1933 ACT FILE NO.: 333-149300
1940 ACT FILE NO.: 811-21056
CIK NO.: 1418993
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: ADVISOR'S DISCIPLINED TRUST 230
B. Name of depositor: FIXED INCOME SECURITIES, INC.
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, Inc. 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 _______, 2008 at _____ pursuant to Rule 487.
- -------------------------------------------------------------------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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 FEBRUARY 19, 2008
SUBJECT TO COMPLETION
TAX EXEMPT SECURITIES TRUST, NATIONAL TRUST 445
(ADVISOR'S DISCIPLINED TRUST 230)
A portfolio of long-term
municipal bonds seeking federally tax
exempt interest income and capital
preservation
PROSPECTUS
FEBRUARY __, 2008
[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, INC. representation is a criminal offense.
- ------------------
INVESTMENT SUMMARY
- ------------------
INVESTMENT OBJECTIVE
The trust seeks to provide interest income exempt from federal personal
income tax and to provide capital preservation.
PRINCIPAL INVESTMENT STRATEGY
The trust seeks to provide interest income exempt from federal personal
income tax and to provide capital preservation by investing in a portfolio
primarily consisting of long-term municipal bonds. In selecting bonds, we<FN1>*
considered the following factors, among others:
* the Standard & Poor's rating of the bonds was not less than A- or the Moody's
Investor Service rating of the bonds was not less than A3 at trust
inception;
* the prices of the bonds relative to other bonds of comparable quality and
maturity; and
* diversification of bonds as to purpose of issue and location of issuer.
The portfolio consists of debt obligations issued by or on behalf of states
and territories of the United States, and political subdivisions and authorities
thereof, the interest on which is excludable from gross income for United States
federal personal income tax purposes under existing law in the opinion of
recognized bond counsel to the issuer of the bonds. The trust portfolio is
structured to have a dollar-weighted average maturity greater than 10 years as
of the inception of the trust. The trust does not include bonds subject to the
federal alternative minimum tax for individuals. Interest may be subject to
state and local tax.
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:
* BOND PRICES WILL FLUCTUATE. The value of your investment may fall over time.
* THE VALUE OF THE BONDS WILL GENERALLY FALL IF INTEREST RATES, IN GENERAL,
RISE. No one can predict whether interest rates will rise or fall in the
future.
* A BOND ISSUER OR INSURER MAY BE UNABLE TO MAKE INTEREST AND/OR PRINCIPAL
PAYMENT IN THE FUTURE.
* 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.
* A BOND ISSUER MIGHT PREPAY OR "CALL" A BOND BEFORE ITS STATED MATURITY. If
this happens, the trust will distribute the principal to you but future
interest distributions will fall. A bond's call price could be less than
the price the trust paid for the bond. If enough bonds are called, the
trust could terminate earlier than expected.
* THE TRUST MAY CONCENTRATE IN BONDS OF A PARTICULAR TYPE OF ISSUER. This
makes the trust less diversified and subject to greater risk than a more
diversified portfolio. The types of bond in the portfolio are listed under
"Types of Bonds" on page 6.
* WE DO NOT ACTIVELY MANAGE THE PORTFOLIO. Except in limited circumstances,
the trust will hold, and may continue to buy, the same bonds even if the
market value declines.
- --------------------
<FN1>* "FIS," "we" and related terms mean Fixed Income Securities, Inc., 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 securities representing interests in a variety of municipal bonds
in a single investment.
* the potential to receive monthly distributions of income exempt from
federal income tax.
* capital preservation potential.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in municipal
bonds.
* want capital appreciation.
------------------------------------------------------------
ESSENTIAL INFORMATION
---------------------
PRINCIPAL AMOUNT OF
SECURITIES PER UNIT AT INCEPTION $_______
PUBLIC OFFERING PRICE PER UNIT
AT INCEPTION $_______
INCEPTION DATE February __, 2008
ESTIMATED CURRENT RETURN* _____%
ESTIMATED LONG-TERM RETURN* _____%
ESTIMATED NET ANNUAL INTEREST
INCOME PER UNIT* $_______
ESTIMATED INITIAL DISTRIBUTION
PER UNIT* $_______
ESTIMATED NORMAL MONTHLY
DISTRIBUTION PER UNIT* $_______
WEIGHTED AVERAGE MATURITY OF
SECURITIES* _____ years
DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month
INITIAL DISTRIBUTION DATE __________ 25, 2008
INITIAL RECORD DATE __________ 10, 2008
CUSIP NUMBER __________
TICKER SYMBOL __________
MINIMUM INVESTMENT 1 unit
* as of February __, 2008 and may vary thereafter.
------------------------------------------------------------
FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that you
may incur based on the initial unit price. Actual expenses may vary.
AS A % AMOUNT
OF $1,000 PER
SALES FEE INVESTED UNIT
------------------------
Maximum sales fee 4.70% $_____
======== =======
ORGANIZATION COSTS __.__% $5.00
======== =======
AS A % OF AMOUNT
ANNUAL NET PER
OPERATING EXPENSES ASSETS UNIT
------------------------
Trustee fee & expenses __.__% $_____
Supervisory, evaluation
and administration fees __.__ 1.00
-------- -------
Total __.__% $_____
======== =======
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 $_____
3 year $_____
5 year $_____
10 years $_____
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
TAX-EXEMPT SECURITIES TRUST, NATIONAL TRUST 445
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT, FEBRUARY __, 2008
COST OF
PRINCIPAL NAME OF ISSUER, INTEREST RATE S&P MOODY'S REDEMPTION SECURITIES
AMOUNT AND MATURITY DATE(1) RATINGS(2) RATINGS(2) FEATURE(3) TO TRUST(4)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------ ------------
____________ $___________
============ ============
<FN>
See "Notes to Portfolio"
4 Investment Summary
Notes to Portfolio
(1) The securities are represented by contracts to purchase such securities the
performance of which is secured by an irrevocable letter of credit.
Contracts to acquire the securities were entered into during the period
from _______________, 2008 to _______________, 2008 and have expected
settlement dates from _______________, 2008 to _______________, 2008.
(2) "NR" indicates that the rating service did not provide a rating for that
bond. For a brief description of the ratings see "Description of
Securities Ratings" in the Information Supplement described under
"Understanding Your Investment-Additional Information".
(3) This is the year in which each bond is initially or currently callable and
the call price for that year. Each bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue
price plus the amount of original issue discount accreted to redemption
date plus, if applicable, some premium, the amount of which will decline in
subsequent years. "S.F." indicates a sinking fund is established with
respect to an issue of bonds. The bonds may also be subject to redemption
without premium at any time pursuant to extraordinary optional or mandatory
redemptions if certain events occur.
(4) The cost of each security is based on the current offering side evaluation
as of the close of the New York Stock Exchange on the business day prior to
the trust's inception date. During the initial offering period,
evaluations of securities are made on the basis of current offering side
evaluations of the securities. The aggregate offering price is greater
than the aggregate bid price of the securities, which is the basis on which
redemption prices will be determined for purposes of redemption of units
after the initial offering period. 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.
(5) Any bond marked with this note has been purchased on a "when, as and if
issued" or "delayed delivery" basis. Delivery of these bonds is expected
to take place at various dates after the first settlement date of the
trust, which is normally three business days following the trust's
inception date. Interest on these bonds begins accruing to the benefit of
unitholders on the related delivery dates for the bonds.
(6) Any bond marked with this note was issued at an original issue discount.
Investment Summary 5
UNDERWRITING
The underwriters for the trust and the amounts of units to be distributed by
each underwriter are as follows:
UNITS
UNDERWRITER AND ADDRESS UNDERWRITTEN
-------------------------------------------------------
AAM/Fixed Income Securities, Inc. _______
18925 Base Camp Road
Monument, CO 80132
-----------
TOTAL _______
===========
TYPES OF BONDS
The following table shows the types of bonds included in the portfolio as of
the trust's inception. For additional information about each of these issuer
types, see "Understanding Your Investment-Investment Risks".
PERCENT OF
PRINCIPAL AMOUNT
TYPE ISSUER OF BONDS
-------------------------------------------
________________________ __.__%
________________________ __.__
________________________ __.__
________________________ __.__
________________________ __.__
---------
100.00%
=========
LOCATION OF ISSUERS
The following table shows the states or territories in which the issuers of
the bonds are located as of the trust's inception.
PERCENT OF
STATE PRINCIPAL AMOUNT
OR TERRITORY OF BONDS
-------------------------------------------
_____________ __.__%
_____________ __.__
_____________ __.__
_____________ __.__
_____________ __.__
---------
100.00%
=========
INSURANCE ON THE BONDS
The following table shows the insurance companies that provide insurance as
of the trust's inception, if any. For additional information about bond
insurance, see "Understanding Your Investment-Bond Insurance".
PERCENT OF
PRINCIPAL AMOUNT
INSURANCE COMPANY OF BONDS
----------------------------------------------------
____________________________ __.__%
____________________________ __.__
____________________________ __.__
____________________________ __.__
____________________________ __.__
---------
100.00%
=========
6 Investment Summary
- -----------------------------
UNDERSTANDING YOUR INVESTMENT
- -----------------------------
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
* cash to pay organization costs plus
* the sales fee plus
* accrued interest, if any.
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." The offer price will be effective for all
orders received prior to the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time). If we receive your order prior to
the close of regular trading on the New York Stock Exchange or authorized
financial professionals receive your order prior to that time and properly
transmit the order to us by the time that we designate, then you will receive
the price computed on the date of receipt. If we receive your order after the
close of regular trading on the New York Stock Exchange, if authorized financial
professionals receive your order after that time or if orders are received by
such persons and are not transmitted to us by the time that we designate, then
you will receive the price computed on the date of the next determined offer
price provided that your order is received in a timely manner on that date. It
is the responsibility of the authorized financial professional to transmit the
orders that they receive to us in a timely manner. Certain broker-dealers may
charge a transaction or other fee for processing unit purchase orders.
ORGANIZATION COSTS. During the initial offering period, part of the value of
the units represents an amount of cash deposited to 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
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.
ACCRUED INTEREST. Accrued interest represents unpaid interest on a security
from the last day it paid interest. Interest on the securities is generally
paid semi-annually, although the trust accrues such interest daily. Because the
trust always has an amount of interest earned but not yet collected, the public
offering price of units will have added to it the proportionate share of accrued
interest to the date of settlement. You will receive the amount, if any, of
accrued interest you paid for on the next distribution date. In addition, if
you sell or redeem your units you will be entitled to receive your proportionate
share of the accrued interest from the purchaser of your units.
