. That is, assuming no
maturity date differences, if there is an obligation available at a price
of $100.125, no alternative obligation will be selected at less than
$99.625. If obligations mature at different dates within the one month
permissible, in determining which obligation to purchase the Trust's buyers
will increase the premium or discount of the bond by 25 cents (1/4 point)
for every month away from the precise one year maturity date of the
original obligation being extended. There will be no attempt to delay the
purchase of the Extension Securities to take advantage of market movements.
During the Extension Period, the pro rata share of cash in the Principal
Account which has not been reinvested or committed for reinvestment will
also be computed as of the 10th day of the month and distributions to the
Unitholders as of the related Record Date will be made on the 20th day of
the same month. After the Extension Period, the pro rata share of cash in
the Principal Account will also be computed as described above. Proceeds
from the disposition of any of the Securities or amounts representing
principal on the Securities received after such Record Date and prior to
the following Distribution Date will be held in the Principal Account and
not distributed until the next Distribution Date. The Trustee is not
required to pay interest on funds held in the Principal or Interest Account
(but may itself earn interest thereon and therefore benefits from the use
of such funds) nor to make a distribution from the Principal Account unless
the amount available for distribution shall equal at least $1.00 per 100
Units. See "Trust Information-Unitholders-Distributions to Unitholders."
TAX STATUS
Rolling Government Series 1, Short Treasury Portfolio may be an appropriate
investment vehicle for investors who desire to participate in a portfolio
of taxable, fixed income securities offering the safety of capital provided
by an investment backed by the full faith and credit of the United States.
In addition, many investors may benefit from the exemption from state and
local personal income taxes that will pass through the Trust to Unitholders
in virtually all states. Rolling Government Series 1, Short Treasury
Portfolio has been created as a regulated investment company for federal
tax reasons. For additional information concerning the Trust's status as a
regulated investment company see "Trust Information-Tax Status-Regulated
Investment Company."
RISK FACTORS
The Securities are direct obligations of the United States and are backed
by its full faith and credit although the Units of the Trusts are not so
backed. The Securities are not rated but in the opinion of the Sponsor have
credit characteristics comparable to those of securities rated "AAA" by
nationally recognized rating agencies.
An investment in Units of a Trust should be made with an understanding of
the risks which an investment in fixed rate debt obligations may entail,
including the risk that the value of the Securities and hence the Units
will decline with increases in interest rates. The high inflation of prior
years, together with the monetary policies and fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in interest
rates and, thus, in the value of fixed rate debt obligations generally. The
Sponsor cannot predict whether such fluctuations will continue in the
future. For a discussion of other considerations associated with an
investment in Units, see "Trust Information-General Information" and "Trust
Information-Risk Factors."
The reinvestment of the proceeds of maturing Securities into Extension
Securities may result in Extension Securities being acquired at a market
discount or a market premium. See "Trust Information-Risk Factors-General"
for a discussion of market discounts and premiums.
ROLLING GOVERNMENT SERIES 1, SHORT TREASURY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
COST OF
FACE SECURITIES
AMOUNT COUPON MATURITIES TO TRUST(1)
(1) Some Securities may be represented by contracts to purchase such
Securities. During the initial offering period, evaluations of Securities
are made on the basis of current offering side evaluations of the
Securities. The aggregate offering price is greater than the aggregate bid
price of the Securities, which is the basis on which Redemption Prices will
be determined for purposes of redemption of Units after the initial
offering period. Other information regarding the Securities in the Trust,
at the opening of business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TRUST TO SPONSOR SPONSOR TO TRUST SECURITIES
Rolling Government Series 1 $ $ $ $
(2) This Security has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Securities
which pay no interest are normally described as "zero coupon" bonds. Over
the life of Securities purchased at a deep discount the value of such
Securities will increase such that upon maturity the holders of such
securities will receive 100% of the principal amount thereof.
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
THE TRUST PORTFOLIO
Rolling Government Series 1, GNMA Portfolio was formed for the purpose of
obtaining safety of capital and current monthly distributions of interest
through investment in a portfolio primarily consisting of taxable
mortgage-backed securities of the fully modified pass-through type, the
payment of principal and interest on which is fully guaranteed by GNMA. In
an effort to minimize the effect of principal payments and prepayments
during the period when such reinvestment is practical in the opinion of the
Sponsor (the "Reinvestment Period"), the Sponsor will direct the Trustee to
reinvest all distributions of principal into additional GNMA securities
which are similar as to maturity and interest rates as the GNMA securities
upon which the principal was received. The Sponsor currently expects the
Reinvestment Period to last two years from the Initial Date of Deposit.
Subsequent to the Reinvestment Period, amounts of principal will be
distributed as in accordance with interest distributions.
In selecting Ginnie Maes for deposit in the Trust, the following factors,
among others, were considered by the Sponsor: (i) the types of such
securities available; (ii) the prices and yields of such securities
relative to other comparable securities, including the extent to which such
securities are trading at a premium or at a discount from par; and (iii)
the maturities of such securities. See "Portfolio" for information with
respect to the Securities initially selected for deposit in the Trust. The
Ginnie Maes included in the Trust are backed by the indebtedness secured by
the mortgages contained in the underlying mortgage pools.
REINVESTMENT
During the Reinvestment Period the Sponsor will direct the Trustee to
reinvest all payments and prepayments of principal from the underlying
Ginnie Maes into additional Ginnie Mae securities which have similar
maturities and interest rates as the Securities upon which the principal
was received. Reinvestment of principal into additional Ginnie Maes during
periods when interest rates are at a level different from those prevailing
at the Initial Date of Deposit will have the effect of increasing or
decreasing monthly distributions of interest income from the Trust.
Reinvestment of principal into the Ginnie Maes eligible for inclusion in
the Trust will also have the effect of increasing the par value of the
Units for reinvestment during periods of increasing interest rates from
those prevailing at the Initial Date of Deposit and during periods of
declining interest rates the par value of the Units will decrease. There
may be times when the Principal Account of the Trust has cash which cannot
be reinvested because additional Ginnie Maes are not available or the
amount of cash in the Principal Account is insufficient to buy additional
Ginnie Maes without the Trust incurring disproportionate expenses. During
these periods, the amounts in the Principal Account will remain uninvested,
thus reducing the return to Unitholders. Amounts, if any, which cannot be
reinvested during the Reinvestment Period in additional Ginnie Maes will be
distributed to Unitholders semiannually unless the amount available for
distribution is less than $1.00 per 100 Units. In such a circumstance,
Unitholders should be aware that at the time of the receipt of such
principal they may not be able to reinvest such principal in other
securities at a yield equal to or in excess of the yield which such
principal would have earned to Unitholders had the principal been
reinvested in additional Ginnie Maes by the Trustee. In addition, principal
will not be reinvested and will be distributed to Unitholders if required
to maintain the status of the Trust as a "regulated investment company."
See "Trust Information-Tax-Status-Regulated Investment Company." The costs
of acquiring the additional Ginnie Maes will be borne by the Trust and
hence, the Unitholders. Although it is currently anticipated that the
Trustee will purchase Ginnie Maes directly from market makers, the Trustee
may retain the Sponsor to purchase the additional Ginnie Maes and pay them
usual and customary brokerage commissions. There will be no attempt to time
or delay the purchase of additional Ginnie Maes for reinvestment to take
advantage of market movements.
TAX STATUS
Rolling Government Series 2, GNMA Portfolio has been created as a regulated
investment company for federal tax reasons. For information concerning the
Trust's status as a regulated investment company. See "Trust
Information-Tax Status-Regulated Investment Company."
RISK FACTORS
The Portfolio of the Trust consists of contracts to purchase Ginnie Maes
fully guaranteed as to payments of principal and interest by GNMA. Each
group of Ginnie Maes described herein as having a specified range of
maturities includes individual mortgage-backed securities which have
varying ranges of maturities within each range set forth in the Portfolio.
Current market conditions accord no difference in price among individual
Ginnie Mae securities within certain ranges of stated maturity dates on the
bas is of the difference in the maturity dates of each Ginnie Mae. A
purchase of Ginnie Maes with the same coupon rate and maturity date within
such range will be considered an acquisition of the same security for both
additional deposits and for the reinvestment of principal. In the future,
however, the difference in maturity ranges could affect market value of the
individual Ginnie Maes. At such time, any additional purchases by the Trust
will take into account the maturities of the individual securities. The
mortgages underlying the Ginnie Maes in the Trust have an original stated
maturity of up to 30 years.
The reinvestment of principal by the Trustee in additional Ginnie Maes may
result in Securities being acquired at a market discount or market premium
(see "Trust Information-Risk Factors-General."). See "Trust
Information-Risk Factors-GNMA Securities" for a general discussion of the
risks associated with an investment in GNMA securities.
During the Reinvestment Period, the Sponsor will direct the Trustee to
reinvest principal payments and prepayments into additional securities.
Precise duplication of the Ginnie Maes to be purchased with reinvested
principal may not be possible because fractions of Ginnie Maes may not be
purchased and substantially similar securities may not be available, but
duplication will be the goal of the Sponsor with respect to the purchase of
additional securities. Principal amounts which cannot be reinvested will be
distributed to Unitholders semiannually unless the amount available for
distribution is less than $1.00 per 100 Units. After the Reinvestment
Period, principal will not be reinvested and will be distributed monthly to
Unitholders. See "Trust Information-Unitholders-Distributions to
Unitholders."
During the Reinvestment Period, the pro rata share of cash in the Principal
Account which has not been reinvested or committed for reinvestment will
also be computed as of the 10th day of each month and distributions to the
Unitholders as of the related Record Date will be made on the 20th day of
the same month. After the Reinvestment Period, the pro rata share of cash
in the Principal Account will also be computed as of the 10th day of each
month and distributions to the Unitholders as of the related Record Date
will be made on the 20th day of such month. Proceeds from the disposition
of any of the Securities or amounts representing principal on the
Securities received after such Record Date and prior to the following
Distribution Date will be held in the Principal Account and not distributed
until the next Distribution Date. The Trustee is not required to pay
interest on funds held in the Principal or Interest Account (but may itself
earn interest thereon and therefore benefits from the use of such funds)
nor to make a distribution from the Principal Account unless the amount
available for distribution shall equal at least $1.00 per 100 Units. See
"Trust Information-Unitholders-Distributions to Unitholders."
ROLLING GOVERNMENT SERIES 2, GNMA PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, MODIFIED PASS-THROUGH
MORTGAGE-BACKED SECURITIES
COST OF COST OF PROFIT
PRINCIPAL COUPON YEARS OF STATED SECURITIES TO SECURITIES OR (LOSS) TO
AMOUNT RATE MATURITY SPONSOR (1) TO TRUST (2) SPONSOR
$ % $ $ $
(1) All Securities on the Initial Date of Deposit are represented by the
Sponsor's contracts to purchase such securities. Such contracts were
acquired by the Sponsor on , 1995. Interest will begin accruing to the
benefit of Unitholders from , 1995, the First Settlement Date of the Trust.
The cost of Securities to Sponsor and Profit or (Loss) to Sponsor reflects
portfolio hedging gains and losses.
(2) The cost of the Securities to the Trust represents the offering side
evaluation of the Securities as determined by . The offering side
evaluation is greater than the current bid side evaluation of the
Securities which is the basis on which Redemption Price per Unit is
determined. The aggregate value based on the bid side evaluation at the
opening of business on the Initial Date of Deposit was $ ,
which is $
($ per 1,000 Units; % of the aggregate principal amount)
lower than the aggregate cost of
the securities to the Trust based on the offering side evaluation.
In addition to the information as to the GNMA fully modified pass-through
mortgage-backed Securities set forth above, the Trustee will furnish
Unitholders a statement listing the name of issuer, pool number, interest
rate, maturity date and principal amount for each such Security in the
Portfolio upon written request.
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
THE TRUST PORTFOLIO
Investment Grade Series 1, Intermediate Insured Utility Portfolio consists
almost entirely of a fixed portfolio of corporate debt obligations
("Bonds") issued after July 18, 1984 by utility companies. The Insured
Utility Portfolio was created to provide a high level of current income.
The Insured Utility Portfolio may also contain zero coupon U.S. Treasury
Obligations.
The selection of Bonds for the Trust was based largely upon the experience
and judgment of the Sponsor. In making such selections the Sponsor
considered the following factors: (i) the price of the Bonds relative to
other issues of similar quality and maturity; (ii) whether the Bonds were
issued by a utility company; (iii) the diversification of the Bonds as to
location of issuer; (iv) the income to the Unitholders of the Trusts; (v)
whether the Bonds were insured or the availability and cost of insurance
for t he scheduled payment of principal and interest on the Bonds; (vi)
whether the Bonds were issued after July 18, 1984; and (vii) the stated
maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust's
portfolio other than any U.S. Treasury Obligations are rated "Aaa" by
Moody's and "AAA" by Standard & Poor's. Standard & Poor's states that
"bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and principal is extremely
strong." Moody's states that bonds "which are rated Aaa are judged to be
the best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that, with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations." See
"Trust Information-Insurance on the Bonds." Subsequent to the Initial Date
of Deposit, a Bond may cease to be so rated. If this should occur, a Trust
would not be required to eliminate the Bond from the Trust, but such event
may be considered in the Sponsor's determination to direct the Trustee to
dispose of such investment. See "Trust Information-Investment Supervision."
TAX STATUS
Investment Grade Series 1, Intermediate Insured Utility Portfolio has been
created as a grantor trust for federal tax reasons. For information
concerning the Trust's status as a grantor trust see "Trust Information-Tax
Status-Grantor Trust."
RISK FACTORS
PUBLIC UTILITY ISSUES
The majority of the Bonds in the Trust are obligations of public utility
issuers. In general, public utilities are regulated monopolies engaged in
the business of supplying light, water, power, gas, heat, transportation or
means of communication. Historically, the utilities industry has provided
investors in securities issued by companies in this industry with high
levels of reliability, stability and relative total return on their
investments. While each of the Bonds in the Trust are insured and "AAA"
rated, an investment in the Trust should nevertheless be made with an
understanding of the characteristics of such issuers and the risks which
such an investment may entail. General problems of such issuers would
include the difficulty in financing large construction programs in an
inflationary period, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining fuel
at reasonable prices and the effect of energy conservation. All of such
issuers have been experiencing certain of these problems in varying
degrees. In addition, federal, state and municipal governmental authorities
may from time to time review existing, and impose additional, regulations
governing the licensing, construction and operation of nuclear power
plants, which may adversely affect the ability of the issuers of certain of
the Bonds in the portfolios to make payments of principal and/or interest
on such Bonds. For additional information concerning the risks associated
with an investment in bonds of utility issuers see "Trust Information-Risk
Factors-Public Utility Issues" and "Trust Information-Risk
Factors-Corporate Bonds."
ZERO COUPON U.S. TREASURY OBLIGATIONS
Certain of the Bonds in the Trust may be "zero coupon" U.S. Treasury bonds.
See footnote (6) to the "Portfolio." Zero coupon bonds are purchased at a
deep discount because the buyer receives only the right to receive a final
payment at the maturity of the bond and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount earned during the life of such income on such
obligation at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality
which pay interest. See "Trust Information-Risk Factors-U.S. Treasury
Obligations" and "Trust Information-Risk Factors-General" for additional
information concerning the risks of investing in zero coupon U.S. Treasury
bonds.
INVESTMENT GRADE SERIES 1, INTERMEDIATE INSURED UTILITY PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
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RATING(2)
STANDARD COST OF
AGGREGATE & REDEMPTION BONDS
PRINCIPAL NAME OF ISSUER(1)(5) COUPON MATURITY MOODY'S POOR'S PROVISIONS (3) TO TRUST(4)
</TABLE>
<TABLE>
All Bonds in the Trust except for the U.S. Treasury Obligations are insured
only by MBIA. The insurance was obtained either directly by the issuer of
the Bonds or by the Sponsor.
