1933 ACT FILE NO.:
1940 ACT FILE NO.: 811-21056
CIK NO.: 1408061
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: ADVISOR'S DISCIPLINED TRUST 176
B. Name of depositor: FIXED INCOME SECURITIES, L.P.
C. Complete address of depositor's principal executive offices:
18925 Base Camp Road
Monument, Colorado 80132
D. Name and complete address of agent for service:
WITH A COPY TO:
SCOTT COLYER MARK J. KNEEDY
Fixed Income Securities, L.P. Chapman and Cutler LLP
18925 Base Camp Road 111 West Monroe Street
Monument, Colorado 80132 Chicago, Illinois 60603-4080
E. Title of securities being registered: Units of undivided beneficial
interest in the trust
F. Approximate date of proposed public offering:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
[ ] Check box if it is proposed that this filing will become effective
on _______, 2007 at _____ pursuant to Rule 487.
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The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
The information in this prospectus is not complete and may be changed. No one
may sell units of the trust until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell units and is not soliciting an offer to buy units in any state
where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS DATED AUGUST 6, 2007
SUBJECT TO COMPLETION
ML STERN INCOME PORTFOLIO, SERIES 1
(ADVISOR'S DISCIPLINED TRUST 176)
A diversified portfolio primarily
consisting of preferred securities and
shares of income-oriented closed-end
funds seeking high current income
Units are available through
ML Stern & Co.
An investment can be made in the
funds directly. Direct investments
would not be subject to the trust sales
fee, expenses or organization costs.
PROSPECTUS
AUGUST __, 2007
[LOGO]
As with any investment, the Securities
ADVISOR'S and Exchange Commission has not approved
ASSET MANAGEMENT or disapproved of these securities or
passed upon the adequacy or accuracy of
A DIVISION OF FIXED this prospectus. Any contrary
INCOME SECURITIES, L.P. representation is a criminal offense.
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INVESTMENT SUMMARY
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INVESTMENT OBJECTIVE
The trust seeks to provide high current income.
PRINCIPAL INVESTMENT STRATEGY
The trust invests in a diversified portfolio consisting of two components:
* Preferred Dividend Income--investment grade and non-investment grade
preferred securities seeking high current income.
* Tactical Income Closed-End Strategy--common stocks of closed-end investment
companies ("closed-end funds") seeking high current income with capital
appreciation potential.
As of the trust's inception date, approximately 80% of the portfolio was
invested in the Preferred Dividend Income component and approximately 20% was
invested in the Tactical Income Closed-End Strategy component. We* selected
these components in an effort to provide an enhanced total return while reducing
overall portfolio volatility through diversification of assets and investment
strategies. We selected the securities within each of these components as
described under "Understanding Your Investment--Security Selection." By
combining these investment strategies, we sought to create a portfolio balanced
between preferred securities and other income-producing securities, such as
corporate bonds, government bonds, corporate loans, convertible securities and
equity securities. We currently offer separate unit investment trusts that
invest according to the same or similar investment strategies as the components
described above. The components, portfolio securities and structure of the
trust offered in this prospectus may differ in certain respects from those of
other trusts we may be offering that use similar investment strategies.
PRINCIPAL RISKS
As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
* SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall over
time.
* AN ISSUER MAY BE UNABLE TO MAKE INCOME AND/OR PRINCIPAL PAYMENTS, OR DECLARE
DIVIDENDS, IN THE FUTURE. This may reduce the level of income the trust
receives which would reduce your income and cause the value of your units
to fall.
* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the primary offering period.
* THE VALUE OF CERTAIN SECURITIES WILL GENERALLY FALL IF INTEREST RATES, IN
GENERAL, RISE. No one can predict whether interest rates will rise or fall
in the future.
* THE TRUST WILL RECEIVE EARLY RETURNS OF PRINCIPAL IF SECURITIES ARE CALLED OR
SOLD BEFORE THE TRUST TERMINATION. If this happens your income will
decline and you may not be able to reinvest the money you receive at as
high a yield.
* THE TRUST INVESTS IN SHARES OF CLOSED-END FUNDS. You should understand the
information about closed-end funds in the section titled "Security
Selection--Tactical Income Closed-End Strategy" before you invest. In
particular, shares of these funds tend to trade at a discount from their
net asset value and are subject to risks related to factors such as the
manager's ability to achieve a fund's objective, market conditions
affecting a fund's investments and use of leverage. The trust and the
underlying funds have management and operating expenses. You will bear not
only your share of the trust's expenses, but also the expenses of the
underlying funds. By investing in other funds, the trust incurs greater
expenses than you would incur if you invested directly in the funds.
* THE TRUST IS CONSIDERED TO BE CONCENTRATED IN SECURITIES ISSUED BY COMPANIES
IN THE FINANCIAL SERVICES INDUSTRY, SUCH AS BANKS, INSURANCE COMPANIES AND
INVESTMENT FIRMS. Negative developments in the financial services industry
will affect the value of your investment more than would be the case in a
more diversified investment.
* THE TRUST AND THE CLOSED-END FUNDS IN THE TRUST WILL INVEST IN SECURITIES
RATED BELOW INVESTMENT GRADE AND ARE CONSIDERED TO BE "JUNK" SECURITIES.
These securities are considered to be speculative and are subject to
greater market and credit risks. Accordingly, the risk of default is
higher than investment grade securities. In addition, these securities may
be more sensitive to interest rate changes and may be more likely to make
early returns of principal.
* SECURITIES OF FOREIGN ISSUERS HELD BY THE TRUST OR BY THE UNDERLYING FUNDS IN
THE TRUST PRESENT RISKS BEYOND THOSE OF U.S. ISSUERS. These risks may
include market and political factors related to the issuer's foreign
market, international trade conditions, the global and country-specific
political environment, less regulation, smaller or less liquid markets,
increased volatility, differing accounting practices and changes in the
value of foreign currencies.
* WE DO NOT ACTIVELY MANAGE THE PORTFOLIO. While the closed-end funds have
managed portfolios, except in limited circumstances, the trust will hold,
and continue to buy, shares of the same funds even if their market value
declines.
- --------------------
<FN1>* "FIS," "we" and related terms mean Fixed Income Securities, L.P., the
trust sponsor, unless the context clearly suggests otherwise.
2 Investment Summary
WHO SHOULD INVEST
You should consider this investment if you want:
* to own a defined portfolio of securities selected based on two distinct
investment strategies.
* to diversify your overall portfolio with investments in various types of
securities.
* the potential to receive monthly distributions of income.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in the
securities held by the trust.
* are uncomfortable with the trust's strategies.
* seek aggressive growth without current income.
* seek capital preservation or capital appreciation without current income.
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ESSENTIAL INFORMATION
---------------------
UNIT PRICE AT INCEPTION $10.0000
INCEPTION DATE August __, 2007
TERMINATION DATE August __, 2009
ESTIMATED NET ANNUAL DISTRIBUTIONS
First year $_______ per unit
Second year $_______ per unit
DISTRIBUTION DATES Last day of each month
RECORD DATES 15th day of each month
CUSIP NUMBERS
Standard Accounts
Cash distributions __________
Reinvest distributions __________
Fee Based Accounts
Cash distributions __________
Reinvest distributions __________
TICKER SYMBOL __________
MINIMUM INVESTMENT $1,000/100 units
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FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that you
may incur based on a $10 unit price. Actual expenses may vary.
AS A % AMOUNT
OF $1,000 PER 100
SALES FEE INVESTED UNITS
------------------------
Initial sales fee 1.00% $10.00
Deferred sales fee 2.35 23.50
Creation & development fee 0.60 6.00
------- -------
Maximum sales fee 3.95% $39.50
======= =======
ORGANIZATION COSTS 0.50% $5.00
======= =======
AS A % AMOUNT
ANNUAL OF NET PER 100
OPERATING EXPENSES ASSETS UNITS
------------------------
Trustee fee & expenses _.__% $_____
Supervisory, evaluation
and administration fees _.__ _____
Closed-end fund expenses _.__ _____
------- -------
Total _.__% $_____
======= =======
The initial sales fee is the difference between the total sales fee (maximum
of 2.95% of the unit offering price) and the sum of the remaining deferred sales
fee and the total creation and development fee. The deferred sales fee is fixed
at $0.235 per unit and is paid in three monthly installments beginning on March
20, 2007. The creation and development fee is fixed at $0.06 per unit and is
paid at the end of the initial offering period (anticipated to be three months).
The trust will indirectly bear the management and operating expenses of the
underlying closed-end funds. While the trust will not pay these expenses
directly out of its assets, these expenses are shown in the trust's annual
operating expenses above to illustrate the impact of these expenses.
EXAMPLE
This example helps you compare the cost of this trust with other unit trusts
and mutual funds. In the example we assume that the expenses do not change and
that the trust's annual return is 5%. Your actual returns and expenses will
vary. Based on these assumptions, you would pay these expenses for every
$10,000 you invest in the trust:
1 year $_______
2 years (life of trust) $_______
These amounts are the same regardless of whether you sell your investment at
the end of a period or continue to hold your investment.
Investment Summary 3
ML STERN INCOME PORTFOLIO, SERIES 1
(ADVISOR'S DISCIPLINED TRUST 176)
PORTFOLIO
AS OF THE TRUST INCEPTION DATE, AUGUST __, 2007
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) PRICE SHARE(4) TO TRUST(5)
- -----------------------------------------------------------------------------------------------------------------------------------
PREFERRED DIVIDEND INCOME
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(continued)
4 Investment Summary
ML STERN INCOME PORTFOLIO, SERIES 1
(ADVISOR'S DISCIPLINED TRUST 176)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, AUGUST __, 2007
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) PRICE SHARE(4) TO TRUST(5)
- -----------------------------------------------------------------------------------------------------------------------------------
TACTICAL INCOME CLOSED-END STRATEGY
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- ------ ------- --------
______ 100.00% $_______
====== ======= ========
<FN>
Notes to Portfolio
(1) Securities are represented by contracts to purchase securities. Shown
under this heading for preferred securities is the stated dividend rate of
each of the securities, expressed as an annual dollar amount or as a
percentage of par or stated value. Each preferred security was originally
issued with a par or stated value per share equal to either $25 or $50.
(2) All ratings are by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. unless otherwise indicated. "*" indicates that the rating
of the security is by Moody's Investor Service, Inc. "NR" indicates that
the rating service did not provide a rating for that security. For a brief
description of the ratings see "Description of Security Ratings" in the
Information Supplement.
(3) The securities are first redeemable on such date and at such price as
listed above. Optional redemption provisions, which may be exercised in
whole or in part, are at prices of par or stated value. Optional
redemption provisions generally will occur at times when the redeemed
securities have an offering side evaluation which represents a premium over
par or stated value. To the extent that the securities were acquired at a
price higher than the redemption price, this will represent a loss of
capital when compared with the public offering price of the units when
acquired. Distributions to unitholders will generally be reduced by the
amount of the dividends which otherwise would have been paid with respect
to redeemed securities, and any principal amount received on such
redemption after satisfying any redemption requests for units received by
the trust will be distributed to unitholders. Certain of the securities
have provisions which would allow for their redemption prior to the
earliest stated call date pursuant to the occurrence of certain
extraordinary events.
(4) The value of each security is based on the most recent closing sale price
of each security as of the close of regular trading on the New York Stock
Exchange on the business day prior to the trust's inception date.
(5) The cost of the securities to the sponsor and the sponsor's profit or
(loss) (which is the difference between the cost of the securities to the
sponsor and the cost of the securities to the trust) are $__________ and
($__________) respectively.
(6) This is a security issued by a foreign company that trades on a U.S.
securities exchange.
Investment Summary 5
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UNDERSTANDING YOUR INVESTMENT
- -----------------------------
SECURITY SELECTION
The following describes the two components of the trust's portfolio. The
initial trust portfolio seeks to invest approximately 80% in the Preferred
Dividend Income component and 20% in the Tactical Income Closed-End Strategy
component as of the trust's inception and the weightings will vary thereafter in
accordance fluctuations in stock prices.
PREFERRED DIVIDEND INCOME. This component seeks to provide high current
income by investing in preferred securities. Approximately 25% of this
component will be invested in non-investment grade securities (20% of the
overall trust portfolio) and 75% will be invested in investment grade securities
(60% of the overall trust portfolio). Preferred securities combine some of the
characteristics of both stocks and bonds. Like bonds, the preferred securities
selected for the portfolio pay a fixed rate of income and are sold on the basis
of yield. However, like common stocks, they are traded on major exchanges.
Preferred securities are "senior securities" which have preference over common
stocks, but not debt, of an issuer. Generally, the issuing company must pay all
income payments on its preferred securities before additional earnings are made
available for distribution to common stockholders. Preferred securities often
have a yield advantage over common stocks as well as comparably rated fixed
income investments.
TACTICAL INCOME CLOSED-END STRATEGY. This component seeks to provide high
current income with capital appreciation potential by investing in a portfolio
primarily consisting of common stock of closed-end funds. The underlying funds
may invest in a variety of income-producing securities issued by various types
of foreign and/or U.S. issuers. Among other securities, these securities may
include corporate bonds, government bonds, corporate loans, convertible
securities, preferred securities and equity securities. These securities may be
rated investment grade, below investment grade or unrated by major security
rating agencies.
In selecting closed-end funds, we considered factors such as historical
returns, income potential, potential future growth, portfolio diversification
and advisor experience. We use a disciplined investment methodology to select
the funds for inclusion in this component. We begin by constructing a universe
of funds that have a stated investment objective in line with this component's
investment objective and that the fund advisor appears to be adhering to. From
this universe we select the final securities by utilizing a multi-factor
approach based on the following factors:
* Premium/Discount--We favor funds that are trading at a discount relative to
their peers and relative to their historic average.
* Dividend--We favor funds that have a history of a consistent and competitive
dividend and that appear to possess the ability to keep the dividend level
intact.
* Performance--We favor funds that have an above average history of performance
based on net asset value when compared to their peers and a relevant
benchmark.
Approximately ___% of the portfolio consists of funds classified as "non-
diversified" under the Investment Company Act of 1940. These funds have the
ability to invest more than 5% of their assets in securities of a single issuer
which could reduce diversification.
Closed-end funds are a type of investment company that holds an actively
managed portfolio
6 Understanding Your Investment
of securities. Closed-end funds issue shares in "closed-end" offerings which
generally trade on a stock exchange (although some closed-end fund shares are
not listed on a securities exchange). Since closed-end funds maintain a
relatively fixed pool of investment capital, portfolio managers may be better
able to adhere to their investment philosophies through greater flexibility and
control. In addition, closed-end funds don't have to manage fund liquidity to
meet potentially large redemptions.
Closed-end funds are subject to various risks, including management's ability
to meet the closed-end fund's investment objective, and to manage the closed-end
fund portfolio when the underlying securities are redeemed or sold, during
periods of market turmoil and as investors' perceptions regarding closed-end
funds or their underlying investments change.
Shares of closed-end funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct from
the risk that the net asset value of closed-end fund shares may decrease. The
amount of such discount from net asset value is subject to change from time to
time in response to various factors.
Certain of the closed-end funds included in the trust may employ the use of
leverage in their portfolios through the issuance of preferred stock. While
leverage often serves to increase the yield of a closed-end fund, this leverage
also subjects the closed-end fund to increased risks. These risks may include
the likelihood of increased volatility and the possibility that the closed-end
fund's common share income will fall if the dividend rate on the preferred
shares or the interest rate on any borrowings rises.
Only the trustee may vote the shares of the closed-end funds held in the
trust. The trustee will vote the shares in the same general proportion as
shares held by other shareholders of each fund. Your trust is generally
required, however, to reject any offer for securities or other property in
exchange for portfolio securities as described under "How the Trust Works--
Changing Your Portfolio."
HOW TO BUY UNITS
You can buy units of the trust on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMPORTFOLIOS.COM. The public offering
price of units includes:
* the net asset value per unit plus
* organization costs plus
* the sales fee.
The "net asset value per unit" is the value of the securities, cash and other
assets in the trust reduced by the liabilities of the trust divided by the total
units outstanding. We often refer to the public offering price of units as the
"offer price" or "purchase price." We must receive your order to buy units
prior to the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time) to give you the price for that day. If we receive your
order after this time, you will receive the price computed on the next business
day. Certain broker-dealers may charge a transaction or other fee for
processing unit purchase orders.
VALUE OF THE SECURITIES. We determine the value of the securities as of the
close of regular trading on the New York Stock Exchange on each
Understanding Your Investment 7
day that exchange is open. We generally determine the value of securities using
the last sale price for securities traded on a national securities exchange.
For this purpose, the trustee provides us closing prices from a reporting
service approved by us. In some cases we will price a security based on its
fair value after considering appropriate factors relevant to the value of the
security. We will only do this if a security is not principally traded on a
national securities exchange or if the market quotes are unavailable or
inappropriate.
We determined the initial prices of the securities shown under "Portfolio" in
this prospectus as described above at the close of regular trading on the New
York Stock Exchange on the business day before the date of this prospectus. On
the first day we sell units we will compute the unit price as of the close of
regular trading on the New York Stock Exchange or the time the registration
statement filed with the Securities and Exchange Commission becomes effective,
if later.
ORGANIZATION COSTS. During the initial offering period, part of the value of
the units represents an amount that will pay the costs of creating your trust.
These costs include the costs of preparing the registration statement and legal
documents, federal and state registration fees, the initial fees and expenses of
the trustee and the initial audit. Your trust will sell securities to reimburse
us for these costs at the end of the initial offering period or after six
months, if earlier. The value of your units will decline when the trust pays
these costs.
TRANSACTIONAL SALES FEE. You pay a fee in connection with purchasing units.
We refer to this fee as the "transactional sales fee." The transactional sales
fee has both an initial and a deferred component and equals 3.35% of the public
offering price per unit based on a $10 public offering price per unit. This
percentage amount of the transactional sales fee is based on the unit price on
the trust's inception date. The transactional sales fee equals the difference
between the total sales fee and the creation and development fee. As a result,
the percentage and dollar amount of the transactional sales fee will vary as the
public offering price per unit varies. The transactional sales fee does not
include the creation and development fee which is described under "Expenses."