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 day that
exchange is open. We generally determine the value of securities during the
initial offering period based on the aggregate offering side evaluations of the
securities determined (a) on the basis of current offering prices of the
Understanding Your Investment 7
securities, (b) if offering prices are not available for any particular
security, on the basis of current offering prices for comparable securities, (c)
by determining the value of securities on the offer side of the market by
appraisal, or (d) by any combination of the above. After the initial offering
period ends, we generally determine the value of the securities as described in
the preceding sentence based on the bid side evaluations rather than the
offering side evaluations. The offering side price generally represents the
price at which investors in the market are willing to sell a security and the
bid side evaluation generally represents the price that investors in the market
are willing to pay to buy a security. The bid side evaluation is lower than the
offering side evaluation. As a result of this pricing method, unitholders
should expect a decrease in the net asset value per unit on the day following
the end of the initial offering period equal to the difference between the
current offering side evaluation and bid side evaluation of the securities.
Capelogic, Inc., an independent pricing service, 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.
SALES FEE. You pay a fee in connection with purchasing units. We refer to
this fee as the "sales fee." The maximum sales fee equals 4.70% of the public
offering price per unit at the time of purchase. You pay the initial sales fee
at the time you buy units.
After the end of the initial offering period, the maximum sales fee for
secondary market transactions is based on the number of years remaining to the
dollar-weighted average maturity of the securities in the trust. For purposes
of this computation, securities will be deemed to mature either on their stated
maturity dates, or an earlier date if: (a) they have been called for redemption
or funds have been placed in escrow to redeem them on an earlier call date; or
(b) such securities are subject to a "mandatory tender." The effect of this
method of sales fee computation will be that different sales fee rates will be
applied in accordance with the following schedule:
SECONDARY
AVERAGE MARKET SALES
MATURITY CHARGE
------------------------------------------
Less than 5 years 3.00%
5 but less than 8 years 4.00
8 or more years 4.70
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.
Large Purchases. You can reduce your sales fee by increasing the size of
your investment:
IF YOU PURCHASE: YOUR FEE WILL BE:
------------------------------------------
Less than 100 units 4.70%
100 - 249 units 3.90
250 - 499 units 3.00
500 - 999 units 2.00
1,000 or more units 1.50
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 dollar basis
using a $1,000 unit equivalent. For
8 Understanding Your Investment
example, if you invest between $250,000 and $499,999, your fee is 3.00% 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 purchases 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 a portion of the 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. Investors may purchase units of the trust in these
accounts at the public offering price less the applicable underwriter or dealer
concession.
This discount applies during the initial offering period and in the secondary
market. 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 a portion of the sales fee for purchases made by
officers, directors and employees of the sponsor and its affiliates. 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 underwriter or dealer concession. This discount applies
during the initial offering period and in the secondary market.
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 use redemption or termination proceeds to purchase
250 or more 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)
Understanding Your Investment 9
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.
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 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". Certain
broker-dealers may charge a transaction or other 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 organization costs if you sell 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 organization costs if you redeem units
during the initial offering period. You will receive the net asset value for a
particular day if the trustee receives your completed redemption request prior
to the close of regular trading on the New York Stock Exchange. Redemption
requests received by authorized financial professionals prior to the close of
regular trading on the New York Stock Exchange that are properly transmitted to
the trustee by the time designated by the trustee, are priced based on the date
of receipt. Redemption requests received by the trustee after the close of
regular trading on the New York Stock Exchange, redemption requests received by
authorized financial professionals after that time or redemption requests
received by such persons that are not transmitted to the trustee until after the
time designated by the trustee, are priced based on the date of the next
determined redemption price provided they are received in a timely manner by the
trustee on such date. It is the responsibility of authorized financial
professionals to transmit redemption requests received by them to the trustee so
they will be received in a timely manner. If your request is not received in a
timely manner or is incomplete in any way,
10 Understanding Your Investment
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.
EXCHANGE OPTION. You may be able to exchange your units for units of our
other 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 upon sixty days notice.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays interest from its net
investment income (pro-rated on an annual basis) along with any available
principal paid on the securities 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. The
amount of your distributions will vary from time to time as interest and
principal payments change or trust expenses change.
Interest received by the trust, including that part of the proceeds of any
disposition of bonds which represents accrued interest, is credited by the
trustee to the trust's "interest account". Other receipts are credited to the
"principal account". After deduction of amounts sufficient to reimburse the
trustee, without interest, for any amounts advanced and paid to the sponsor as
the unitholder of record as of the first settlement date, interest received will
be distributed on each distribution date to unitholders of record as of the
preceding record date. All distributions will be net of estimated expenses.
Funds in the principal account will be distributed on each distribution date to
unitholders of record as of the preceding record date provided that the amount
available for distribution therein shall equal at least $0.01 per unit.
Because interest payments are not received by the trust at a constant rate
throughout the year, interest distributions may be more or less than the amount
credited to the interest account as of the record date. For the purpose of
minimizing fluctuations in interest distributions, the
Understanding Your Investment 11
trustee is authorized to advance amounts necessary to provide interest
distributions of approximately equal amounts. The trustee is reimbursed for
these advances from funds in the interest account on the next record date.
Investors who purchase units between a record date and a distribution date will
receive their first distribution on the second distribution date after the
purchase.
ESTIMATED DISTRIBUTIONS. The estimated net annual interest income per unit,
estimated initial distribution per unit and estimated normal monthly
distribution per unit as of the close of business the day before the trust's
inception date are shown under "Essential Information" in the "Investment
Summary" section of this prospectus. We base these amounts on the estimated
cash flows of the bonds per unit. The actual distributions that you receive
will vary from these estimates with changes in expenses, interest rates and
maturity, call, default or sale of bonds. You may request the estimated cash
flows from the sponsor. The estimated cash flows are computed based on factors
described under "Understanding Your Investment-How the Trust Works-Estimated
Current and Long-Term Returns".
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 or your financial professional 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 or below the principal value. 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.
INTEREST RATE RISK is the risk that the value of securities will fall if
interest rates increase. The securities in your trust typically fall in value
when interest rates rise and rise in value when interest rates fall. Securities
with longer periods before maturity are often more sensitive to interest rate
changes.
CREDIT RISK is the risk that a security's issuer or insurer is unable to meet
its obligation to pay principal or interest on the security.
CALL RISK is the risk that the issuer prepays or "calls" a bond before its
stated maturity. An issuer might call a bond if interest rates fall and the
bond pays a higher interest rate or if it no longer needs the money for the
original purpose.
12 Understanding Your Investment
If an issuer calls a bond, your trust will distribute the principal to you but
your future interest distributions will fall. You might not be able to reinvest
this principal at as high a yield. A bond's call price could be less than the
price your trust paid for the bond and could be below the bond's par value.
This means that you could receive less than the amount you paid for your units.
If enough bonds in your trust are called, your trust could terminate early.
Some or all of the bonds 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 bonds were used, and various other events.
The call provisions are described in general terms in the "Portfolio".
BOND QUALITY RISK is the risk that a bond will fall in value if a rating
agency decreases the bond's rating.
CONCENTRATION RISK is the risk that the value of your trust is more
susceptible to fluctuations based on factors that impact a particular type of
bond because the portfolio concentrates in bonds of that type. A portfolio
"concentrates" in a type of bond when bonds in a particular category make up 25%
or more of the portfolio. A table on page 6 lists the type of bonds held by the
trust with the percentage that each type represents in the portfolio. The
following discusses various types of bonds. The information supplement contains
additional information on these types of bonds.
General Obligation Bonds. Certain of the bonds in the portfolio may be
general obligations of a governmental entity that are secured by the taxing
power of the entity. General obligation bonds are backed by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest. The taxing power of any governmental entity may be limited, however,
by provisions of state constitutions or laws. An entity's credit will depend on
many factors: tax base, reliance on federal or state aid, and factors which are
beyond the entity's control.
Revenue Bonds. Certain of the bonds in the portfolio may be "revenue bonds"
that are payable only from the revenue of a specific project or authority. They
not supported by the issuer's general power to levy taxes, if any. The risk of
default in payment of interest or principal increases if the income of the
related project or authority falters because that income is the only source of
payment. The following types of bonds are "revenue bonds".
Appropriations Bonds. Certain bonds in the trust may be bonds that are, in
whole or in part, subject to and dependent upon either the governmental entity
making appropriations from time to time or the continued existence of special
temporary taxes which require legislative action for their reimposition. The
availability of any appropriation is subject to the willingness or ability of
the governmental entity to continue to make such special appropriations or to
reimpose such special taxes. The obligation to make lease payments exists only
to the extent of the monies available to the governmental entity therefor, and
no liability is incurred by the governmental entity beyond the monies so
appropriated. Once an annual appropriation is made, the governmental entity's
obligation to make lease rental payments is absolute and unconditional
regardless of any circumstances or occurrences which might arise. In the event
of non-appropriation, certificateholders' or bondowners' sole remedy (absent
credit enhancement) generally is limited to repossession of the collateral for
resale or releasing. In the event of
Understanding Your Investment 13
non-appropriation, the sponsor may instruct the trustee to sell such bonds.
Airport, Port and Highway Bonds. Certain facility revenue bonds are payable
from and secured by the revenues from the ownership and operation of particular
facilities, such as airports, highways and port authorities. Airport operating
income may be affected by the ability of airlines to meet their obligations
under the agreements with airports. Similarly, payment on bonds related to
other facilities is dependent on revenues from the projects, such as use fees
from ports, tolls on turnpikes and bridges and rents from buildings. Payment
may be adversely affected by reduction in revenues due to such factors and
increased cost of maintenance or decreased use of a facility. The sponsor
cannot predict what effect conditions may have on revenues which are dependent
for payment on these bonds.
Capital Improvement Facility Bonds. The portfolio of a trust may contain
bonds which are in the capital improvement facilities category. Capital
improvement bonds are bonds issued to provide funds to assist political
subdivisions or agencies of a state through acquisition of the underlying debt
of a state or local political subdivision or agency. The risks of an investment
in such bonds include the risk of possible prepayment or failure of payment of
proceeds on and default of the underlying debt.
Convention Facility Bonds. The portfolio of a trust may contain bonds of
issuers in the convention facilities category. Bonds in the convention
facilities category include special limited obligation bonds issued to finance
convention and sports facilities payable from rental payments and annual
governmental appropriations. The governmental agency is not obligated to make
payments in any year in which the monies have not been appropriated to make such
payments. In addition, these facilities are limited use facilities that may not
be used for purposes other than as convention centers or sports facilities.