* These Bonds are "when, as and if issued" or "delayed delivery" and have
expected settlement dates after the "First Settlement Date."
(1) Contracts to acquire Bonds were entered into by the Sponsor on , 1995.
All Bonds are represented by regular way contracts, unless otherwise
indicated, for the performance of which an irrevocable letter of credit has
been deposited with the Trustee.
(2) All the Bonds in the Trust except for any U.S. Treasury Obligations are
insured by MBIA and therefore are rated AAA by Standard & Poor's and Aaa by
Moody's. See "Trust Information-Insurance on the Bonds." Also, the Units of
the Trust are rated AAA by Standard & Poor's (see "Trust
Information-Insurance on the Bonds"). A Standard & Poor's rating on the
units of an insured unit investment trust (hereinafter referred to
collectively as "units" and "trusts") is a current assessment of
creditworthiness the respect to the investment held by such trust. This
assessment takes into consideration the financial capacity of the issuers
and of any guarantors, insurers, lessees or mortgagors with respect to such
investments. The assessment, however, does not take into account the extent
to which trust expenses or portfolio asset sales for less than the trust
purchase price will reduce payment to the unitholder of the interest and
principal required to be paid on the portfolio assets. In addition, the
rating is not a recommendation to purchase, sell or hold units, inasmuch as
the rating does not comment as to market price of the units or suitability
for a particular investor. Units rated "AAA" are composed exclusively of
assets that are rated "AAA" by Standard & Poor's and/or certain short-term
investments. Standard & Poor's defines its AAA rating for such assets as
the highest rating assigned by Standard & Poor's to a debt obligation.
Capacity to pay interest and repay principal is very strong. However, unit
ratings may be subject to revision or withdrawal at any time by Standard &
Poor's and each rating should be evaluated independently of any other
rating.
(3) There is shown under this heading the year in which each issue of Bonds
is initially or currently redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to the Trust. In addition, certain Bonds in the portfolio may be
redeemed in whole or in part other than by operation of the stated
redemption provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds.
(4) During the initial offering period, evaluations of Bonds are made on
the basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
BONDS TO (LOSS) TO INCOME VALUE OF
SPONSOR SPONSOR TO TRUST BONDS
Investment Grade Series 1 $ $ $ $
The Cost of Bonds to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, certain other
carrying costs and the cost of insurance obtained by the Sponsor for
individual Bonds, if any, prior to the date such Bonds are deposited in the
Trust.
"#" indicates that such Bond was issued at an original issue discount. The
tax effect of Bonds issued at an original issue discount is described in
"Trust Information-Tax Status-Grantor Trust."
(6) This Bond was issued at an original issue discount. The tax effect of
Bonds issued at an original issue discount is described in "Trust
Information-Tax Status-Grantor Trust." This Bond has been purchased at a
deep discount from the par value because there is little or no stated
interest income thereon. Bonds which pay no interest are normally described
as "zero coupon" bonds. Over the life of bonds purchased at a deep discount
the value of such bonds will increase such that upon maturity the holders
of such bonds will receive 100% of the principal amount thereof.
Approximately % of the aggregate principal amount of the Bonds in the
Trust were issued at an original issue discount.
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
THE TRUST PORTFOLIO
Investment Grade Series 2, Corporate Portfolio was formed for the purpose
of providing a high level of current income through investment in a fixed
portfolio consisting primarily of investment grade, corporate debt
obligations issued after July 18, 1984. For foreign investors who are not
United States citizens or residents, interest income from the Corporate
Portfolio may not be subject to federal withholding taxes if certain
conditions are met. See "Trust Information-Tax Status-Grantor Trust."
The Trust may be an appropriate investment vehicle for investors who desire
to participate in a portfolio of intermediate term taxable fixed income
securities issued by corporate obligors with greater diversification than
investors might be able to acquire individually. Diversification of the
Trust assets will not eliminate the risk of loss always inherent in the
ownership of securities. In addition, Bonds of the type deposited in the
Trust often are not available in small amounts.
The selection of Bonds for the Trust was based largely upon the experience
and judgment of the Sponsor. In making such selections the Sponsor
considered the following factors: (a) the price of the Bonds relative to
other issues of similar quality and maturity; (b) the present rating and
credit quality of the issuers of the Bonds and the potential improvement in
the credit quality of such issuers; (c) the diversification of the Bonds as
to location of issuer; (d) the income to the Unitholders of the Trust; (e)
whether the Bonds were issued after July 18, 1984; and (f) the stated
maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trust are rated
"A" or better by Moody's, Standard & Poor's or Duff & Phelps. See "Trust
Information-Description of Ratings" and "Portfolio" below. Subsequent to
the Initial Date of Deposit, a Bond may cease to be so rated. If this
should occur, the Trust would not be required to eliminate the Bond from
the Trust, but such event may be considered in the Sponsor's determination
to direct the Trustee to dispose of such investment. See "Trust
Information-Investment Supervision."
TAX STATUS
Investment Grade Series 2, Corporate Portfolio has been created as a
grantor trust for federal tax reasons. For information concerning the
Trust's status as a grantor trust see "Trust Information-Tax Status-Grantor
Trust."
RISK FACTORS
An investment in Units of the Trust should be made with an understanding of
the risks that an investment in fixed rate, corporate debt obligations may
entail, including credit risks and the risk that the value of the Units
will decline, and may decline precipitously, with increases in interest
rates. In recent years there have been wide fluctuations in interest rates
and thus in the value of fixed-rate, debt obligations generally. The
Sponsor cannot predict future economic policies or their consequences or ,
therefore, the course or extent of any similar market fluctuations in the
future. The portfolio consists of Bonds that, in many cases, do not have
the benefit of covenants that would prevent the issuer from engaging in
capital restructurings or borrowing transactions in connection with
corporate acquisitions, leveraged buy outs or restructurings that could
have the effect of reducing the ability of the issuer to meet its
obligations and might result in the ratings of the Bonds and the value of
the underlying portfolio being reduced. See "Trust Information-Risk
Factors-Corporate Securities" for additional risk factors concerning
corporate debt obligations.
INVESTMENT GRADE SERIES 2, CORPORATE PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT: , 1995
</TABLE>
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RATING(2)
STANDARD COST OF
AGGREGATE & REDEMPTION BONDS
PRINCIPAL NAME OF ISSUER(1)(5) COUPON MATURITY MOODY'S POOR'S PROVISIONS (3) TO TRUST(4)
</TABLE>
<TABLE>
$ $
$ $
</TABLE>
* These Bonds are "when, as and if issued" or "delayed delivery" and have
expected settlement dates after the "First Settlement Date."
(1) Contracts to acquire Bonds were entered into by the Sponsor on
___________________, 1995. All Bonds are represented by regular way
contracts, unless otherwise indicated, for the performance of which an
irrevocable letter of credit has been deposited with the Trustee.
(2) A brief description of the applicable Standard & Poor's, Moody's and
Duff & Phelps, rating symbols and their meanings is set forth under "Trust
Information-Description of Ratings." "N.R." indicates that the issue has
not been rated by that rating agency.
(3) There is shown under this heading the year in which each issue of Bonds
is initially or currently redeemable and the redemption price for that
year; unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter, but not below par value. The prices at which
the Bonds may be redeemed or called prior to maturity may or may not
include a premium and, in certain cases, may be less than the cost of the
Bonds to the Trust. In addition, certain Bonds in the portfolio may be
redeemed in whole or in part other than by operation of the stated
redemption provisions under certain unusual or extraordinary circumstances
specified in the instruments setting forth the terms and provisions of such
Bonds. "S.F." indicates that a sinking fund is established with respect to
that issue of Bonds.
(4) During the initial offering period, evaluations of Bonds are made on
the basis of current offering side evaluations of the Bonds. The aggregate
offering price is greater than the aggregate bid price of the Bonds, which
is the basis on which the Redemption Price will be determined for purposes
of redemption of Units after the initial offering period.
(5) Other information regarding the Bonds in the Trust, at the opening of
business on the Initial Date of Deposit, is as follows:
ANNUAL
COST OF PROFIT OR INTEREST BID SIDE
SECURITIES (LOSS) TO INCOME VALUE OF
TO SPONSOR SPONSOR TO TRUST BONDS
Investment Grade Series 2 $ $ $ $
The Cost of Bonds to Sponsor and Profit or (Loss) to Sponsor reflect
portfolio hedging transaction costs, hedging gains or losses, and certain
other carrying costs.
(6) This Bond was issued at an original issue discount. The tax effect of
Bonds issued at an original issue discount is described in "Trust
Information-Tax Status-Grantor Trust." This Bond has been purchased at a
deep discount from the par value because there is little or no stated
interest income thereon. Bonds which pay no interest are normally described
as "zero coupon" bonds. Over the life of bonds purchased at a deep discount
the value of such bonds will increase such that upon maturity the holders
of such bonds will receive 100% of the principal amount thereof.
Approximately % of the aggregate principal amount of the Bonds in the
Trust were issued at an original issue discount.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
UNITHOLDERS
FIDELITY DEFINED TRUSTS SERIES 1
We have audited the accompanying statements of condition and the related
portfolios of Fidelity Defined Trusts Series 1 (Laddered Government Series
1, Short Treasury Portfolio, Laddered Government Series 2,
Short/Intermediate Treasury Portfolio, Rolling Government Series 1, GNMA
Portfolio, Rolling Government Series 2, Short Treasury Portfolio Investment
Grade Series 1, Intermediate Insured Utility Portfolio and Investment Grade
Series 2, Corporate Portfolio) as of _______________, 1995. The statements
of condition and portfolios are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of Securities owned at
___________________, 1995 and a letter of credit deposited to purchase
Securities by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by
the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fidelity Defined Trusts
Series 1 (Laddered Government Series 1, Short Treasury Portfolio, Laddered
Government Series 2, Short/Intermediate Treasury Portfolio, Rolling
Government Series 1, GNMA Portfolio, Rolling Government Series 2, Short
Treasury Portfolio Investment Grade Series 1, Intermediate Insured Utility
Portfolio and Investment Grade Series 2, Corporate Portfolio) as of
_______________________, 1995, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
__________________, 1995
FIDELITY DEFINED TRUSTS SERIES 1
STATEMENTS OF CONDITION
AT THE OPENING OF BUSINESS ON , 1995, THE INITIAL DATE OF DEPOSIT
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LADDERED LADDERED ROLLING ROLLING INVESTMENT INVESTMENT
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT GRADE GRADE
SERIES 1 SERIES 2 SERIES 1 SERIES 2 SERIES 1 SERIES 2
INVESTMENT IN SECURITIES
Securities deposited in the Trusts (1) (2) $ $ $ $ $ $
Contracts to purchase Securities (1) (2)
Organizational Costs (3)
Accrued interest to First Settlement Date
on Securities (1) (4) Total $ $ $ $ $ $
Number of Units
LIABILITIES AND INTEREST OF
UNITHOLDERS
Liabilities-
Accrued Organizational Costs (3)
Accrued interest payable to Sponsor(1)(4) $ $ $ $ $ $
Interest of Unitholders-
Cost to investors (5)
Less: Gross underwriting
commission (5)
Net interest to Unitholders (1) (4) (5)
Total $ $ $ $ $ $
</TABLE>
NOTES:
(1) The aggregate value of the Securities listed in each "Portfolio" and
their cost to the Trust are the same. The value of the Securities is
determined by on the bases set forth under "Trust
Information-Public Offering of Units-Public Offering Price". The contracts
to purchase Securities are collateralized by an irrevocable letter of
credit of $ which has been deposited with the Trustee. Of this
amount, $ relates to the offering price of Securities to be purchased
and $ relates to accrued interest on such Securities to the expected
dates of delivery.
(2) Insurance coverage providing for the timely payment of principal and
interest on the Securities in an Insured Trust Fund has been obtained
directly by the issuer of such Securities or by the Sponsor from MBIA
Insurance Corporation or other insurers.
(3) Each Trust will bear all or a portion of its organizational costs which
will be deferred and amortized over five years or over the life of the
Trust if the term of such Trust is less than five years. Organizational
costs have been estimated based on a projected size of each Trust of $
. To the extent a Trust is larger or smaller, the estimate will vary.
(4) The Trustee will advance to each Trust the amount of net interest
accrued to the First Settlement Date for distribution to the Sponsor as the
Unitholder of Record.
(5) The aggregate public offering price includes a sales charge for the
Trust as set forth under "Essential Information", assuming all single
transactions involve less than 10,000 Units. For single transactions
involving 10,000 or more Units the sales charge is reduced (see "Trust
Information-Public Offering of Units-Public Offering Price") resulting in
an equal reduction in both the Cost to investors and the Gross underwriting
commission while the Net interest to Unitholders remains unchanged.
TRUST INFORMATION
GENERAL INFORMATION
Because certain of the Securities in certain of the Trusts may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present size
and composition. Neither the Sponsor nor the Trustee shall be liable in any
way for any default, failure or defect in any Security. In the event of a
failure to deliver any Security that has been purchased for a Trust under a
contract, including those securities purchased on a "when, as and if
issued" basis ("Failed Securities"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such Trust.
Securities in certain of the Trusts may have been purchased on a "when, as
and if issued" or delayed delivery basis with delivery expected to take
place after the First Settlement Date. See "Notes to Portfolios" for each
Trust. Accordingly, the delivery of such Securities may be delayed or may
not occur. Interest on these Securities begins accruing to the benefit of
Unitholders on their respective dates of delivery. Unitholders of all
Trusts will be "at risk" with respect to any "when, as and if issued" or
"delayed delivery" Securities included in their respective Trust (i.e., may
derive either gain or loss from fluctuations in the evaluation of such
Securities) from the date they commit for Units.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a Security will not be honored and
the purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Securities. The Replacement Securities (i) must be
payable in United States currency, (ii) must be purchased at a price that
results in a yield to maturity and a current return at least equal to that
of the Failed Securities as of the Initial Date of Deposit, (iii) shall not
be "when, as and if issued" or restricted securities, (iv) must satisfy any
rating criteria for Securities originally included in such Trust, (v) not
cause the Units of such Trust to cease to be rated AAA by the appropriate
rating agency if the Units were so rated on the Initial Date of Deposit and
(vi) in the case of Insured Trust Funds must be insured prior to
acquisition by a Trust. In connection with an Insured Utility Portfolio
only, Replacement Securities also must (i) be intermediate or long-term, as
applicable, corporate bonds, debentures, notes or other straight debt
obligations (whether secured or unsecured and whether senior or
subordinated) without equity or other conversion features, with fixed
maturity dates substantially the same as those of the Failed Securities
having no warrants or subscription privileges attached and (ii) be issued
after July 18, 1984 if interest thereon is United States source income.
Whenever a Replacement Security is acquired for a Trust, the Trustee shall,
within five days thereafter, notify all Unitholders of the Trust of the
acquisition of the Replacement Security and shall, on the next monthly
distribution date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the Trust of the
Failed Security exceeded the cost of the Replacement Security. Once all of
the Securities in a Trust are acquired, the Trustee will have no power to
vary the investments of the Trust, i.e., the Trustee will have no
managerial power to take advantage of market variations to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the Sponsor will refund the sales charge attributable to such
Failed Securities to all Unitholders of the Trust and the Trustee will
distribute the principal and accrued interest attributable to such Failed
Securities not more than 30 days after the date on which the Trustee would
have been required to purchase a Replacement Security. In addition,
Unitholders should be aware that, at the time of receipt of such principal,
they may not be able to reinvest such proceeds in other securities at a
yield equal to or in excess of the yield which such proceeds would have
earned for Unitholders of such Trusts.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid
to Unitholders of the Trust to the date the Sponsor removes the Failed
Securities from the Trust if the Sponsor determines not to purchase a
Replacement Security or to the date of substitution if a Replacement
Security is purchased. All such interest paid to Unitholders which accrued
after the date of settlement for a purchase of Units will be paid by the
Sponsor. In the event a Replacement Security could not be acquired by a
Trust, the net annual interest income per Unit for such Trust would be
reduced and the Estimated Current Return and Estimated Long-Term Return
might be lowered.