The maximum sales fee equals 3.95% of the public offering price per unit at
the time of purchase. You pay the initial sales fee at the time you buy units.
The initial sales fee is the difference between the total sales fee percentage
(maximum of 3.95% of the public offering price per unit) and the sum of the
remaining fixed dollar deferred sales fee and the total fixed dollar creation
and development fee. The initial sales fee will be approximately 1.00% of the
public offering price per unit depending on the public offering price per unit.
The deferred sales fee is fixed at $0.235 per unit. Your trust pays the
deferred sales fee in equal monthly installments as described on page 3. If you
redeem or sell your units prior to collection of the total deferred sales fee,
you will pay any remaining deferred sales fee upon redemption or sale of your
units.
If you purchase units after the last deferred sales fee payment has been
assessed, the secondary market sales fee is equal to 3.00% of the public
offering price per unit and does not include deferred payments.
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
fee you pay. It is your financial professional's responsibility to alert us of
any discount when you order units. Since the deferred sales fee and the
creation and development fee are fixed dollar amounts per unit, your trust
8 Understanding Your Investment
must charge these fees per unit regardless of any discounts. However, if you
are eligible to receive a discount such that your total sales fee is less than
the fixed dollar amounts of the deferred sales fee and the creation and
development fee, we will credit you the difference between your total sales fee
and these fixed dollar fees at the time you buy units.
Large Purchases. You can reduce your sales fee by increasing the size of
your investment:
IF YOU PURCHASE: YOUR FEE WILL BE:
------------------------------------------
Less than $50,000 3.95%
$50,000 - $99,999 3.70
$100,000 - $249,999 3.45
$250,000 - $499,999 2.95
$500,000 - $999,999 1.95
$1,000,000 or more 1.75
We apply these fees as a percent of the public offering price per unit at the
time of purchase. We also apply the different purchase levels on a unit basis
using a $10 unit equivalent. For example, if you purchase between 10,000 and
24,999 units, your fee is 3.95% of your public offering price per unit.
You may AGGREGATE unit orders submitted by the same person for units of any
of the trusts we sponsor on any single day from any one broker-dealer to qualify
for a purchase level. You can also include these orders as your own for
purposes of this aggregation:
* orders submitted by your spouse or minor children living in the same
household and
* orders submitted by your trust estate or fiduciary accounts.
The discounts described above apply during the initial offering period.
Fee Accounts. We waive the transactional sales fee for purchases made
through registered investment advisers, certified financial planners or
registered broker-dealers who charge periodic fees in lieu of commissions or who
charge for financial planning or for investment advisory or asset management
services or provide these services as part of an investment account where a
comprehensive "wrap fee" is imposed. You should consult your financial advisor
to determine whether you can benefit from these accounts. To purchase units in
these fee-based accounts, your financial advisor must purchase units designated
with one of the fee account CUSIP numbers, if available. Please contact your
financial advisor for more information. Fee account purchases are not subject
to the transactional sales fee but will be subject to the creation and
development fee that is retained by the sponsor. For example, this table
illustrates the sales fee you will pay as a percentage of the initial $10 public
offering price per unit (the percentage will vary with the unit price).
Initial sales fee 0.00%
Deferred sales fee 0.00%
-------
Transactional sales fee 0.00%
=======
Creation and development fee 0.60%
-------
Total sales fee 0.60%
=======
This discount applies only during the initial offering period. Certain fee
account investors may be assessed transaction or other fees on the purchase
and/or redemption of units by their broker-dealer or other processing
organizations for providing certain transaction or account activities. We
reserve the right to limit or deny purchases of units in fee accounts by
investors or selling firms whose frequent trading activity is determined to be
detrimental to the trust.
Employees. We waive the transactional sales fee for purchases made by
officers, directors and employees of the sponsor and its affiliates and
Understanding Your Investment 9
their family members (spouses, children and parents). These purchases are not
subject to the transactional sales fee but will be subject to the creation and
development fee.
We also waive a portion of the sales fee for purchases made by registered
representatives of selling firms and their family members (spouses, children and
parents). These purchases may be made at the public offering price per unit
less the applicable regular dealer concession.
These discounts apply during the initial offering period and in the secondary
market.
Rollover/Exchange Option. We waive a portion of the sales fee on units of
the trust offered in this prospectus if you buy your units with redemption or
termination proceeds from any of our other unit trusts. You may also purchase
units of the trust offered in this prospectus at this reduced fee if you
purchase your units with (1) termination proceeds from an unaffiliated unit
trust or (2) redemption proceeds from an unaffiliated unit trust if such trust
is scheduled to terminate within 30 days of the redemption. The discounted
public offering price per unit for these transactions is equal to the regular
public offering price per unit less 1.00%. However, if you invest redemption or
termination proceeds of $1,000,000 or more in units of the trust, the maximum
sales fee on your units will be limited to the maximum sales fee for the
applicable amount invested in the table under "Large Purchases" above. To
qualify for this discount, the termination or redemption proceeds used to
purchase units of the trust offered in this prospectus must be derived from a
transaction that occurred within 30 days of your purchase of units of the trust
offered in this prospectus. In addition, the discount will only be available
for investors that utilize the same broker-dealer (or a different broker-dealer
with appropriate notification) for both the unit purchase and the transaction
resulting in the receipt of the termination or redemption proceeds used for the
unit purchase. You may be required to provide appropriate documentation or
other information to your broker-dealer to evidence your eligibility for this
sales fee discount.
Please note that if you purchase units of the trust in this manner using
redemption proceeds from trusts which assess the amount of any remaining
deferred sales fee at redemption, you should be aware that any deferred sales
fee remaining on these units will be deducted from those redemption proceeds.
These discounts apply only during the initial offering period.
Dividend Reinvestment Plan. We do not charge any sales fee when you reinvest
distributions from your trust into additional units of the trust. This sales
fee discount applies during the initial offering period and in the secondary
market. Since the deferred sales fee and the creation and development fee are
fixed dollar amounts per unit, your trust must charge these fees per unit
regardless of this discount. If you elect the distribution reinvestment plan,
we will credit you with additional units with a dollar value sufficient to cover
the amount of any remaining deferred sales fee and creation and development fee
that will be collected on such units at the time of reinvestment. The dollar
value of these units will fluctuate over time.
RETIREMENT ACCOUNTS. The portfolio may be suitable for purchase in tax-
advantaged retirement accounts. You should contact your financial professional
about the accounts offered and any additional fees imposed.
10 Understanding Your Investment
HOW TO SELL YOUR UNITS
You can sell or redeem your units on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the internet at WWW.AAMPORTFOLIOS.COM or through your
financial professional. The sale and redemption price of units is equal to the
net asset value per unit, provided that you will not pay any remaining creation
and development fee or organization costs if you sell or redeem units during the
initial offering period. The sale and redemption price is sometimes referred to
as the "liquidation price." You pay any remaining deferred sales fee when you
sell or redeem your units. Certain broker-dealers may charge a transaction fee
for processing unit redemption or sale requests.
SELLING UNITS. We may maintain a secondary market for units. This means
that if you want to sell your units, we may buy them at the current net asset
value, provided that you will not pay any remaining creations and development
fee or organization costs if you redeem units during the initial offering
period. We may then resell the units to other investors at the public offering
price or redeem them for the redemption price. Our secondary market repurchase
price is the same as the redemption price. Certain broker-dealers might also
maintain a secondary market in units. You should contact your financial
professional for current repurchase prices to determine the best price
available. We may discontinue our secondary market at any time without notice.
Even if we do not make a market, you will be able to redeem your units with the
trustee on any business day for the current redemption price.
REDEEMING UNITS. You may also redeem your units directly with the trustee,
The Bank of New York, on any day the New York Stock Exchange is open. The
redemption price that you will receive for units is equal to the net asset value
per unit, provided that you will not pay any remaining creation and development
fee or organization costs if you redeem units during the initial offering
period. You will pay any remaining deferred sales fee at the time you redeem
units. The trustee must receive your completed redemption request prior to the
close of regular trading on the New York Stock Exchange for you to receive the
net asset value for a particular day. If your request is received after that
time or is incomplete in any way, you will receive the next net asset value
computed after the trustee receives your completed request.
If you redeem your units, the trustee will generally send you a payment for
your units no later than seven days after it receives all necessary
documentation (this will usually only take three business days). The only time
the trustee can delay your payment is if the New York Stock Exchange is closed
(other than weekends or holidays), the Securities and Exchange Commission
determines that trading on that exchange is restricted or an emergency exists
making sale or evaluation of the securities not reasonably practicable, and for
any other period that the Securities and Exchange Commission permits.
To redeem your units, you must send the trustee any certificates for your
units. You must properly endorse your certificates or sign a written transfer
instrument with a signature guarantee. The trustee may require additional
documents such as a certificate of corporate authority, trust documents, a death
certificate, or an appointment as executor, administrator or guardian. The
trustee cannot complete your redemption or send your payment to you until it
receives all of these documents in complete form.
Understanding Your Investment 11
You can request an in-kind distribution of the securities underlying your
units if you tender at least 2,500 units for redemption (or such other amount as
required by your financial professional's firm). This option is generally
available only for securities traded and held in the United States. The trustee
will make any in-kind distribution of securities by distributing applicable
securities in book entry form to the account of your financial professional at
Depository Trust Company. You will receive whole shares of the applicable
securities and cash equal to any fractional shares. You may not request this
option in the last 30 days of your trust's life. We may discontinue this option
upon sixty days notice.
EXCHANGE OPTION. You may be able to exchange your units for units of our
unit trusts at a reduced sales fee. You can contact your financial professional
for more information about trusts currently available for exchanges. Before you
exchange units, you should read the prospectus carefully and understand the
risks and fees. You should then discuss this option with your financial
professional to determine whether your investment goals have changed, whether
current trusts suit you and to discuss tax consequences. We may discontinue
this option at any time upon sixty days notice.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays distributions of its net
investment income (pro-rated on an annual basis) along with any excess capital
on each monthly distribution date to unitholders of record on the preceding
record date. The record and distribution dates are shown under "Essential
Information" in the "Investment Summary" section of this prospectus. In some
cases, your trust might pay a special distribution if it holds an excessive
amount of cash pending distribution. For example, this could happen as a result
of a merger or similar transaction involving a company whose stock is in your
portfolio. The trust will also generally make required distributions or
distributions to avoid imposition of tax at the end of each year because it is
structured as a "regulated investment company" for federal tax purposes. The
amount of your distributions will vary from time to time as companies change
their dividends or trust expenses change.
The closed-end funds in the trust's portfolio generally make dividend
payments on a monthly basis. Different funds pay dividends at different times
during a month. When the trust receives dividends from a fund, the trustee
credits the dividends to the trust's accounts. In an effort to make relatively
regular income distributions, the trust's monthly income distribution is equal
to one-twelfth of the estimated net annual dividends to be received by the trust
after deduction of trust operating expenses. Because the trust does not
necessarily receive dividends from the underlying funds at a constant rate
throughout the year, the trust's income distributions to unitholders may be more
or less than the amount credited to the trust accounts as of the record date.
For the purpose of minimizing fluctuation in income distributions, the trustee
is authorized to advance such amounts as may be necessary to provide income
distributions of approximately equal amounts. The trustee will be reimbursed,
without interest, for any such advances from available income received by the
trust on the ensuing record date.
ESTIMATED ANNUAL DISTRIBUTIONS. The estimated net annual distributions are
shown under "Essential Information" in the "Investment Summary" section of this
prospectus. We generally base the estimate of the dividends the trust will
receive from the closed-end funds by annualizing
12 Understanding Your Investment
the most recent dividends declared by the closed-end funds. We generally base
the estimate of the income the trust may receive from other issuers by
annualizing the most recent ordinary dividend declared by an issuer (or adding
the most recent interim and final dividends declared for certain foreign
issuers) or on scheduled income payments. However, dividend conventions for
certain companies and/or certain countries differ from those in the United
States and in certain instances, dividends paid or declared over several years
or other periods were used to estimate annual distributions. Due to this and
various other factors, actual dividends received by the trust will most likely
differ from the most recent annualized dividends or scheduled income payments.
The actual net annual distributions you will receive will vary with changes in
the trust's fees and expenses, in dividends received and with the sale of
securities. The estimated net annual distributions for subsequent years are
expected to be less than estimated distributions for the first year because a
portion of the securities included in the trust portfolio will be sold during
the first year to pay for organization costs, creation and development fee and
the deferred sales fee.
REPORTS. The trustee or your financial professional will make available to
you a statement showing income and other receipts of your trust for each
distribution. Each year the trustee will also provide an annual report on your
trust's activity and certain tax information. You can request copies of
security evaluations to enable you to complete your tax forms and audited
financial statements for your trust, if available.
INVESTMENT RISKS
All investments involve risk. This section describes the main risks that can
impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK is the risk that the value of the securities in your trust will
fluctuate. This could cause the value of your units to fall below your original
purchase price. Market value fluctuates in response to various factors. These
can include changes in interest rates, inflation, the financial condition of a
security's issuer, perceptions of the issuer, or ratings on a security. Even
though we supervise your portfolio, you should remember that we do not manage
your portfolio. Your trust will not sell a security solely because the market
value falls as is possible in a managed fund.
CREDIT RISK is the risk that a borrower is unable to meet its obligation to
pay principal or interest on a security held by a closed-end fund. This may
reduce the level of dividends a closed-end fund pays which would reduce your
income and could cause the value of your units to fall.
DIVIDEND PAYMENT RISK is the risk that an issuer of a security is unwilling
or unable to pay income on a security. Stocks represent ownership interests in
the issuers and are not obligations of the issuers. Common stockholders have a
right to receive dividends only after the company has provided for payment of
its creditors, bondholders and preferred stockholders. Common stocks do not
assure dividend payments. Dividends are paid only when declared by an issuer's
board of directors and the amount of any dividend may vary over time.
INTEREST RATE RISK is the risk that the value of securities held by the trust
or closed-end fund will fall if interest rates increase. Fixed income
securities
Understanding Your Investment 13
typically fall in value when interest rates rise and rise in value when interest
rates fall. Fixed income securities with longer periods before maturity are
often more sensitive to interest rate changes.
CALL RISK is the risk that the issuer redeems or "calls" a security. An
issuer might call a security if interest rates fall and the security pays a
higher interest or dividend rate or if it no longer needs the money for the
original purpose. If an issuer calls a security, the trust will distribute the
proceeds to you but your future income distributions will fall. You might not
be able to reinvest these proceeds at as high a yield. A security's call price
could be less than the price the trust paid for the security and could be below
the security's original par or face value. You could also receive less than the
amount you paid for your units. If enough securities in the trust are called,
the trust could terminate early. Some or all of the securities may also be
subject to extraordinary optional or mandatory redemptions if certain events
occur, such as certain changes in tax laws, the substantial damage or
destruction by fire or other casualty of the project for which the proceeds of
the securities were used, and various other events. The call provisions are
described in general terms in the "Portfolio" under "Redemption Provisions".
PREFERRED SECURITIES. The trust and certain closed-end funds held by the
trust will invest in preferred securities including preferred stocks, trust
preferred securities or other similar securities. Preferred stocks are unique
securities that combine some of the characteristics of both common stocks and
bonds. Preferred stocks generally pay a fixed rate of return and are sold on
the basis of current yield, like bonds. However, because they are equity
securities, preferred stocks provide equity ownership of a company and the
income is paid in the form of dividends. Preferred stocks typically have a
yield advantage over common stocks as well as comparably-rated fixed income
investments. Preferred stocks are typically subordinated to bonds and other
debt instruments in a company's capital structure, in terms of priority to
corporate income, and therefore will be subject to greater credit risk than
those debt instruments.
Trust preferred securities are limited-life preferred securities typically
issued by corporations, generally in the form of interest-bearing notes or
preferred securities, or by an affiliated business trust of a corporation,
generally in the form of beneficial interests in subordinated debentures or
similarly structured securities. Distribution payments of the trust preferred
securities generally coincide with interest payments on the underlying
obligations. Trust preferred securities generally have a yield advantage over
traditional preferred stocks, but unlike preferred stocks, in some cases
distributions are treated as interest rather than dividends for federal income
tax purposes and therefore, are not eligible for the dividends-received
deduction. Trust preferred securities prices fluctuate for several reasons
including changes in investors' perception of the financial condition of an
issuer or the general condition of the market for trust preferred securities, or
when political or economic events affecting the issuers occur. Trust preferred
securities are also sensitive to interest rate fluctuations, as the cost of
capital rises and borrowing costs increase in a rising interest rate environment
and the risk that a trust preferred security may be called for redemption in a
falling interest rate environment. Trust preferred securities are also subject
to unique risks which include the fact that dividend payments will only be paid
if interest payments on the underlying obligations are made, which interest
payments are dependent on the financial condition of the issuer and may be
deferred for up to 20 consecutive quarters. During any deferral
14 Understanding Your Investment
period, investors are generally taxed as if they had received current income.
In such a case, an investor will have income taxes due prior to receiving cash
distributions to pay such taxes. In addition, the underlying obligations, and
thus the trust preferred securities, may be prepaid after a stated call date or
as a result of certain tax or regulatory events. Preferred securities are
typically subordinated to bonds and other debt instruments in a company's
capital structure, in terms of priority to corporate income, and therefore will
be subject to greater credit risk than those debt instruments.
CLOSED-END FUNDS. Your portfolio invests in shares of closed-end investment
companies. You should understand the information about closed-end funds in the
section titled "Understanding Your Investment--Security Selection--Tactical
Income Closed-End Strategy" before you invest.
FINANCIAL SERVICES COMPANIES. The trust invests significantly in financial
services companies or related subsidiaries. Any negative impact on this
industry will have a greater impact on the value of units than on a portfolio
diversified over several industries. You should understand the risks of this
industry before you invest.
The trust invests significantly in banks and other financial services
companies or related subsidiaries. Banks and their holding companies are
especially subject to the adverse effects of economic recession; volatile
interest rates; portfolio concentrations in geographic markets and in commercial
and residential real estate loans; and competition from new entrants in their
fields of business. In addition, banks and their holding companies are
extensively regulated at both the federal and state level and may be adversely
affected by increased regulations.