Correctional Facility Bonds. The portfolio of a trust may contain bonds of
issuers in the correctional facilities category. Bonds in the correctional
facilities category include special limited obligation bonds issued to
construct, rehabilitate and purchase correctional facilities payable from
governmental rental payments and/or appropriations.
Education, University and College Bonds. The ability of educational
institutions, including universities and colleges, to meet their obligations is
dependent upon various factors. Some of these factors include the size and
diversity of their sources of revenues, enrollment, reputation, management
expertise, the availability and restrictions on the use of endowments and other
funds, the quality and maintenance costs of campus facilities. Also, in the
case of public institutions, the financial condition of the relevant state or
other governmental entity and its policies with respect to education may affect
an institution's ability to make payment on its own.
Hospital and Health Care Facility Bonds. The ability of hospitals and other
health care facilities to meet their obligations with respect to revenue bonds
issued on their behalf is dependent on various factors. Some such factors are
the level of payments received from private third-party payors and government
programs and the cost of providing health care services. There can be no
assurance that payments under governmental programs will remain at levels
comparable to present levels or will be sufficient to cover the costs associated
with their bonds. It also may be necessary for a hospital or other health care
facility to incur substantial capital expenditures or increased operating
14 Understanding Your Investment
expenses to effect changes in its facilities, equipment, personnel and services.
Hospitals and other health care facilities are additionally subject to claims
and legal actions by patients and others in the ordinary course of business.
There can be no assurance that a claim will not exceed the insurance coverage of
a health care facility or that insurance coverage will be available to a
facility.
Housing Bonds. Multi-family housing revenue bonds and single family mortgage
revenue bonds are state and local housing issues that have been issued to
provide financing for various housing projects. Multi-family housing revenue
bonds are payable primarily from mortgage loans to housing projects for low to
moderate income families. Single-family mortgage revenue bonds are issued for
the purpose of acquiring notes secured by mortgages on residences. The ability
of housing issuers to make debt service payments on their obligations may be
affected by various economic and non-economic factors. Such factors include:
occupancy levels, adequate rental income in multi-family projects, the rate of
default on mortgage loans underlying single family issues and the ability of
mortgage insurers to pay claims. All single family mortgage revenue bonds and
certain multi-family housing revenue bonds are prepayable over the life of the
underlying mortgage or mortgage pool. Therefore, the average life of housing
obligations cannot be determined. However, the average life of these
obligations will ordinarily be less than their stated maturities. Mortgage
loans are frequently partially or completely prepaid prior to their final stated
maturities. To the extent that these obligations were valued at a premium when
a unitholder purchased units, any prepayment at par would result in a loss of
capital to the unitholder and reduce the amount of income that would otherwise
have been paid to unitholders.
Industrial Development Revenue Bonds ("IDRs"). IDRs, including pollution
control revenue bonds, are tax-exempt bonds issued by states, municipalities,
public authorities or similar entities to finance the cost of acquiring,
constructing or improving various projects. These projects are usually operated
by corporate entities. IDRs are not general obligations of governmental
entities backed by their taxing power. Issuers are only obligated to pay
amounts due on the IDRs to the extent that funds are available from the
unexpended proceeds of the IDRs or receipts or revenues of the issuer. Payment
of IDRs is solely dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor. Such corporate operators or guarantors
that are industrial companies may be affected by many factors which may have an
adverse impact on the credit quality of the particular company or industry.
Lease Rental Bonds. Lease rental bonds are predominantly issued by
governmental authorities that have no taxing power or other means of directly
raising revenues. Rather, the authorities are financing vehicles created solely
for the construction of buildings or the purchase of equipment that will be used
by a state or local government. Thus, the bonds are subject to the ability and
willingness of the lessee government to meet its lease rental payments which
include debt service on the bonds. Lease rental bonds are subject to the risk
that the lessee government is not legally obligated to budget and appropriate
for the rental payments beyond the current fiscal year. These bonds are also
subject to the risk of abatement in many states as rental bonds cease in the
event that damage, destruction or condemnation of the project prevents its use
by the lessee. Also, in the event of default by the lessee government, there
may be significant legal and/or practical difficulties involved in the reletting
or sale of the project.
Understanding Your Investment 15
Moral Obligation Bonds. A trust may also include "moral obligation" bonds.
If an issuer of moral obligation bonds is unable to meet its obligations, the
repayment of the bonds becomes a moral commitment but not a legal obligation of
the state or municipality in question. Thus, such a commitment generally
requires appropriation by the state legislature and accordingly does not
constitute a legally enforceable obligation of debt of the state. The agencies
or authorities generally have no taxing power.
Power Bonds. The ability of utilities to meet their obligations with respect
to bonds they issue is dependent on various factors. These factors include the
rates they may charge their customers, the demand for a utility's services and
the cost of providing those services. Utilities may also be subject to
extensive regulations relating to the rates which they may charge customers.
Utilities can experience regulatory, political and consumer resistance to rate
increases. Utilities engaged in long-term capital projects are especially
sensitive to regulatory lags in granting rate increases. Utilities are
additionally subject to increased costs due to governmental environmental
regulation and decreased profits due to increasing competition. Any difficulty
in obtaining timely and adequate rate increases could adversely affect a
utility's results of operations. The sponsor cannot predict at this time the
ultimate effect of such factors on the ability of any issuers to meet their
obligations with respect to bonds.
Refunded Bonds. Refunded bonds are typically secured by direct obligations
of the U.S. Government, or in some cases obligations guaranteed by the U.S.
Government, placed in an escrow account maintained by an independent party until
maturity or a predetermined redemption date. These obligations are generally
non-callable prior to maturity or the predetermined redemption date. In a few
isolated instances to date, however, bonds which were thought to be escrowed to
maturity have been called for redemption prior to maturity.
Solid Waste Disposal Bonds. Bonds issued for solid waste disposal facilities
are generally payable from tipping fees and from revenues that may be earned by
the facility on the sale of electrical energy generated in the combustion of
waste products. The ability of solid waste disposal facilities to meet their
obligations depends upon the continued use of the facility, the successful and
efficient operation of the facility and, in the case of waste-to-energy
facilities, the continued ability of the facility to generate electricity on a
commercial basis. Also, increasing environmental regulation of the federal,
state and local level has a significant impact on waste disposal facilities.
While regulation requires most waste producers to use waste disposal facilities,
it also imposes significant costs on the facilities.
Special Tax Bonds. Special tax bonds are payable for and secured by the
revenues derived by a municipality from a particular tax. Examples of special
taxes are a tax on the rental of a hotel room, on the purchase of food and
beverages, on the rental of automobiles or on the consumption of liquor.
Special tax bonds are not secured by the general tax revenues of the
municipality, and they do not represent general obligations of the municipality.
Payment on special tax bonds may be adversely affected by a reduction in
revenues realized from the underlying special tax. Also, should spending on the
particular goods or services that are subject to the special tax decline, the
municipality may be under no obligation to increase the rate of the special tax
to ensure that sufficient revenues are raised from the shrinking taxable base.
16 Understanding Your Investment
Tax Allocation Bonds. Tax allocation bonds are typically secured by
incremental tax revenues collected on property within the areas where
redevelopment projects, financed by bond proceeds are located. Bond payments
are expected to be made from projected increases in tax revenues derived from
higher assessed values of property resulting from development in the particular
project area and not from an increase in tax rates. Special risk considerations
include: variations in taxable values of property in the project area;
successful appeals by property owners of assessed valuations; substantial
delinquencies in the payment of property taxes; or imposition of any
constitutional or legislative property tax rate decrease.
Transit Authority Bonds. Mass transit is generally not self-supporting from
fare revenues. Additional financial resources must be made available to ensure
operation of mass transit systems as well as the timely payment of debt service.
Often such financial resources include federal and state subsidies, lease
rentals paid by funds of the state or local government or a pledge of a special
tax. If fare revenues or the additional financial resources do not increase
appropriately to pay for rising operating expenses, the ability of the issuer to
adequately service the debt may be adversely affected.
Water and Sewer Revenue Bonds. Water and sewer bonds are generally payable
from user fees. The ability of state and local water and sewer authorities to
meet their obligations may be affected by a number of factors. Some such
factors are the failure of municipalities to utilize fully the facilities
constructed by these authorities, declines in revenue from user charges, the
possible inability to obtain rate increases, rising construction and maintenance
costs, impact of environmental requirements, the difficulty of obtaining or
discovering new supplies of fresh water, the effect of conservation programs,
the impact of "no growth" zoning ordinances and the continued availability of
federal and state financial assistance and of municipal bond insurance for
future bond issues.
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 because these securities generally
trade in the over-the-counter market (they are not listed on a securities
exchange).
LITIGATION AND LEGISLATION RISK is the risk that future litigation or
legislation could affect the value of your trust. For example, future
legislation could reduce tax rates, impose a flat tax, exempt all investment
income from tax or change the tax status of the securities. Litigation could
challenge an issuer's authority to issue or make payments on securities.
"WHEN ISSUED" AND "DELAYED DELIVERY" BONDS. "When, as and if issued" bonds
are bonds that trade before they are actually issued. Bonds purchased on a
"when issued" basis have not yet been issued by the issuer on the trust's
inception date although such issuer has committed to issue such bonds. This
means that the sponsor can only deliver them to the trust "when, as and if" the
bonds are actually issued. In addition, other bonds may have been purchased by
the sponsor on a "delayed delivery" basis. These bonds are expected to be
delivered to the trust after the trust's first settlement date (normally three
business days after the trust's inception date).
Delivery of these bonds may be delayed or may not occur. Interest on these
bonds does not begin accruing to your trust until the bond is delivered to the
trust. You may have to adjust your tax basis of any bonds delivered after the
expected delivery date. Any adjustment would
Understanding Your Investment 17
reflect interest that accrued between the time you purchased your units and the
delivery of the bonds to your trust. This could lower your first year estimated
current return. You may experience gains or losses on these bonds from the time
you purchase units even though your trust has not yet received them.
ORIGINAL ISSUE DISCOUNT BONDS. Original issue discount bonds were initially
issued at a price below their face (or par) value. These bonds typically pay a
lower interest rate than comparable bonds that were issued at or above their par
value. In a stable interest rate environment, the market value of these bonds
tends to increase more slowly in early years and in greater increments as the
bonds approach maturity. The issuers of these bonds may be able to call or
redeem a bond before its stated maturity date and at a price less than the
bond's par value.