Subsequent to the Initial Date of Deposit, a Security may cease to be rated
or its rating may be reduced below any minimum required as of the initial
Date of Deposit. Neither event requires the elimination of such investment
from a Trust, but may be considered in the Sponsor's determination to
direct the Trustee to dispose of such investment. See "Trust
Information-Investment Supervision."
The Sponsor may not alter the portfolio of a Trust except upon the
occurence of certain extraordinary circumstances or, in the case of a
Rolling Government Series, in connection with a reinvestment of principal.
See "Trust Information-Investment Supervision." Certain of the Securities
may be subject to optional call or mandatory redemption pursuant to sinking
fund provisions, in each case prior to their stated maturity. A bond
subject to optional call is one which is subject to redemption or refunding
prior to maturity at the option of the issuer, often at a premium over par.
A refunding is a method by which a bond issue is redeemed, at or before
maturity, by the proceeds of a new bond issue. A bond subject to sinking
fund redemption is one which is subject to partial call from time to time
at par with proceeds from a fund accumulated for the scheduled retirement
of a portion of an issue to maturity. Special or extraordinary redemption
provisions may provide for redemption at par of all or a portion of an
issue upon the occurrence of certain circumstances, which may be prior to
the optional call dates shown under "Portfolio" for each Trust. Redemption
pursuant to optional call provisions is more likely to occur, and
redemption pursuant to special or extraordinary redemption provisions may
occur, when the Securities have an offering side evaluation which
represents a premium over par, that is, when they are able to be refinanced
at a lower cost. The proceeds from any such call or redemption pursuant to
sinking fund provisions, as well as proceeds from the sale of Securities
and from Securities which mature in accordance with their terms from a
Trust, unless utilized to pay for Units tendered for redemption, will be
distributed to Unitholders of such Trust and will not be used to purchase
additional Securities for such Trust. Accordingly, any such call,
redemption, sale or maturity will reduce the size and diversity of a Trust
and the net annual interest income of such Trust and may reduce the
Estimated Current Return and the Estimated Long-Term Return. See "Trust
Information-Interest, Estimated Long-Term Return and Estimated Current
Return." The call, redemption, sale or maturity of Securities also may have
tax consequences to a Unitholder. See "Trust Information-Tax Status."
Information with respect to the call provisions and maturity dates of the
Securities is contained under "Portfolio" for each Trust.
Each Unit of a Trust represents an undivided fractional interest in the
Securities deposited therein, in the ratio shown under "Essential
Information." Units may be purchased and certificates, if requested, will
be issued in denominations of one Unit or any multiple or fraction thereof,
subject to each Trust's minimum investment requirement of one Unit.
Fractions of Units will be computed to three decimal points. To the extent
that Units of a Trust are redeemed, the principal amount of Securities in
such Trust will be reduced and the undivided fractional interest
represented by each outstanding Unit of such Trust will increase. See
"Trust Information-Redemption."
RISK FACTORS
U.S. TREASURY OBLIGATIONS. U.S. Treasury Obligations are direct obligations
of the United States and are backed by its full faith and credit although
the Units are no so backed. The U.S. Treasury Obligations are not rated but
in the opinion of the Sponsor have credit characteristics comparable to
those of securities rated "AAA" by nationally recognized rating agencies.
An investment in Units of a Trust which contains U.S. Treasury Obligations
should be made with an understanding of the risks which an investment in
fixed rate debt obligations may entail, including the risk that the value
of the Securities and hence the Units will decline with increases in
interest rates. The high inflation of prior years, together with the fiscal
measures adopted to attempt to deal with it, have resulted in wide
fluctuations in interest rates and, thus, in the value of fixed rate debt
obligations generally. The Sponsor cannot predict whether such fluctuations
will continue in the future.
GNMA SECURITIES. An investment in Units of a GNMA Portfolio should be made
with an understanding of the risks which an investment in fixed rate long
term debt obligations may entail, including the risk that the value of the
portfolio and hence of the Units will decline with increases in interest
rates. The value of the underlying Securities will fluctuate inversely with
changes in interest rates. In addition, the potential for appreciation of
the underlying Securities, which might otherwise be expected to occur as a
result of a decline in interest rates, may be limited or negated by
increased principal prepayments in respect of the underlying mortgages. The
high inflation of prior years, together with the fiscal measures adopted to
attempt to deal with it, have resulted in wide fluctuations in interest
rates and, thus, in the value of fixed rate long term obligations
generally. The Sponsor cannot predict whether such fluctuations will
continue in the future.
The Ginnie Maes are backed by the indebtedness secured by underlying
mortgage pools of long-term mortgages on 1- to 4-family dwellings. The pool
of mortgages which is to underlie a particular new issue of Ginnie Maes is
assembled by the proposed issuer of such Ginnie Maes. The issuer is
typically a mortgage banking firm, and in every instance must be a
mortgagee approved by and in good standing with the Federal Housing
Administration ("FHA"). In addition, GNMA imposes its own criteria on the
eligibility of issuers, including a net worth requirement.
During the Reinvestment Period for a GNMA Portfolio, the Sponsor will
direct the Trustee to reinvest principal payments and prepayments into
additional securities. Precise duplication of the Ginnie Maes to be
purchased with reinvested principal may not be possible because fractions
of Ginnie Maes may not be purchased and substantially similar securities
may not be available, but duplication will be the goal of the Sponsor with
respect to the purchase of additional securities. Principal amounts which
cannot be reinvested will be distributed to Unitholders of such Trust
semiannually unless the amount available for distribution is less than
$1.00 per 100 Units. After the Reinvestment Period, principal will not be
reinvested and will be distributed monthly (subject to amount limitations)
to Unitholders.
The mortgages underlying a Ginnie Mae may be prepaid at any time without
penalty. A lower or higher return on Units may occur depending on (i)
whether the price at which the respective Ginnie Maes were acquired by a
Trust is lower or higher than par (which represents the price at which such
Ginnie Maes will be redeemed upon prepayment), (ii) whether principal is
reinvested or distributed to Unitholders and (iii) if reinvestment occurs,
whether the Ginnie Maes purchased by the Trustee with reinvested principal
are purchased at a premium or discount from par. During periods of
declining interest rates, prepayments of Ginnie Maes may occur with
increasing frequency because, among other reasons, mortgagors may be able
to refinance their outstanding mortgages at lower interest rates. In such a
case, (i) the reinvestment of principal may be at prices which result in a
lower return on Units or (ii) principal will be distributed to Unitholders
who cannot reinvest such principal distributions in other securities at an
attractive yield.
The Ginnie Maes in a GNMA Portfolio are guaranteed as to timely payment of
principal and interest by GNMA. Funds received by the issuers on account of
the mortgages backing the Ginnie Maes in a GNMA Portfolio are intended to
be sufficient to make the required payments of principal of and interest on
such Ginnie Maes but, if such funds are insufficient for that purpose, the
guaranty agreements between the issuers and GNMA require the issuers to
make advances sufficient for such payments. If the issuers fail to make
such payments, GNMA will do so. Any statement in this Prospectus that a
particular Security is backed by the full faith and credit of the United
States is based upon the opinion of an Assistant Attorney General of the
United States and should be so construed.
THE GNMA GUARANTIES REFERRED TO HEREIN RELATE ONLY TO PAYMENT OF PRINCIPAL
OF AND INTEREST ON THE GINNIE MAES IN A PORTFOLIO AND NOT THE UNITS OFFERED
HEREBY.
All of the mortgages in the pools relating to the Ginnie Maes in each GNMA
Portfolio are subject to prepayment without any significant premium or
penalty at the option of the mortgagors. It has been the experience of the
mortgage industry that the average life of mortgages comparable to those
contained in a GNMA Portfolios, owing to prepayments, refinancings and
payments from foreclosures is considerably less than the stated maturity
for each series set forth in "Essential Information."
A number of factors, including homeowners' mobility, change in family size
and mortgage market interest rates will affect the average life of the
Ginnie Maes in a Trust. For example, Ginnie Maes issued during a period of
high interest rates will be backed by a pool of mortgage loans bearing
similarly high rates. In general, during a period of declining interest
rates, new mortgage loans with interest rates lower than those charged
during periods of high rates will become available. To the extent a
homeowner has an outstanding mortgage with a high rate, he may refinance
his mortgage at a lower interest rate or he may rapidly repay his old
mortgage. Should this happen, a Ginnie Mae issued with a high interest rate
may experience a rapid prepayment of principal as the underlying mortgage
loans prepay in whole or in part. Accordingly, there can be no assurance
that the prepayment levels which will be actually realized will conform to
the experience of the FHA, other mortgage lenders or other Ginnie Mae
investors. It is not possible to meaningfully predict prepayment levels
regarding the Ginnie Maes in a Trust. Therefore, the termination of a Trust
might be accelerated as a result of prepayments made as described herein.
PUBLIC UTILITY ISSUES. Certain of the Bonds in an Insured Utility Portfolio
are obligations of public utility issuers. In general, public utilities are
regulated monopolies engaged in the business of supplying light, water,
power, heat, transportation or means of communication. Historically, the
utilities industry has provided investors in securities issued by companies
in this industry with high levels of reliability, stability and relative
total return on their investments. However, an investment in an Insured
Utility Portfolio should be made with an understanding of the
characteristics of such issuers and the risks which such an investment may
entail. General problems of such issuers would include the difficulty in
financing large construction programs in an inflationary period, the
limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital markets in
absorbing utility debt, the difficulty in obtaining fuel at reasonable
prices and the effect of energy conservation. All of such issuers have been
experiencing certain of these problems in varying degrees. In addition,
federal, state and municipal governmental authorities may from time to time
review existing, and impose additional, regulations governing the
licensing, construction and operation of nuclear power plants, which may
adversely affect the ability of the issuers of certain of the Bonds in an
Insured Utility Portfolio to make payments of principal and/or interest on
such Bonds.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged
and the appropriate rate of return on an approved asset base, which must be
approved by the state commissions. Certain utilities have had difficulty
from time to time in persuading regulators, who are subject to political
pressures, to grant rate increases necessary to maintain an adequate return
on investment and voters in many states have the ability to impose limits
on rate adjustments (for example, by initiative or referendum). Any
unexpected limitations could negatively affect the profitability of
utilities whose budgets are planned far in advance. Also, changes in
certain accounting standards currently under consideration by the Federal
Accounting Standards Board could cause significant write-downs of assets
and reductions in earnings for many investor-owned utilities. In addition,
gas pipeline and distribution companies have had difficulties in adjusting
to short and surplus energy supplies, enforcing or being required to comply
with long-term contracts and avoiding litigation from their customers, on
the one hand, or suppliers, on the other hand.
Certain of the issuers of the Bonds in a Trust may own or operate nuclear
generating facilities. Governmental authorities may from time to time
review existing, and impose additional, requirements governing the
licensing, construction and operation of nuclear power plants. Nuclear
generating projects in the electric utility industry have experienced
substantial cost increases, construction delays and licensing difficulties.
These have been caused by various factors, including inflation, high
financing costs, required design changes and rework, allegedly faulty
construction, objections by groups and governmental officials, limits on
the ability to finance, reduced forecasts of energy requirements and
economic conditions. This experience indicates that the risk of significant
cost increases, delays and licensing difficulties remains present through
completion and achievement of commercial operation of any nuclear project.
Also, nuclear generating units in service have experienced unplanned
outages or extensions of scheduled outages due to equipment problems or new
regulatory requirements sometimes followed by a significant delay in
obtaining regulatory approval to return to service. A major accident at a
nuclear plant anywhere, such as the accident at a plant in Chernobyl,
U.S.S.R., could cause the imposition of limits or prohibitions on the
operation, construction or licensing of nuclear units in the United States.
In view of the uncertainties discussed above, there can be no assurance
that any bond issuer's share of the full cost of nuclear units under
construction ultimately will be recovered in rates or of the extent to
which a bond issuer could earn an adequate return on its investment in such
units. The likelihood of a significantly adverse event occurring in any of
the areas of concern described above varies, as does the potential severity
of any adverse impact. It should be recognized, however, that one or more
of such adverse events could occur and individually or collectively could
have a material adverse impact on the financial condition or the results of
operations or on a bond issuer's ability to make interest and principal
payments on its outstanding debt.
Other general problems of the gas, water, telephone and electric utility
industry (including state and local joint action power agencies) include
difficulty in obtaining timely and adequate rate increases, difficulty in
financing large construction programs to provide new or replacement
facilities during an inflationary period, rising costs of rail
transportation to transport fossil fuels, the uncertainty of transmission
service costs for both interstate and intrastate transactions, changes in
tax laws which adversely affect a utility's ability to operate profitably,
increased competition in service costs, reductions in estimates of future
demand for electricity and gas in certain areas of the country,
restrictions on operations and increased cost and delays attributable to
environmental considerations, uncertain availability and increased cost of
capital, unavailability of fuel for electric generation at reasonable
prices, including the steady rise in fuel costs and the costs associated
with conversion to alternate fuel sources such as coal, availability and
cost of natural gas for resale, technical and cost factors and other
problems associated with construction, licensing, regulation and operation
of nuclear facilities for electric generation, including among other
considerations the problems associated with the use of radioactive
materials and the disposal of radioactive wastes, and the effects of energy
conservation. Each of the problems referred to could adversely affect the
ability of the issuers of any utility Bonds in a Trust to make payments due
on these Bonds.
In addition, the ability of state and local joint action power agencies to
make payments on bonds they have issued is dependent in large part on
payments made to them pursuant to power supply or similar agreements.
Courts in Washington and Idaho have held that certain agreements between
Washington Public Power Supply System ("WPPSS") and the WPPSS participants
are unenforceable because the participants did not have the authority to
enter into the agreements. While these decisions are not specifically
applicable to agreements entered into by public entities in other states,
they may cause a reexamination of the legal structure and economic
viability of certain projects financed by joint action power agencies,
which might exacerbate some of the problems referred to above and possibly
lead to legal proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Business conditions of the telephone industry in general may affect the
performance of a Trust. General problems of telephone companies include
regulation of rates for service by the FCC and various state or other
regulatory agencies. However, over the last several years regulation has
been changing, resulting in increased competition. The new approach is more
market oriented, more flexible and more complicated. For example, Federal
and certain state regulators have instituted "price cap" regulation which
couples protection of rate payers for basic services with flexible pricing
for ancillary services. These new approaches to regulation could lead to
greater risks as well as greater rewards for operating telephone companies
such as those in a Trust. Inflation has substantially increased the
operating expenses and cost of plant required for growth, service,
improvement and replacement of existing plant. Continuing cost increases,
to the extent not offset by improved productivity and revenues from
increased business, would result in a decreasing rate of return and a
continuing need for rate increases. Although allowances are generally made
in ratemaking proceedings for cost increases, delays may be experienced in
obtaining the necessary rate increases and there can be no assurance that
the regulatory agencies will grant rate increases adequate to cover
operating and other expenses and debt service requirement. To meet
increasing competition, telephone companies will have to commit substantial
capital, technological and marketing resources. Telephone usage, and
therefore revenues, could also be adversely affected by any sustained
economic recession. New technology, such as cellular service and fiber
optics, will require additional capital outlays. The uncertain outcomes of
future labor agreements may also have a negative impact on the telephone
companies. Each of these problems could adversely affect the ability of the
telephone company issuers of any Bonds in a portfolio to make payments of
principal and interest on their Bonds.