Banks will face increased competition from nontraditional lending sources as
regulatory changes, such as the recently enacted Gramm-Leach-Bliley financial
services overhaul legislation, permit new entrants to offer various financial
products. Technological advances such as the Internet allow these
nontraditional lending sources to cut overhead and permit the more efficient use
of customer data. Banks are already facing tremendous pressure from mutual
funds, brokerage firms and other financial service providers in the competition
to furnish services that were traditionally offered by banks.
Companies engaged in investment management and broker-dealer activities are
subject to volatility in their earnings and share prices that often exceeds the
volatility of the equity market in general. Adverse changes in the direction of
the stock market, investor confidence, equity transaction volume, the level and
direction of interest rates and the outlook of emerging markets could adversely
affect the financial stability, as well as the stock prices, of these companies.
Additionally, competitive pressures, including increased competition with new
and existing competitors, the ongoing commoditization of traditional businesses
and the need for increased capital expenditures on new technology could
adversely impact the profit margins of companies in the investment management
and brokerage industries. Companies involved in investment management and
broker-dealer activities are also subject to extensive regulation by government
agencies and self-regulatory organizations, and changes in laws, regulations or
rules, or in the interpretation of such laws, regulations and rules could
adversely affect the stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management industry
Understanding Your Investment 15
underwrite, sell or distribute property, casualty and business insurance. Many
factors affect insurance, reinsurance and risk management company profits,
including interest rate movements, the imposition of premium rate caps, a
misapprehension of the risks involved in given underwritings, competition and
pressure to compete globally, weather catastrophes or other disasters and the
effects of client mergers. Already extensively regulated, insurance companies'
profits may be adversely affected by increased government regulations or tax law
changes.
HIGH YIELD SECURITY RISK. The trust invests significantly, and the closed-
end funds held by your trust may invest, in high yield securities or unrated
securities. High yield, high risk securities are subject to greater market
fluctuations and risk of loss than securities with higher investment ratings.
The value of these securities will decline significantly with increases in
interest rates, not only because increases in rates generally decrease values,
but also because increased rates may indicate an economic slowdown. An economic
slowdown, or a reduction in an issuer's creditworthiness, may result in the
issuer being unable to maintain earnings at a level sufficient to maintain
interest and principal payments.
High-yield or "junk" securities, the generic names for securities rated below
"BBB" by Standard & Poor's or "Baa" by Moody's, are frequently issued by
corporations in the growth stage of their development or by established
companies who are highly leveraged or whose operations or industries are
depressed. Securities rated below BBB or Baa are considered speculative as
these ratings indicate a quality of less than investment grade. Because high-
yield securities are generally subordinated obligations and are perceived by
investors to be riskier than higher rated securities, their prices tend to
fluctuate more than higher rated securities and are affected by short-term
credit developments to a greater degree.
The market for high-yield securities is smaller and less liquid than that for
investment grade securities. High-yield securities are generally not listed on
a national securities exchange but trade in the over-the-counter markets. Due
to the smaller, less liquid market for high-yield securities, the bid-offer
spread on such securities is generally greater than it is for investment grade
securities and the purchase or sale of such securities may take longer to
complete.
FOREIGN ISSUER RISK. Many of the securities held by the trust and certain of
the underlying closed-end funds in the trust may be issued by foreign issuers.
This subjects the trust to more risks than if it only invested in closed-end
funds which invest solely in securities of domestic issuers. Risks of foreign
issuers include restrictions on foreign investments and exchange of securities
and inadequate financial information. Foreign securities may also be affected
by market and political factors specific to the issuer's country as well as
fluctuations in foreign currency exchange rates. Risks associated with
investing in foreign securities may be more pronounced in emerging markets where
the securities markets are substantially smaller, less developed, less liquid,
less regulated, and more volatile than the securities markets of the U.S. and
developed foreign markets. Investments in debt securities of foreign
governments present special risks, including the fact that issuers may be unable
or unwilling to repay principal and/or interest when due in accordance with the
terms of such debt, or may be unable to make such repayments when due in the
currency required under the terms of the debt. Political, economic and social
events also may have a greater impact on the price of
16 Understanding Your Investment
debt securities issued by foreign governments than on the price of U.S.
securities. In addition, brokerage and other transaction costs on foreign
securities exchanges are often higher than in the United States and there is
generally less government supervision and regulation of exchanges, brokers and
issuers in foreign countries.
CONVERTIBLE SECURITY RISK. Certain closed-end funds held by the trust may
invest in convertible securities. Convertible securities generally offer lower
interest or dividend yields than non-convertible fixed-income securities of
similar credit quality because of the potential for capital appreciation. The
market values of convertible securities tend to decline as interest rates
increase and, conversely, to increase as interest rates decline. However, a
convertible security's market value also tends to reflect the market price of
the common stock of the issuing company, particularly when that stock price is
greater than the convertible security's "conversion price." The conversion
price is defined as the predetermined price or exchange ratio at which the
convertible security can be converted or exchanged for the underlying common
stock. As the market price of the underlying common stock declines below the
conversion price, the price of the convertible security tends to be increasingly
influenced more by the yield of the convertible security. Thus, it may not
decline in price to the same extent as the underlying common stock. In the
event of a liquidation of the issuing company, holders of convertible securities
would be paid before that company's common stockholders. Consequently, an
issuer's convertible securities generally entail less risk than its common
stock. However, convertible securities fall below debt obligations of the same
issuer in order of preference or priority in the event of a liquidation and are
typically unrated or rated lower than such debt obligations.
Mandatory convertible securities are distinguished as a subset of convertible
securities because the conversion is not optional and the conversion price at
maturity is based solely upon the market price of the underlying common stock,
which may be significantly less than par or the price (above or below par) paid.
For these reasons, the risks associated with investing in mandatory convertible
securities most closely resemble the risks inherent in common stocks. Mandatory
convertible securities customarily pay a higher coupon yield to compensate for
the potential risk of additional price volatility and loss upon conversion.
Because the market price of a mandatory convertible security increasingly
corresponds to the market price of its underlying common stock, as the
convertible security approaches its conversion date, there can be no assurance
that the higher coupon will compensate for a potential loss.
REAL ESTATE INVESTMENT TRUSTS. Certain closed-end funds held by the trust
may invest in real estate investment trusts. Many factors can have an adverse
impact on the performance of a particular REIT, including its cash available for
distribution, the credit quality of a particular REIT or the real estate
industry generally. The success of REITs depends on various factors, including
the occupancy and rent levels, appreciation of the underlying property and the
ability to raise rents on those properties. Economic recession, overbuilding,
tax law changes, higher interest rates or excessive speculation can all
negatively impact REITs, their future earnings and share prices.
Risks associated with the direct ownership of real estate include, among
other factors,
* general U.S. and global as well as local economic conditions,
Understanding Your Investment 17
* decline in real estate values,
* the financial health of tenants,
* overbuilding and increased competition for tenants,
* oversupply of properties for sale,
* changing demographics,
* changes in interest rates, tax rates and other operating expenses, changes
in government regulations,
* faulty construction and the ongoing need for capital improvements,
* regulatory and judicial requirements, including relating to liability for
environmental hazards,
* changes in neighborhood values and buyer demand, and
* the unavailability of construction financing or mortgage loans at rates
acceptable to developers.
Variations in rental income and space availability and vacancy rates in terms
of supply and demand are additional factors affecting real estate generally and
REITs in particular. Properties owned by a REIT may not be adequately insured
against certain losses and may be subject to significant environmental
liabilities, including remediation costs.
You should also be aware that REITs may not be diversified and are subject to
the risks of financing projects. The real estate industry may be cyclical, and,
if a fund acquires REIT securities at or near the top of the cycle, there is
increased risk of a decline in value of the REIT securities. Recent demand for
certain types of real estate may have inflated the value of real estate. This
may increase the risk of a substantial decline in the value of such real estate
and increase the risk of a decline in the value of the securities. REITs are
also subject to defaults by borrowers and the market's perception of the REIT
industry generally.
Because of their structure, and a current legal requirement that they
distribute at least 90% of their taxable income to shareholders annually, REITs
require frequent amounts of new funding, through both borrowing money and
issuing stock. Thus, REITs historically have frequently issued substantial
amounts of new equity shares (or equivalents) to purchase or build new
properties. This may have adversely affected REIT equity share market prices.
Both existing and new share issuances may have an adverse effect on these prices
in the future, especially if REITs continue to issue stock when real estate
prices are relatively high and stock prices are relatively low.
SENIOR LOANS. Certain closed-end funds held by your trust may invest in
senior loans. Senior loans are issued by banks, other financial institutions
and other investors to corporations, partnerships, limited liability companies
and other entities to finance leveraged buyouts, recapitalizations, mergers,
acquisitions, stock repurchases, debt refinancings and, to a lesser extent, for
general operating and other purposes.
An investment by the closed-end funds in senior loans involves risk that the
borrowers under senior loans may default on their obligations to pay principal
or interest when due. Although senior loans may be secured by specific
collateral, there can be no assurance that liquidation of collateral would
satisfy the borrower's obligation in the event of non-payment or
18 Understanding Your Investment
that such collateral could be readily liquidated. Senior loans are typically
structured as floating rate instruments in which the interest rate payable on
the obligation fluctuates with interest rate changes. As a result, the yield on
closed-end funds investing in senior loans will generally decline in a falling
interest rate environment and increase in a rising interest rate environment.
Senior loans are generally below investment grade quality and may be unrated at
the time of investment; are generally not registered with the SEC or state
securities commissions; and are generally not listed on any securities exchange.
In addition, the amount of public information available on senior loans is
generally less extensive than that available for other types of securities.
LEGISLATION/LITIGATION. From time to time, various legislative initiatives
are proposed in the United States and abroad which may have a negative impact on
certain of the companies represented in the trust. In addition, litigation
regarding any of the issuers of the securities or of the industries represented
by these issuers may negatively impact the share prices of these securities. No
one can predict what impact any pending or threatened litigation will have on
the share prices of the securities.
LIQUIDITY RISK is the risk that the value of a security will fall if trading
in the security is limited or absent. No one can guarantee that a liquid
trading market will exist for any security.
NO FDIC GUARANTEE. An investment in the trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
HOW THE TRUST WORKS
YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940. We created the trust under a trust agreement
between Fixed Income Securities, L.P. (as depositor/sponsor, evaluator and
supervisor) and The Bank of New York (as trustee). We provide services to unit
trusts through our Advisor's Asset Management division. To create your trust,
we deposited securities with the trustee (or contracts to purchase securities
along with an irrevocable letter of credit or other consideration to pay for the
securities). In exchange, the trustee delivered units of your trust to us.
Each unit represents an undivided interest in the assets of your trust. These
units remain outstanding until redeemed or until your trust terminates. At the
close of the New York Stock Exchange on the trust's inception date, the number
of units may be adjusted so that the public offering price per unit equals $10.
The number of units and fractional interest of each unit in the trust will
increase or decrease to the extent of any adjustment.
CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed. Your trust will
generally buy and sell securities:
* to pay expenses,
* to issue additional units or redeem units,
* in limited circumstances to protect the trust,
* to make required distributions or avoid imposition of taxes on the trust,
or
* as permitted by the trust agreement.
When your trust sells securities, the composition and diversity of the
securities in the portfolio
Understanding Your Investment 19
may be altered. However, if the trustee sells fund shares to redeem units or to
pay trust expenses or sales charges, the trustee will do so, as nearly as
practicable, on a pro rata basis. If a public tender offer has been made for a
security or a merger, acquisition or similar transaction has been announced
affecting a security, the trustee may either sell the security or accept a
tender offer if the supervisor determines that the action is in the best
interest of unitholders. The trustee will distribute any cash proceeds to
unitholders. If your trust receives securities or other property, it will
either hold the securities or property in the portfolio or sell the securities
or property and distribute the proceeds. If any contract for the purchase of
securities fails, the sponsor will refund the cash and sales fee attributable to
the failed contract to unitholders on or before the next distribution date
unless substantially all of the moneys held to cover the purchase are reinvested
in substitute securities in accordance with the trust agreement. The sponsor
may direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of the sponsor,
would make retention of the securities detrimental to the trust. In such a
case, the sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities that meet the criteria for inclusion in the
trust on the trust's inception date. The sponsor may also instruct the trustee
to take action necessary to ensure that the portfolio continues to satisfy the
qualifications of a regulated investment company.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to replicate the existing portfolio. When your
trust buys securities, it may pay brokerage or other acquisition fees. You
could experience a dilution of your investment because of these fees and
fluctuations in security prices between the time we create units and the time
your trust buys the securities. When your trust buys or sells securities, we
may direct that it place orders with and pay brokerage commissions to brokers
that sell units or are affiliated with your trust or the trustee.
AMENDING THE TRUST AGREEMENT. The sponsor and the trustee can change the
trust agreement without your consent to correct any provision that may be
defective or to make other provisions that will not materially adversely affect
your interest (as determined by the sponsor and the trustee). We cannot change
this agreement to reduce your interest in your trust without your consent.
Investors owning two-thirds of the units in your trust may vote to change this
agreement.
TERMINATION OF YOUR TRUST. Your trust will terminate on the termination date
set forth under "Essential Information" in the "Investment Summary" section of
this prospectus. The trustee may terminate your trust early if the value of the
trust is less than 40% of the original value of the securities in the trust at
the time of deposit. At this size, the expenses of your trust may create an
undue burden on your investment. Investors owning two-thirds of the units in
your trust may also vote to terminate the trust early. The trustee will
liquidate the trust in the event that a sufficient number of units not yet sold
to the public are tendered for redemption so that the net worth of the trust
would be reduced to less than 40% of the value of the securities at the time
they were deposited in the trust. If this happens, we will refund any sales
charge that you paid.
The trustee will notify you of any termination and sell any remaining
securities. The trustee will send your final distribution to you within a
reasonable time following liquidation of all the securities after deducting
final expenses. Your termination distribution may be less than the price you
originally paid for your units.
20 Understanding Your Investment
THE SPONSOR. The sponsor of the trust is Fixed Income Securities, L.P.
acting through its Advisor's Asset Management division. We are a broker-dealer
specializing in providing trading and support services to broker-dealers,
registered representatives, investment advisers and other financial
professionals. Our headquarters are located at 18925 Base Camp Road, Monument,
Colorado 80132. You can contact our Advisor's Asset Management division at 8100
East 22nd Street North, Suite 900B, Wichita, Kansas 67226-2309 or by using the
contacts listed on the back cover of this prospectus. FIS is a registered
broker-dealer and investment adviser, a member of the Financial Industry
Regulatory Authority, Inc. (FINRA) and Securities Investor Protection
Corporation (SIPC) and a registrant of the Municipal Securities Rulemaking Board
(MSRB). If we fail to or cannot perform our duties as sponsor or become
bankrupt, the trustee may replace us, continue to operate your trust without a
sponsor, or terminate your trust.
We and your trust have adopted a code of ethics requiring our employees who
have access to information on trust transactions to report personal securities
transactions. The purpose of the code is to avoid potential conflicts of
interest and to prevent fraud, deception or misconduct with respect to your
trust.
THE TRUSTEE. The Bank of New York is the trustee of your trust with its
principal unit investment trust division offices located at
2 Hanson Place, 12th Floor, Brooklyn, New York 11217. You can contact the
trustee by calling the telephone number on the back cover of this prospectus or
by writing to its unit investment trust office. We may remove and replace the
trustee in some cases without your consent. The trustee may also resign by
notifying us and investors.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. We pay part of the sales fee to these distribution firms when
they sell units. Units are available through ML Stern & Co. During the initial
offering period, the distribution fee per unit (the broker-dealer concession or
agency commission) for broker-dealers and other firms is as follows:
TRANSACTION CONCESSION OR
AMOUNT: AGENCY COMMISSION:
------------------------------------------
Less than $50,000 3.00%
$50,000 - $99,999 2.75
$100,000 - $249,999 2.50
$250,000 - $499,999 2.00
$500,000 - $999,999 1.00
$1,000,000 or more 1.00
We also apply the different levels on a unit basis using a $10 unit
equivalent. The broker-dealer concession or agency commission is 65% of the
applicable sales fee for secondary market sales. For transactions involving
unitholders of other unit investment trusts who use their redemption or
termination proceeds to purchase units of the trust, the distribution fee is
2.00% of the public offering price per unit. No distribution fee is paid to
broker-dealers or other selling firms in connection with unit sales in
investment accounts that charge a "wrap fee" or periodic fees for investment
advisory, financial planning or asset management services in lieu of
commissions.
Broker-dealers and other firms that sell units of all Advisor's Disciplined
Trusts are eligible to receive additional compensation for volume sales. Such
payments will be in addition to the regular concessions paid to firms as set
forth in the applicable trust's prospectus. The additional concession is based
on total initial offering
Understanding Your Investment 21
period sales of all Advisor's Disciplined Trusts during a calendar quarter as
set forth in the following table:
INITIAL OFFERING PERIOD SALES VOLUME
DURING CALENDAR QUARTER CONCESSION
------------------------------------------------------
Less than $2,500,000 0.00%
$2,500,000 but less than $20,000,000 0.05
$20,000,000 but less than $50,000,000 0.10
$50,000,000 or more 0.15
This volume concession will be paid on units of all eligible Advisor's
Disciplined Trusts sold in the initial offering period. For a trust to be
eligible for this additional compensation for calendar quarter sales, the
trust's prospectus must include disclosure related to this additional
compensation; a trust is not eligible for this additional compensation if the
prospectus for such trust does not include disclosure related to this additional
compensation. Broker-dealer firms will not receive additional compensation for
the first $2.5 million sold in units during a calendar quarter. For example, if
a firm sells $3.5 million of units in the initial offering period during a
calendar quarter, the firm will receive additional compensation of 0.05% of $1
million. Also, if a firm sells $22.5 million of units in the initial offering
period during a calendar quarter, the firm will receive additional compensation
of 0.10% of $20 million. In addition, dealer firms will not receive volume
concessions on the sale of units which are not subject to a transactional sales
charge. However, such sales will be included in determining whether a firm has
met the sales level breakpoints for volume concessions. Secondary market sales
of all unit trusts are excluded for purposes of these volume concessions. We
will pay these amounts out of our own assets within a reasonable time following
each calendar quarter.