Zero coupon bonds are a type of original issue discount bond. These bonds do
not pay any current interest during their life. If an investor owns this type
of bond, the investor has the right to receive a final payment of the bond's par
value at maturity. The price of these bonds often fluctuates greatly during
periods of changing market interest rates compared to bonds that make current
interest payments. The issuers of these bonds may be able to call or redeem a
bond before its stated maturity date and at a price less than the bond's par
value.
MARKET DISCOUNT. The portfolio of the trust may consist of some bonds whose
current market values were below the principal value on the trust's inception
date or your unit purchase date. A primary reason for the market value of such
bonds being less than the principal value is that the interest rate of such
bonds is at a lower rate than the current market interest rates for comparable
bonds. Bonds selling at market discounts tend to increase in market value as
they approach maturity. A market discount tax-exempt bond held to maturity will
have a larger portion of its total return in the form of taxable ordinary income
and less in the form of tax-exempt income than a comparable bond bearing
interest at current market rates.
PREMIUM BONDS. The portfolio of the trust may consist of some bonds whose
current market values were above the principal value on the trust's inception
date or your unit purchase date. A primary reason for the market value of such
bonds being higher than the principal value is that the interest rate of such
bonds is at a higher rate than the current market interest rates for comparable
bonds. The current returns of bonds trading at a market premium are initially
higher than the current returns of comparable bonds issued at currently
prevailing interest rates because premium bonds tend to decrease in market value
as they approach maturity when the principal value becomes payable. Because
part of the purchase price is effectively returned not at maturity but through
current income payments, early redemption of a premium bond at par or any other
amount below the trust's purchase price 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 bonds have a market
value that represents a premium over par or for original issue discount
securities a premium over the accreted value.
BOND INSURANCE
Bonds are not required to be covered by insurance to be included in the trust
portfolio. Certain bonds may, however, be covered by insurance guaranteeing
payment of interest and
18 Understanding Your Investment
principal, when due. The premium for any bond insurance is paid by the issuer
or by a prior owner of the bonds and any policy is non-cancelable and will
continue in force so long as the bonds so insured are outstanding and the bond
insurer remains in business. The bond insurers, if any, are listed in the bond
names in the "Portfolio" and a table following the "Portfolio". Bond insurance,
if any, guarantees the timely payment of principal and interest on the bonds
when they fall due. For this purpose, "when due" generally means the stated
payment or maturity date for the payment of principal and interest. The
insurance does not guarantee the market value of the bonds or the value of the
trust units. Each bond insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such
regulation, however, is no guarantee that a bond insurer will be able to perform
on its contract of insurance in the event a claim should be made.
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, Inc. (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
$1,000. The number of units, fractional interest of each unit in the trust,
estimated interest distributions per unit and estimated current and long-term
returns 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 may be altered. Your trust will generally reject
any offer for securities or other property in exchange for the securities in its
portfolio. 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.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to maintain a portfolio that replicates the
principal amounts of the securities in the portfolio. When your trust buys
securities, it may pay brokerage or other acquisition fees. You could
experience a dilution of your investment
Understanding Your Investment 19
because of these fees and fluctuations in security prices between the time we
create units and the time your trust buys the securities. Because the trust
pays the brokerage fees associated with the creation of new units and with the
sale of securities to meet redemption and exchange requests, frequent redemption
and exchange activity will likely result in higher brokerage expenses. 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.
In the event of a failure to deliver any bond that has been purchased for the
trust under a contract ("failed bonds"), the sponsor is authorized to purchase
other bonds ("replacement bonds"). The trustee shall pay for replacement bonds
out of funds held in connection with the failed bonds and will accept delivery
of such bonds to make up the original principal of the trust. The replacement
bonds must be purchased within 20 days after delivery of the notice of the
failed contract, and the purchase price (exclusive of accrued interest) may not
exceed the principal attributable to the failed bonds. Whenever a replacement
bond has been acquired for the trust, the trustee shall, within five days
thereafter, notify all unitholders of the trust of the acquisition of the
replacement bond and shall, on the next 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 bond exceeded the cost of the replacement
bond. In addition, a replacement bond must (at the time of purchase):
* be a tax exempt bond;
* have a fixed maturity or disposition date comparable to that of the failed
bond it replaces;
* be purchased at a price that results in a yield to maturity and in a
current return which is approximately equivalent to the yield to maturity
and current return of the failed bond which it replaces; and
* be rated at least in the category of A- or the equivalent by a major
rating organization.
If the right of limited substitution described above shall not be used to
acquire replacement bonds in the event of a failed contract, the sponsor will
refund the sales charge attributable to such failed bonds to all unitholders of
the trust, and distribute the principal attributable to such failed bonds on the
next monthly distribution date which is more than 30 days thereafter. In the
event a replacement bond is not acquired by the trust, the estimated net annual
interest income per unit would be reduced and the estimated current and long-
term returns might be lowered.
ESTIMATED CURRENT AND LONG-TERM RETURNS. The estimated current return and
the estimated long-term return as of the business day before the trust's
inception date are shown under "Essential Information" in the "Investment
Summary" section of this prospectus. Estimated current return is calculated by
dividing the estimated net annual interest income per unit by the public
offering price. The estimated net annual interest income per unit will vary
with changes in fees and expenses of your trust and with the default,
redemption, maturity, exchange or sale of bonds. The public offering price will
vary with changes in the price of the bonds. Accordingly, there is no assurance
that the present estimated current return will be realized in the future.
Estimated long-term return is calculated using a formula which (1) takes into
consideration, and determines
20 Understanding Your Investment
and factors in the relative weightings of, the market values, yields (which
takes into account the amortization of premiums and the accretion of discounts)
and estimated retirements of the bonds and (2) takes into account the expenses
and sales charge associated with units. Since the value and estimated
retirements of the bonds and the expenses of your trust will change, there is no
assurance that the present estimated long-term return will be realized in the
future. The estimated current return and estimated long-term return are
expected to differ because the calculation of estimated long-term return
reflects the estimated date and amount of principal returned while the estimated
current return calculation includes only net annual interest income and public
offering price.
In order to acquire certain bonds, it may be necessary for the sponsor or
trustee to pay amounts covering accrued interest on the bonds which exceed the
amounts which will be made available through cash furnished by the sponsor on
the trust's inception date. This cash may exceed the interest which would
accrue to the first settlement date. The trustee has agreed to pay for any
amounts necessary to cover any excess and will be reimbursed when funds become
available from interest payments on the related bonds.
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 upon the maturity,
payment, redemption, sale or other liquidation of all of the securities in the
portfolio. 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.
THE SPONSOR. The sponsor of the trust is Fixed Income Securities, Inc.
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
Understanding Your Investment 21
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 the
underwriters and other broker-dealers and selling agents. We pay part of the
sales fee to these distribution firms when they sell units. Units will be
distributed to the public by these firms at the public offering price per unit
as described under "How to Buy Units".
Underwriter Compensation. The underwriters for the trust and the amounts of
units underwritten are listed under "Investment Summary-Underwriting". As
sponsor and principal underwriter, we sell these units to the underwriters at
the regular public offering price per unit less a concession per unit as set
forth in the following table:
AGGREGATE AMOUNT UNDERWRITER
ORIGINALLY UNDERWRITTEN CONCESSION
------------------------------------------
100 - 249 units $38.00
250 or more units 40.00
In addition, with respect to all subsequent unit purchases by an underwriter
above the original underwriting commitment, an underwriter will be allowed an
initial offering period broker-dealer concession equal to the original
underwriter concession applicable to the underwriter as set forth in the table
above rather than the broker-dealer concessions described below under "Broker-
Dealer Compensation".
In addition to any other benefits underwriters may realize from the sale of
units, the sponsor will share on a pro rata basis among underwriters that
underwrite 500 to 999 units 25% of any gain (less deductions for accrued
interest and certain costs) represented by the difference between the cost of
the bonds to the sponsor and the evaluation of the bonds on the trust's
inception date. In addition to any other benefits underwriters may realize from
the sale of units, the sponsor will share on a pro rata basis among underwriters
that underwrite at least 1,000 units 50% of any gain (less deductions for
accrued interest and certain costs) represented by the difference between the
cost of the bonds to the sponsor and the evaluation of the bonds on the trust's
inception date.
Broker-Dealer Compensation. During the initial offering period, we will sell
units of the trust to non-underwriter broker-dealers and selling agents at the
public offering price per unit (net of any sales fee discount) less the gross
concession
22 Understanding Your Investment
or agency commission set forth in the following table:
CONCESSION
OR AGENCY
TRANSACTION AMOUNT COMMISSION
-------------------------------------------
Less than 100 units $33.00
100 - 249 units 30.00
250 - 499 units 20.00
500 - 999 units 15.00
1,000 or more units 12.00
We apply these concessions as a fixed dollar amount per unit net of any sales
fee discount. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled due to
the requirement that only whole units be issued. We also apply the breakpoints
in the table above on a dollar basis using a breakpoint equivalent of $1,000 per
unit and will be applied on whichever basis is more favorable to the broker-
dealer or selling agent.
For transactions involving unitholders of other unit investment trusts who
use their redemption or termination proceeds to purchase units of the trust
offered in this prospectus, the concession or agency commission is $22.50 per
unit.
No concession or agency commission 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.
Underwriters other than the sponsor will sell units of the trust to other
broker-dealers and selling agents at the public offering price per unit less a
concession or agency commission not in excess of the underwriter concession
allowed to the underwriter by the sponsor as described under "Underwriter
Compensation" above.
For secondary market transactions, the sponsor will sell units of the trust
to broker-dealers and selling agents at the public offering price per unit less
the concession or agency commission based on the dollar-weighted average
maturity of the securities in the trust as set forth in the following table:
CONCESSION
AVERAGE OR AGENCY
MATURITY COMMISSION
-------------------------------------------
Less than 5 years $22.50
5 but less than 8 years 32.50
8 or more years 40.00
Dealers other than the sponsor may sell units in the secondary market to
other broker-dealers and selling agents at the public offering price per unit
less a concession or agency commission not in excess of the secondary market
concession allowed to the dealer.
Any sales fee discount is borne by the broker-dealer or selling firm out of
the concession or agency commission, except as stated above. We reserve the
right to change the amount of concessions or agency commissions from time to
time.
General. Underwriters, 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 period sales of all Advisor's
Understanding Your Investment 23
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.
As compensation for purchasing a portion of the unit investment trust
business of Citigroup Global Markets Inc. ("CGMI"), we will pay CGMI an amount
based on the total dollar amount of units of municipal bond unit investment
trusts that we sponsor. For long-term municipal bond trusts created in 2008,
this amount equals $7.50 per $1,000 of units of such a trust at inception and
reduces for trusts offered in subsequent years. This payment will be made out
of our assets and not from assets of a trust.