CORPORATE BONDS. An investment in Units of a Corporate Portfolio or an
Insured Utility Portfolio should be made with an understanding of the risks
that an investment in fixed rate, investment grade corporate debt
obligations may entail, including the risk that the value of the Units will
decline with increases in interest rates. In recent years there have been
wide fluctuations in interest rates and thus in the value of fixed-rate,
debt obligations generally. Generally, bonds with longer maturities will
fluctuate in value more than bonds with shorter maturities. A slowdown in
the economy, or a development adversely affecting an issuer's
creditworthiness, may result in the issuer being unable to maintain
earnings or sell assets at the rate and at the prices, respectively, that
are required to produce sufficient cash flow to meet its interest and
principal requirements. The Sponsor cannot predict future economic policies
or their consequences or, therefore, the course or extent of any similar
market fluctuations in the future.
Should the issuer of any Bond default in the payment of principal or
interest, a Trust may incur additional expenses seeking payment on the
defaulted Bond. Because amounts (if any) recovered by a Trust in payment
under the defaulted Bond may not be reflected in the value of the Units
until actually received by a Trust, and depending upon when a Unitholder
purchases or sells his Units, it is possible that a Unitholder would bear a
portion of the cost of recovery without receiving any portion of the
payment recovered.
GENERAL. Certain of the Securities in certain of the Trusts may have been
acquired at a market discount from par value at maturity. The coupon
interest rates on the discount securities at the time they were purchased
and deposited in the Trusts were lower than the current market interest
rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable securities increase, the market
discount of previously issued securities will become greater, and if such
interest rates for newly issued comparable securities decline, the market
discount of previously issued securities will be reduced, other things
being equal. Investors should also note that the value of securities
purchased at a market discount will increase in value faster than
securities purchased at a market premium if interest rates decrease.
Conversely, if interest rates increase, the value of securities purchased
at a market discount will decrease faster than securities purchased at a
market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium securities and the prepayment benefit for lower
yielding, discount securities will be reduced. A discount security held to
maturity will have a larger portion of its total return in the form of
taxable income and capital gain and loss in the form of tax-exempt interest
income than a comparable security newly issued at current market rates. See
"Trust Information-Tax Status." Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue. Neither
the Sponsor nor the Trustee shall be liable in any way for any default,
failure or defect in any of the Securities.
Certain of the Securities in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium securities at the time they were purchased and deposited in the
Trusts were higher than the current market interest rates for newly issued
securities of comparable rating and type. If such interest rates for newly
issued and otherwise comparable securities decrease, the market premium of
previously issued securities will be increased, and if such interest rates
for newly issued comparable securities increase, the market premium of
previously issued securities will be reduced, other things being equal. The
current returns of securities trading at a market premium are initially
higher than the current returns of comparable securities of a similar type
issued at currently prevailing interest rates because premium securities
tend to decrease in market value as they approach maturity when the face
amount becomes payable. Because part of the purchase price is thus returned
not at maturity but through current income payments, early redemption of a
premium bond at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally will,
and redemption pursuant to sinking fund provisions may, occur at times when
the redeemed Securities have an offering side valuation which represents a
premium over par or for original issue discount Securities a premium over
the accreted value. To the extent that the Securities were deposited in the
Trusts at a price higher than the price at which they are redeemed, this
will represent a loss of capital when compared to the original Public
Offering Price of the Units. Because premium securities generally pay a
higher rate of interest than securities priced at or below par, the effect
of the redemption of premium securities would be to reduce Estimated Net
Annual Unit Income by a greater percentage than the par amount of such
securities bears to the total par amount of Securities in a Trust. Although
the actual impact of any such redemptions that may occur will depend upon
the specific Securities that are redeemed, it can be anticipated that the
Estimated Net Annual Unit Income will be significantly reduced after the
dates on which such Securities are eligible for redemption. A Trust may be
required to sell zero coupon bonds prior to maturity (at their current
market price which is likely to be less than their par value) in the event
that all the Securities in the portfolio other than the zero coupon bonds
are called or redeemed in order to pay expenses of a Trust or in case a
Trust is terminated. See "Portfolio" for each Trust for the earliest
scheduled call date and the initial redemption price for each Security.
Certain of the Securities in certain of the Trusts may be "zero coupon"
bonds, i.e., an original issue discount bond that does not provide for the
payment of current interest. Zero coupon bonds are purchased at a deep
discount because the buyer receives only the right to receive a final
payment at the maturity of the bond and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in
effect, on all discount earned during the life of such obligation. This
implicit reinvestment of earnings at the same rate eliminates the risk of
being unable to reinvest the income on such obligation at a rate as high as
the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future.
For this reason, zero coupon bonds are subject to substantially greater
price fluctuations during periods of changing market interest rates than
are securities of comparable quality which pay interest currently. For the
Federal tax consequences of original issue discount securities such as the
zero coupon bonds, see "Trust Information-Tax Status."
To the best of the Sponsor's knowledge, there is no litigation pending as
of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trusts. At
any time after the Initial Date of Deposit, litigation may be instituted on
a variety of grounds with respect to the Securities. The Sponsor is unable
to predict whether any such litigation may be instituted, or if instituted,
whether such litigation might have a material adverse effect on the Trusts.
RATING OF UNITS
Standard & Poor's, a Division of The McGraw-Hill Companies ("Standard &
Poor's") has rated the Units of any Treasury Portfolio or GNMA Portfolio
"AAA." Because the Securities in an Insured Utility Portfolio are insured
as to the scheduled payment of principal and interest and on the basis of
the financial condition and the method of operation of the insurance
companies referred to in "Insurance on the Bonds" below, Standard & Poor's
has also rated the Units of any Insured Utility Portfolio "AAA." This is
the highest rating assigned by Standard & Poor's. Standard & Poor's has
been compensated by the Sponsor for its services in rating Units of the
Trusts.
A Standard & Poor's rating (as described by Standard & Poor's) on the units
of an investment trust (hereinafter referred to collectively as "units" or
"trust") is a current assessment of creditworthiness with respect to the
investments held by such trust. This assessment takes into consideration
the financial capacity of the issuers and of any guarantors, insurers,
lessees, or mortgagors with respect to such investments. The assessment,
however, does not take into account the extent to which trust expenses or
portfolio asset sales for less than the trust's purchase price will reduce
payment to the Unitholder of the interest and principal required to be paid
on the portfolio assets. In addition, the rating is not a recommendation to
purchase, sell, or hold units, inasmuch as the rating does not comment as
to market price of the units or suitability for a particular investor.
Trusts rated "AAA" are composed exclusively of assets that are rated "AAA"
by Standard & Poor's or have, in the opinion of Standard & Poor's, credit
characteristics comparable to assets rated "AAA," or certain short-term
investments. Standard & Poor's defines its "AAA" rating for such assets as
the highest rating assigned by Standard & Poor's to a debt obligation.
Capacity to pay interest and repay principal is very strong.
Securities in an Insured Utility Portfolio for which insurance has been
obtained by the issuer or the Sponsor (all of which were rated "AAA" by
Standard & Poor's and/or "Aaa" by Moody's Investors Service, Inc.
("Moody's")) may or may not have a higher yield than uninsured Securities
rated "AAA" by Standard & Poor's or "Aaa" by Moody's. In selecting
Securities for an Insured Utility Portfolio, the Sponsor has applied the
criteria hereinbefore described.
INSURANCE ON THE BONDS
All Bonds in an Insured Utility Portfolio except for any U.S. Treasury
obligations are insured as to the scheduled payment of interest and
principal either by the issuer of the Bonds or by the Sponsor under a
financial guaranty insurance policy obtained from MBIA Insurance
Corporation ("MBIA"). The premium for each such insurance policy has been
paid in advance by such issuer or the Sponsor and each such policy is
non-cancellable and will remain in force so long as the Bonds are
outstanding and MBIA remains in business. No premiums for such insurance
are paid by an Insured Utility Portfolio. If MBIA is unable to meet its
obligations under its policy or if the rating assigned to the claims-paying
ability of MBIA deteriorates, no other insurer has any obligation to insure
any issue adversely affected by either of these events.
The aforementioned insurance guarantees the scheduled payment of principal
and interest on all of the Bonds in an Insured Utility Portfolio except for
any U.S. Treasury obligations. It does not guarantee the market value of
the Bonds or the value of the Units of the Trust. This insurance is
effective so long as the Bond is outstanding, whether or not held by a
Trust. Therefore, any such insurance may be considered to represent an
element of market value in regard to the Bonds, but the exact effect, if
any, of this insurance on such market value cannot be predicted.
MBIA, formerly known as Municipal Bond Investors Insurance Corporation, is
the principal operating subsidiary of MBIA, Inc., a New York Stock Exchange
listed company. MBIA, Inc. is not obligated to pay the debts of or claims
against MBIA. MBIA is domiciled in the State of New York and licensed to do
business in all 50 states, the District of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin
Islands of the United States and the Territory of Guam. MBIA has one
European branch in the Republic of France.
As of March 31, 1995, MBIA had admitted assets of $3.5 billion (unaudited),
total liabilities of $2.4 billion (unaudited), and total capital and
surplus of $1.1 billion (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of December 31, 1994, MBIA had admitted assets of $3.4
billion (audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance
regulatory authorities. Copies of MBIA Corporation's financial statements
prepared in accordance with statutory accounting practices are available
from MBIA Corporation. The address of MBIA Corporation is 113 King Street,
Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group, Inc.
On January 5, 1990, the Insurer acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of BIG, now known as MBIA Insurance
Corp. of Illinois. Through a reinsurance agreement, BIG has ceded all of
its net insured risks, as well as its unearned premium and contingency
reserves, to the Insurer and the Insurer has reinsured BIG's net
outstanding exposure.
Moody's rates all bond issues insured by MBIA "Aaa" and short term loans
"MIG 1," both designated to be of the highest quality. Standard & Poor's
rates all new issues by MBIA "AAA".
Because the Bonds in an Insured Utility Portfolio (other than U.S. Treasury
Obligations) are insured as to the scheduled payment of principal and
interest and on the basis of the financial condition and the method of
operation of MBIA, Moody's has assigned to Units in an Insured Utility
Portfolio its "Aaa" investment rating. This is the highest rating assigned
to securities by such rating agency. These ratings should not be construed
as an approval of the offering of the Units by Standard & Poor's or as a
guarantee of the market value of a Trust or the Units thereof.
Bonds in a Trust for which insurance has been obtained by the issuer
thereof or by the Sponsor from MBIA (all of which were rated "Aaa" by
Moody's) may or may not have a higher yield than uninsured bonds rated
"Aaa" by Moody's. In selecting Bonds for the portfolio of a Trust, the
Sponsor has applied the criteria hereinbefore described.
RETIREMENT PLANS
Units of the Trusts may be suitable for purchase by Individual Retirement
Accounts, Keogh Plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received under each of the foregoing
plans are deferred from federal taxation. All distributions from such plans
are generally treated as ordinary income but may, in some cases, be
eligible for special income averaging or tax-deferred rollover treatment.
Investors considering participation in any such plan should review specific
tax laws related thereto and should consult their attorneys or tax advisor
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions. The
Trusts will waive the $1,000 minimum investment requirement for IRA
accounts. The minimum investment is $250 for tax-deferred plans such as IRA
accounts. Fees and charges with respect to such plans may vary.
TAX STATUS
GRANTOR TRUST
The following discussion applies only to Laddered Government Series and
Investment Grade Series, each of which are organized as grantor trusts for
federal tax purposes. In the opinion of Chapman and Cutler, special counsel
for the Sponsor, under existing law:
1. Each Trust is not an association taxable as a corporation for Federal
income tax purposes.
2. Each Unitholder will be considered the owner of a pro rata portion of
each of the Trust assets for Federal income tax purposes under Subpart E,
Subchapter J of Chapter 1 of the Internal Revenue Code of 1986 (the
"Code"). Each Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income is received
by a Trust. Each Unitholder will also be required to include in taxable
income for Federal income tax purposes, original issue discount with
respect to his interest in any Securities held by a Trust at the same time
and in the same manner as though the Unitholder were the direct owner of
such interest.
3. Each Unitholder will have a taxable event when a Security is disposed of
(whether by sale, exchange, redemption, or payment at maturity) or when the
Unitholder redeems or sells his Units. The cost of the Units to a
Unitholder on the date such Units are purchased is allocated among the
Securities held in a Trust (in accordance with the proportion of the fair
market values of such Securities) in order to determine his tax basis for
his pro rata portion in each Security. Unitholders must reduce the tax
basis of their Units for their share of accrued interest received, if any,
on Securities delivered after the date the Unitholders pay for their Units
and, consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing the proceeds
of such sale or redemption with the adjusted basis of the Units. If the
Trustee disposes of Securities, gain or loss is recognized to the
Unitholder. The amount of any such gain or loss is measured by comparing
the Unitholder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed of. The
basis of each Unit and of each Security which was issued with original
issue discount must be increased by the amount of accrued original issue
discount and the basis of each Unit and of each Security which was
purchased by a Trust at a premium must be reduced by the annual
amortization of security premium which the Unitholder has properly elected
to amortize under Section 171 of the Code. The tax cost reduction
requirements of the Code relating to amortization of security premium may,
under some circumstances, result in the Unitholder realizing a taxable gain
when his Units are sold or redeemed for an amount equal to or less than his
original cost. In general, original issue discount accrues daily under a
constant interest rate method which takes into account the semi-annual
compounding of accrued interest.
Limitations on Deductibility of Trust Expenses by Unitholders-Each
Unitholder's pro rata share of each expense paid by a Trust is deductible
by the Unitholder to the same extent as though the expense had been paid
directly by him, subject to the following limitation. It should be noted
that as a result of the Tax Reform Act of 1986 (the "Act"), certain
miscellaneous itemized deductions, such as investment expenses, tax return
preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted
gross income. Temporary regulations have been issued which require
Unitholders to treat certain expenses of a Trust as miscellaneous itemized
deductions subject to this limitation.
Acquisition Premium-If a Unitholder's tax basis of his pro rata portion in
any Securities held by a Trust exceeds the amount payable by the issuer of
the Security with respect to such pro rata interest upon the maturity of
the Security, such excess would be considered "acquisition premium" which
may be amortized by the Unitholder at the Unitholder's election as provided
in Section 171 of the Code. Unitholders should consult their tax advisors
regarding whether such election should be made and the manner of amortizing
acquisition premium.
Original Issue Discount-Certain of the Securities in a Trust may have been
acquired with "original issue discount." In the case of any Securities in a
Trust acquired with "original issue discount" that exceeds a "de minimis"
amount as specified in the Code, such discount is includable in taxable
income of the Unitholders on an accrual basis computed daily, without
regard to when payments of interest on such Securities are received. The
Code provides a complex set of rules regarding the accrual of original
issue discount. These rules provide that original issue discount generally
accrues on the basis of a constant compound interest rate over the term of
the Securities. Unitholders should consult their tax advisor as to the
amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Security by a Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon its
issue price (its "adjusted issue price"). Similarly these special rules
would apply to a Unitholder if the tax basis of his pro rata portion of a
Security issued with original issue discount exceeds his pro rata portion
of its adjusted issue price. Unitholders should also consult their tax
advisor regarding these special rules.