Any sales fee discount is borne by the broker-dealer or selling firm out of
the distribution fee. We reserve the right to change the amount of concessions
or agency commissions from time to time.
We may provide, at our own expense and out of our own profits, additional
compensation and benefits to broker-dealers who sell units of this trust and our
other products. This compensation is intended to result in additional sales of
our products and/or compensate broker-dealers and financial advisors for past
sales. We may make these payments for marketing, promotional or related
expenses, including, but not limited to, expenses of entertaining retail
customers and financial advisors, advertising, sponsorship of events or
seminars, obtaining shelf space in broker-dealer firms and similar activities
designed to promote the sale of the our products. These arrangements will not
change the price you pay for your units.
We generally register units for sale in various states in the U.S. We do not
register units for sale in any foreign country. This prospectus does not
constitute an offer of units in any state or country where units cannot be
offered or sold lawfully. We may reject any order for units in whole or in
part.
We may gain or lose money when we hold units in the primary or secondary
market due to fluctuations in unit prices. The gain or loss is equal to the
difference between the price we pay for units and the price at which we sell or
redeem them. We may also gain or lose money when we deposit securities to
create units. The amount of our profit or loss on the initial deposit of
securities into the trust is shown in the "Notes to Portfolio."
22 Understanding Your Investment
TAXES
This section summarizes some of the main U.S. federal income tax consequences
of owning units of the trust. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example,
these summaries generally do not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or other investor with special
circumstances. In addition, this section does not describe your state, local or
foreign tax consequences.
This federal income tax summary is based in part on the advice of counsel to
the sponsor. The Internal Revenue Service could disagree with any conclusions
set forth in this section. In addition, our counsel was not asked to review,
and has not reached a conclusion with respect to the federal income tax
treatment of the assets to be deposited in the trust. This may not be
sufficient for you to use for the purpose of avoiding penalties under federal
tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
TRUST STATUS. The trust intends to qualify as a "regulated investment
company" under the federal tax laws. If the trust qualifies as a regulated
investment company and distributes its income as required by the tax law, the
trust generally will not pay federal income taxes.
DISTRIBUTIONS. Trust distributions are generally taxable. After the end of
each year, you will receive a tax statement that separates your trust's
distributions into two categories, ordinary income distributions and capital
gains dividends. Ordinary income distributions are generally taxed at your
ordinary tax rate, however, as further discussed below, certain ordinary income
distributions received from the trust may be taxed at the capital gains tax
rates. Generally, you will treat all capital gains dividends as long-term
capital gains regardless of how long you have owned your units. To determine
your actual tax liability for your capital gains dividends, you must calculate
your total net capital gain or loss for the tax year after considering all of
your other taxable transactions, as described below. In addition, the trust may
make distributions that represent a return of capital for tax purposes and thus
will generally not be taxable to you. The tax status of your distributions from
your trust is not affected by whether you reinvest your distributions in
additional units or receive them in cash. The income from your trust that you
must take into account for federal income tax purposes is not reduced by amounts
used to pay a deferred sales fee, if any. The tax laws may require you to treat
distributions made to you in January as if you had received them on December 31
of the previous year.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns units generally will
not be entitled to the dividends received deduction with respect to many
dividends received from the trust because the dividends received deduction is
generally not available for distributions from regulated investment companies.
However, certain ordinary income dividends on units that are attributable to
qualifying dividends received by the trust from certain corporations may be
designated by the trust as being eligible for the dividends received deduction.
SALE OR REDEMPTION OF UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this
gain or loss, you must subtract your tax basis in your units from the amount you
receive in the
Understanding Your Investment 23
transaction. Your tax basis in your units is generally equal to the cost of
your units, generally including sales charges. In some cases, however, you may
have to adjust your tax basis after you purchase your units.
CAPITAL GAINS AND LOSSES AND CERTAIN ORDINARY INCOME DIVIDENDS. If you are
an individual, the maximum marginal federal tax rate for net capital gain is
generally 15% (generally 5% for certain taxpayers in the 10% and 15% tax
brackets). These new capital gains rates are generally effective for taxable
years beginning before January 1, 2011. For later periods, if you are an
individual, the maximum marginal federal tax rate for net capital gain is
generally 20% (10% for certain taxpayers in the 10% and 15% tax brackets). The
20% rate is reduced to 18% and the 10% rate is reduced to 8% for long-term
capital gains from most property acquired after December 31, 2000 with a holding
period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the date you
purchase your units to determine your holding period. However, if you receive a
capital gain dividend from your trust and sell your unit at a loss after holding
it for six months or less, the loss will be recharacterized as long-term capital
loss to the extent of the capital gain dividend received. The tax rates for
capital gains realized from assets held for one year or less are generally the
same as for ordinary income. The Internal Revenue Code treats certain capital
gains as ordinary income in special situations.
Ordinary income dividends received by an individual unitholder from a
regulated investment company such as the trust are generally taxed at the same
rates that apply to net capital gain (as discussed above), provided certain
holding period requirements are satisfied and provided the dividends are
attributable to qualifying dividends received by the trust itself. These
special rules relating to the taxation of ordinary income dividends from
regulated investment companies generally apply to taxable years beginning before
January 1, 2011. The trust will provide notice to its unitholders of the amount
of any distribution which may be taken into account as a dividend which is
eligible for the new capital gains tax rates.
IN-KIND DISTRIBUTIONS. Under certain circumstances, as described in this
prospectus, you may receive an in-kind distribution of trust securities when you
redeem units or when your trust terminates. This distribution is subject to
taxation and you will recognize gain or loss, generally based on the value at
that time of the securities and the amount of cash received.
EXCHANGES. If you elect to have your proceeds from your trust rolled over
into a future trust, it is considered a sale for federal income tax purposes and
any gain on the sale will be treated as a capital gain, and any loss will be
treated as a capital loss. However, any loss realized on a sale or exchange
will be disallowed to the extent that units disposed of are replaced (including
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after disposition of units or to the extent that the
unitholder, during such period, acquires or enters into an option or contract to
acquire, substantially identical stock or securities. In such a case, the basis
of the units acquired will be adjusted to reflect the disallowed loss.
DEDUCTIBILITY OF TRUST EXPENSES. Generally, expenses incurred by your trust
will be deducted
24 Understanding Your Investment
from the gross income received by your trust and only your share of the trust's
net income will be paid to you and reported as taxable income to you. However,
if the units of your trust are held by fewer than 500 unitholders at any time
during a taxable year, your trust will generally not be able to deduct certain
expenses from income, thus resulting in your reported share of the trust's
taxable income being increased by your share of those expenses, even though you
do not receive a corresponding cash distribution. In this case you may be able
to take a deduction for these expenses; however, certain miscellaneous itemized
deductions, such as investment expenses, may be deducted by individuals only to
the extent that all of these deductions exceed 2% of the individual's adjusted
gross income.
FOREIGN TAX CREDIT. If your trust invests in any foreign securities, the tax
statement that you receive may include an item showing foreign taxes your trust
paid to other countries. In this case, dividends taxed to you will include your
share of the taxes your trust paid to other countries. You may be able to
deduct or receive a tax credit for your share of these taxes.
FOREIGN INVESTORS. If you are a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from the trust will be characterized as dividends for federal
income tax purposes (other than dividends which the trust designates as capital
gain dividends) and will be subject to U.S. income taxes, including withholding
taxes, subject to certain exceptions described below. However, distributions
received by a foreign investor from the trust that are properly designated by
the trust as capital gain dividends may not be subject to U.S. federal income
taxes, including withholding taxes, provided that the trust makes certain
elections and certain other conditions are met. In the case of dividends with
respect to taxable years of the trust beginning prior to 2008, distributions
from the trust that are properly designated by the trust as an interest-related
dividend attributable to certain interest income received by the trust or as a
short-term capital gain dividend attributable to certain net short-term capital
gain income received by the trust may not be subject to U.S. federal income
taxes, including withholding taxes when received by certain foreign investors,
provided that the trust makes certain elections and certain other conditions are
met.
EXPENSES
Your trust will pay various expenses to conduct its operations. The "Fees
and Expenses" section of the "Investment Summary" in this prospectus shows the
estimated amount of these expenses.
The sponsor will receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. This "creation and
development fee" is a charge of $0.06 per unit. The trustee will deduct this
amount from your trust's assets as of the close of the initial offering period.
No portion of this fee is applied to the payment of distribution expenses or as
compensation for sales efforts. This fee will not be deducted from proceeds
received upon a repurchase, redemption or exchange of units before the close of
the initial public offering period.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing
Understanding Your Investment 25
accounts. Your trust will reimburse us as supervisor, evaluator and sponsor for
providing portfolio supervisory services, for evaluating your portfolio and for
providing bookkeeping and administrative services. Our reimbursements may
exceed the costs of the services we provide to your trust but will not exceed
the costs of services provided to all of our unit investment trusts in any
calendar year. All of these fees may adjust for inflation without your
approval.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and the
sponsor, legal fees and expenses, expenses incurred in contacting you and costs
incurred to reimburse the trustee for advancing funds to meet distributions.
Your trust may pay the costs of updating its registration statement each year.
The trustee will generally pay trust expenses from distributions received on the
securities but in some cases may sell securities to pay trust expenses.
The trust will also indirectly bear the expenses of the underlying closed-end
funds. While the trust will not pay these expenses directly out of its assets,
these expenses are shown in the trust's annual operating expenses under "Fees
and Expenses" to illustrate the impact of these expenses.
EXPERTS
LEGAL MATTERS. Chapman and Cutler LLP acts as counsel for the trust and has
given an opinion that the units are validly issued. Dorsey & Whitney LLP acts
as counsel for the trustee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Grant Thornton LLP,
independent registered public accounting firm, audited the statement of
financial condition and the portfolio included in this prospectus.
ADDITIONAL INFORMATION
This prospectus does not contain all the information in the registration
statement that your trust filed with the Securities and Exchange Commission.
The Information Supplement, which was filed with the Securities and Exchange
Commission, includes more detailed information about the securities in your
portfolio, investment risks and general information about your trust. You can
obtain the Information Supplement by contacting us or the Securities and
Exchange Commission as indicated on the back cover of this prospectus. This
prospectus incorporates the Information Supplement by reference (it is legally
considered part of this prospectus).
26 Understanding Your Investment
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISOR'S DISCIPLINED TRUST 176
We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 4 and 5, of Advisor's Disciplined Trust 176, as of
August __, 2007, the initial date of deposit. The statement of financial
condition is the responsibility of the trust's sponsor. Our responsibility is
to express an opinion on this statement of financial condition based on our
audit.
We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the statement of financial condition is free of material misstatement. The
trust is not required to have, nor were we engaged to perform an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of financial condition, assessing the accounting
principles used and significant estimates made by the sponsor, as well as
evaluating the overall statement of financial condition presentation. Our
procedures included confirmation with The Bank of New York, trustee, of cash or
an irrevocable letter of credit deposited for the purchase of securities as
shown in the statement of financial condition as of August __, 2007. We believe
that our audit of the statement of financial condition provides a reasonable
basis for our opinion.
In our opinion, the statement of financial condition referred to above presents
fairly, in all material respects, the financial position of Advisor's
Disciplined Trust 176 as of August __, 2007, in conformity with accounting
principles generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
August __, 2007
ADVISOR'S DISCIPLINED TRUST 176
STATEMENT OF FINANCIAL CONDITION AS OF AUGUST __, 2007
- ---------------------------------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . . . . . . . . . $
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred sales fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creation and development fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
----------
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: deferred sales fee, creation & development fee and organization costs (3)(4)(5) . .
----------
Net interest of investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
==========
Net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
<FN>
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the evaluator.
(2) Cash or an irrevocable letter of credit has been deposited with the trustee
covering the funds (aggregating $__________) necessary for the purchase of
securities in the trust represented by purchase contracts.
(3) A portion of the public offering price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing and offering
the trust. These costs have been estimated at $0.05 per unit for the
trust. A distribution will be made as of the earlier of the close of the
initial offering period or six months following the trust's inception date
to an account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent the actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be reimbursed to the sponsor
and deducted from the assets of the trust.
(4) The total sales fee consists of an initial sales fee, a deferred sales fee
and a creation and development fee. The initial sales fee is equal to the
difference between the maximum sales fee and the sum of the remaining
deferred sales fee and the total creation and development fee. The maximum
sales fee is 3.95% of the public offering price per unit. The deferred
sales fee is equal to $0.235 per unit and the creation and development fee
is equal to $0.06 per unit.
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees.
Understanding Your Investment 27
CONTENTS
INVESTMENT SUMMARY
- -------------------------------------------------------------------
A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
3 Who Should Invest
3 Essential Information
3 Fees and Expenses
4 Portfolio
UNDERSTANDING YOUR INVESTMENT
- -------------------------------------------------------------------
Detailed information to 6 Security Selection
help you understand 7 How to Buy Units
your investment 11 How to Sell Your Units
12 Distributions
13 Investment Risks
19 How the Trust Works
23 Taxes
25 Expenses
26 Experts
26 Additional Information
27 Report of Independent Registered
Public Accounting Firm
27 Statement of Financial Condition
WHERE TO LEARN MORE
- -------------------------------------------------------------------
You can contact us for VISIT US ON THE INTERNET
free information about http://www.AAMPortfolios.com
this and other investments, BY E-MAIL
including the Information info@AAMPortfolios.com
Supplement CALL ADVISOR'S ASSET MANAGEMENT
(877) 858-1773
CALL THE BANK OF NEW YORK
(800) 848-6468
ADDITIONAL INFORMATION
- -------------------------------------------------------------------
This prospectus does not contain all information filed with the
Securities and Exchange Commission. To obtain or copy this
information including the Information Supplement (a duplication
fee may be required):
E-MAIL: publicinfo@sec.gov
WRITE: Public Reference Section
Washington, D.C. 20549
VISIT: http://www.sec.gov
(EDGAR Database)
CALL: 1-202-551-8090
(only for information on the operation of the
Public Reference Section)
REFER TO:
ADVISOR'S DISCIPLINED TRUST 176
Securities Act file number: 333-__________
Investment Company Act file number: 811-21056
ML STERN INCOME
PORTFOLIO,
SERIES 1
PROSPECTUS
AUGUST __, 2007
[LOGO]
ADVISOR'S
ASSET MANAGEMENT
A DIVISION OF FIXED INCOME SECURITIES, L.P.
ADVISOR'S DISCIPLINED TRUST 176
ML STERN INCOME PORTFOLIO, SERIES 1
INFORMATION SUPPLEMENT
This Information Supplement provides additional information concerning
each trust described in the prospectus for the Advisor's Disciplined Trust
series identified above. This Information Supplement should be read in
conjunction with the prospectus. It is not a prospectus. It does not include
all of the information that an investor should consider before investing in a
trust. It may not be used to offer or sell units of a trust without the
prospectus. This Information Supplement is incorporated into the prospectus by
reference and has been filed as part of the registration statement with the
Securities and Exchange Commission. Investors should obtain and read the
prospectus prior to purchasing units of a trust. You can obtain the prospectus
without charge by contacting your financial professional or by contacting the
Advisor's Asset Management division of Fixed Income Securities, L.P. at 18925
Base Camp Road, Suite 203, Monument, Colorado 80132, at 8100 East 22nd Street
North, Suite 900B, Wichita, Kansas 67226-2309 or by calling (877) 858-1773.
This Information Supplement is dated as of the date of the prospectus.
CONTENTS
General Information 2
Investment Objective and Policies 3
Closed-End Funds 5
Risk Factors 5
Administration of the Trust 19
Portfolio Transactions and Brokerage Allocation 28
Purchase, Redemption and Pricing of Units 29
Taxation 34
Performance Information 36
GENERAL INFORMATION
Each trust is one of a series of separate unit investment trusts created
under the name Advisor's Disciplined Trust and registered under the Investment
Company Act of 1940. Each trust was created as a common law trust on the
inception date described in the prospectus under the laws of the state of
New York. Each trust was created under a trust agreement among Fixed Income
Securities, L.P. (as sponsor, evaluator and supervisor) and The Bank of New York
(as trustee). The sponsor provides services to unit investment trusts through
its Advisor's Asset Management division.
When your trust was created, the sponsor delivered to the trustee
securities or contracts for the purchase thereof for deposit in the trust and
the trustee delivered to the sponsor documentation evidencing the ownership of
units of the trust. At the close of the New York Stock Exchange on the trust's
inception date, the number of units may be adjusted so that the public offering
price per unit equals $10. The number of units, fractional interest of each
unit in the trust and estimated interest distributions per unit will increase or
decrease to the extent of any adjustment. Additional units of each trust may be
issued from time to time by depositing in the trust additional securities (or
contracts for the purchase thereof together with cash or irrevocable letters of
credit) or cash (including a letter of credit or the equivalent) with
instructions to purchase additional securities. 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, provided that such additional deposits will be in amounts, which
will generally maintain the existing relationship among the shares of the
securities in such trust. Thus, although additional units will be issued, each
unit will generally continue to represent the same number of shares of each
security. If the sponsor deposits cash to purchase additional securities,
existing and new investors may experience a dilution of their investments and a
reduction in their anticipated income because of fluctuations in the prices of
the securities between the time of the deposit and the purchase of the
securities and because the trust will pay any associated brokerage fees.
The trustee has not participated in the selection of the securities
deposited in the trust and has no responsibility for the composition of the
trust portfolio.
Each unit initially offered represents an undivided interest in the related
trust. 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.
A trust consists of (a) the securities listed under "Portfolio" in the
prospectus as may continue to be held from time to time in the trust, (b) any
additional securities acquired and held by the trust pursuant to the provisions
of the trust agreement and (c) any cash held in the accounts of the trust.
Neither the sponsor nor the trustee shall be liable in any way for any failure
in any of
-2-
the securities. However, should any contract for the purchase of any of the
securities initially deposited in a trust fail, the sponsor will, unless
substantially all of the moneys held in the trust to cover such purchase are
reinvested in substitute securities in accordance with the trust agreement,
refund the cash and sales fee attributable to such failed contract to all
unitholders on the next distribution date.