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. As part of its general broker-dealer
business, the sponsor provides training, account servicing and related services
to TD AMERITRADE, Inc. and receives compensation for these services that is
partially comprised of an amount equal to twenty percent of the gross sales
concessions earned by TD AMERITRADE, Inc. on transactions in various securities,
including transactions in units of all unit investment trusts, whether or not
issued or distributed by the sponsor.
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
24 Understanding Your Investment
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.
TAXES
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. After the end of each year, you will receive a tax statement
that separates your trust's distributions into three categories, exempt-interest
dividends, ordinary income distributions and capital gains dividends. Exempt-
interest dividends generally are excluded from your gross income for federal
income tax purposes. Some or all of the exempt-interest dividends, however, may
be taken into account in determining your alternative minimum tax and may have
other tax consequences (e.g., they may affect the amount of your social security
benefits that are taxed).
Ordinary income distributions are generally taxed at your ordinary tax rate.
Generally, you will treat all capital gains dividends as long-term capital gains
regardless of how long you have owned your shares. 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
shares 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 charge, 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 dividends
received from the trust because the dividends received deduction is generally
not available for distributions from regulated investment companies.
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 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. 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 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
Understanding Your Investment 25
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.
EXCHANGES. If you elect to have your proceeds from your trust rolled over
into a future series of the trust, the exchange would generally be considered a
sale for federal income tax purposes.
DEDUCTIBILITY OF TRUST EXPENSES. Generally, expenses incurred by your trust
will be deducted 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.
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.
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 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
26 Understanding Your Investment
each year. The trustee will generally pay trust expenses from interest income
and principal payments received on the securities but in some cases may sell
securities to pay trust 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 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).
Understanding Your Investment 27
TAXABLE EQUIVALENT ESTIMATED CURRENT RETURN
The following table shows the approximate taxable estimated current returns
for individuals that are equivalent to tax-exempt estimated current returns
under United States federal taxes using the published marginal federal tax rates
scheduled to be in effect in 2008 as of the date of this prospectus. The table
illustrates approximately what you would have to earn on taxable investments to
equal the tax-exempt estimated current return in your income tax bracket. The
table does not reflect any state or local taxes, any alternative minimum taxes
or any taxes other than federal personal income taxes. The table does not show
the approximate taxable estimated current returns for individuals that are
subject to the alternative minimum tax. The taxable equivalent estimated
current returns may be somewhat higher than the equivalent returns indicated in
the following tables for those individuals who have adjusted gross incomes in
excess of $159,950. The tables do not reflect the effect of federal or state
limitations (if any) on the amount of allowable itemized deductions or the
phase-outs of personal or dependent exemption credits or any other credits.
These limitations were designed to phase out certain benefits of these
deductions and credits for higher income taxpayers. These limitations, in
effect, raise the current maximum marginal federal tax rate to approximately
37.3567% for taxpayers filing a joint return and entitled to four personal
exemptions and to approximately 36.05% for taxpayers filing a single return
entitled to only one personal exemption. These limitations are subject to
certain maximums, which depend on the number of exemptions claimed and the total
amount of taxpayer's itemized deductions. For example, the limitation on
itemized deductions will not cause a taxpayer to lose more than 80% of his
allowable itemized deductions, with certain exceptions. See "Understanding
Your Investment--Taxes" for a more detailed discussion of federal tax issues.
TAXABLE INCOME TAX-EXEMPT ESTIMATED CURRENT RETURN
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
- ------------------------------------ -----------------------------------------------------------
SINGLE RETURN JOINT RETURN TAX RATE EQUIVALENT TAXABLE ESTIMATED CURRENT RETURN
- ----------------------------------------------------------------------------------------------------------------
$0-8,025 $0-16,050 10.00% 3.33% 3.89% 4.44% 5.00% 5.56% 6.11% 6.67%
8,025-32,550 16,050-65,100 15.00% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06%
32,550-78,850 65,100-131,450 25.00% 4.00% 4.67% 5.33% 6.00% 6.67% 7.33% 8.00%
78,850-164,550 131,450-200,300 28.00% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33%
164,550-357,700 200,300-357,700 33.00% 4.48% 5.22% 5.97% 6.72% 7.46% 8.21% 8.96%
Over 357,700 Over 357,700 35.00% 4.62% 5.38% 6.15% 6.92% 7.69% 8.46% 9.23%
28 Understanding Your Investment
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISOR'S DISCIPLINED TRUST 230
We have audited the accompanying statement of financial condition, including the
trust portfolio on page 4, of Advisor's Disciplined Trust 230, as of February
__, 2008, 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of financial condition. 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 February __, 2008. An audit also
includes assessing the accounting principles used and significant estimates made
by the sponsor, as well as evaluating the overall statement of financial
condition presentation. 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 230 as of February __, 2008, in conformity with accounting
principles generally accepted in the United States of America.
GRANT THORNTON LLP
Chicago, Illinois
February __, 2008
ADVISOR'S DISCIPLINED TRUST 230
STATEMENT OF FINANCIAL CONDITION
AS OF FEBRUARY __, 2008
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . $
Accrued interest to first settlement date (1) . . . . . . . . . . . . . .
Cash (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Accrued interest payable to sponsor (1) . . . . . . . . . . . . . . . . $
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred sales fee (4) . . . . . . . . . . . . . . . . . . . . . . . . .
----------
----------
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . .
Less: sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . .
Less: organization costs (3)(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 offer side evaluations as
determined by the evaluator. The trustee will advance the amount of net
interest accrued to the first settlement date to the trust for distribution
to the sponsor as unitholder of record as of such date.
(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 the trust.
These costs have been estimated at $5.00 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 sales fee is equal to 4.70%.
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees.
Understanding Your Investment 29
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
6 Underwriting
6 Types of Bonds
6 Location of Issuers
6 Insurance on the Bonds
UNDERSTANDING YOUR INVESTMENT
- -------------------------------------------------------------------
Detailed information to 7 How to Buy Units
help you understand 10 How to Sell Your Units
your investment 11 Distributions
12 Investment Risks
18 Bond Insurance
19 How the Trust Works
25 Taxes
26 Expenses
27 Experts
27 Additional Information
28 Taxable Equivalent Estimated
Current Return
29 Report of Independent Registered
Public Accounting Firm
29 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 (FIS)
(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 230
Securities Act file number: 333-149300
Investment Company Act file number: 811-21056
TAX-EXEMPT
SECURITIES TRUST,
NATIONAL TRUST 445
PROSPECTUS
FEBRUARY __, 2008
[LOGO]
ADVISOR'S
ASSET MANAGEMENT
A DIVISION OF FIXED INCOME SECURITIES, INC.
ADVISOR'S DISCIPLINED TRUST, SERIES 230
TAX EXEMPT SECURITIES TRUST, NATIONAL TRUST 445
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, Inc. 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
Risk Factors 7
Administration of the Trust 18
Purchase, Redemption and Pricing of Units 25
Performance Information 33
Description of Securities Ratings 33
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, Inc. (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 $1,000. 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 principal
amounts which will generally maintain the same original percentage relationship
among the principal amounts of the securities in such trust established by the
initial deposit of the securities. Thus, although additional units will be
issued, each unit will generally continue to represent the same principal amount
of each security, and the percentage relationship among the principal amount of
each security in the related trust will generally remain the same. 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 cash deposit and the purchase of the securities and
because the trust will pay any associated brokerage fees.
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
-2-
in any of 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 monthly distributions of interest income exempt
from United States federal personal income tax and to provide capital
preservation by investing in a portfolio primarily consisting of long-term
municipal bonds. There is, of course, no guarantee that the trust will achieve
its objective. The trust portfolio consists of interest-bearing obligations
issued by or on behalf of states and territories of the United States, and
political subdivisions and authorities thereof, the interest on which is
excludable from gross income for United States federal personal income tax
purposes under existing law in the opinion of recognized bond counsel to the
issuer of the bonds. The prospectus provides additional information regarding
the trust's objective and investment strategy.
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 the special circumstances discussed herein
regarding the substitution of replacement securities for any failed securities.
Thus, with the exception of the redemption or maturity of securities in
accordance with their terms, the assets of a trust will remain unchanged under
normal circumstances.
The sponsor may direct the trustee to dispose of securities the value of
which has been affected by certain adverse events including institution of
certain legal proceedings or decline in price or the occurrence of other market
factors, including advance refunding, so that in the opinion of the sponsor the
retention of such securities in a trust would be detrimental to the interest of
the unitholders. The proceeds from any such sales, exclusive of any portion
which represents accrued interest, will be credited to the Principal Account of
such trust for distribution to the unitholders.
The sponsor is required to instruct the trustee to reject any offer made by
an issuer of securities to issue new securities, or to exchange securities, for
trust securities, the trustee shall reject such offer. However, should any
issuance, exchange or substitution be effected notwithstanding such rejection or
without an initial offer, any securities or property received shall be deposited
in the trust and shall be promptly sold by the trustee unless the sponsor
advises the trustee to keep such securities or properties. The excess cash
proceeds of any such sales will be distributed to unitholders.
-3-
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 sponsor, 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 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 Principal
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 redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to unitholders and will not be reinvested, no assurance can be given
that a trust will retain for any length of time its present size and
composition. Neither the sponsor nor the trustee shall be liable in any way for
any default, failure or defect in any security. In the event of a failure to
deliver any security that has been purchased for a trust under a contract,
including those securities purchased on a "when, as and if issued" basis
("Failed Securities"), the sponsor is authorized under the trust agreement to
direct the trustee to acquire other securities ("Replacement Securities") to
make up the original corpus of such trust.
Securities in certain of the trusts may have been purchased on a "when, as
and if issued" or delayed delivery basis with delivery expected to take place
after the first settlement date. Accordingly, the delivery of such securities
may be delayed or may not occur. Interest on these securities begins accruing
to the benefit of unitholders on their respective dates of delivery.