It is possible that a corporate Bond that has been issued at an original
issue discount may be characterized as a "high-yield discount obligation"
within the meaning of Section 163(e)(5) of the Code. To the extent that
such an obligation is issued at a yield in excess of six percentage points
over the applicable Federal rate, a portion of the original issue discount
on such obligation will be characterized as a distribution on stock (e.g.
dividends) for purposes of the dividends received deduction which is
available to certain corporations with respect to certain dividends
received by such corporation.
Market Discount-If a Unitholder's tax basis in his pro rata portion of
Securities is less than the allocable portion of such Security's stated
redemption price at maturity (or, if issued with original issue discount,
the allocable portion of its "revised issue price"), such difference will
constitute market discount unless the amount of market discount is "de
minimis" as specified in the Code. Market discount accrues daily computed
on a straight line basis, unless the Unitholder elects to calculate accrued
market discount under a constant yield method. Unitholders should consult
their tax advisor as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Securities, on the sale, maturity or
disposition of such Securities by a Trust, and on the sale by a Unitholder
of Units, unless a Unitholder elects to include the accrued market discount
in taxable income as such discount accrues. If a Unitholder does not elect
to annually include accrued market discount in taxable income as it
accrues, deductions for any interest expense incurred by the Unitholder
which is incurred to purchase or carry his Units will be reduced by such
accrued market discount. In general, the portion of any interest expense
which was not currently deductible would ultimately be deductible when the
accrued market discount is included in income. Unitholders should consult
their tax advisor regarding whether an election should be made to include
market discount in income as it accrues and as to the amount of interest
expense which may not be currently deductible.
Computation of the Unitholder's Tax Basis-The tax basis of a Unitholder
with respect to his interest in a Security is increased by the amount of
original issue discount (and market discount, if the Unitholder elects to
include market discount, if any, on the Securities held by a Trust in
income as it accrues) thereon properly included in the Unitholder's gross
income as determined for Federal income tax purposes and reduced by the
amount of any amortized acquisition premium which the Unitholder has
properly elected to amortize under Section 171 of the Code. A Unitholder's
tax basis in his Units will equal his tax basis in his pro rata portion of
all of the assets of a Trust.
Recognition of Taxable Gain or Loss Upon Disposition of Obligations by a
Trust or Disposition of Unit-A Unitholder will recognize taxable capital
gain (or loss) when all or part of his pro rata interest in a Security is
disposed of in a taxable transaction for an amount greater (or less) than
his tax basis therefor. Any gain recognized on a sale or exchange and not
constituting a realization of accrued "market discount," and any loss will,
under current law, generally be capital gain or loss except in the case of
a dealer or financial institution. As previously discussed, gain realized
on the disposition of the interest of a Unitholder in any Security deemed
to have been acquired with market discount will be treated as ordinary
income to the extent the gain does not exceed the amount of accrued market
discount not previously taken into income. Any capital gain or loss arising
from the disposition of a Security by a Trust or the disposition of Units
by a Unitholder will be short-term capital gain or loss unless the
Unitholder has held his Units for more than one year in which case such
capital gain or loss will be long-term. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated
tax rate of 28 percent. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates and could
affect relative differences at which ordinary income and capital gains are
taxed. The tax cost reduction requirements of the Code relating to
amortization of bond premium may under some circumstances, result in the
Unitholder realizing taxable gain when his Units are sold or redeemed for
an amount equal to or less than his original cost.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed
of his entire pro rata interest in all Trust assets including his pro rata
portion of all of the Securities represented by the Unit. This may result
in a portion of the gain, if any, on such sale being taxable as ordinary
income under the market discount rules (assuming no election was made by
the Unitholder to include market discount in income as it accrues) as
previously discussed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28 percent
maximum stated rate for taxpayers other than corporations. Because some or
all capital gains are taxed at a comparatively lower rate under the Tax
Act, the Tax Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on
their investment in Units.
Foreign Investors-A Unitholder who is a foreign investor (i.e., an investor
other than a U.S. citizen or resident of a U.S. corporation, partnership,
estate or trust) will not be subject to United States federal income taxes,
including withholding taxes, on interest income (including any original
issue discount) on, or any gain from the sale or other disposition of, his
pro rata interest in any Security or the sale of his Units provided that
all of the following conditions are met: (i) the interest income or gain is
not effectively connected with the conduct by the foreign investor of a
trade or business within the United States, (ii) either (a) the interest is
United States source income (which is the case for most securities issued
by United States issuers), the Security is issued after July 18, 1984
(which is the case for each Security held by a Trust), the foreign investor
does not own, directly or indirectly, 10% or more of the total combined
voting power of all classes of voting stock of the issuer of the Security
and the foreign investor is not a controlled foreign corporation related
(within the meaning of Section 864(d)(4) of the Code) to the issuer of the
Security, or (b) the interest income is not from sources within the United
States (iii) with respect to any gain, the foreign investor (if an
individual) is not present in the United States for 183 days or more during
his taxable year and (iv) the foreign investor provides all certification
which may be required of his status (foreign investors may contact the
Sponsor to obtain a Form W-8 which must be filed with the Trustee and
refiled every three calendar years thereafter). Foreign investors should
consult their tax advisers with respect to United States tax consequences
of ownership of Units.
It should be noted that the Tax Act includes a provision which eliminates
the exemption from United States taxation, including withholding taxes, for
certain "contingent interest." The provision applies to interest received
after December 31, 1993. No opinion is expressed herein regarding the
potential application of this provision and whether United States taxation
or withholding taxes could be imposed with respect to income derived from
the Units as a result thereof. Unitholders and prospective investors should
consult with their tax advisers regarding the potential effect of this
provision on their investment in Units.
General-Each Unitholder (other than a foreign investor who has properly
provided the certifications described above) will be requested to provide
the Unitholder's taxpayer identification number to the Trustee and to
certify that the Unitholder has not been notified that payments to the
Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by a Trust to such Unitholder will be subject to
back- up withholding.
The foregoing discussion relates only to United States Federal income taxes
and applies only to Laddered Government Series and Investment Grade Series
which are described in this Prospectus; Unitholders may be subject to state
and local taxation in other jurisdictions (including a foreign investor's
country of residence). Unitholders should consult their tax advisers
regarding potential state, local, or foreign taxation with respect to the
Units.
REGULATED INVESTMENT COMPANY
The following discussion applies only to Rolling Government Series, each of
which are structured to qualify as a regulated investment company for
federal tax purposes. In the opinion of Chapman and Cutler, counsel or the
Sponsor, under existing law:
Each Rolling Government Series Trust is an association taxable as a
corporation under the Internal Revenue Code and intends to qualify for and
elect tax treatment as a "regulated investment company" under the Code. By
qualifying for and electing such treatment, such Trust will not be subject
to Federal income tax on net investment income or net capital gains
distributed to Unitholders of such Trust. The Code imposes a 4% excise tax
on certain undistributed income of a regulated investment company that does
not timely distribute certain percentages of its ordinary taxable income
and capital gains by the end of each calendar year. Each Trust intends to
distribute taxable income and capital gains to avoid the imposition of such
tax. Distributions of the entire net investment income of each Trust is
required by the Indenture.
Distributions from a Trust, to the extent of the earnings and profits of
such Trust, will constitute dividends for Federal income tax purposes which
are taxable as ordinary income to Unitholders. Distributions of a Series'
net investment income and any net short-term capital gain will be taxable
as ordinary income to the Unitholders of such Trust. Distributions from
each Trust will not be eligible for the 70% dividends received deduction
for corporations.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December, payable to
Unitholders of record on a specified date in one of those months and paid
during January of the following year will be treated as having been
distributed by each Trust (and received by the Unitholders) on December 31
of the year such distributions are declared.
Distributions which a Trust designates as capital gain dividends will be
taxable to Unitholders thereof as long-term capital gains, regardless of
the length of time the Units have been held by a Unitholder. Distributions
in partial liquidation, reflecting the proceeds of prepayments,
redemptions, maturities (including monthly mortgage payments of principal
in GNMA Portfolios) or sales of Securities from a Trust (exclusive of net
capital gain) will not be taxable to Unitholders of such Trust to the
extent that they represent a return of capital for tax purposes. The
portion of distributions which represents a return of capital will,
however, reduce a Unitholder's basis in his Units, and to the extent they
exceed the basis of his Units will be taxable as a capital gain. A
Unitholder will realize a taxable gain (or loss) when his Units are sold or
redeemed for an amount different from his original cost after reduction for
previous distributors to the extent that they represented a return of
capital. Such gain or loss will constitute either a long-term or short-term
capital gain or loss depending upon the length of time the Unitholder has
held his Units. Any loss of Units held six months or less will be treated
as long-term capital loss to the extent of any long-term capital gains
dividends received (or deemed to have been received) by the Unitholder with
respect to such Units. For taxpayers other than corporations, net capital
gains are presently subject to a maximum stated marginal rate of 28%.
However, it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed. A capital loss is
long-term if the asset is held for more than one year and short-term if
held for one year or less.
Under the Code, certain miscellaneous itemized deductions, such as
investment expenses, tax return preparation fees and employee business
expenses, will be deductible by individuals only to the extent they exceed
2% of adjusted gross income. Miscellaneous itemized deductions subject to
this limitation under present law do not include expenses incurred by a
Trust as long as the Units of such Trust are held by or for 500 or more
persons at all times during the taxable year. In the event the Units of a
Trust are held by fewer than 500 persons, additional taxable income will be
realized by the individual (and other noncorporate) Unitholders in excess
of the distributions received from such Trust.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate. Because some or all capital gains are taxed at a comparatively lower
rate under the Act, the Act includes a provision that recharacterizes
capital gains as ordinary income in the case of certain financial
transactions that are "conversion transactions" effective for transactions
entered into after April 30, 1993. Unitholders and prospective investors
should consult with their tax advisor regarding the potential effect of
this provision on their investment in Units.
If a Security has been purchased by a Trust at a market discount (i.e., for
a purchase price less than its outstanding principal amount) unless the
amount of market discount is "de minimis" as specified in the Code, each
payment of principal on the Security will constitute ordinary income to
such Series of the Trust to the extent of any accrued market discount. In
the case of a Ginnie Mae, the amount of market discount that is deemed to
accrue each month shall generally be the amount of discount that bears the
same ratio to the total amount of remaining market discount that the amount
of interest paid during the accrual period (each month) bears to the total
amount of interest remaining to be paid on the Ginnie Mae as of the
beginning of the accrual period.
The market discount rules do not apply to stripped U.S. Treasury
Obligations because they are stripped debt instruments subject to special
original issue discount rules. Unitholders should consult their tax
advisers as to the amount of original issue discount which accrues.
Additional Units of a Trust may be issued after the Initial Date of Deposit
in respect of additional Securities deposited in such Trust by the Sponsor.
Because of possible market interest rate fluctuations, the purchase price
to a Trust of such additional Securities may differ from the purchase price
of the Securities in such Trust on the Initial Date of Deposit. If interest
rates decline and such additional Securities are purchased at a higher
price than the Securities originally deposited, then the amounts includable
in the taxable income of such Trust in proportion to the asset value of
that Trust will be reduced for all Unitholders thereof, not just the
Unitholders of such additional Units. Conversely, if interest rates rise
and such additional Securities are purchased at a lower price than the
Securities originally deposited, then the amounts includable in the taxable
income of such Trust in proportion to the asset value of that Trust will be
increased for all Unitholders thereof, not just the Unitholders of such
additional Units.
Each Unitholder of each Trust shall receive an annual statement describing
the tax status of the distributions paid by such Trust. Foreign Unitholders
should consult their own tax advisers with respect to the tax consequences
or ownership of Units.
It should be remembered that even if distributions are reinvested; they are
still treated as distributions for income tax purposes.
DISTRIBUTION REINVESTMENT
Each Unitholder of a Trust may elect to have distributions of principal
(including capital gains, if any) or interest or both automatically
invested without charge in shares of any mutual fund which is registered in
such Unitholder's state of residence and is advised by Fidelity Management
& Research Company an affiliate of the Sponsor (the "Fidelity Funds"),
other than those Fidelity Funds sold with a contingent deferred sales
charge.
If individuals indicate they wish to participate in the Reinvestment
Program but do not designate a reinvestment fund, the Trustee will contact
such individuals to determine which reinvestment fund or funds they wish to
elect. Since the portfolio securities and investment objectives of such
Fidelity Funds generally will differ significantly from that of the Trusts,
Unitholders should carefully consider the consequences before selecting
such Fidelity Funds for reinvestment. Detailed information with respect to
the investment objectives and the management of the Fidelity Funds is
contained in their respective prospectuses, which can be obtained from the
Sponsor upon request. An investor should read the prospectus of the
reinvestment fund selected prior to making the election to reinvest.
Unitholders who desire to have such distributions automatically reinvested
should inform their broker at the time of purchase or should file with the
Trustee a written notice of election.
Unitholders who are receiving distributions in cash may elect to
participate in distribution reinvestment by filing with the Trustee an
election to have such distributions reinvested without charge. Such
election must be received by the Trustee at least ten days prior to the
Record Date applicable to any distribution in order to be in effect for
such Record Date. Any such election shall remain in effect until a
subsequent notice is received by the Trustee. See "Trust
Information-Unitholders-Distributions to Unitholders."
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Long-Term Return and the Estimated Current Return, if applicable, for each
Trust were as set forth in the "Essential Information" for each Trust.
Estimated Current Return is calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net
annual interest income per Unit will vary with changes in fees and expenses
of the Trustee, the Sponsor and the Evaluator and with the principal
prepayment (in the case of a Rolling Government Series, GNMA Portfolio),
reinvestment (in the case of any Rolling Government Series), redemption (in
the case of an Investment Grade Series), maturity, exchange or sale of the
Securities while the Public Offering Price will vary with changes in the
offering price of the underlying Securities and accrued interest;
therefore, there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is calculated
using a formula which (i) considers the relative weightings, the market
values, yields (which take into account the amortization of premiums and
the accretion of discounts) and estimated retirements or average life of
all of the Securities in a Trust, including the effect of the reinvestment
of principal for the GNMA Portfolio, and (ii) takes into account the
expenses and sales charge associated with each Trust Unit. Since the market
values and estimated retirements of the Securities and the expenses of a
Trust will change, there is no assurance that the present Estimated
Long-Term Return will be realized in the future. Estimated Current Return
and Estimated Long-Term Return are expected to differ because the
calculation of Estimated Long-Term Return reflects the estimated date and
amount of principal returned while Estimated Current Return calculations
include only net annual interest income and Public Offering Price.
In order to acquire certain of the Securities contracted for by a Trust, it
may be necessary for the Sponsor or Trustee to pay on the dates for
delivery of such Securities amounts covering accrued interest on such
Securities which exceed the amount which will be made available in the
letter of credit furnished by the Sponsor on the Initial Date of Deposit.
The Trustee has agreed to pay any amounts necessary to cover any such
excess and will be reimbursed therefor, without interest, when funds become
available from interest payments on the Securities deposited in that Trust.