INVESTMENT OBJECTIVE AND POLICIES
The trust seeks to provide high current income. The trust invests in a
diversified portfolio consisting of the components described in the prospectus.
There is, of course, no guarantee that the trust will achieve its objectives.
The trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analysis. The portfolio of a trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from a portfolio.
The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in special circumstances as provided in the
trust agreement. Thus, the assets of a trust will generally remain unchanged
under normal circumstances. The trust agreement provides that the sponsor may
(but need not) direct the trustee to dispose of a security in certain events
such as the issuer having defaulted on the payment on any of its outstanding
obligations or the price of a security has declined to such an extent or other
such credit factors exist so that in the opinion of the supervisor the retention
of such securities would be detrimental to the trust.
If a public tender offer has been made for a security or a merger,
acquisition or similar transaction has been announced affecting a security, the
trustee may either sell the security or accept a tender offer if the supervisor
determines that the action is in the best interest of unitholders. The trustee
will distribute any excess cash proceeds to unitholders. If your trust receives
securities or other property, it will either hold the securities or property in
the portfolio or sell the securities or property and distribute the proceeds.
The sponsor may direct the reinvestment of security sale proceeds if the sale is
the direct result of serious adverse credit factors which, in the opinion of the
sponsor, would make retention of the securities detrimental to the trust. In
such a case, the sponsor may, but is not obligated to, direct the reinvestment
of sale proceeds in any other securities that meet the criteria for inclusion in
the trust on the trust's inception date. The sponsor may also instruct the
trustee to take action necessary to ensure that the portfolio continues to
satisfy the qualifications of a regulated investment company for federal tax
purposes if the trust has elected to be taxed as a regulated investment company.
The trustee may sell securities, designated by the supervisor, from a trust
for the purpose of redeeming units of such trust tendered for redemption and the
payment of expenses.
In addition, if a trust has elected to be taxed as a regulated investment
company, the trustee may dispose of certain securities and take such further
action as may be needed from time to time to ensure that a trust continues to
satisfy the qualifications of a regulated investment
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company, including the requirements with respect to diversification under
Section 851 of the Internal Revenue Code, and as may be needed from time to time
to avoid the imposition of any tax on a trust or undistributed income of a trust
as a regulated investment company.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Capital
Account of a trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided herein, in the prospectus or in the
trust agreement, the acquisition by a trust of any securities other than the
portfolio securities is prohibited.
Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or otherwise liquidated 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 ("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.
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 must be equity securities of
the type selected for the trust and must not adversely affect the federal income
tax status of the trust. Whenever a Replacement Security is acquired for a
trust, the trustee shall 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 fee attributable to such Failed
Securities to all unitholders of the trust and the trustee will distribute the
cash 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 cash, they may not be able to reinvest such proceeds in other securities
at a return equal to or in excess of the return which such proceeds would have
earned for unitholders of such trust.
In the event that a Replacement Security is not acquired by a trust, the
income for such trust may be reduced.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security that might reasonably be
expected to have a material adverse effect on the trust. At any time after the
trust's inception, litigation may be instituted on a variety
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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 trust. The sponsor and
the trustee shall not be liable in any way for any default, failure or defect in
any security.
CLOSED-END FUNDS
Closed-end funds are actively managed investment companies that invest in
various types of securities. Closed-end funds issue shares of common stock that
are generally traded on a securities exchange (although some closed-end fund
shares are not listed on a securities exchange). Closed-end funds are subject
to various risks, including management's ability to meet the closed-end fund's
investment objective, and to manage the closed-end fund portfolio when the
underlying securities are redeemed or sold, during periods of market turmoil and
as investors' perceptions regarding closed-end funds or their underlying
investments change.
Shares of closed-end funds frequently trade at a discount from their net
asset value in the secondary market. This risk is separate and distinct from
the risk that the net asset value of closed-end fund shares may decrease. The
amount of such discount from net asset value is subject to change from time to
time in response to various factors.
Certain of the closed-end funds included in the trust may employ the use of
leverage in their portfolios through the issuance of preferred stock. While
leverage often serves to increase the yield of a closed-end fund, this leverage
also subjects the closed-end fund to increased risks. These risks may include
the likelihood of increased volatility and the possibility that the closed-end
fund's common share income will fall if the dividend rate on the preferred
shares or the interest rate on any borrowings rises.
RISK FACTORS
MARKET RISK. Because the trust invests in securities, you should understand
the risks of investing in securities before purchasing units. These risks
include the risk that the financial condition of the company or the general
condition of the stock market may worsen and the value of the securities (and
therefore units) will fall. Securities are especially susceptible to general
stock market movements. The value of securities often rises or falls rapidly and
unpredictably as market confidence and perceptions of companies change. These
perceptions are based on factors including expectations regarding government
economic policies, inflation, interest rates, economic expansion or contraction,
political climates and economic or banking crises. The value of units will
fluctuate with the value of the securities in the trust and may be more or less
than the price you originally paid for your units. As with any investment, we
cannot guarantee that the performance of the trust will be positive over any
period of time. Because the trust is unmanaged, the Trustee will not sell
securities in response to market fluctuations as is common in managed
investments. In addition, because some trusts hold a relatively small number of
securities, you may encounter greater market risk than in a more diversified
investment.
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DIVIDENDS. Stocks represent ownership interests in a company and are not
obligations of the company. Common stockholders have a right to receive
payments from the company that is subordinate to the rights of creditors,
bondholders or preferred stockholders of the company. This means that common
stockholders have a right to receive dividends only if a company's board of
directors declares a dividend and the company has provided for payment of all of
its creditors, bondholders and preferred stockholders. If a company issues
additional debt securities or preferred stock, the owners of these securities
will have a claim against the company's assets before common stockholders if the
company declares bankruptcy or liquidates its assets even though the common
stock was issued first. As a result, the company may be less willing or able to
declare or pay dividends on its common stock.
CLOSED-END FUNDS. The closed-end funds in the trust invest in various
securities. As such, an investment in units of the trust should be made with an
understanding of the risks of investing in both closed-end fund shares and such
securities.
Closed-end funds' portfolios are managed and their shares are generally
listed on a securities exchange. The net asset value of closed-end fund shares
will fluctuate with changes in the value of the underlying securities that the
closed-end fund owns. In addition, for various reasons closed-end fund shares
frequently trade at a discount from their net asset value in the secondary
market. The amount of such discount from net asset value is subject to change
from time to time in response to various factors. Closed-end funds' articles of
incorporation may contain certain anti-takeover provisions that may have the
effect of inhibiting a fund's possible conversion to open-end status and
limiting the ability of other persons to acquire control of a fund. In certain
circumstances, these provisions might also inhibit the ability of stockholders
(including the trust) to sell their shares at a premium over prevailing market
prices. This characteristic is a risk separate and distinct from the risk that
a fund's net asset value will decrease. In particular, this characteristic
would increase the loss or reduce the return on the sale of those closed-end
fund shares that were purchased by the trust at a premium. In the unlikely
event that a closed-end fund converts to open-end status at a time when its
shares are trading at a premium there would be an immediate loss in value to the
trust since shares of open-end funds trade at net asset value. Certain closed-
end funds may have in place or may put in place in the future plans pursuant to
which the fund may repurchase its own shares in the marketplace. Typically,
these plans are put in place in an attempt by a fund's board of directors to
reduce a discount on its share price. To the extent that such a plan is
implemented and shares owned by the trust are repurchased by a fund, the trust's
position in that fund will be reduced and the cash will be distributed.
The trust is prohibited from subscribing to a rights offering for shares of
any of the closed-end funds in which it invests. In the event of a rights
offering for additional shares of a fund, unitholders should expect that the
trust will, at the completion of the offer, own a smaller proportional interest
in such fund that would otherwise be the case. It is not possible to determine
the extent of this dilution in share ownership without knowing what proportion
of the shares in a rights offering will be subscribed. This may be particularly
serious when the subscription price per share for the offer is less than the
fund's net asset value per share. Assuming that all rights are exercised and
there is no change in the net asset value per share, the aggregate net asset
value of each shareholder's shares of common stock should decrease as a result
of the offer. If a fund's
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subscription price per share is below that fund's net asset value per share at
the expiration of the offer, shareholders would experience an immediate dilution
of the aggregate net asset value of their shares of common stock as a result of
the offer, which could be substantial.
Closed-end funds may use leveraging in their portfolios. Leveraging can be
expected to cause increased price volatility for those fund's shares, and as a
result, increased volatility for the price of the units of the trust. There can
be no assurance that a leveraging strategy will be successful during any period
in which it is employed.
PREFERRED STOCKS RISKS. The trust and certain closed-end funds held by the
trust will invest in preferred stocks. Preferred stocks may be susceptible to
general stock market movements and to volatile increases and decreases of value
as market confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, market liquidity, and global or regional political,
economic or banking crises. Preferred stocks are also vulnerable to
Congressional reductions in the dividends-received deduction which would
adversely affect the after-tax return to the investors who can take advantage of
the deduction. Such a reduction might adversely affect the value of preferred
stocks in general. Holders of preferred stocks, as owners of the entity, have
rights to receive payments from the issuers of those preferred stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or, in some cases, other senior preferred stocks of, such issuers. Preferred
stocks do not represent an obligation of the issuer and, therefore, do not offer
any assurance of income or provide the same degree of protection of capital as
do debt securities. The issuance of additional debt securities or senior
preferred stocks will create prior claims for payment of principal and interest
and senior dividends which could adversely affect the ability and inclination of
the issuer to declare or pay dividends on its preferred stock or the rights of
holders of preferred stock with respect to assets of the issuer upon liquidation
or bankruptcy. The value of preferred stocks is subject to market fluctuations
for as long as the preferred stocks remain outstanding, and thus the value of
the securities may be expected to fluctuate over the life of the trust to values
higher or lower than those prevailing on the trust's inception date.
TRUST PREFERRED SECURITIES RISKS. The trust and certain closed-end funds
held by the trust may invest in various preferred securities. Holders of trust
preferred securities incur risks in addition to or slightly different than the
typical risks of holding preferred stocks. Trust preferred securities are
limited-life preferred securities that are typically issued by corporations,
generally in the form of interest-bearing notes or preferred securities issued
by corporations, or by an affiliated business trust of a corporation, generally
in the form of beneficial interests in subordinated debentures issued by the
corporation, or similarly structured securities. The maturity and dividend rate
of the trust preferred securities are structured to match the maturity and
coupon interest rate of the interest-bearing notes, preferred securities or
subordinated debentures. Trust preferred securities usually mature on the stated
maturity date of the interest-bearing notes, preferred securities or
subordinated debentures and may be redeemed or liquidated prior to the stated
maturity date of such instruments for any reason on or after their stated call
date or upon the occurrence of certain circumstances at any time. Trust
preferred securities generally have a yield advantage over traditional preferred
stocks, but unlike preferred stocks, distributions on the trust
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preferred securities are generally treated as interest rather than dividends for
federal income tax purposes. Unlike most preferred stocks, distributions
received from trust preferred securities are generally not eligible for the
dividends received deduction. Certain of the risks unique to trust preferred
securities include: (i) distributions on trust preferred securities will be made
only if interest payments on the interest-bearing notes, preferred securities or
subordinated debentures are made; (ii) a corporation issuing the interest-
bearing notes, preferred securities or subordinated debentures may defer
interest payments on these instruments for up to 20 consecutive quarters and if
such election is made, distributions will not be made on the trust preferred
securities during the deferral period; (iii) certain tax or regulatory events
may trigger the redemption of the interest-bearing notes, preferred securities
or subordinated debentures by the issuing corporation and result in prepayment
of the trust preferred securities prior to their stated maturity date; (iv)
future legislation may be proposed or enacted that may prohibit the corporation
from deducting its interest payments on the interest-bearing notes, preferred
securities or subordinated debentures for tax purposes, making redemption of
these instruments likely; (v) a corporation may redeem the interest-bearing
notes, preferred securities or subordinated debentures in whole at any time or
in part from time to time on or after a stated call date; (vi) trust preferred
securities holders have very limited voting rights; and (vii) payment of
interest on the interest-bearing notes, preferred securities or subordinated
debentures, and therefore distributions on the trust preferred securities, is
dependent on the financial condition of the issuing corporation.
DISCOUNT SECURITIES. Certain of the securities held by the trust or the
closed-end funds in the trust 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 funds were lower than the
current market interest rates for newly issued securities 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. 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.
PREMIUM SECURITIES. Certain of the securities held by the trust or the
closed-end funds in the trust 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 by the fund 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
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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 security 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.
FINANCIAL SERVICES INDUSTRY. Your trust concentrates in securities of
issuers in the financial services industry.
Banks and their holding companies are especially subject to the adverse
effects of economic recession, volatile interest rates, portfolio concentrations
in geographic markets and in commercial and residential real estate loans, and
competition from new entrants in their fields of business. Banks are highly
dependent on net interest margin. Bank profits have come under pressure as net
interest margins have contracted. There is no certainty that such conditions
will continue. Banks receive significant consumer mortgage fee income as a
result of activity in mortgage and refinance markets. If initial home purchasing
and refinancing activity were to subside as a result of increasing interest
rates and other factors, this income would diminish. Economic conditions in the
real estate markets, which have been weak in the past, can have a substantial
effect upon banks because they generally have a portion of their assets invested
in loans secured by real estate.
Banks and their holding companies are subject to extensive federal
regulation and, when such institutions are state-chartered, to state regulation
as well. Such regulations impose strict capital requirements and limitations on
the nature and extent of business activities that banks may pursue. Furthermore,
bank regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose significant
risks to the soundness of such institution or the safety of the federal deposit
insurance fund. Regulatory actions, such as increases in the minimum capital
requirements applicable to banks and increases in deposit insurance premiums
required to be paid by banks and thrifts to the Federal Deposit Insurance
Corporation ("FDIC"), can negatively impact earnings and the ability of a
company to pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or their
holding companies, or insures against any risk of investment in the securities
issued by such institutions.
The statutory requirements applicable to, and regulatory supervision of,
banks and their holding companies have increased significantly and have
undergone substantial change in the past. To a great extent, these changes are
embodied in the Financial Institutions Reform, Recovery and Enforcement Act,
enacted in August 1989; the Federal Deposit Insurance Corporation Improvement
Act of 1991, and the regulations promulgated under these laws. The impact of
these laws on the business, financial condition and prospects of the Securities
in the Trust's portfolio cannot be predicted with certainty. The Gramm-Leach-
Bliley financial services overhaul legislation allows banks, securities firms
and insurance companies to form one-stop
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financial conglomerates marketing a wide range of financial service products to
investors. This legislation will likely result in increased merger activity and
heightened competition among existing and new participants in the field.
Legislation to liberalize interstate banking has also been enacted. Under the
legislation, banks are able to purchase or establish subsidiary banks in any
state. Since mid-1997, banks have been allowed to turn existing banks into
branches. Consolidation may continue. The Securities and Exchange Commission and
the Financial Accounting Standards Board require the expanded use of market
value accounting by banks and have imposed rules requiring market accounting for
investment securities held in trading accounts or available for sale. Adoption
of additional such rules may result in increased volatility in the reported
health of the industry, and mandated regulatory intervention to correct such
problems. Additional legislative and regulatory changes may be forthcoming. For
example, the bank regulatory authorities have proposed substantial changes to
the Community Reinvestment Act and fair lending laws, rules and regulations, and
there can be no certainty as to the effect, if any, that such changes would have
on the Securities in the Trust's portfolio. In addition, from time to time the
deposit insurance system is reviewed by Congress and federal regulators, and
proposed reforms of that system could, among other things, further restrict the
ways in which deposited moneys can be used by banks or reduce the dollar amount
or number of deposits insured for any depositor. Such reforms could reduce
profitability, as investment opportunities available to bank institutions become
more limited and as consumers look for savings vehicles other than bank
deposits. Banks face significant competition from other financial institutions
such as mutual funds, credit unions, mortgage banking companies and insurance
companies, and increased competition may result from legislative broadening of
regional and national interstate banking powers. Among other benefits, such
legislation allows banks and bank holding companies to acquire across previously
prohibited state lines and to consolidate their various bank subsidiaries into
one unit. Neither the Sponsor nor the Underwriter makes any prediction as to
what, if any, manner of bank regulatory actions might ultimately be adopted or
what ultimate effect such actions might have on the Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5% of the
outstanding shares of any class of voting securities of a bank or bank holding
company, (2) acquiring control of a bank or another bank holding company, (3)
acquiring all or substantially all the assets of a bank, or (4) merging or
consolidating with another bank holding company, without first obtaining Federal
Reserve Board ("FRB") approval. In considering an application with respect to
any such transaction, the FRB is required to consider a variety of factors,
including the potential anti-competitive effects of the transaction, the
financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws. In addition, the federal
Change In Bank Control Act and various state laws impose limitations on the
ability of one or more individuals or other entities to acquire control of banks
or bank holding companies.
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The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company experiencing earnings weaknesses should not pay cash
dividends which exceed its net income or which could only be funded in ways that
would weaken its financial health, such as by borrowing. The FRB also may impose
limitations on the payment of dividends as a condition to its approval of
certain applications, including applications for approval of mergers and
acquisitions. Neither the Sponsor nor the Underwriter makes any prediction as to
the effect, if any, such laws will have on the Securities or whether such
approvals, if necessary, will be obtained.
Companies engaged in investment management and brokerage activities are
subject to the adverse effects of economic recession, volatile interest rates,
and competition from new entrants in their fields of business. Adverse changes
in the direction of the stock market, investor confidence, the financial health
of customers, equity transaction volume, the level and direction of interest
rates and the outlook of emerging markets could adversely affect the financial
stability, as well as the stock prices, of these companies. Additionally,
competitive pressures, including increased competition from new and existing
competitors, the ongoing commoditization of traditional businesses and the need
for increased capital expenditures on new technology could adversely impact the
profit margins of companies in the investment management and brokerage
industries. Companies involved in investment management and brokerage activities
are also subject to extensive regulation by government agencies and self-
regulatory organizations, and changes in laws, regulations or rules, or in the
interpretation of such laws, regulations and rules could adversely affect the
stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management
industry underwrite, sell or distribute property, casualty and business
insurance. Many factors affect insurance, reinsurance and risk management
company profits, including but not limited to interest rate movements, the
imposition of premium rate caps, a misapprehension of the risks involved in
given underwritings, competition and pressure to compete globally, weather
catastrophes or other natural or man-made disasters and the effects of client
mergers. Individual companies may be exposed to material risks including reserve
inadequacy and the inability to collect from reinsurance carriers. Insurance
companies are subject to extensive governmental regulation, including the
imposition of maximum rate levels, which may not be adequate for some lines of
business. Proposed or potential tax law changes may also adversely affect
insurance companies' policy sales, tax obligations and profitability. In
addition to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressure to compete globally.