Unitholders of all trusts will be "at risk" with respect to any "when, as and if
issued" or "delayed
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delivery" securities included in their respective trust (i.e., may derive either
gain or loss from fluctuations in the evaluation of such securities) from the
date they commit for units.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities (i) shall be bonds,
debentures, notes or other straight debt obligations (whether secured or
unsecured and whether senior or subordinated) without equity or other conversion
features, with fixed maturity dates substantially the same as those of the
Failed Securities, having no warrants or subscription privileges attached;
(ii) shall be payable in United States currency; (iii) shall not be "when, as
and if issued" obligations or restricted securities; (iv) shall be issued after
July 18, 1984 if interest thereon is United States source income; (v) shall be
issued or guaranteed by an issuer subject to or exempt from the reporting
requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934
(or similar provisions of law) or in effect guaranteed, directly or indirectly,
by means by of a lease agreement, agreement to buy securities, services or
products, or other similar commitment of the credit of such an issuer to the
payment of the Replacement Securities; (vi) if the prospectus for the related
trust provides that an objective of such trust is to provide income exempt from
United States federal taxation, shall be securities issued by states or
territories of the United States or political subdivisions thereof which shall
have the benefit of an exemption from United States federal taxation of interest
to an extent equal to or greater than that of the Securities they replace and,
if the prospectus for the related trust provides that an objective of such trust
is to provide income exempt from state taxation, shall have the benefit of an
exemption from state taxation to an extent equal to or greater than that of the
Securities they replace; and (vii) shall not cause the units of the related
trust to cease to be rated "AAA" by Standard & Poor's, a division of The McGraw-
Hill Companies, Inc. if the units are so rated. The purchase price of the
Replacement Securities (exclusive of accrued interest) shall not exceed the
principal attributable to the Failed Securities. In addition, no substitution of
Replacement Securities will be made without an opinion of counsel that such
substitution will not adversely affect the federal income tax status of the
related trust, if such Replacement Securities when added to all previously
purchased Replacement Securities in the related trust exceed 15% of the
principal amount of Securities initially deposited in the related trust.
Whenever a Replacement Security is acquired for a trust, the trustee shall,
within five days thereafter, notify all unitholders of the trust of the
acquisition of the Replacement Security and shall, on the next monthly
distribution date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the trust of the Failed
Security exceeded the cost of the Replacement Security. Once all of the
securities in a trust are acquired, the trustee will have no power to vary the
investments of the trust, i.e., the trustee will have no managerial power to
take advantage of market variations to improve a unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the sponsor will refund the sales fee attributable to such Failed
Securities to all unitholders of the trust and the trustee will distribute the
principal and accrued interest attributable to such Failed Securities not more
than 30 days after the date on which the trustee would have been required to
purchase a Replacement Security. In addition, unitholders should be aware that,
at the time of receipt of such principal,
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they may not be able to reinvest such proceeds in other securities at a yield
equal to or in excess of the yield which such proceeds would have earned for
unitholders of such trust.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid to
unitholders of the trust to the date the sponsor removes the Failed Securities
from the trust if the sponsor determines not to purchase a Replacement Security
or to the date of substitution if a Replacement Security is purchased. All such
interest paid to unitholders which accrued after the date of settlement for a
purchase of units will be paid by the sponsor. In the event a Replacement
Security could not be acquired by a trust, the net annual interest income per
unit for such trust would be reduced and the estimated current return and
estimated long-term return might be lowered.
Subsequent to the trust's inception, a security may cease to be rated or
its rating may be reduced below any minimum required as of the trust's
inception. Neither event requires the elimination of such investment from a
trust, but may be considered in the sponsor's determination to direct the
trustee to dispose of such investment.
The sponsor may not alter the portfolio of a trust except upon the
happening of certain extraordinary circumstances. Certain of the securities may
be subject to optional call or mandatory redemption pursuant to sinking fund
provisions, in each case prior to their stated maturity. A bond subject to
optional call is one which is subject to redemption or refunding prior to
maturity at the option of the issuer, often at a premium over par. A refunding
is a method by which a bond issue is redeemed, at or before maturity, by the
proceeds of a new bond issue. A bond subject to sinking fund redemption is one
which is subject to partial call from time to time at par with proceeds from a
fund accumulated for the scheduled retirement of a portion of an issue to
maturity. Special or extraordinary redemption provisions may provide for
redemption at par of all or a portion of an issue upon the occurrence of certain
circumstances. Redemption pursuant to optional call provisions is more likely
to occur, and redemption pursuant to special or extraordinary redemption
provisions may occur, when the securities have an offering side evaluation which
represents a premium over par, that is, when they are able to be refinanced at a
lower cost. The proceeds from any such call or redemption pursuant to sinking
fund provisions, as well as proceeds from the sale of securities and from
securities which mature in accordance with their terms from a trust, unless
utilized to pay for units tendered for redemption, will be distributed to
unitholders of such trust and will not be used to purchase additional securities
for such trust. Accordingly, any such call, redemption, sale or maturity will
reduce the size and diversity of a trust and the net annual interest income of
such trust and may reduce the estimated current return and the estimated long-
term return. The call, redemption, sale or maturity of securities also may have
tax consequences to a unitholder.
Certain of the securities in certain of the trusts may have been acquired
at a market discount from par value at maturity. The coupon interest rates on
the discount securities at the time they were purchased and deposited in the
trusts were lower than the current market interest rates for newly issued bonds
of comparable rating and type. If such interest rates for newly issued
comparable securities increase, the market discount of previously issued
securities will become greater, and if such interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal.
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Investors should also note that the value of securities purchased at a market
discount will increase in value faster than securities purchased at a market
premium if interest rates decrease. Conversely, if interest rates increase, the
value of securities purchased at a market discount will decrease faster than
securities purchased at a market premium. In addition, if interest rates rise,
the prepayment risk of higher yielding, premium securities and the prepayment
benefit for lower yielding, discount securities will be reduced. A discount
security held to maturity will have a larger portion of its total return in the
form of taxable income and capital gain and loss in the form of tax-exempt
interest income than a comparable security newly issued at current market rates.
Market discount attributable to interest changes does not indicate a lack of
market confidence in the issue. Neither the sponsor nor the trustee shall be
liable in any way for any default, failure or defect in any of the securities.
Certain of the securities in the trust may be "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the payment of current
interest. Zero coupon bonds are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the maturity of the bond
and does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the zero
coupon bonds) is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount earned during the life of such
obligation. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest the income on such obligation at a rate as
high as the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future. For
this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
securities of comparable quality which pay interest currently.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security which 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 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.
RISK FACTORS
MUNICIPAL BONDS. The trusts include certain types of bonds described below.
Accordingly, an investment in a trust should be made with an understanding of
the characteristics of and risks associated with such bonds. The types of bonds
included in each trust are described in the prospectus. Neither the sponsor nor
the trustee shall be liable in any way for any default, failure or defect in any
of the bonds.
Certain of the bonds may be general obligations of a governmental entity
that are backed by the taxing power of such entity. All other bonds in the
trusts are revenue bonds payable from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds, on the
other hand, are payable
-7-
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source. There are, of course, variations in the security of the
different bonds in a trust, both within a particular classification and between
classifications, depending on numerous factors.
Certain of the bonds may be obligations which derive their payments from
mortgage loans. Certain of such housing bonds may be FHA insured or may be
single family mortgage revenue bonds issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on residences
located within the issuer's boundaries and owned by persons of low or moderate
income. Mortgage loans are generally partially or completely prepaid prior to
their final maturities as a result of events such as sale of the mortgaged
premises, default, condemnation or casualty loss. Because these bonds are
subject to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary
call dates. Extraordinary mandatory redemption without premium could also result
from the failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period. Additionally,
unusually high rates of default on the underlying mortgage loans may reduce
revenues available for the payment of principal of or interest on such mortgage
revenue bonds. These bonds were issued under Section 103A of the Internal
Revenue Code, which Section contains certain requirements relating to the use of
the proceeds of such bonds in order for the interest on such bonds to retain its
tax-exempt status. In each case the issuer of the bonds has covenanted to comply
with applicable requirements and bond counsel to such issuer has issued an
opinion that the interest on the bonds is exempt from Federal income tax under
existing laws and regulations. Certain issuers of housing bonds have considered
various ways to redeem bonds they have issued prior to the stated first
redemption dates for such bonds. In connection with the housing bonds held by a
trust, the sponsor at the date of deposit is not aware that any of the
respective issuers of such bonds are actively considering the redemption of such
bonds prior to their respective stated initial call dates.
Certain of the bonds may be health care revenue bonds. Ratings of bonds
issued for health care facilities are often based on feasibility studies that
contain projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service may be affected by
future events and conditions including, among other things, demand for services
and the ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with other
health care facilities, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the cost
and possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third party pay or programs, government regulation
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar third party
pay or programs.
Certain of the bonds may be obligations of public utility issuers,
including those selling wholesale and retail electric power and gas. General
problems of such issuers would include the difficulty in financing large
construction programs in an inflationary period, the limitations on operations
and increased costs and delays attributable to environmental considerations, the
difficulty of the capital market in absorbing utility debt, the difficulty in
obtaining fuel at
-8-
reasonable prices and the effect of energy conservation. In addition, Federal,
state and municipal governmental authorities may from time to time review
existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain of the bonds to make payments of principal
and/or interest on such bonds.
Certain of the bonds may be obligations of issuers whose revenues are
derived from the sale of water and/or sewerage services. Such bonds are
generally payable from user fees. The problems of such issuers include the
ability to obtain timely and adequate rate increases, population decline
resulting in decreased user fees, the difficulty of financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing difficulty of
obtaining or discovering new supplies of fresh water, the effect of conservation
programs and the impact of "no-growth" zoning ordinances.
Certain of the bonds may be industrial revenue bonds ("IRBs"). IRBs have
generally been issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a particular
project have been assigned and pledged to purchasers. In some cases, a mortgage
on the underlying project may have been granted as security for the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon the
creditworthiness of the corporate operator of the project or corporate
guarantor. Corporate operators or guarantors may be affected by many factors
which may have an adverse impact on the credit quality of the particular company
or industry. These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a corporate restructuring pursuant to a leveraged
buy-out, takeover or otherwise. Such a restructuring may result in the operator
of a project becoming highly leveraged which may impact on such operator's
creditworthiness which in turn would have an adverse impact on the rating and/or
market value of such bonds. Further, the possibility of such a restructuring may
have an adverse impact on the market for and consequently the value of such
bonds, even though no actual takeover or other action is ever contemplated or
effected.
Certain of the bonds may be obligations that are secured by lease payments
of a governmental entity (hereinafter called "lease obligations"). Lease
obligations are often in the form of certificates of participation. Although the
lease obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to appropriate for and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. A governmental entity that enters into such
a lease agreement cannot obligate future governments to appropriate for and make
lease payments but covenants to take such action as is necessary to include any
lease payments due in its budgets and to make the appropriations therefor. A
governmental entity's failure to appropriate for and to make payments under its
lease obligation could result in insufficient funds available for payment of the
obligations secured thereby.