Payments received in respect of mortgages underlying Ginnie Maes in any
GNMA Portfolio will consist of a portion representing interest and a
portion representing principal. Although the aggregate monthly payment made
by the obligor on each mortgage remains constant (aside from optional
prepayments of principal), in the early years most of each such payment
will represent interest, while in later years, the proportion representing
interest will decline and the proportion representing principal will
increase . However, by reason of optional prepayments, principal payments
in the earlier years on mortgages underlying Ginnie Maes may be
substantially in excess of those required by the amortization schedules of
such mortgages. Therefore, principal payments in later years may be
substantially less since the aggregate unpaid principal balances of such
underlying mortgages may have been greatly reduced. To the extent that the
underlying mortgages bearing higher interest rates in a GNMA Portfolio are
prepaid faster than the other underlying mortgages, the net annual interest
rate per Unit and the Estimated Current Return on the Units of a GNMA
Portfolio can be expected to decline. Monthly payments to the Unitholders
of a GNMA Portfolio will reflect all of these factors.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. Units of a Trust are offered at the Public Offering
Price thereof. During the initial offering period, the Public Offering
Price per Unit is equal to the aggregate of the offering side evaluations
of the Securities in such Trust, plus or minus a pro rata share of cash, if
any, in the Principal account held or owned by such Trust plus accrued
interest plus the applicable sales charge referred to in the tables below
divided by the number of outstanding Units of such Trust. Such price
determination as of the close of business on the day before the Initial
Date of Deposit was made on the basis of an evaluation of the Securities in
each Trust prepared by Kenny S&P Evaluation Services, a firm regularly
engaged in the business of evaluating, quoting or appraising comparable
securities. The Public Offering Price for secondary market transactions, on
the other hand, is based on the aggregate bid side evaluations of the
Securities in a Trust, plus or minus cash, if any, in the Principal Account
held or owned by such Trust, plus accrued interest plus a sales charge
based upon the dollar weighted average maturity of such Trust. Investors
who purchase Units through brokers or dealers pursuant to a current
management agreement which by contract or operation of law does not allow
such broker or dealer to earn an additional commission (other than any fee
or commission paid for maintenance of such investor's account under the
management agreement) on such transactions may purchase such Units at the
current Public Offering Price net of the applicable broker or dealer
concession. See "Trust Information-Public Offering of Units-Public
Distribution of Units" below.
The applicable sales charge per Unit for each Trust will be as set forth in
the following table:
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT OFFERING NET AMOUNT
PRICE INVESTED PRICE INVESTED PRICE INVESTED PRICE INVESTED
</TABLE>
Rolling Government
Series Treasury
Portfolio
Rolling Government
Series, GNMA
Portfolio
Laddered Government
Series, Treasury
Portfolio
Investment Grade
Series, Insured
Utility Portfolio
Investment Grade
Series, Corporate
Portfolio
In connection with certain quantity purchases during the initial offering
period, the sales charge for each Trust will be reduced by that percentage
set forth in the following table:
PERCENTAGE REDUCTION
NUMBER OF UNITS PURCHASED OF SALES CHARGE
1 to 9,999
10,000 to 24,999
25,000 to 49,999
50,000 to 99,999
100,000 or more
As indicated above, in connection with secondary market transactions the
sales charge is based upon the dollar weighted average maturity of a Trust
and is determined in accordance with the tables set forth below. For
purposes of this computation, Securities will be deemed to mature on their
expressed maturity dates unless: (a) the Securities have been called for
redemption or funds or securities have been placed in escrow to redeem them
on an earlier call date, in which case such call date will be deemed to be
the date upon which they mature; or (b) such Securities are subject to a
"mandatory tender," in which case such mandatory tender will be deemed to
be the date upon which they mature. The effect of this method of sales
charge computation will be that different sales charge rates will be
applied to a Trust based upon the dollar weighted average maturity of such
Trust's portfolio, in accordance with the following schedules.
In connection with secondary market transactions, the sales charge per Unit
will be as set forth in the table below:
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
SALES CHARGE (PERCENT OF PUBLIC OFFERING PRICE)
Rolling Government Series, Treasury Portfolio
Rolling Government Series, GNMA Portfolio
Laddered Government Series, Treasury Portfolio
Investment Grade Series, Insured Utility Portfolio
Investment Grade Series, Corporate Portfolio
In connection with secondary market transactions, the sales charge to each
Trust will be reduced by that percentage set forth in the following table:
PERCENTAGE REDUCTION
NUMBER OF UNITS PURCHASED OF SALES CHARGE
1 to 9,999
10,000 to 24,999
25,000 to 49,999
50,000 to 99,999
100,000 or more
The reduced sales charges resulting from quantity discounts as shown on the
tables above will apply to all purchases of Units on any one day by the
same purchaser from the same broker or dealer and for this purpose
purchases of Units of a Trust will be aggregated with concurrent purchases
of Units of any other unit investment trust that may be offered by the
Sponsor. Additionally, Units purchased in the name of a spouse or child
(under 21) of such purchaser will be deemed to be additional purchases by
such purchaser. The reduced sales charges will also be applicable to a
trust or other fiduciary purchasing for a single trust estate or single
fiduciary account. The Sponsor intends to permit officers, directors and
employees of the Sponsor and Evaluator and at the discretion of the Sponsor
registered representatives of selling firms to purchase Units of a Trust
without a sales charge, although a transaction processing fee may be
imposed on such trades.
Had Units of a Trust been available for sale at the opening of business on
the Initial Date of Deposit, the Public Offering Price would have been as
shown under "Essential Information." The Public Offering Price per Unit of
a Trust on the date of this Prospectus or on any subsequent date will vary
from the amount stated under "Essential Information" in accordance with
fluctuations in the prices of the underlying Securities and the amount of
accrued interest on the Units. On the Initial Date of Deposit, pursuant to
an exemptive order from the Securities and Exchange Commission, the Public
Offering Price at which Units will be sold will not exceed the price
determined as of the opening of business on the Initial Date of Deposit as
shown under "Essential Information"; however, should the value of the
underlying Securities decline, purchasers will, of course, be given the
benefit of such lower price. The aggregate bid and offering side
evaluations of the Securities shall be determined (i) on the basis of
current bid or offering prices of the Securities, (ii) if bid or offering
prices are not available for any particular Security, on the basis of
current bid or offering prices for comparable bonds, (iii) by determining
the value of Securities on the bid or offer side of the market by
appraisal, or (iv) by any combination of the above.
The foregoing evaluations and computations shall be made as of the
evaluation time stated under "Essential Information," on each business day
commencing with the Initial Date of Deposit of the Securities, effective
for all sales made during the preceding 24-hour period.
The interest on the Securities deposited in a Trust, less the related
estimated fees and expenses, is estimated to accrue in the annual amounts
per Unit set forth under "Essential Information." The amount of net
interest income which accrues per Unit may change as Securities mature or
are redeemed, exchanged or sold, or as the expenses of a Trust change or
the number of outstanding Units of a Trust changes.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of Units on the First Settlement Date or any date of settlement
thereafter provided payment has been received. Cash, if any, made available
to the Sponsor prior to the date of settlement for the purchase of Units
may be used on the Sponsor's business and may be deemed to be a benefit to
the Sponsor, subject to the limitations of the Securities Exchange Act of
1934. If a Unitholder desires to have certificates representing Units
purchased, such certificates (if available) will be delivered as soon as
possible following his written request therefor. For information with
respect to redemption of Units purchased, but as to which certificates
requested have not been received, see "Trust Information-Redemption" below.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a security from the last day on which interest thereon was paid.
Interest on Securities generally is paid semi-annually (monthly in the case
of Ginnie Maes, if any) although a Trust accrues such interest daily.
Because of this, a Trust always has an amount of interest earned but not
yet collected by the Trustee. For this reason, with respect to sales
settling subsequent to the First Settlement Date, the Public Offering Price
of Units will have added to it the proportionate share of accrued interest
to the date of settlement. Unitholders will receive on the next
distribution date of a Trust the amount, if any, of accrued interest paid
on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of
Units to the public, the Trustee will advance the amount of accrued
interest as of the First Settlement Date and the same will be distributed
to the Sponsor as the Unitholder of record as of the First Settlement Date.
Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date.
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the Trusts and distributed to Unitholders. Therefore,
there will always remain an item of accrued interest that is added to the
value of the Units. If a Unitholder sells or redeems all or a portion of
his Units, he will be entitled to receive his proportionate share of the
accrued interest from the purchaser of his Units. Since the Trustee has the
use of the funds held in the Interest Account for distributions to
Unitholders and since such Account is non-interest-bearing to Unitholders,
the Trustee benefits thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the Initial
Public Offering Price of Units will be determined on the basis of the
current offering prices of the Securities in a Trust, the redemption price
per Unit (as well as the secondary market price per Unit) at which Units
may be redeemed (see "Trust Information-Redemption") will be determined on
the basis of the current bid prices of the Securities. As of the opening of
business on the Initial Date of Deposit, the Public Offering Price per Unit
(based on the offering prices of the Securities in a Trust and including
the sales charge) exceeded the redemption price at which Units could have
been redeemed (based upon the current bid prices of the Securities in a
Trust) by the amount shown under "Essential Information." Under current
market conditions the bid prices for U.S. Treasury Obligations are expected
to be approximately 1/8 to 1/4 of 1% lower than the offer price of such
obligations. In the past, bid prices on securities similar to those in the
Trusts have been lower than the offering prices thereof by as much as 1% or
more of principal amount in the case of inactively traded bonds or as
little as 1/2 of 1% in the case of actively traded bonds, but the
difference between such offering and bid prices may be expected to average
approximately 1/2 of 1% of principal amount. For this reason, among others
(including fluctuations in the market prices of the Securities and the fact
that the Public Offering Price includes a sales charge), the amount
realized by a Unitholder upon any redemption of Units may be less than the
price paid for such Units.
PUBLIC DISTRIBUTION OF UNITS. The Sponsor intends to qualify the Units for
sale in a number of states. Units will be sold through dealers who are
members of the National Association of Securities Dealers, Inc. [and
through others.] Sales may be made to or through dealers at prices which
represent discounts from the Public Offering Price as set forth below.
Certain commercial banks are making Units of the Trust Funds available to
their customers on an agency basis. A portion of the sales charge paid by
their customers is retained by or remitted to the banks in the amount shown
in the tables below. Under the Glass-Steagall Act, banks are prohibited
from underwriting Trust Units; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have indicated that
these particular agency transactions are permitted under such Act. In
addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Sponsor reserves the right to change the discounts set forth below from
time to time. In addition to such discounts, the Sponsor may, from time to
time, pay or allow an additional discount, in the form of cash or other
compensation, to dealers employing registered representatives who sell,
during a specified time period, a minimum dollar amount of Units of a Trust
and other unit investment trusts created by the Sponsor. The difference
between the discount and the sales charge will be retained by the Sponsor.
The primary market concessions and agency commissions for each Trust are as
follows:
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
PERCENTAGE DISCOUNT PER UNIT
Rolling Government Series, Treasury Portfolio
Rolling Government Series, GNMA Portfolio
Laddered Government Series, Treasury Portfolio
Investment Grade Series, Insured Utility Portfolio
Investment Grade Series, Corporate Portfolio
The secondary market concessions and agency commissions for each Trust are
as follows:
WEIGHTED AVERAGE YEARS TO MATURITY
0 TO 4.99 5 TO 9.99 10 TO 14.99 15 OR MORE
PERCENTAGE DISCOUNT PER UNIT
Rolling Government Series, Treasury Portfolio
Rolling Government Series, GNMA Portfolio
Laddered Government Series, Treasury Portfolio
Investment Grade Series, Insured Utility Portfolio
Investment Grade Series, Corporate Portfolio
The Sponsor reserves the right to reject, in whole or in part, any order
for the purchase of Units.
PROFITS OF SPONSOR. The Sponsor will receive gross sales charges equal to
the percentage of the Public Offering Price of the Units as stated under
"Public Offering Price" and will pay a fixed portion of such sales charges
to dealers and agents. In addition, the Sponsor may realize a profit or a
loss resulting from the difference between the purchase prices of the
Securities to the Sponsor and the cost of such Securities to a Trust, which
is based on the offering side evaluation of the Securities. See "Portfolio"
for each Trust. The Sponsor may also realize profits or losses with respect
to Securities deposited in a Trust which were acquired from underwriting
syndicates of which the Sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated
or competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The Sponsor may realize additional
profits or losses during the initial offering period on unsold Units as a
result of changes in the daily evaluation of the Securities in a Trust.
MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the
Sponsor intends to, and certain of the dealers may, subject to change at
any time, maintain a market for Units of the Trusts offered hereby and to
continuously offer to purchase said Units at prices, determined by the
Evaluator, based on the aggregate bid prices of the underlying Securities
in such Trusts, together with accrued interest to the expected dates of
settlement. To the extent that a market is maintained during the initial
offering period, the prices at which Units will be repurchased will be
based upon the aggregate offering side evaluation of the Securities in the
Trusts. The aggregate bid prices of the underlying Securities in each Trust
are expected to be less than the related aggregate offering prices (which
is the evaluation method used during the initial public offering period).
ACCORDINGLY, UNITHOLDERS WHO WISH TO DISPOSE OF THEIR UNITS SHOULD INQUIRE
OF THEIR BANK OR BROKER AS TO CURRENT MARKET PRICES IN ORDER TO DETERMINE
WHETHER THERE IS IN EXISTENCE ANY PRICE IN EXCESS OF THE REDEMPTION PRICE
AND, IF SO, THE AMOUNT THEREOF.
The offering price of any Units resold by the Sponsor will be in accord
with that described in the currently effective Prospectus describing such
Units. Any profit or loss resulting from the resale of such Units will
belong to the Sponsor. The Sponsor may suspend or discontinue purchases of
Units of any Trust if the supply of Units exceeds demand, or for other
business reasons.
REDEMPTION
A Unitholder who does not dispose of Units in the secondary market
described above may cause Units to be redeemed by the Trustee by making a
written request to the Trustee, United States Trust Company of New York,
770 Broadway, 10003 and, in the case of Units evidenced by a certificate,
by tendering such certificate to the Trustee, properly endorsed or
accompanied by a written instrument or instruments of transfer in a form
satisfactory to the Trustee. Unitholders must sign the request, and such
certificate or transfer instrument, exactly as their names appear on the
records of the Trustee and on any certificate representing the Units to be
redeemed. If the amount of the redemption is $25,000 or less and the
proceeds are payable to the Unitholder(s) of record at the address of
record, no signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional documentation may be
requested, and a signature guarantee is always required, from corporations,
executors, administrators, trustees, guardians or associations. The
signatures must be guaranteed by a participant in the Securities Transfer
Agents Medallion Program ("STAMP") or such other guarantee program in
addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. A certificate should only be sent by registered or certified mail
for the protection of the Unitholder. Since tender of the certificate is
required for redemption when one has been issued, Units represented by a
certificate cannot be redeemed until the certificate representing such
Units has been received by the purchasers.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the Redemption Price for such
Trust, determined as set forth below under "Computation of Redemption
Price," as of the evaluation time stated under "Essential Information,"
next following such tender, multiplied by the number of Units being
redeemed. Any Units redeemed shall be cancelled and any undivided
fractional interest in the Trust extinguished. The price received upon
redemption might be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the Trust at the time of
redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a certain percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may
be recovered by the Unitholder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification
number from the selling broker. However, any time a Unitholder elects to
tender Units for redemption, such Unitholder should make sure that the
Trustee has been provided a certified tax identification number in order to
avoid this possible "back-up withholding." In the event the Trustee has not
been previously provided such number, one must be provided at the time
redemption is requested.
Any amounts paid on redemption representing interest shall be withdrawn
from the Interest Account for such Trust to the extent that funds are
available for such purpose. All other amounts paid on redemption shall be
withdrawn from the Principal Account for such Trust. The Trustee is
empowered to sell Securities for a Trust in order to make funds available
for the redemption of Units of such Trust. Such sale may be required when
Securities would not otherwise be sold and might result in lower prices
than might otherwise be realized. To the extent Securities are sold, the
size and diversity of a Trust will be reduced.