In addition to the normal risks of business, companies involved in the
insurance and risk management industry are subject to significant risk factors,
including those applicable to regulated insurance companies, such as:
* the inherent uncertainty in the process of establishing property-liability
loss reserves, and the fact that ultimate losses could materially exceed
established loss reserves, which could have a material adverse effect on
results of operations and financial condition;
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* the fact that insurance companies have experienced, and can be expected in
the future to experience, catastrophic losses, which could have a material
adverse impact on their financial conditions, results of operations and
cash flow;
* the inherent uncertainty in the process of establishing property-liability
loss reserves due to changes in loss payment patterns caused by new claim
settlement practices;
* the need for insurance companies and their subsidiaries to maintain
appropriate levels of statutory capital and surplus, particularly in light
of continuing scrutiny by rating organizations and state insurance
regulatory authorities, and in order to maintain acceptable financial
strength or claims-paying ability ratings;
* the extensive regulation and supervision to which insurance companies are
subject, and various regulatory and other legal actions;
* the adverse impact that increases in interest rates could have on the value
of an insurance company's investment portfolio and on the attractiveness of
certain of its products; and
* the uncertainty involved in estimating the availability of reinsurance and
the collectibility of reinsurance recoverables.
The state insurance regulatory framework has, during recent years, come
under increased federal scrutiny, and certain state legislatures have considered
or enacted laws that alter and, in many cases, increase state authority to
regulate insurance companies and insurance holding company systems. Further, the
National Association of Insurance Commissioners and state insurance regulators
are re-examining existing laws and regulations, specifically focusing on
insurance companies, interpretations of existing laws and the development of new
laws. In addition, Congress and certain federal agencies have investigated the
condition of the insurance industry in the United States to determine whether to
promulgate additional federal regulation. The Sponsor is unable to predict
whether any state or federal legislation will be enacted to change the nature or
scope of regulation of the insurance industry, or what effect, if any, such
legislation would have on the industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the amount of
investments in certain investment categories. Failure to comply with these laws
and regulations would cause non-conforming investments to be treated as non-
admitted assets for purposes of measuring statutory surplus and, in some
instances, would require divestiture.
HIGH-YIELD SECURITIES. An investment in units of the trust should be made
with an understanding of the risks that an investment in "high-yield, high-risk"
debt obligations or "junk" obligations may entail, including increased 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 debt
obligations generally.
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Certain of the securities included in the funds in the trust may be subject to
greater market fluctuations and risk of loss of income and principal than are
investments in lower-yielding, higher-rated securities, and their value may
decline precipitously because of increases in interest rates, not only because
the increases in rates generally decrease values, but also because increased
rates may indicate a slowdown in the economy and a decrease in the value of
assets generally that may adversely affect the credit of issuers of high-yield,
high-risk securities resulting in a higher incidence of defaults among high-
yield, high-risk securities. 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. For an issuer that has outstanding both
senior commercial bank debt and subordinated high-yield, high-risk securities,
an increase in interest rates will increase that issuer's interest expense
insofar as the interest rate on the bank debt is fluctuating. However, many
leveraged issuers enter into interest rate protection agreements to fix or cap
the interest rate on a large portion of their bank debt. This reduces exposure
to increasing rates, but reduces the benefit to the issuer of declining rates.
The sponsor cannot predict future economic policies or their consequences or,
therefore, the course or extent of any similar market fluctuations in the
future.
"High-yield" or "junk" securities, the generic names for securities rated
below BBB by Standard & Poor's, or below Baa by Moody's, are frequently issued
by corporations in the growth stage of their development, by established
companies whose operations or industries are depressed or by highly leveraged
companies purchased in leveraged buyout transactions. The market for high-yield
securities is very specialized and investors in it have been predominantly
financial institutions. High-yield securities are generally not listed on a
national securities exchange. Trading of high- yield securities, therefore,
takes place primarily in over-the-counter markets that consist of groups of
dealer firms that are typically major securities firms. Because the high-yield
security market is a dealer market, rather than an auction market, no single
obtainable price for a given security prevails at any given time. Prices are
determined by negotiation between traders. The existence of a liquid trading
market for the securities may depend on whether dealers will make a market in
the securities. There can be no assurance that a market will be made for any of
the securities, that any market for the securities will be maintained or of the
liquidity of the securities in any markets made. Not all dealers maintain
markets in all high-yield securities. Therefore, since there are fewer traders
in these securities than there are in "investment grade" securities, the bid-
offer spread is usually greater for high-yield securities than it is for
investment grade securities. The price at which the securities may be sold to
meet redemptions and the value of the trust will be adversely affected if
trading markets for the securities are limited or absent. If the rate of
redemptions is great, the value of the trust may decline to a level that
requires liquidation.
Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the issuers
of lower-rated securities may not be as strong as that of other issuers.
Moreover, if a security is recharacterized as equity by the Internal Revenue
Service for federal income tax purposes, the issuer's interest deduction with
respect to the security will be disallowed and this disallowance may adversely
affect the issuer's credit rating. Because investors generally perceive that
there are greater risks associated with the lower-rated securities in the funds
in the trust, the yields and prices of these securities tend to fluctuate
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more than higher- rated securities with changes in the perceived quality of the
credit of their issuers. In addition, the market value of high-yield, high-risk
securities may fluctuate more than the market value of higher-rated securities
since these securities tend to reflect short-term credit development to a
greater extent than higher-rated securities. Lower-rated securities generally
involve greater risks of loss of income and principal than higher-rated
securities. Issuers of lower-rated securities may possess fewer
creditworthiness characteristics than issuers of higher-rated securities and,
especially in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders, owners of
property leased to the issuer or others which, if sustained, would make it more
difficult for the issuers to meet their payment obligations. High-yield, high-
risk securities are also affected by variables such as interest rates, inflation
rates and real growth in the economy. Therefore, investors should consider
carefully the relative risks associated with investment in securities that carry
lower ratings.
The value of the shares of the closed-end funds reflects the value of the
portfolio securities, including the value (if any) of securities in default.
Should the issuer of any security default in the payment of principal or
interest, the closed-end funds in the trust may incur additional expenses
seeking payment on the defaulted security. Because amounts (if any) recovered
by the funds in payment under the defaulted security may not be reflected in the
value of the fund shares until actually received by the funds, and depending
upon when a unitholder purchases or sells his or her units, it is possible that
a unitholder would bear a portion of the cost of recovery without receiving any
portion of the payment recovered.
High-yield, high-risk securities are generally subordinated obligations.
The payment of principal (and premium, if any), interest and sinking fund
requirements with respect to subordinated obligations of an issuer is
subordinated in right of payment to the payment of senior obligations of the
issuer. Senior obligations generally include most, if not all, significant debt
obligations of an issuer, whether existing at the time of issuance of
subordinated debt or created thereafter. Upon any distribution of the assets of
an issuer with subordinated obligations upon dissolution, total or partial
liquidation or reorganization of or similar proceeding relating to the issuer,
the holders of senior indebtedness will be entitled to receive payment in full
before holders of subordinated indebtedness will be entitled to receive any
payment. Moreover, generally no payment with respect to subordinated
indebtedness may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of senior indebtedness
of an issuer generally will recover more, ratably, than holders of subordinated
indebtedness of that issuer.
Obligations that are rated lower than "BBB" by Standard & Poor's, or "Baa"
by Moody's, respectively, should be considered speculative as such ratings
indicate a quality of less than investment grade. Investors should carefully
review the objective of the trust and consider their ability to assume the risks
involved before making an investment in the trust.
FOREIGN ISSUERS. Since certain or all of the trust's portfolio securities
or the underlying securities held by certain of the closed-end funds trust are
issued by foreign companies, an investment in the trust involves certain
investment risks that are different in some respects from an investment in a
trust which invests entirely in the securities of domestic issuers. These
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investment risks include future political or governmental restrictions which
might adversely affect the payment or receipt of payment of dividends on the
relevant securities, the possibility that the financial condition of the issuers
of the securities may become impaired or that the general condition of the
relevant stock market may worsen (both of which would contribute directly to a
decrease in the value of the securities and thus in the value of the units), the
limited liquidity and relatively small market capitalization of the relevant
securities market, expropriation or confiscatory taxation, economic
uncertainties and foreign currency devaluations and fluctuations. In addition,
for foreign issuers that are not subject to the reporting requirements of the
Securities Exchange Act of 1934, there may be less publicly available
information than is available from a domestic issuer. In addition, foreign
issuers are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic issuers. The securities of many foreign issuers are less
liquid and their prices more volatile than securities of comparable domestic
issuers. In addition, fixed brokerage commissions and other transaction costs
in foreign securities markets are generally higher than in the United States and
there is generally less government supervision and regulation of exchanges,
brokers and issuers in foreign countries than there is in the United States.
However, due to the nature of the issuers of the securities in the closed-end
funds selected for the trust, the sponsor believes that adequate information
will be available to allow the Supervisor to provide portfolio surveillance for
the trust.
Securities issued by non-U.S. issuers generally pay income in foreign
currencies and principally trade in foreign currencies. Therefore, there is a
risk that the U.S. dollar value of these securities will vary with fluctuations
in the U.S. dollar foreign exchange rates for the various securities.
There can be no assurance that exchange control regulations might not be
adopted in the future which might adversely affect payment to the closed-end
funds or the trust. The adoption of exchange control regulations and other
legal restrictions could have an adverse impact on the marketability of
international securities in the trust and on the ability of the trust to satisfy
its obligation to redeem units tendered to the trustee for redemption. In
addition, restrictions on the settlement of transactions on either the purchase
or sale side, or both, could cause delays or increase the costs associated with
the purchase and sale of the foreign Securities and correspondingly could affect
the price of the units.
Investors should be aware that it may not be possible to buy all securities
at the same time because of the unavailability of any security, and restrictions
applicable to the trust relating to the purchase of a security by reason of the
federal securities laws or otherwise.
Foreign securities generally have not been registered under the Securities
Act of 1933 and may not be exempt from the registration requirements of such
Act. Sales of non-exempt securities by a closed-end fund in the United States
securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these securities by a closed-end fund will
generally be effected only in foreign securities markets. Investors should
realize that the securities in the closed-end funds might be traded in foreign
countries where the securities markets are not as developed or efficient and may
not be as liquid as those in the United States.
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The value of the securities will be adversely affected if trading markets for
the securities are limited or absent.
CONVERTIBLE SECURITIES RISKS. The closed-end funds held by the trust may
invest in convertible securities. Convertible securities generally offer lower
interest or dividend yields than non-convertible fixed-income securities of
similar credit quality because of the potential for capital appreciation. The
market values of convertible securities tend to decline as interest rates
increase and, conversely, to increase as interest rates decline. However, a
convertible security's market value also tends to reflect the market price of
the common stock of the issuing company, particularly when the stock price is
greater than the convertible security's conversion price. The conversion price
is defined as the predetermined price or exchange ratio at which the convertible
security can be converted or exchanged for the underlying common stock. As the
market price of the underlying common stock declines below the conversion price,
the price of the convertible security tends to be increasingly influenced more
by the yield of the convertible security than by the market price of the
underlying common stock. Thus, it may not decline in price to the same extent as
the underlying common stock, and convertible securities generally have less
potential for gain or loss than common stocks. However, mandatory convertible
securities (as discussed below) generally do not limit the potential for loss to
the same extent as securities convertible at the option of the holder. In the
event of a liquidation of the issuing company, holders of convertible securities
would be paid before that company's common stockholders. Consequently, an
issuer's convertible securities generally entail less risk than its common
stock. However, convertible securities fall below debt obligations of the same
issuer in order of preference or priority in the event of a liquidation and are
typically unrated or rated lower than such debt obligations. In addition,
contingent payment, convertible securities allow the issuer to claim deductions
based on its nonconvertible cost of debt, which generally will result in
deduction in excess of the actual cash payments made on the securities (and
accordingly, holders will recognize income in amounts in excess of the cash
payments received).
Mandatory convertible securities are distinguished as a subset of
convertible securities because the conversion is not optional and the conversion
price at maturity is based solely upon the market price of the underlying common
stock, which may be significantly less than par or the price (above or below
par) paid. For these reasons, the risks associated with investing in mandatory
convertible securities most closely resemble the risks inherent in common
stocks. Mandatory convertible securities customarily pay a higher coupon yield
to compensate for the potential risk of additional price volatility and loss
upon conversion. Because the market price of a mandatory convertible security
increasingly corresponds to the market price of its underlying common stock as
the convertible security approaches its conversion date, there can be no
assurance that the higher coupon will compensate for the potential loss.
SENIOR LOANS. The trust and certain closed-end funds held by the trust may
invest in senior loans issued by banks, other financial institutions, and other
investors to corporations, partnerships, limited liability companies and other
entities to finance leveraged buyouts, recapitalizations, mergers, acquisitions,
stock repurchases, debt refinancings and, to a lesser extent, for general
operating and other purposes. Senior loans in which the closed-end funds
invest:
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* generally are of below investment grade credit quality;
* may be unrated at the time of investment;
* generally are not registered with the SEC or any state securities
commission; and
* generally are not listed on any securities exchange.
An investment by closed-end funds in senior loans involves risk that the
borrowers under senior loans may default on their obligations to pay principal
or interest when due. Although senior loans may be secured by specific
collateral, there can be no assurance that liquidation of collateral would
satisfy the borrower's obligation in the event of non-payment or that such
collateral could be readily liquidated. Senior loans are typically structured as
floating rate instruments in which the interest rate payable on the obligation
fluctuates with interest rate changes. As a result, the yield on closed-end
funds investing in senior loans will generally decline in a falling interest
rate environment and increase in a rising interest rate environment.
The amount of public information available on senior loans generally will
be less extensive than that available for other types of assets. No reliable,
active trading market currently exists for many senior loans, although a
secondary market for certain senior loans has developed over the past several
years. Senior loans are thus relatively illiquid. Liquidity relates to the
ability of a closed-end fund to sell an investment in a timely manner at a price
approximately equal to its value on the closed-end fund's books. The illiquidity
of senior loans may impair a closed-end fund's ability to realized the full
value of its assets in the event of a voluntary or involuntary liquidation of
such assets. Because of the lack of an active trading market, illiquid
securities are also difficult to value and prices provided by external pricing
services may not reflect the true value of the securities. However, many senior
loans are of a large principal amount and are held by a large number of
financial institutions. To the extent that a secondary market does exist for
certain senior loans, the market may be subject to irregular trading activity,
wide bid/ask spreads and extended trade settlement periods. The market for
senior loans could be disrupted in the event of an economic downturn or a
substantial increase or decrease in interest rates. This could result in
increased volatility in the market and in the trust's net asset value.
If legislation or state or federal regulators impose additional
requirements or restrictions on the ability of financial institutions to make
loans that are considered highly leveraged transactions, the availability of
senior loans for investment by the closed-end funds may be adversely affected.
In addition, such requirements or restrictions could reduce or eliminate sources
of financing for certain borrowers. This would increase the risk of default. If
legislation or federal or state regulators require financial institutions to
dispose of senior loans that are considered highly leveraged transactions or
subject such senior loans to increased regulatory scrutiny, financial
institutions may determine to sell such senior loans. Such sales could result in
depressed prices. If a closed-end fund attempts to sell a senior loan at a time
when a financial institution is engaging in such a sale, the price a closed-end
fund could get for the senior loan may be adversely affected.
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Some senior loans are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate the senior loans
to presently existing or future indebtedness of the borrower or take other
action detrimental to lenders. Such court action could under certain
circumstances include invalidation of senior loans. Any lender, which could
include a closed-end fund, is subject to the risk that a court could find the
lender liable for damages in a claim by a borrower arising under the common laws
of tort or contracts or anti-fraud provisions of certain securities laws for
actions taken or omitted to be taken by the lenders under the relevant terms of
a loan agreement or in connection with actions with respect to the collateral
underlying the senior loan.
REAL ESTATE INVESTMENT TRUSTS. Certain closed-end funds held by the trust
may invest in securities issued by real estate investment trusts or other real
estate-related investments. Many factors can have an adverse impact on the
performance of a particular real estate investment trust or other real estate-
related investments (a "REIT"), including its cash available for distribution,
the credit quality of a particular REIT or the real estate industry generally.
The success of REITs depends on various factors, including the occupancy and
rent levels, appreciation of the underlying property and the ability to raise
rents on those properties. Economic recession, overbuilding, tax law changes,
higher interest rates or excessive speculation can all negatively impact REITs,
their future earnings and share prices.
Risks associated with the direct ownership of real estate include, among
other factors,
* general U.S. and global as well as local economic conditions,
* decline in real estate values,
* the financial health of tenants,
* overbuilding and increased competition for tenants,
* oversupply of properties for sale,
* changing demographics,
* changes in interest rates, tax rates and other operating expenses,
* changes in government regulations,
* changes in zoning laws,
* the ability of the owner to provide adequate management, maintenance and
insurance,
* faulty construction and the ongoing need for capital improvements,
* the cost of complying with the Americans with Disabilities Act,
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* regulatory and judicial requirements, including relating to liability for
environmental hazards,
* natural or man-made disasters,
* changes in the perception of prospective tenants of the safety, convenience
and attractiveness of the properties changes in neighborhood values and
buyer demand, and
* the unavailability of construction financing or mortgage loans at rates
acceptable to developers.
Variations in rental income and space availability and vacancy rates in
terms of supply and demand are additional factors affecting real estate
generally and REITs in particular. Properties owned by a REIT may not be
adequately insured against certain losses and may be subject to significant
environmental liabilities, including remediation costs.