-9-
Although "non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult.
Certain of the bonds may be obligations of issuers which are, or which
govern the operation of, schools, colleges and universities and whose revenues
are derived mainly from ad valorem taxes or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby creating a
disparity in educational funds available to schools in wealthy areas and schools
in poor areas. Litigation or legislation on this issue may affect the sources of
funds available for the payment of school bonds in the trusts. General problems
relating to college and university obligations include the prospect of a
declining percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal grants and
state funding, and government legislation or regulations which may adversely
affect the revenues or costs of such issuers.
Certain of the bonds in certain of the trusts may be obligations which are
payable from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. The major portion of an airport's gross operating income is
generally derived from fees received from signatory airlines pursuant to use
agreements which consist of annual payments for leases, occupancy of certain
terminal space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under the use
agreements. From time to time the air transport industry has experienced
significant variations in earnings and traffic, due to increased competition,
excess capacity, increased costs, deregulation, traffic constraints and other
factors, and several airlines have experienced severe financial difficulties.
Similarly, payment on bonds related to other facilities is dependent on revenues
from the projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected by
reduction in revenues due to such factors as increased cost of maintenance,
decreased use of a facility, lower cost of alternative modes of transportation,
scarcity of fuel and reduction or loss of rents.
Certain of the bonds may be obligations which are payable from and secured
by revenues derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam and
convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation of a
project; contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of a project or
technological or other unavoidable changes adversely affecting the operation of
a project; and administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform or impose
unreasonable burdens or excessive liabilities. The sponsor cannot predict the
causes or likelihood of the redemption of resource recovery bonds in a trust
prior to the stated maturity of the bonds.
-10-
Certain of the bonds may have been acquired at a market discount from par
value at maturity. The coupon interest rates on discount bonds at the time they
were purchased and deposited in a trust were lower than the current market
interest rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable bonds increase, the market discount
of previously issued bonds will become greater, and if such interest rates for
newly issued comparable bonds decline, the market discount of previously issued
bonds will be reduced, other things being equal. Investors should also note that
the value of bonds purchased at a market discount will increase in value faster
than bonds purchased at a market premium if interest rates decrease. Conversely,
if interest rates increase, the value of bonds purchased at a market discount
will decrease faster than bonds purchased at a market premium. In addition, if
interest rates rise, the prepayment risk of higher yielding, premium bonds and
the prepayment benefit for lower yielding, discount bonds will be reduced. A
bond purchased at a market discount and held to maturity will have a larger
portion of its total return in the form of taxable income and capital gain and
less in the form of tax-exempt interest income than a comparable bond newly
issued at current market rates. 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 bonds.
Certain of the bonds held by the trust may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the premium
bonds at the time they were purchased by the trust were higher than the current
market interest rates for newly issued bonds of comparable rating and type. If
such interest rates for newly issued and otherwise comparable bonds decrease,
the market premium of previously issued bonds will be increased, and if such
interest rates for newly issued comparable bonds increase, the market premium of
previously issued bonds will be reduced, other things being equal. The current
returns of bonds trading at a market premium are initially higher than the
current returns of comparable bonds of a similar type issued at currently
prevailing interest rates because premium bonds tend to decrease in market value
as they approach maturity when the face amount becomes payable. Because part of
the purchase price is thus returned not at maturity but through current income
payments, early redemption of a premium bond at par or early prepayments of
principal will result in a reduction in yield. Redemption pursuant to call
provisions generally will, and redemption pursuant to sinking fund provisions
may, occur at times when the redeemed bonds have an offering side valuation
which represents a premium over par or for original issue discount bonds a
premium over the accreted value.
Certain of the bonds may be "zero coupon" bonds. Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligation at a rate as high as the implicit yield
on the discount obligation, but at the same time eliminates the holder's ability
to reinvest at higher rates in the future. For this reason, zero coupon bonds
are subject to substantially greater price fluctuations during periods of
changing market interest rates than are securities of comparable quality which
pay interest.
-11-
Certain of the bonds may have been purchased on a "when, as and if issued"
or "delayed delivery" basis. See "Notes to Portfolio" in the prospectus. The
delivery of any such bonds may be delayed or may not occur. Interest on these
Bonds begins accruing to the benefit of unitholders on their respective dates of
delivery. To the extent any bonds are actually delivered to a trust after their
respective expected dates of delivery, unitholders who purchase their unit prior
to the date such bonds are actually delivered to the trustee would be required
to adjust their tax basis in their unit for a portion of the interest accruing
on such bonds during the interval between their purchase of unit and the actual
delivery of such bonds. As a result of any such adjustment, the Estimated
Current Returns during the first year would be slightly lower than those stated
in the Prospectus which would be the returns after the first year, assuming the
portfolio of a trust and estimated annual expenses other than that of the
trustee (which may be reduced in the first year only) do not vary from that set
forth in the prospectus. Unitholders will be "at risk" with respect to all bonds
in the portfolios including "when, as and if issued" and "delayed delivery"
bonds (i.e., may derive either gain or loss from fluctuations in the evaluation
of such bonds) from the date they commit for unit.
Certain of the bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is a method
by which a debt obligation is redeemed, at or before maturity, by the proceeds
of a new debt obligation. In general, call provisions are more likely to be
exercised when the offering side valuation is at a premium over par than when it
is at a discount from par. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called bonds are used to pay for unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions; it may also affect
the current return on unit of the trust involved. Each trust portfolio contains
a listing of the sinking fund and call provisions, if any, with respect to each
of the debt obligations. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. Generally, events that
may permit the extraordinary optional redemption of bonds or may require the
mandatory redemption of bonds include, among others: a final determination that
the interest on the bonds is taxable; the substantial damage or destruction by
fire or other casualty of the project for which the proceeds of the bonds were
used; an exercise by a local, state or Federal governmental unit of its power of
eminent domain to take all or substantially all of the project for which the
proceeds of the bonds were used; changes in the economic availability of raw
materials, operating supplies or facilities or technological or other changes
which render the operation of the project for which the proceeds of the bonds
were used uneconomic; changes in law or an administrative or judicial decree
which renders the performance of the agreement under which the proceeds of the
bonds were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes, not
imposed on the date the bonds are issued on the issuer of the bonds or the user
of the proceeds of the bonds; an administrative or judicial decree which
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the bonds; an overestimate of the costs of the
project to be financed with the proceeds of the bonds resulting in excess
proceeds of the bonds which may be applied to redeem bonds; or an underestimate
of a source of funds securing the bonds resulting in excess funds
-12-
which may be applied to redeem bonds. The issuer of certain bonds in a trust may
have sold or reserved the right to sell, upon the satisfaction of certain
conditions, to third parties all or any portion of its rights to call bonds in
accordance with the stated redemption provisions of such bonds. In such a case
the issuer no longer has the right to call the bonds for redemption unless it
reacquires the rights from such third party. A third party pursuant to these
rights may exercise the redemption provisions with respect to a bond at a time
when the issuer of the bond might not have called a bond for redemption had it
not sold such rights. The sponsor is unable to predict all of the circumstances
which may result in such redemption of an issue of bonds. See also the
discussion of single family mortgage and multi-family revenue bonds above for
more information on the call provisions of such bonds.
To the best knowledge of the sponsor, there is no litigation pending as of
the date of deposit in respect of any bonds which might reasonably be expected
to have a material adverse effect upon any of the trusts. At any time after the
trust's inception date, litigation may be initiated on a variety of grounds with
respect to bonds in a trust. Such litigation, as, for example, suits challenging
the issuance of pollution control revenue bonds under environmental protection
statutes, may affect the validity of such bonds or the tax-free nature of the
interest thereon. While the outcome of litigation of such nature can never be
entirely predicted, each trust has received or will receive opinions of bond
counsel to the issuing authorities of each bond on the date of issuance to the
effect that such bonds have been validly issued and that the interest thereon is
exempt from Federal income tax. In addition, other factors may arise from time
to time which potentially may impair the ability of issuers to meet obligations
undertaken with respect to the bonds.
PUERTO RICO. Your trust may significantly invest in bonds issued by
issuers located in Puerto Rico. Accordingly, an investment in such a trust
should be made with an understanding of the general risks associated with the
Commonwealth of Puerto Rico.
Economic Conditions and Outlook. Puerto Rico enjoyed almost two decades of
economic expansion through fiscal year 2001. Almost every sector of the economy
participated, and record levels of employment were achieved. Factors behind
this expansion included government-sponsored economic development programs,
periodic declines in the value of the U.S. dollar, which is the currency used in
the Commonwealth, increases in the level of federal transfers, a significant
expansion in construction investment driven by infrastructure projects and
private investment, primarily in housing, and the relatively low cost of
borrowing.
Puerto Rico has a diversified economy, with manufacturing and services
comprising its principal sectors. The economy of Puerto Rico is closely linked
to the United States economy. The following exogenous variables are affected by
the United States economy: exports, direct investment, transfer payments,
interest rates, inflation, and tourist expenditures.
Manufacturing is the largest sector in terms of gross domestic product.
Manufacturing in Puerto Rico is now more diversified than during the earlier
phases of its industrial development and includes several industries less prone
to business cycles. In the last three decades, industrial development has
tended to be more capital intensive and more dependent on skilled labor. The
services sector, which includes finance, insurance, real estate, wholesale and
retail trade, tourism,
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and other services, has shown a strong interaction with manufacturing, tourism,
construction, and agriculture. Tourism makes a significant contribution to
economic activity. An estimated $3.4 billion was spent by visitors in Puerto
Rico during fiscal year 2006. San Juan has become the largest home port for
cruise ships in the Caribbean and the fourth largest home port for cruise ships
in the world. During the year 2006, the number of persons registered in tourist
hotels maintained the same occupancy rate as fiscal year 2005. The construction
sector is an integral part of the economic activity from fiscal year 1999
through fiscal year 2006. Puerto Rico is heavily dependent on oil imports for
the production of electricity; however, as a result of the construction of two
cogeneration plants, one of which is fueled by liquefied natural gas and the
other by coal, Puerto Rico's dependence on oil imports for the production of
electricity has been reduced from 99% to 72%.