In the case of a Treasury Portfolio or a GNMA Portfolio, Securities will be
sold by the Trustee so as to maintain, as closely as practicable, the
original percentage relationship between the principal amounts of the
Securities in such Trusts. The Securities to be sold for purposes of
redeeming Units will be selected from a list supplied by the Sponsor. The
Securities will be chosen for this list by the Sponsor on the basis of such
market and credit factors as it may determine are in the best interests of
such Trusts. Provision is made under the related Trust Agreements for the
Sponsor to specify minimum face amounts in which blocks of Securities are
to be sold in order to obtain the best price available. While such minimum
amounts may vary from time to time in accordance with market conditions, it
is anticipated that the minimum face amounts which would be specified would
range from $25,000 to $100,000. Sales may be required at a time when the
Securities would not otherwise be sold and might result in lower prices
than might otherwise be realized. Moreover, due to the minimum principal
amount in which U.S. Treasury Obligations and Ginnie Maes may be required
to be sold, the proceeds of such sales may exceed the amount necessary for
payment of Units redeemed. To the extent not used to meet other redemption
requests in such Trusts, such excess proceeds will be distributed pro rata
to all remaining Unitholders of record of such Trusts, unless reinvested in
substitute Securities. See "Trust Information-Investment Supervision."
The Trustee is irrevocably authorized in its discretion, if the Sponsor
does not elect to purchase any Unit tendered for redemption, in lieu of
redeeming such Units, to sell such Units in the over-the-counter market for
the account of tendering Unitholders at prices which will return to the
Unitholders amounts in cash, net after brokerage commissions, transfer
taxes and other charges, equal to or in excess of the Redemption Price for
such Units. In the event of any such sale, the Trustee shall pay the net
proceeds thereof to the Unitholders on the day they would otherwise be
entitled to receive payment of the Redemption Price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than
customary weekend and holiday closings, or during which (as determined by
the Securities and Exchange Commission) trading on the New York Stock
Exchange is restricted; (2) for any period during which an emergency exists
as a result of which disposal by the Trustee of Securities is not
reasonably practicable or it is not reasonably practicable to fairly
determine the value of the underlying Securities in accordance with the
Trust Agreements; or (3) for such other period as the Securities and
Exchange Commission may by order permit. The Trustee is not liable to any
person in any way for any loss or damage which may result from any such
suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price for Units of each
Trust is computed by the Evaluator as of the evaluation time stated under
"Essential Information" next occurring after the tendering of a Unit for
redemption and on any other business day desired by it, by:
A. adding: (1) the cash on hand in the Trust other than cash deposited in
the Trust to purchase Securities not applied to the purchase of such
Securities; (2) the aggregate value of each issue of the Securities
(including "when issued" contracts, if any) held in the Trust as determined
by the Evaluator on the basis of bid prices therefor; and (3) interest
accrued and unpaid on the Securities in the Trust as of the date of
computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the Trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account described under "Trust Information-Trust Expenses"; (2) an amount
representing estimated accrued expenses of the Trust, including but not
limited to fees and expenses of the Trustee (including legal and auditing
fees and any insurance costs), the Evaluator, the Sponsor and bond counsel
, if any; (3) cash held for distribution to Unitholders of record as of the
business day prior to the evaluation being made; and (4) other liabilities
incurred by the Trust; and
C. finally dividing the results of such computation by the number of Units
of the Trust outstanding as of the date thereof.
UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of a Trust will not be evidenced by
certificates unless a Unitholder, the Unitholder's registered broker/dealer
or the clearing agent for such broker/dealer makes a written request to the
Trustee. Certificates, if issued, will be so noted on the confirmation
statement sent to the Underwriter and broker. Non-receipt of such
certificate(s) must be reported to the Trustee within one year; otherwise,
a 2% surety bond fee will be required for replacement.
Units are transferable by making a written request to the Trustee and, in
the case of Units evidenced by a certificate, by presenting and
surrendering such certificate to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer which should
be sent registered or certified mail for the protection of the Unitholder.
Unitholders must sign such written request, and such certificate or
transfer instrument, exactly as their names appear on the records of the
Trustee and on any certificate representing the Units to be transferred.
Such signatures must be guaranteed as provided in "Trust
Information-Redemption."
Units may be purchased and certificates, if requested will be issued in
denominations of one Unit subject to each Trust's minimum investment
requirement of 100 Units or any whole Unit multiple thereof subject to any
minimum requirement established by the Sponsor from time to time. Any
certificate issued will be numbered serially for identification, issued in
fully registered form and will be transferable only on the books of the
Trustee. The Trustee may require a Unitholder to pay a reasonable fee, to
be determined in the sole discretion of the Trustee, for each certificate
re-issued or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or interchange. The Trustee
at the present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity (generally amounting to 3% of the market value of the Units),
affidavit of loss, evidence of ownership and payment of expenses incurred.
DISTRIBUTIONS TO UNITHOLDERS. Interest received by each Trust, including
any portion of the proceeds from a disposition of Securities which
represents accrued interest, is credited by the Trustee to the Interest
Account for such Trust. All other receipts are credited by the Trustee to a
separate Principal Account for the Trust. The Trustee normally has no cash
for distribution to Unitholders until it receives interest payments on the
Securities in the Trust. Since interest usually is paid semi-annually
(monthly in the case of a GNMA Portfolio), during the initial months of the
Trusts, the Interest Account of each Trust, consisting of accrued but
uncollected interest and collected interest (cash), will be predominantly
the uncollected accrued interest that is not available for distribution. On
the dates set forth under "Essential Information" for each Trust, the
Trustee will commence distributions, in part from funds advanced by the
Trustee.
Thereafter, assuming the Trust retains its original size and composition,
after deduction of the fees and expenses of the Trustee, the Sponsor and
Evaluator and reimbursements (without interest) to the Trustee for any
amounts advanced to a Trust, the Trustee will normally distribute on each
Interest Distribution Date (the twentieth of the month) or shortly
thereafter to Unitholders of record of such Trust on the preceding Record
Date (which is the tenth day of each month). Unitholders of the Trusts will
receive an amount substantially equal to one-twelfth of such holders' pro
rata share of the estimated net annual interest income to the Interest
Account of such Trust. However, interest earned at any point in time will
be greater than the amount actually received by the Trustee and distributed
to the Unitholders. Therefore, there will always remain an item of accrued
interest that is added to the daily value of the Units. If Unitholders of a
Trust sell or redeem all or a portion of their Units, they will be paid
their proportionate share of the accrued interest of such Trust to, but not
including, the fifth business day after the date of a sale or to the date
of tender in the case of a redemption.
In connection with GNMA Portfolios only, the terms of the Ginnie Maes
provide for payment to the holders thereof (including a GNMA Portfolio) on
the fifteenth day of each month of amounts collected by or due to the
issuers thereof with respect to the underlying mortgages during the
preceding month. The Trustee will collect the interest due a GNMA Portfolio
on the Securities therein as it becomes payable and credit such interest to
a separate Interest Account for such GNMA Portfolio created by the Trust
Agreement. Distributions will be made to each Unitholder of record of a
GNMA Portfolio on the appropriate Distribution Date (see "Essential
Information") and will consist of an amount substantially equal to such
Unitholder's pro rata share of the cash balances, if any, in the Interest
Account and the Principal Account of such GNMA Portfolio, computed as of
the close of business on the preceding Record Date.
In order to equalize distributions and keep the undistributed interest
income of the Trusts at a low level, all Unitholders of record in such
Trust on the first Record Date will receive an interest distribution on the
first Interest Distribution Date. Because the period of time between the
first Interest Distribution Date and the regular distribution dates may be
a full period, the first regular distributions may be partial
distributions.
Unitholders of a Treasury Portfolio which contains Stripped Treasury
Securities should note that Stripped Treasury Securities are sold at a deep
discount because the buyer of those securities obtains only the right to
receive a future fixed payment on the security and not any rights to
periodic interest payments thereon. Purchasers of these Securities acquire,
in effect, discount obligations that are economically identical to the
"zero-coupon bonds" that have been issued by corporations. Zero coupon
bonds are debt obligations which do not make any periodic payments of
interest prior to maturity and accordingly are issued at a deep discount.
Under general accepted accounting principles, a holder of a security
purchased at a discount normally must report as an item of income for
financial accounting purposes the portion of the discount attributable to
the applicable reporting period. The calculation of this attributable
income would be made on the "interest" method which generally will result
in a lesser amount of includable income in earlier periods and a
corresponding larger amount in later periods. For Federal income tax
purposes, the inclusion will be on a basis that reflects the effective
compounding of accrued but unpaid interest effectively represented by the
discount. Although this treatment is similar to the "interest" method
described above, the "interest" method may differ to the extent that
generally accepted accounting principles permit or require the inclusion of
interest on the basis of a compounding period other than the semi-annual
period. See "Trust Information-Tax Status."
Persons who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the second Distribution Date
following their purchase of Units. Since interest on Securities in the
Trusts is payable at varying intervals, usually in semi-annual
installments, and distributions of income are made to Unitholders at
different intervals from receipt of interest, the interest accruing to a
Trust may not be equal to the amount of money received and available for
distribution from t he Interest Account. Therefore, on each Distribution
Date the amount of interest actually deposited in the Interest Account of a
Trust and available for distribution may be slightly more or less than the
interest distribution made. In order to eliminate fluctuations in interest
distributions resulting from such variances, the Trustee is authorized by
the Trust Agreements to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee will be
reimbursed, without interest, for any such advances from funds available in
the Interest Account for such Trust.
The Trustee will distribute on each Distribution Date or shortly
thereafter, to each Unitholder of record of a Trust on the preceding Record
Date, an amount substantially equal to such Unitholder's pro rata share of
the cash balance, if any, in the Principal Account of such Trust computed
as of the close of business on the preceding Record Date. However, no
distribution will be required if the balance in the Principal Account is
less than $1.00 per 100 Units. Notwithstanding the foregoing, the Trustee
will make a distribution to Unitholders of all principal relating to
maturing U.S. Treasury Obligations in a Trust within twelve business days
of the date of such maturity unless such principal is to be reinvested in
connection with a Rolling Government Series.
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will furnish
or cause to be furnished to each Unitholder a statement of the amount of
interest and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit.
The accounts of each Trust are required to be audited annually, at the
Trust's expense, by independent auditors designated by the Sponsor, unless
the Sponsor determines that such an audit would not be in the best interest
of the Unitholders of such Trust. The accountants' report will be furnished
by the Trustee to any Unitholder of such Trust upon written request. Within
a reasonable period of time after the end of each calendar year, the
Trustee shall furnish to each person who at any time during the calendar
year was a Unitholder of a Trust a statement, covering the calendar year,
setting forth for the applicable Trust:
A. As to the Interest Account:
1. The amount of interest received on the Securities;
2. The amount paid from the Interest Account representing accrued interest
of any Units redeemed;
3. The deductions from the Interest Account for applicable taxes, if any,
fees and expenses (including auditing fees) of the Trustee, the Sponsor,
the Evaluator, and, if any, of bond counsel;
4. Any amounts credited by the Trustee to the Reserve Account;
5. The net amount remaining after such payments and deductions, expressed
both as a total dollar amount and a dollar amount per Unit outstanding on
the last business day of such calendar year; and
B. As to the Principal Account:
1. The dates of the maturity, liquidation or redemption of any of the
Securities and the net proceeds received therefrom excluding any portion
credited to the Interest Account;
2. The amount paid from the Principal Account representing the principal of
any Units redeemed;
3. The deductions from the Principal Account for payment of applicable
taxes, if any, fees and expenses (including auditing fees) of the Trustee,
the Sponsor, the Evaluator, and, if any, of bond counsel;
4. The amount of when-issued interest treated as a return of capital, if
any;
5. Any amounts credited by the Trustee to the Reserve Account;
6. The net amount remaining after distributions of principal and
deductions, expressed both as a dollar amount and as a dollar amount per
Unit outstanding on the last business day of the calendar year; and
C. The following information:
1. A list of the Securities as of the last business day of such calendar
year;
2. The number of Units outstanding on the last business day of such
calendar year;
3. The Redemption Price based on the last evaluation made during such
calendar year;
4. The amount actually distributed during such calendar year from the
Interest and Principal Accounts separately stated, expressed both as total
dollar amounts and as dollar amounts per Unit outstanding on the Record
Dates for each such distribution.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the
Trustee for redemption. The death or incapacity of any Unitholder will not
operate to terminate a Trust nor entitle legal representatives or heirs to
claim an accounting or to bring any action or proceeding in any court for
partition or winding up of a Trust. No Unitholder shall have the right to
control the operation and management of any Trust in any manner, except to
vote with respect to the amendment of the Trust Agreements or termination
of any Trust.
INVESTMENT SUPERVISION
The Sponsor may not alter the portfolios of the Trusts by the purchase,
sale or substitution of Securities, except in the circumstances noted
herein. Thus, with the exception of the redemption or maturity of
Securities in accordance with their terms (and reinvestments made in
connection with a Rolling Government Series), the assets of the Trusts will
remain unchanged under normal circumstances.
The Sponsor may direct the Trustee to dispose of Securities the value of
which has been affected by certain adverse events including institution of
certain legal proceedings or decline in price or the occurrence of other
market factors, including advance refunding, so that in the opinion of the
Sponsor the retention of such Securities in a Trust would be detrimental to
the interest of the Unitholders. In addition, the Sponsor will instruct the
Trustee to dispose of certain Securities and to take such further action as
may be needed from time to time to ensure that a Rolling Government Series
continues to satisfy the qualifications of a regulated investment company,
including the requirements with respect to diversification under Section
851 of the Internal Revenue Code. The proceeds from any such sales,
exclusive of any portion which represents accrued interest, will be
credited to the Principal Account of such Trust for distribution to the
Unitholders.
The Sponsor is required to instruct the Trustee to reject any offer made by
an issuer of Securities to issue new obligations in exchange or
substitution for any of such Securities pursuant to a refunding financing
plan, except that the Sponsor may instruct the Trustee to accept or reject
such an offer or to take any other action with respect thereto as the
Sponsor may deem proper if (i) the issuer is in default with respect to
such Securities or (ii) in the written opinion of the Sponsor the issuer
will probably default with respect to such Securities in the reasonably
foreseeable future. Any obligation so received in exchange or substitution
will be held by the Trustee subject to the terms and conditions of the
Trust Agreement to the same extent as Securities originally deposited
thereunder. Within five days after deposit of obligations in exchange or
substitution for underlying Securities, the Trustee is required to give
notice thereof to each Unitholder, identifying the Securities eliminated
and the Securities substituted therefor. The Trustee may sell Securities,
designated by the Sponsor, from a Trust for the purpose of redeeming Units
of such Trust tendered for redemption and the payment of expenses.
TRUST ADMINISTRATION
THE TRUSTEE. The Trustee is United States Trust Company of New York with
its principal place of business at 45 Wall Street, New York, New York 10005
and its unit investment trust offices at 770 Broadway, New York, New York
10003. Unitholders who have questions regarding the Trusts may call the
Customer Service Help Line at 1-800- . The Trustee is a member of the
New York Clearing House Association and is subject to supervision and
examination by the Comptroller of the Currency, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
The Trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any Trust. For information relating to the
responsibilities of the Trust under the Trust Agreements, reference is made
to the material set forth under "Trust Information-Unitholders."
In accordance with the Trust Agreements, the Trustee shall keep records of
all transactions at its office. Such records shall include the name and
address of, and the number of Units held by, every Unitholder of each
Trust. Such books and records shall be open to inspection by any Unitholder
of such Trust at all reasonable times during usual business hours. The
Trustee shall make such annual or other reports as may from time to time be
required under any applicable state or Federal statute, rule or regulation.