You should also be aware that REITs may not be diversified and are subject
to the risks of financing projects. The real estate industry may be cyclical,
and, if a fund acquires REIT securities at or near the top of the cycle, there
is increased risk of a decline in value of the REIT securities and therefore the
value of the units. REITs are also subject to defaults by borrowers and the
market's perception of the REIT industry generally.
Because of their structure, and the legal requirement that they distribute
at least 90% of their taxable income to shareholders annually, REITs require
frequent amounts of new funding, through both borrowing money and issuing stock.
Thus, REITs historically have frequently issued substantial amounts of new
equity shares (or equivalents) to purchase or build new properties. This may
have adversely affected REIT equity share market prices. Both existing and new
share issuances may have an adverse effect on these prices in the future,
especially when REITs continue to issue stock when real estate prices are
relatively high and stock prices are relatively low.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities between the time of the deposit and the purchase
of the securities and because a trust will pay the associated brokerage fees and
other acquisition costs.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Income received by a trust is credited by
the trustee to the Income Account for the trust. All other receipts are
credited by the trustee to a separate Capital Account for the trust. The
trustee will normally distribute any income received by a trust on each
distribution date or shortly thereafter to unitholders of record on the
preceding record date. The
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trust will also generally make required distributions or distributions to avoid
imposition of tax at the end of each year if it has elected to be taxed as a
"regulated investment company" for federal tax purposes. Unitholders will
receive an amount substantially equal to their pro rata share of the estimated
net annual income distributions to be received by the trust. All distributions
will be net of applicable expenses. There is no assurance that any actual
distributions will be made since all dividends received may be used to pay
expenses. In addition, excess amounts from the Capital Account of a trust, if
any, will be distributed at least annually to the unitholders then of record.
Proceeds received from the disposition of any of the securities after a record
date and prior to the following distribution date will be held in the Capital
Account and not distributed until the next distribution date applicable to the
Capital Account. The trustee shall be required to make a distribution from the
Capital Account if the cash balance on deposit therein available for
distribution shall be sufficient to distribute at least $0.01 per unit. The
trustee is not required to pay interest on funds held in the Capital or Income
Accounts (but may itself earn interest thereon and therefore benefits from the
use of such funds).
The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the unitholders' pro rata share of
the estimated annual income distributions to be received by the trust after
deducting estimated expenses. Because dividends are not received by a trust at
a constant rate throughout the year, such distributions to unitholders are
expected to fluctuate. Persons who purchase units will commence receiving
distributions only after such person becomes a record owner. A person will
become the owner of units, and thereby a unitholder of record, on the date of
settlement provided payment has been received. Notification to the trustee of
the transfer of units is the responsibility of the purchaser, but in the normal
course of business the selling broker-dealer provides such notice.
The trustee will periodically deduct from the Income Account of a trust
and, to the extent funds are not sufficient therein, from the Capital Account of
a trust amounts necessary to pay the expenses of the trust. The trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of a trust.
Amounts so withdrawn shall not be considered a part of a trust's assets until
such time as the trustee shall return all or any part of such amounts to the
appropriate accounts. In addition, the trustee may withdraw from the Income and
Capital Accounts of a trust such amounts as may be necessary to cover
redemptions of units.
DISTRIBUTION REINVESTMENT. Unitholders may reinvest distributions into
additional units of their trust without a sales fee. Your trust will pay any
deferred sales fee and creation and development fee per unit regardless of any
sales fee discounts. However, if you are eligible to receive a discount such
that the sales fee you must pay is less than the applicable deferred sales fee
and creation and development fee, you will be credited the difference between
your sales fee and the deferred sales fee and the creation and development fee
at the time you buy your units. Accordingly, if you reinvest distributions into
additional units of your trust, you will be credited the amount of any remaining
deferred sales fee and creation and development fee on such units at the time of
reinvestment.
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STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will
furnish to each unitholder a statement of the amount of income 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 a trust are required to be audited annually, at the related
trust's expense, by independent public accountants designated by the sponsor,
unless the sponsor determines that such an audit would not be in the best
interest of the unitholders of the trust. The accountants' report will be
furnished by the trustee to any unitholder 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 trust:
(A) As to the Income Account:
(1) the amount of income received on the securities (including income
received as a portion of the proceeds of any disposition of
securities);
(2) the amounts paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Income Account for payment into
the Reserve Account;
(4) the deductions for applicable taxes and fees and expenses of the
trustee, the depositor, the evaluator, the supervisor, counsel,
auditors and any other expenses paid by the trust;
(5) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(6) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(7) the aggregate distributions to unitholders; and
(8) the balance remaining after such deductions and distributions,
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 Capital Account:
(1) the net proceeds received due to sale, maturity, redemption,
liquidation or disposition of any of the securities, excluding
any portion thereof credited to the Income Account;
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(2) the amount paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Capital Account for payments
into the Reserve Account;
(4) the deductions for payment of applicable taxes and fees and
expenses of the trustee, the depositor, the evaluator, the
supervisor, counsel, auditors and any other expenses paid by the
trust;
(5) the deductions for payment of the depositor's expenses of
organizing the trust;
(6) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(7) the deductions for payment of deferred sales fee and creation and
development fee, if any;
(8) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(9) the aggregate distributions to unitholders; and
(10) 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 held as of the last business day of such
calendar year and a list which identifies all securities sold or
other securities acquired during such calendar year, if any;
(2) the number of units outstanding on the last business day of such
calendar year;
(3) the unit value based on the last trust evaluation of such trust
made during such calendar year; and
(4) the amounts actually distributed during such calendar year from
the Income and Capital Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for such distributions.
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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 a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
AMENDMENT AND TERMINATION. The trust agreement may be amended from time to
time by the sponsor and trustee or their respective successors, 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 with any other
provision contained in the trust agreement, (ii) to make such other provision in
regard to matters or questions arising under the trust agreement as shall not
materially adversely affect the interests of the unitholders or (iii) to make
such amendments as may be necessary (a) for the trust to continue to qualify as
a regulated investment company for federal income tax purposes if the trust has
elected to be taxed as such under the United States Internal Revenue Code of
1986, as amended, or (b) to prevent the trust from being deemed an association
taxable as a corporation for federal income tax purposes if the trust has not
elected to be taxed as a regulated investment company under the United States
Internal Revenue Code of 1986, as amended. The trust agreement may not be
amended, however, without the consent of all unitholders then outstanding, so as
(1) to permit, except in accordance with the terms and conditions thereof, the
acquisition hereunder of any securities other than those specified in the
schedules to the trust agreement or (2) to reduce the percentage of units the
holders of which are required to consent to certain of such amendments. The
trust agreement may not be amended so as to reduce the interest in a trust
represented by units without the consent of all affected unitholders. Except
for the amendments, changes or modifications described above, neither the
sponsor nor the trustee may consent to any other amendment, change or
modification of the trust agreement without the giving of notice and the
obtaining of the approval or consent of unitholders representing at least 66
2/3% of the units then outstanding of the affected trust. No amendment may
reduce the aggregate percentage of units the holders of which are required to
consent to any amendment, change or modification of the trust agreement without
the consent of the unitholders of all of the units then outstanding of the
affected trust and in no event may any amendment be made which would (1) alter
the rights to the unitholders as against each other, (2) provide the trustee
with the power to engage in business or investment activities other than as
specifically provided in the trust agreement, (3) adversely affect the tax
status of the trust for federal income tax purposes or result in the units being
deemed to be sold or exchanged for federal income tax purposes or (4) unless the
trust has elected to be taxed as a regulated investment company for federal
income tax purposes, result in a variation of the investment of unitholders in
the trust. The trustee will notify unitholders of the substance of any such
amendment.
The trust agreement provides that a trust shall terminate upon the
liquidation, redemption or other disposition of the last of the securities held
in the trust but in no event is it to continue beyond the mandatory termination
date. If the value of a trust shall be less than the applicable minimum value
stated in the prospectus (generally 40% of the total value of securities
deposited in the trust during the initial offering period), 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 holders of units representing 66
2/3% of the units thereof then outstanding. In addition, the sponsor may
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terminate a trust if it is based on a security index and the index is no longer
maintained. A trust will be liquidated by the trustee in the event that a
sufficient number of units of the trust not yet sold are tendered for redemption
by the sponsor, so that the net worth of the trust would be reduced to less than
40% of the value of the securities at the time they were deposited in the trust.
If a trust is liquidated because of the redemption of unsold units by the
sponsor, the sponsor will refund to each purchaser of units the entire sales fee
paid by such purchaser.
Beginning nine business days prior to, but no later than, the scheduled
termination date described in the prospectus, the trustee may begin to sell all
of the remaining underlying securities on behalf of unitholders in connection
with the termination of the trust. The sponsor may assist the trustee in these
sales and receive compensation to the extent permitted by applicable law. The
sale proceeds will be net of any incidental expenses involved in the sales.
The sponsor will generally instruct the trustee to sell the securities as
quickly as practicable during the termination proceedings without in its
judgment materially adversely affecting the market price of the securities, but
it is expected that all of the securities will in any event be disposed of
within a reasonable time after a trust's termination. The sponsor does not
anticipate that the period will be longer than one month, and it could be as
short as one day, depending on the liquidity of the securities being sold. The
liquidity of any security depends on the daily trading volume of the security
and the amount that the sponsor has available for sale on any particular day.
Of course, no assurances can be given that the market value of the securities
will not be adversely affected during the termination proceedings.
Approximately thirty days prior to termination of a trust, the trustee will
notify unitholders of the termination and provide a form allowing qualifying
unitholders to elect an in-kind distribution. A unitholder who owns the minimum
number of units described in the prospectus may request an in-kind distribution
from the trustee instead of cash. The trustee will make an in-kind distribution
through the distribution of each of the securities of the trust in book entry
form to the account of the unitholder's bank or broker-dealer at Depository
Trust Company. The unitholder will be entitled to receive whole shares of each
of the securities comprising the portfolio of a trust and cash from the Capital
Account equal to the fractional shares to which the unitholder is entitled. The
trustee may adjust the number of shares of any security included in a
unitholder's in-kind distribution to facilitate the distribution of whole
shares. The sponsor may terminate the in-kind distribution option at any time
upon notice to the unitholders. Special federal income tax consequences will
result if a unitholder requests an in-kind distribution.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a 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 Income and Capital Accounts of the trust.
The sponsor may, but is not obligated to, offer for sale units of a
subsequent series of a trust at approximately the time of the mandatory
termination date. If the sponsor does offer such units for sale, unitholders
may be given the opportunity to purchase such units at a public offering price
that includes a reduced sales fee. There is, however, no assurance that units
of any new
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series of a trust will be offered for sale at that time, or if offered, that
there will be sufficient units available for sale to meet the requests of any or
all unitholders.
THE TRUSTEE. The trustee is The Bank of New York, a trust company
organized under the laws of New York. The Bank of New York has its principal
unit investment trust division offices at 2 Hanson Place, 12th Floor, Brooklyn,
New York 11217, (800) 848-6468. The Bank of New York is subject to supervision
and examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust
agreement, 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 a trust. Such books and records shall be open to
inspection by any unitholder 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 agreement 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
agreement, the trustee may employ one or more agents for the purpose of custody
and safeguarding of securities comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement 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 sixty 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 thirty days after
notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. In case at any time the trustee
shall not meet the requirements set forth in the trust agreement, or shall
become incapable of acting, or if a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the trustee in an
involuntary case, or the trustee shall commence a voluntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the trustee or for any substantial part of its
property shall be appointed, or the trustee shall generally fail to pay its
debts as they become due, or shall fail to meet such written standards for the
trustee's performance as shall be established from time to time by the sponsor,
or if the sponsor determines in good faith that there has occurred either (1) a
material deterioration in the creditworthiness of the trustee or (2) one or more
grossly negligent acts on the part of the trustee with respect to a trust, the
sponsor, upon sixty days' prior written notice, may remove the trustee and
appoint a successor trustee, as hereinafter provided, 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 removal and appointment shall
be mailed to each unitholder by
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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 must be a corporation
organized under the laws of the United States, or any state thereof, be
authorized under such laws to exercise trust powers and have at all times an
aggregate capital, surplus and undivided profits of not less than $5,000,000.
THE SPONSOR. The sponsor of the trust is Fixed Income Securities, L.P.
acting through its Advisor's Asset Management division. The sponsor is a
broker-dealer specializing in providing services to broker-dealers, registered
representatives, investment advisers and other financial professionals. The
sponsor's headquarters are located at 18925 Base Camp Road, Monument, Colorado
80132. You can contact the Advisor's Asset Management division at 8100 East 22nd
Street North, Suite 900B, Wichita, Kansas 67226-2309 or by using the contacts
listed on the back cover of the prospectus. The sponsor is a registered broker-
dealer and investment adviser and a member of the Financial Industry Regulatory
Authority, Inc. (FINRA) and the Securities Investor Protection Corporation
(SIPC), and a registrant of the Municipal Securities Rulemaking Board (MSRB).
If at any time the sponsor shall fail to perform any of its duties under
the trust agreement 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, (b) terminate the trust agreement and liquidate any trust as
provided therein, or (c) continue to act as trustee without terminating the
trust agreement.
THE EVALUATOR AND SUPERVISOR. Fixed Income Securities, L.P., the sponsor,
also serves as evaluator and supervisor. The evaluator and supervisor may
resign or be removed by the sponsor and trustee in which event the sponsor or
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 thirty 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.
LIMITATIONS ON LIABILITY. The sponsor, evaluator, and supervisor are
liable for the performance of their obligations arising from their
responsibilities under the trust agreement 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 agreement or for errors in judgment, except in cases of
its own gross negligence, bad faith or willful misconduct or its reckless
disregard for its duties thereunder. 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 trust agreement provides 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 moneys, securities or certificates
except by reason of its own gross negligence, bad faith or willful misconduct,
or its reckless disregard for its duties under the trust agreement, nor
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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 thereof. In addition, the trust
agreement contains other customary provisions limiting the liability of the
trustee.
The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides 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 for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
EXPENSES OF THE TRUST. The sponsor will not charge a trust any fees for
services performed as sponsor. The sponsor will receive a portion of the sale
commissions paid in connection with the purchase of units and will share in
profits, if any, related to the deposit of securities in the trust.
The sponsor may receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. The amount of this
"creation and development fee" is set forth in the prospectus. The trustee will
deduct this amount from your trust's assets as of the close of the initial
offering period. No portion of this fee is applied to the payment of
distribution expenses or as compensation for sales efforts. This fee will not be
deducted from proceeds received upon a repurchase, redemption or exchange of
units before the close of the initial public offering period.
The trustee receives for its services that fee set forth in the prospectus.
The trustee's fee which is calculated and paid monthly is based on the total
number of units of the related trust outstanding as of January 1 for any annual
period, except during the initial offering period the fee will be based on the
units outstanding at the end of each month. The trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Capital and Income Accounts since these Accounts are non-interest bearing
and the amounts earned by the trustee are retained by the trustee. Part of the
trustee's compensation for its services to a trust is expected to result from
the use of these funds.
The supervisor will charge a trust a surveillance fee for services
performed for the trust in an amount not to exceed that amount set forth in the
prospectus 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 of providing such services. Such fee shall be based on the
total number of units of the related trust outstanding as of January 1 for any
annual period, except during the initial offering period the fee will be based
on the units outstanding at the end of each month.
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For evaluation of the securities in a trust, the evaluator shall receive an
evaluation fee in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation from other unit investment trusts for which the sponsor acts as
sponsor and provides evaluation services, exceed the aggregate cost of providing
such services. Such fee shall be based on the total number of units of the
related trust outstanding as of January 1 for any annual period, except during
the initial offering period the fee will be based on the units outstanding at
the end of each month.
For providing bookkeeping and administrative services to a trust, the
sponsor shall receive an administration fee in an amount not to exceed that
amount set forth in the prospectus but in no event will such compensation, when
combined with all compensation from other unit investment trusts for which the
sponsor acts as sponsor and provides evaluation services, exceed the aggregate
cost of providing such services. Such fee shall be based on the total number of
units of the related trust outstanding as of January 1 for any annual period,
except during the initial offering period the fee will be based on the units
outstanding at the end of each month.
The trustee's fee, sponsor's fee for providing bookkeeping and
administrative services to the trust, supervisor's fee and evaluator's fee are
deducted from the Income Account of the related trust to the extent funds are
available and then from the Capital Account. Each such fee (other than any
creation and development fee) may be increased without approval of unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index or
any equivalent index substituted therefor.
The following additional charges are or may be incurred by the trust:
(a) fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses and reimbursement of the cost of advances
to the trust for payment of expenses and distributions, but not including any
fees and expenses charged by an agent for custody and safeguarding of
securities) and of counsel, if any; (c) various governmental charges;
(d) expenses and costs of any action taken by the trustee to protect the trust
or the rights and interests of the unitholders; (e) indemnification of the
trustee for any loss, liability or expense incurred by it in the administration
of the trust not resulting from negligence, bad faith or willful misconduct on
its part or its reckless disregard of its obligations under the trust agreement;
(f) indemnification of the sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct or its reckless disregard for its obligations under the trust
agreement; and (g) expenditures incurred in contacting unitholders upon
termination of the trust. The fees and expenses set forth herein are payable
out of a trust and, when owing to the trustee, are secured by a lien on the
trust. If the balances in the Income and Capital Accounts are insufficient to
provide for amounts payable by the trust, the trustee has the power to sell
securities to pay such amounts. These sales may result in capital gains or
losses to unitholders. A trust may pay the costs of updating its registration
statement each year.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
When a trust sells securities, the composition and diversity of the
securities in the trust may be altered. In order to obtain the best price for a
trust, it may be necessary for the sponsor to specify minimum amounts in which
blocks of securities are to be sold. In effecting purchases and
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sales of a trust's portfolio securities, the sponsor may direct that orders be
placed with and brokerage commissions be paid to brokers, including brokers
which may be affiliated with the trust, the sponsor or dealers participating in
the offering of units.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. The public offering price per unit is equal to the net asset
value per unit plus organization costs plus the applicable sales fee referred to
in the prospectus. The initial sales fee is equal to the difference between the
maximum sales fee and the sum of the remaining deferred sales fee and the total
creation and development fee. The sales fee as a percentage of the public
offering price and the net amount invested is set forth in the prospectus. The
deferred sales fee is a fixed dollar amount and will be collected in
installments as described in the prospectus. The creation and development fee is
a fixed dollar amount and will be collected at the end of the initial offering
period as described in the prospectus. Units purchased after the initial
deferred sales fee payment will be subject to the remaining deferred sales fee
payments. Units sold or redeemed prior to such time as the entire applicable
deferred sales fee has been collected will be assessed the remaining deferred
sales fee at the time of such sale or redemption. Units sold or redeemed prior
to such time as the entire applicable creation and development fee has been
collected will not be assessed the remaining creation and development fee at the
time of such sale or redemption. During the initial offering period, a portion
of the public offering price includes an amount of securities to pay for all or
a portion of the costs incurred in establishing a trust. These costs include
the cost 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 portfolio, legal fees and the initial
fees and expenses of the trustee. These costs will be deducted from a trust as
of the end of the initial offering period or after six months, if earlier.
Certain broker-dealers may charge a transaction fee for processing unit
purchases.
As indicated above, the initial public offering price of the units was
established by dividing the aggregate underlying value of the securities by the
number of units outstanding. Such price determination as of the opening of
business on the date a trust was created was made on the basis of an evaluation
of the securities in the trust prepared by the evaluator. After the opening of
business on this date, the evaluator will appraise or cause to be appraised
daily the value of the underlying securities as of the close of regular trading
on the New York Stock Exchange on days the New York Stock Exchange is open and
will adjust the public offering price of the units commensurate with such
valuation. Such public offering price will be effective for all orders received
at or prior to the close of regular trading on the New York Stock Exchange on
each such day. Orders received by the trustee, sponsor or any dealer for
purchases, sales or redemptions after that time, or on a day when the New York
Stock Exchange is closed, will be held until the next determination of price.
Had units of a trust been available for sale at the close of business on
the business day before the inception date of the trust, the public offering
price would have been as shown under "Essential Information" in the prospectus.
The public offering price per unit of a trust on the date of the prospectus or
on any subsequent date will vary from the amount stated under "Essential
Information" in the prospectus in accordance with fluctuations in the prices of
the underlying
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securities. Net asset value per unit is determined by dividing the value of a
trust's portfolio securities, cash and other assets, less all liabilities, by
the total number of units outstanding. The portfolio securities are valued by
the evaluator as follows: If the security is listed on a national securities
exchange, the evaluation will generally be based on the last sale price on the
exchange (unless the evaluator deems the price inappropriate as a basis for
evaluation). If the security is not so listed or, if so listed and the
principal market for the security is other than on the exchange, the evaluation
will generally be made by the evaluator in good faith based on an appraisal of
the fair value of the securities using recognized pricing methods.
The foregoing evaluations and computations shall be made as of the close of
regular trading on the New York Stock Exchange, on each business day commencing
with the trust's inception date of the securities, effective for all sales made
during the preceding 24-hour period.
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 date of settlement provided payment has been received.
Cash, if any, made available to the sponsor prior to the date of settlement for
the purchase of units may be used in 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 will be delivered as soon as possible
following his written request therefor.
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 in the prospectus. Certain commercial
banks may be making units available to their customers on an agency basis. The
sponsor reserves the right to change the discounts from time to time.
We may provide, at our own expense and out of our own profits, additional
compensation and benefits to broker-dealers who sell shares of units of this
trust and our other products. This compensation is intended to result in
additional sales of our products and/or compensate broker-dealers and financial
advisors for past sales. We may make these payments for marketing, promotional
or related expenses, including, but not limited to, expenses of entertaining
retail customers and financial advisors, advertising, sponsorship of events or
seminars, obtaining shelf space in broker-dealer firms and similar activities
designed to promote the sale of the our products. These arrangements will not
change the price you pay for your units.
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 fees equal to the
percentage of the offering price of the units of such trusts stated in the
prospectus and will pay a portion of such sales fees 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. 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
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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 may, subject to change at any time, maintain a market for
units of the trust offered hereby and to continuously offer to purchase said
units at the net asset value determined by the evaluator, provided that the
repurchase price will not be reduced by any remaining creation and development
fee or organization costs during the initial offering period. While the sponsor
may repurchase units from time to time, it does not currently intend to maintain
an active secondary market for units. Unitholders who wish to dispose of their
units should inquire of their 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. Unitholders who sell or redeem units
prior to such time as the entire deferred sales fee on such units has been
collected will be assessed the amount of the remaining deferred sales fee at the
time of such sale or redemption. Unitholders who sell or redeem units prior to
such time as the entire creation and development fee on such units has been
collected will not be assessed the amount of the remaining creation and
development fee at the time of such sale or redemption. 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. If the
sponsor decides to maintain a secondary market, it may suspend or discontinue
purchases of units of the 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 at its unit investment trust division office 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 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. 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 signature guaranty 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 no later than the seventh day
following the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the redemption price, determined as set
forth below under "Computation of Redemption Price," as of the close of regular
trading on the New York Stock Exchange next following such tender, multiplied by
the number of units being redeemed. Any units redeemed
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shall be canceled and any undivided fractional interest in the related 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. Unitholders who sell or redeem units prior to
such time as the entire deferred sales fee on such units has been collected will
be assessed the amount of the remaining deferred sales fee at the time of such
sale or redemption. Unitholders who sell or redeem units prior to such time as
the entire creation and development fee on such units has been collected will
not be assessed the amount of the remaining creation and development fee at the
time of such sale or redemption. Certain broker-dealers may charge a
transaction fee for processing redemption requests.
Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the unitholder only when filing 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 Income Account of a trust to
the extent that funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Capital Account for a trust.
Unitholders tendering units for redemption may request a distribution in
kind (a "Distribution In Kind") from the trustee in lieu of cash redemption of
an amount and value of securities per unit equal to the redemption price per
unit as determined as of the evaluation time next following the tender, provided
that the tendering unitholder meets the requirements stated in the prospectus
and the unitholder has elected to redeem at least thirty days prior to the
termination of the trust. If the unitholder meets these requirements, a
Distribution In Kind will be made by the trustee through the distribution of
each of the securities of the trust in book entry form to the account of the
unitholder's bank or broker-dealer at Depository Trust Company. The tendering
unitholder shall be entitled to receive whole shares of each of the securities
comprising the portfolio of the trust and cash from the Capital Account equal to
the fractional shares to which the tendering unitholder is entitled. The
trustee shall make any adjustments necessary to reflect differences between the
redemption price of the units and the value of the securities distributed in
kind as of the date of tender. If funds in the Capital Account are insufficient
to cover the required cash distribution to the tendering unitholder, the trustee
may sell securities. The in kind redemption option may be terminated by the
sponsor at any time.
The trustee is empowered to sell securities in order to make funds
available for the redemption of units. To the extent that securities are sold
or redeemed in-kind, the size of a trust will be, and the diversity of a trust
may be, reduced but each remaining unit will continue to represent approximately
the same proportional interest in each security. Sales may be required at a
time when securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. The price received upon redemption may be
more or less than the amount
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paid by the unitholder depending on the value of the securities in the portfolio
at the time of redemption.
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 agreement; 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 in the
prospectus 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
and (2) the aggregate value of each issue of the securities held in the
trust as determined by the evaluator as described above;
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; (2) an amount representing estimated accrued expenses, including
but not limited to fees and expenses of the trustee (including legal and
auditing fees), the evaluator, the sponsor and 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, provided that the redemption price will not be reduced by any
remaining creation and development fee or organization costs during the
initial offering period; and
C. Finally dividing the results of such computation by the number of units of
the trust outstanding as of the date thereof.
RETIREMENT PLANS. A trust may be suited 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
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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
advisers with respect to the establishment and maintenance of any such plan.
Such plans are offered by brokerage firms and other financial institutions. The
trust will lower the minimum investment requirement for IRA accounts. Fees and
charges with respect to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units 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. 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 by 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 described
above.
Units may be purchased and certificates, if requested, will be issued in
denominations of one unit or any multiple thereof, subject to the minimum
investment requirement. Fractions of units, if any, will be computed to three
decimal places. 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.
TAXATION
The prospectus contains a discussion of certain U.S. federal income tax
issues concerning your trust and the purchase, ownership and disposition of
trust units. The discussion below supplements the prospectus discussion and is
qualified in its entirety by the prospectus discussion. Prospective investors
should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of trust units, as well
as the tax consequences arising under the laws of any state, locality, non-U.S.
country, or other taxing jurisdiction.
The federal income tax summary below and in the prospectus is based in part
on the advice of counsel to your trust. The Internal Revenue Service could
disagree with any conclusions set forth in these discussions. In addition, our
counsel was not asked to review, and has not reached a conclusion with respect
to the federal income tax treatment of the assets to be held by your trust. This
may not be sufficient for prospective investors to use for the purpose of
avoiding penalties under federal tax law.
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If so indicated in the prospectus, your trust intends (i) to elect and (ii)
to qualify annually as a regulated investment company under the Code and to
comply with applicable distribution requirements so that it will not pay federal
income tax on income and capital gains distributed to its unitholders.
To qualify for the favorable U.S. federal income tax treatment generally
accorded to regulated investment companies, your trust must, among other things,
(a) derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies or other income
derived with respect to its business of investing in such stock, securities or
currencies, and net income from certain publicly traded partnerships; (b)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the trust's assets is represented by
cash and cash items (including receivables), U.S. government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer generally limited for the purposes of
this calculation to an amount not greater than 5% of the value of the trust's
total assets and not greater than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities (other than U.S. government securities or the
securities of other regulated investment companies) of any one issuer, or two or
more issuers which the trust controls and are engaged in the same, similar or
related trades or businesses, or the securities of certain publicly traded
partnerships; and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net short-
term capital gains in excess of net long-term capital losses but excludes net
capital gain, if any) and at least 90% of its net tax-exempt interest income
each taxable year.
As a regulated investment company, your trust generally will not be subject
to U.S. federal income tax on its investment company taxable income (as that
term is defined in the Code, but without regard to the deduction for dividends
paid) and net capital gain (the excess of net long-term capital gain over net
short term capital loss), if any, that it distributes to unitholders. The trusts
intend to distribute to its unitholders, at least annually, substantially all of
its investment company taxable income and net capital gain. If your trust
retains any net capital gain or investment company taxable income, it will
generally be subject to federal income tax at regular corporate rates on the
amount retained. In addition, amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax unless, generally, your trust distributes during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of the calendar year, and (3) any ordinary income and capital gains
for previous years that were not distributed during those years. To prevent
application of the excise tax, your trust intends to make its distributions in
accordance with the calendar year distribution requirement. Further, if your
trust retains any net capital gain, the trust may designate the retained amount
as undistributed capital gains in a notice to unitholders who, if subject to
federal income tax on long-term capital gains (i) will be required to include in
income for federal income tax purposes, as long-term capital gain, their share
of such undistributed amount, and (ii) will be entitled to credit their
proportionate share of the tax paid by the trust against their federal income
tax liabilities if any, and to claim refunds to the
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extent the credit exceeds such liabilities. A distribution will be treated as
paid on December 31 of the current calendar year if it is declared by your trust
in October, November or December with a record date in such a month and paid by
your trust during January of the following calendar year. These distributions
will be taxable to unitholders in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are
received.
If your trust failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the trust would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its unitholders) and all distributions out of earnings and
profits would be taxed to unitholders as ordinary dividend income.
If the trust is treated as holding directly or indirectly 10 percent or
more of the combined voting power of the stock of a foreign corporation, and all
U.S. shareholders collectively own more than 50 percent of the vote or value of
the stock of such corporation, the foreign corporation may be treated as a
"controlled foreign corporation" (a "CFC") from a U.S. tax perspective. In such
circumstances, the trust will be required to include certain types of passive
income and certain other types of income relating to insurance, sales and
services with related parties and oil related income in the trust's taxable
income whether or not such income is distributed.
If the trust holds an equity interest in any "passive foreign investment
companies" ("PFICs"), which are generally certain foreign corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rents and royalties or capital gains) or that hold
at least 50% of their assets in investments producing such passive income, the
trust could be subject to U.S. federal income tax and additional interest
charges on gains and certain distributions with respect to those equity
interests, even if all the income or gain is timely distributed to its
unitholders. The trust will not be able to pass through to its unitholders any
credit or deduction for such taxes. The trust may be able to make an election
that could ameliorate these adverse tax consequences. In this case, the trust
would recognize as ordinary income any increase in the value of such PFIC
shares, and as ordinary loss any decrease in such value to the extent it did not
exceed prior increases included in income. Under this election, the trust might
be required to recognize in a year income in excess of its distributions from
PFICs and its proceeds from dispositions of PFIC stock during that year, and
such income would nevertheless be subject to the distribution requirement and
would be taken into account for purposes of the 4% excise tax (described above).
Dividends paid by PFICs will not be treated as qualified dividend income.
PERFORMANCE INFORMATION
Information contained in this Information Supplement or in the prospectus, as it
currently exists or as further updated, may also be included from time to time
in other prospectuses or in advertising material. Information on the
performance of a trust strategy or the actual performance of a trust may be
included from time to time in other prospectuses or advertising material and may
reflect sales fees and expenses of a trust. The performance of a trust may also
be compared to the performance of money managers as reported in SEI Fund
Evaluation Survey or of mutual funds as reported by Lipper Analytical Services
Inc. (which calculates total return using actual dividends on ex-dates
accumulated for the quarter and reinvested at quarter end), Money Magazine Fund
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Watch (which rates fund performance over a specified time period after sales fee
and assuming all dividends reinvested) or Wiesenberger Investment Companies
Service (which states fund performance annually on a total return basis) or of
the New York Stock Exchange Composite Index, the American Stock Exchange Index
(unmanaged indices of stocks traded on the New York and American Stock
Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks) or the Standard & Poor's 500 Index (an
unmanaged diversified index of 500 stocks) or similar measurement standards
during the same period of time.
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CONTENTS OF REGISTRATION STATEMENT
This Amendment to the Registration Statement comprises the following papers
and documents:
The facing sheet
The prospectus
The signatures
The consents of the initial evaluator, independent public accountants and
legal counsel
The following exhibits:
1.1 Trust Agreement (to be filed by amendment).
1.1.1 Standard Terms and Conditions of Trust (to be filed by amendment).
1.2 Certificate of Limited Partnership of Fixed Income Securities, L.P.
Reference is made to Exhibit A(6)(a) to the Registration Statement on
Form N-8B-2 for Advisor's Disciplined Trust (File No. 811-21056) as
filed on March 22, 2006.
1.3 Agreement of Limited Partnership of Fixed Income Securities, L.P.
Reference is made to Exhibit A(6)(b) to the Registration Statement on
Form N-8B-2 for Advisor's Disciplined Trust (File No. 811-21056) as
filed on March 22, 2006.
1.4 Articles of Organization of Sterling Management, LLC, general partner of
Fixed Income Securities, L.P. Reference is made to Exhibit 1.4 to the
Registration Statement on Form S-6 for Advisor's Disciplined Trust 73
(File No. 333-131959) as filed on March 16, 2006.
1.5 Operating Agreement of Sterling Management, LLC, general partner of Fixed
Income Securities L.P. Referenced is made Exhibit 1.5 to the Registration
Statement on Form S-6 for Advisor's Disciplined Trust 73
(File No. 333-131959) as filed on March 16, 2006.
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1.1 filed
herewith and incorporated herein by reference).
2.2 Form of Code of Ethics. Reference is made to Exhibit 2.2 to the
Registration Statement on Form S-6 for Advisor's Disciplined Trust 73
(File No. 333-131959) as filed on March 16, 2006.
3.1 Opinion of counsel as to legality of securities being registered (to be
filed by amendment).
3.2 Opinion of counsel as to the New York and federal income tax status of
securities being registered (to be filed by amendment).
3.3 Opinion of counsel as to the Trustee and the Trust. (to be filed by
amendment).
4.1 Consent of evaluator (to be filed by amendment).
4.2 Consent of independent auditors (to be filed by amendment).
6.1 List of Officers of Fixed Income Securities, L.P. Reference is made to
Exhibit 6.1 to the Registration Statement on Form S-6 for Advisor's
Disciplined Trust, Series 10 (File No. 333-115977) as filed on
May 28, 2004.
7.1 Power of Attorney. Reference is made to Exhibit 7.1 to the Registration
Statement on Form S-6 for Advisor's Disciplined Trust, Series 10
(File No. 333-115977) as filed on May 28, 2004.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Advisor's Disciplined Trust 176 has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wichita and State of Kansas on the 6th day of August, 2007.
ADVISOR'S DISCIPLINED TRUST 176
By FIXED INCOME SECURITIES, L.P., DEPOSITOR
By /s/ ALEX R MEITZNER
-----------------------------
Alex R. Meitzner
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on August 6, 2007 by the following
persons in the capacities indicated:
SIGNATURE TITLE
Scott Colyer Director of Sterling )
Resources, Inc., the Member )
of the General )
Partner of Fixed Income )
Securities, L.P. )
Jack Simkin Director of Sterling )
Resources, Inc., the Member )
of the General )
Partner of Fixed Income )
Securities, L.P. )
Jim Dillahunty Director of Sterling )
Resources, Inc., the Member )
of the General )
Partner of Fixed Income )
Securities, L.P. )
Joe Cotton Director of Sterling )
Resources, Inc., the Member )
of the General )
Partner of Fixed Income )
Securities, L.P. )
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Randy Pegg Director of Sterling )
Resources, Inc., the Member )
of the General )
Partner of Fixed Income )
Securities, L.P. )
Lisa Colyer Director of Sterling )
Resources, Inc., the Member )
of the General )
Partner of Fixed Income )
Securities, L.P. )
By /s/ ALEX R MEITZNER
-----------------------------
Alex R. Meitzner
Attorney-in-Fact*
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*An executed copy of each of the related powers of attorney is filed
herewith or incorporated herein by reference as Exhibit 7.1.
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