The Trustee shall keep a certified copy or duplicate original of the Trust
Agreements on file in its office available for inspection at all reasonable
times during usual business hours by any Unitholder, together with a
current list of the Securities held in each Trust. Pursuant to the Trust
Agreements, the Trustee may employ one or more agents for the purpose of
custody and safeguarding of Securities comprising the Trusts. Under the
Trust Agreements, the Trustee or any successor trustee may resign and be
discharged of its duties created by the Trust Agreements by executing an
instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than 60 days before
the date specified in such notice when such resignation is to take effect.
The Sponsor upon receiving notice of such resignation is obligated to
appoint a successor trustee promptly. If, upon such resignation, no
successor trustee has been appointed and has accepted the appointment
within 30 days after notification, the retiring Trustee may apply to a
court of competent jurisdiction for the appointment of a successor. The
Sponsor may at any time remove the Trustee, with or without cause, and
appoint a successor trustee as provided in the Trust Agreements. Notice of
such removal and appointment shall be mailed to each Unitholder by the
Sponsor. Upon execution of a written acceptance of such appointment by such
successor trustee, all the rights, powers, duties and obligations of the
original Trustee shall vest in the successor. The Trustee shall be a
corporation organized under the laws of the United States, or any state
thereof, which is authorized under such laws to exercise trust powers. The
Trustee shall have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
THE EVALUATOR. National Financial Services Corporation, the Sponsor, also
serves as Evaluator. The Evaluator may resign or be removed by the Trustee
in which event the Trustee is to use its best efforts to appoint a
satisfactory successor. Such resignation or removal shall become effective
upon acceptance of appointment by the successor evaluator. If upon
resignation of the Evaluator no successor has accepted appointment within
30 days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to
each Unitholder.
AMENDMENT AND TERMINATION. The Trust Agreements may be amended by the
Trustee and the Sponsor without the consent of any of the Unitholders: (i)
to cure any ambiguity or to correct or supplement any provision which may
be defective or inconsistent; (ii) to change any provision thereof as may
be required by the Securities and Exchange Commission or any successor
governmental agency; or (iii) to make such provisions as shall not
adversely affect the interests of the Unitholders. The Trust Agreements
with respect to the Trusts may also be amended in any respect by the
Sponsor and the Trustee, or any of the provisions thereof may be waived,
with the consent of the holders of Units representing 66 2/3% of the Units
then outstanding of such Trust, provided that no such amendment or waiver
will reduce the interest of any Unitholder thereof without the consent of
such Unitholder or reduce the percentage of Units required to consent to
any such amendment or waiver without the consent of all Unitholders of such
Trust. In no event shall any Trust Agreement be amended to increase the
number of Units of a Trust issuable thereunder or to permit, except in
accordance with the provisions of such Trust Agreement, the acquisition of
any Securities in addition to or in substitution for those initially
deposited in a Trust. The Trustee shall promptly notify Unitholders of the
substance of any such amendment.
The Trust Agreements provide that the Trusts shall terminate upon the
maturity, redemption or other disposition of the last of the Securities
held in a Trust. If the value of a Trust shall be less than the applicable
minimum value stated under "Essential Information," the Trustee may, in its
discretion, and shall, when so directed by the Sponsor, terminate the
Trust. A Trust may be terminated at any time by the Unitholders
representing 66 2/3% of the Units thereof then outstanding. In the event of
termination of a Trust, written notice thereof will be sent by the Trustee
to all Unitholders of such Trust. Within a reasonable period after
termination, the Trustee will sell any Securities remaining in such Trust
and, after paying all expenses and charges incurred by the Trust, will
distribute to Unitholders thereof (upon surrender for cancellation of
certificates for Units, if issued) their pro rata share of the balances
remaining in the Interest and Principal Accounts of such Trust.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the
Trust Agreements, but will be under no liability to the Unitholders for
taking any action or refraining from any action in good faith pursuant to
the Trust Agreements or for errors in judgment, except in cases of its own
gross negligence, bad faith or willful misconduct. The Sponsor shall not be
liable or responsible in any way for depreciation or loss incurred by
reason of the sale of any Securities.
The Trustee: The Trust Agreements provide that the Trustee shall be under
no liability for any action taken in good faith in reliance upon prima
facie properly executed documents or for the disposition of monies,
Securities or certificates except by reason of its own gross negligence,
bad faith or willful misconduct, nor shall the Trustee be liable or
responsible in any way for depreciation or loss incurred by reason of the
sale by the Trustee of any Securities. In the event that the Sponsor shall
fail to act, the Trustee may act and shall not be liable for any such
action taken by it in good faith. The Trustee shall not be personally
liable for any taxes or other governmental charges imposed upon or in
respect of the Securities or upon the interest thereon. In addition, the
Trust Agreements contain other customary provisions limiting the liability
of the Trustee.
The Evaluator: The Trustee and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. The Trust Agreements provide that the determinations made
by the Evaluator shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator shall be
under no liability to the Trustee or Unitholders for errors in judgment,
but shall be liable only for its gross negligence, lack of good faith or
willful misconduct.
TRUST EXPENSES
The Sponsor will charge the Trusts a surveillance fee for services
performed for the Trusts in an amount not to exceed that amount set forth
in "Essential Information" but in no event will such compensation, when
combined with all compensation received from other unit investment trusts
for which the Sponsor both acts as sponsor and provides portfolio
surveillance, exceed the aggregate cost to the Sponsor for providing such
services. Such fee shall be based on the total number of Units of the
related Trust outstanding as of the January Record Date for any annual
period. The Sponsor will receive a portion of the sales commissions paid in
connection with the purchase of Units and will share in profits, if any,
related to the deposit of Securities in the Trusts.
The Trustee receives for its services fees set forth under "Essential
Information." The Trustee fee which is calculated monthly is based on the
largest aggregate principal amount of Securities in a Trust at any time
during the period. In no event shall the Trustee be paid less than $2,000
per Trust in any one year. Funds that are available for future
distributions, redemptions and payment of expenses are held in accounts
which are non-interest bearing to Unitholders and are available for use by
the Trustee pursuant to normal trust procedures; however, the Trustee is
also authorized by the Trust Agreements to make from time to time certain
non-interest bearing advances to the Trusts. During the first year the
Trustee has agreed to lower its fees and absorb expenses by the amount set
forth under "Essential Information." The Trustee's fee will not be
increased in future years in order to make up this reduction in the
Trustee's fee. The Trustee's fee is payable on or before each Distribution
Date.
For evaluation of Securities in each Trust, the Evaluator shall receive a
fee, payable monthly, calculated on the basis of that annual rate set forth
under "Essential Information," based upon the largest aggregate principal
amount of Securities in such Trust at any time during such monthly period.
The Trustee's and Evaluator's fees are deducted first from the Interest
Account of a Trust to the extent funds are available and then from the
Principal Account. Such fees may be increased without approval of
Unitholders by amounts not exceeding a proportionate increase in the
Consumer Price Index entitled "All Services Less Rent of Shelter,"
published by the United States Department of Labor, or any equivalent index
substituted therefor. In addition, the Trustee's fee may be periodically
adjusted in response to fluctuations in short-term interest rates
(reflecting the cost to the Trustee of advancing funds to a Trust to meet
scheduled distributions).
Expenses incurred in establishing the Trusts, including the cost of the
initial preparation of documents relating to the Trusts, federal and state
registration fees, the initial fees and expenses of the Trustee, legal
expenses and any other out-of-pocket expenses, will be paid by the Trusts
and amortized over the life of the Trusts. The following additional charges
are or may be incurred by the Trusts: (i) fees for the Trustee's
extraordinary services; (ii) expenses of the Trustee (including legal and
auditing expenses and insurance costs for an Insured Utility Portfolio, but
not including any fees and expenses charged by any agent for custody and
safeguarding of Securities) and of bond counsel, if any; (iii) various
governmental charges; (iv) expenses and costs of any action taken by the
Trustee to protect a Trust or the rights and interests of the Unitholders;
(v) indemnification of the Trustee for any loss, liability or expense
incurred by it in the administration of a Trust not resulting from gross
negligence, bad faith or willful misconduct on its part; (vi)
indemnification of the Sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct; and (vii) expenditures incurred in contacting Unitholders upon
termination of the Trusts. The fees and expenses set forth herein are
payable out of the appropriate Trust and, when owing to the Trustee, are
secured by a lien on such Trust. Fees or charges relating to a Trust shall
be allocated to each Trust in the same ratio as the principal amount of
such Trust bears to the total principal amount of all Trusts. Fees or
charges relating solely to a particular Trust shall be charged only to such
Trust.
Fees and expenses of the Trusts shall be deducted from the Interest Account
thereof, or, to the extent funds are not available in such Account, from
the Principal Accounts. The Trustee may withdraw from the Principal Account
or the interest Account of any Trust such amounts, if any, as it deems
necessary to establish a reserve for any taxes or other governmental
charges or other extraordinary expenses payable out of the Trust. Amounts
so withdrawn shall be credited to a separate account maintained for a Trust
known as the Reserve Account and shall not be considered a part of the
Trust when determining the value of the Units until such time as the
Trustee shall return all or any part of such amounts to the appropriate
account.
THE SPONSOR
NFSC is a registered broker and dealer and a member of The New York Stock
Exchange, Inc., and various other national and regional exchanges. As a
securities broker and dealer, NFSC is engaged in various securities
trading, brokerage and clearing activities serving a diverse group of
domestic corporations, institutional and individual investors, and brokers
and dealers.
NFSC is a wholly owned subsidiary of Fidelity Brokerage Services, Inc.
("FBSI"). NFSC was incorporated in Massachusetts, June 3, 1981. FBSI is a
wholly owned subsidiary of FMR Corp. ("FMR"). Edward C. Johnson 3d owns
approximately 12% and Abigail P. Johnson owns approximately 24.5% of the
issued and outstanding shares of the Voting Common Stock of FMR. Members
of the Edward C. Johnson 3d family and trusts for their benefit control up
to 49% of the voting shares of FMR.
If at any time the Sponsor shall fail to perform any of its duties under
the Trust Agreements or shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or shall have its affairs taken over by
public authorities, then the Trustee may (a) appoint a successor sponsor at
rates of compensation deemed by the Trustee to be reasonable and not
exceeding such reasonable amounts as may be prescribed by the Securities
and Exchange Commission, or (b) terminate the Trust Agreements and
liquidate the Trusts as provided therein, or (c) continue to act as Trustee
without terminating the Trust Agreements.
The foregoing financial information with regard to the Sponsor relates to
the Sponsor only and not to these Trusts. Such information is included in
this Prospectus only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations with respect to the Trusts. More comprehensive
financial information can be obtained upon request from the Sponsor.
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The statements of condition and the related portfolios at the Initial Date
of Deposit included in this Prospectus have been audited by Deloitte &
Touche LLP independent certified public accountants, as set forth in their
report in the Prospectus, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per 100 Units estimated distributions of
interest and principal to Unitholders. The tables assume no changes in
Trust expenses, no redemptions or sales of the underlying Securities prior
to maturity and the receipt of all principal due upon maturity. To the
extent the foregoing assumptions change actual distributions will vary.
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 1
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
LADDERED GOVERNMENT SERIES 2
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
ROLLING GOVERNMENT SERIES 1
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
INVESTMENT GRADE SERIES 1
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
FIDELITY DEFINED TRUSTS
INVESTMENT GRADE SERIES 2
ESTIMATED ESTIMATED ESTIMATED
INTEREST PRINCIPAL TOTAL
DATES DISTRIBUTION DISTRIBUTION DISTRIBUTION
DESCRIPTION OF RATINGS*
STANDARD & POOR'S-A brief description of the applicable Standard & Poor's
rating symbols and their meanings follow:
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific debt obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees. The bond rating is not a recommendation to purchase,
sell or hold a security, inasmuch as it does not comment as to market price
or suitability for a particular investor. The ratings are based on current
information furnished by the issuer and obtained by Standard & Poor's from
other sources it considers reliable. Standard & Poor's does not perform an
audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn
as a result of changes in, or unavailability of, such information, or for
other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement, under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
* As described by the rating company itself.
Plus (+) or Minus (-): The ratings from "AA" to "A" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise his own judgment with respect to
such likelihood and risk.
MOODY'S INVESTORS SERVICE, INC.-A brief description of the applicable
Moody's rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues. Their safety is so absolute that with the occasional exception of
oversupply in a few specific instances, characteristically, their market
value is affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be a high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Their market value is virtually
immune to all but money market influences, with the occasional exception of
oversupply in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future. The market value of A-rated bonds may be influenced to some degree
by economic performance during a sustained period of depressed business
conditions, but, during periods of normalcy, A-rated bonds frequently move
in parallel with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
A1-Bonds which are rated A1 offer the maximum in security within their
quality group, can be bought for possible upgrading in quality, and
additionally, afford the investor an opportunity to gauge more precisely
the relative attractiveness of offerings in the marketplace.
Conditional Ratings: Bonds rated "Con(-)" are ones for which the security
depends upon the completion of some act or the fulfillment of some
condition. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting conditions attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in certain areas of its bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.
DUFF & PHELPS CREDIT RATING CO. - A brief description of the applicable
Duff & Phelps Credit Rating Co. rating symbols and their meanings follow:
These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks
related to such factors as competition, government action, regulation,
technological obsolescence, demand shifts, cost structure, and management
depth and expertise. The projected viability of the obligor at the trough
of the cycle is a critical determination.
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A - Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
BBB - Below average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during economic
cycles.
BB - Below investment grade but deemed likely to meet obligations when due.
Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or
down frequently within this category.
B - Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according
to economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC - Well below investment grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD - Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
TABLE OF CONTENTS PAGE
SUMMARY 2
ESSENTIAL INFORMATION 4
THE TRUSTS 7
LADDERED GOVERNMENT SERIES 1, SHORT
TREASURY PORTFOLIO AND LADDERED
GOVERNMENT SERIES 2,
SHORT/INTERMEDIATE TREASURY PORTFOLIO 9
ROLLING GOVERNMENT SERIES 1, SHORT
TREASURY PORTFOLIO 11
ROLLING GOVERNMENT SERIES 2,
GNMA PORTFOLIO 14
INVESTMENT GRADE SERIES 1, INTERMEDIATE
INSURED UTILITY PORTFOLIO 17
INVESTMENT GRADE SERIES 2,
CORPORATE PORTFOLIO 21
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS 24
STATEMENTS OF CONDITION 25
TRUST INFORMATION A-1
General Information A-1
Risk Factors A-3
Rating of Units A-8
Insurance on the Bonds A-9
Retirement Plans A-10
Tax Status A-10
Distribution Reinvestment A-16
Interest, Estimated Long-Term Return and
Estimated Current Return A-16
Public Offering of Units A-17
Market For Units A-22
Redemption of Units A-22
Unitholders A-24
Investment Supervision A-28
Trust Administration A-28
Trust Expenses A-30
The Sponsor A-32
Legal Opinions A-32
Independent Certified Public Accountants A-32
ESTIMATED CASH FLOWS TO UNITHOLDERS B-1
Description of Ratings B-3
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. UNDER THE SECURITIES
ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, AND TO WHICH REFERENCE
IS MADE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUSTS, THE TRUSTEE, OR THE SPONSOR. THE TRUSTS ARE
REGISTERED AS UNIT INVESTMENT TRUSTS UNDER THE INVESTMENT COMPANY ACT OF
1940. SUCH REGISTRATION DOES NOT IMPLY THAT THE TRUSTS OR THE UNITS HAVE
BEEN GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES OR
ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT
LAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
NFSC OFFICERS AND DIRECTORS
Jeffrey R. Larsen is a graduate of 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.