The Puerto Rico Planning Board's preliminary reports of the performance of
the Puerto Rico economy during fiscal year 2006 indicate that the economy
registered an increase of 0.7% in total gross product. Gross product in fiscal
year 2000 was $41.4 billion and gross product in fiscal year 2006 was $56.7
billion. This represents an increase in gross product of 36.9% from fiscal year
2000 to fiscal year 2006. In terms of personal income, in fiscal year 2006,
personal income per capita was $12,997 compared to $12,365 in 2005 and $10,204
in 2000. According to the Department of Labor and Human Resources, during
fiscal year 2006 the labor force was 1.42 million compared to 1.39 million in
fiscal year 2005. Unemployment, although at relative low historical levels,
remains above the United States average. The average unemployment rate
increased from 10.6% during fiscal year 2005 to 11.7% in fiscal year 2006.
Financial Information. The Commonwealth reported a deficit of $16.4
billion as of June 30, 2006, a deterioration in the financial position of $1.2
billion from last year's balances. The accumulated deficit is principally the
result of the Commonwealth's practice of issuing debt and transferring such
funds to its discretely presented component units in order for them to carry out
the corresponding construction programs.
The Commonwealth's total deficit increased by $1.2 billion (a 7% increase)
as a result of this year's operations. The governmental activities deficit
increased by $0.3 billion (an 8% increase), while net assets of the
business-type activities showed an increase of $97 million (a 10% increase).
The Commonwealth's governmental activities had total revenue of $14.3 billion,
which was exceeded by total expenses of $15.8 billion, excluding transfers
received from business-type activities amounting to $243 million. The
Commonwealth's business-type activities had total revenue of $1.2 billion, which
exceeded total expenses of $903 million, excluding transfers made to the
governmental activities amounting to $243 million.
Cash Management. The Commonwealth maintains a cash pool for its cash and
cash equivalents. The balance in the pooled cash accounts is available to meet
current operating requirements and any excess is invested in various
interest-bearing accounts in the Government Development Bank for Puerto Rico
(GDB), a discretely presented component unit. In addition, the Puerto Rico
Government Investment Trust Fund (PRGITF), was created by the Commonwealth
pursuant to Act No. 176 of August 11, 1995, and began operations on December 4,
1995. PRGITF is a no-load diversified collective investment trust that was
created for the purpose of providing eligible investors with a convenient and
economical way to invest in
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a professionally managed money market portfolio. The deposits on hand and the
investments purchased are not collateralized, secured, or guaranteed by the
Commonwealth or any of its agencies, instrumentalities, or political
subdivisions.
The Commonwealth's investment policy is to minimize credit and market risk
while maintaining a competitive yield on its portfolio. The cash temporarily
idle during this year was invested mainly in U.S. government securities, stocks,
corporate bonds, repurchase agreements, Commonwealth securities, trading
securities, and short-term investments. These are primary government
investments that are restricted and unrestricted.
Budgetary Policy. The fiscal year of the Commonwealth begins each July 1.
The Governor is constitutionally required to submit to the Legislature an annual
balanced budget of capital improvements and operating expenses of the Central
Government for the ensuing fiscal year.
The Commonwealth maintains extensive budgetary controls. The objective of
these controls is to ensure compliance with legal provisions embodied in the
annual appropriated budget approved by the Legislature. Activities of the
general fund are included in the annual appropriated budget. Budgetary control
resides at the department level. The Commonwealth also maintains an encumbrance
accounting system as one method of maintaining budgetary control.
The annual budget, which is developed using elements of performance-based
program budgeting and zero-based budgeting, includes an estimate of revenue and
other resources for the ensuing fiscal year under laws existing at the time the
budget is submitted and legislative measures proposed by the Governor and
submitted with the proposed budget, as well as the Governor's recommendations as
to appropriations that in his judgment are necessary, convenient and in
conformity with the four-year investment plan prepared by the Puerto Rico
Planning Board.
The Legislature may amend the budget submitted by the Governor, but may not
increase items that would cause a deficit without imposing additional taxes to
cover such deficit. Once approved by the Legislature, the budget is referred to
the Governor, who may decrease or eliminate any item, but may not increase or
insert new items in the budget. The Governor may also veto the budget in its
entirety and return it to the Legislature with his objections. The Legislature,
by a two-thirds majority in each house, may override the Governor's veto. If a
budget is not adopted prior to the end of the fiscal year, as originally
approved by the Legislature and the Governor, it is automatically renewed for
the ensuing fiscal year until a new budget is approved by the Legislature and
the Governor. This allows the Commonwealth to continue to pay operating and
other expenses until a new budget is approved.
Assets. Total assets and total liabilities of the Commonwealth's primary
government at June 30, 2006 amounted to $14.9 billion and $31.3 billion,
respectively, for a net deficit of $16.4 billion, compared to a $15.2 billion
net deficit at the beginning of the current year, as restated.
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A portion of the Commonwealth's net assets (deficit) reflects its
investment in capital assets such as land, buildings, equipment and
infrastructure, less any related debt used to acquire those assets that are
still outstanding. The Commonwealth uses these capital assets to provide
services to its residents; consequentially, these assets are not available for
future spending. Although the Commonwealth's investment in its capital assets
is reported net of related debt, it should be noted that the resources needed to
repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
An additional portion of the Commonwealth's net assets (deficit) represents
resources that are subject to external restrictions on how they may be used. An
otherwise positive remaining balance would be used to meet the Commonwealth's
ongoing obligations to its residents and creditors. Internally imposed
designations of resources are not presented as restricted net assets. At the
end of the current fiscal year, the Commonwealth is able to report positive
balances in two categories of net assets, and a deficit, both for the government
as a whole, as well as for its separate governmental and business-type
activities.
The net deficit of the primary government primarily results from the
Commonwealth's practice of issuing debt and transferring such funds to the
component units so that they can carry out the construction projects. The
primary government retains the debt while the component units report the
corresponding asset financed by such debt.
Total assets increased by $1.5 billion during the fiscal year 2006 when
compared to the prior fiscal year. Restricted cash increased by $647 million
when compared to the prior year. The increase was due to approximately $250
million in cash restricted for tax revenue anticipation notes, and an overall
increase in cash restricted for the payment of other long-term debt. Taxes
receivable increased $120 million when compared to the prior year. Additions of
capital assets and depreciation expense amounted to $816 million and $223
million, respectively.
Total liabilities increased $3 billion during the current fiscal year when
compared to the prior fiscal year. The key elements for this increase are
mostly due to the net increase in debt issued of $1.64 billion, which consisted
of issuances during fiscal year 2006 of Commonwealth general obligation bonds
and notes payable amounting to $141 million, and $3.2 billion, respectively,
offset by repayments of such debt in the amount of $209 million and $140
million. Increases were also experienced in the net pension obligation of $261
million and accounts payable and tax revenue anticipation notes of $298 million
and $250 million, respectively.
The Commonwealth's net deficit increased by $1.2 billion, or 8%, from last
year's total net deficit. Approximately 52% of the Commonwealth's total revenue
came from taxes, while 29% resulted from grants and contributions (primarily
federal financial assistance). Charges for services represented 13% of the
total revenue. The Commonwealth's expenses cover a range of services. The
largest expenses were for education, public housing and welfare, and public
safety. In 2006, governmental activities' expenses exceeded program revenue by
$10.5 billion, resulting in the use of $9.2 billion in general revenue (mostly
taxes) and transfers. On the other hand, program revenue from business-type
activities in 2006 exceeded expenses by approximately $306 million. In
addition, the business-type activities had unrestricted investment earnings of
$33 million and transfers to the governmental activities amounting to $243
million.
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Governmental activities decreased the Commonwealth's net assets by $1.2
billion, which is $1.7 billion less than experienced in the prior year.
Business-type activities decreased the Commonwealth's net assets by $97 million.
The Commonwealth made efforts to decrease overall expenses; these efforts
resulted in a decrease of $1.2 billion, but revenues were still lower than total
expenses. The Commonwealth implemented the 5.5% sales and use tax during fiscal
year 2007. This sales and use tax results in higher tax revenues. The
Commonwealth expects that the effort to decrease expenses and the increase in
tax revenue with the sales and use tax will eliminate or significantly lower the
deficit in future years. The two main factors that contributed to the increase
in net assets were the reduction of $30 million in the operating expenses in
lottery funds and the increase in nonoperating revenue of $37.3 million of
contributions from the federal government on unemployment fund, water pollution
control and treatment revolving loan funds.
The key factor of this variance was a transfer of funds of $200 million
from the Additional Lottery System to the general fund as further explained in
note 10 to the basic financial statements.
Debt Administration. Section 2 of Article VI of the Constitution of Puerto
Rico provides that direct obligations of the Commonwealth evidenced by full
faith and credit bonds or notes shall not be issued if the amount of the
principal of and interest on such bonds and notes and on all such bonds and
notes theretofore issued, which is payable in any fiscal year, together with any
amount paid by the Commonwealth in the preceding fiscal year on accounts of
bonds or notes guaranteed by the Commonwealth, exceeds 15% of the average annual
revenue raised under the provisions of the Commonwealth Legislation and covered
into Treasury of Puerto Rico in the two fiscal years preceding the current
fiscal year. Section 2 of Article VI does not limit the amount of debt that the
Commonwealth may guarantee so long as the 15% limitation is not exceeded.
The Commonwealth's total long-term obligations increased by $2 billion
during the current fiscal year, representing an 8% increase.
Ratings. As of February 2008, the Commonwealth of Puerto Rico has a BBB-
credit rating from Standard & Poor's Corporation and a Baa3 from Moody's
Investor Service on general obligation bond issues.
Local Issuances. It should be noted that the creditworthiness of
obligations issued by local Pennsylvania issuers may be unrelated to the
creditworthiness of obligations issued by the Commonwealth of Puerto Rico, and
there is no obligation on the part of the Commonwealth to make payments on such
local obligations in the event of default.
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
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between the time of the cash 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. Interest received by a trust, including any
portion of the proceeds from a disposition of securities which represents
accrued interest, is credited by the trustee to the Interest Account for the
trust. All other receipts are credited by the trustee to a separate Principal
Account for the trust. The trustee normally has no cash for distribution to
unitholders until it receives interest payments on the securities in the trust.
On the dates set forth under "Essential Information" in the prospectus, the
trustee will commence distributions, in part from funds advanced by the trustee.
Thereafter, assuming the trust retains its original size and composition,
after deduction of the fees and expenses and reimbursements (without interest)
to the trustee for any amounts advanced to a trust, the trustee will normally
distribute any income and principal received by the trust on each distribution
date or shortly thereafter to unitholders of record on the preceding Record
Date. Unitholders will receive an amount substantially equal to their pro rata
share of the balance of the Interest Account. However, interest earned at any
point in time will generally be greater than the amount actually received by the
trustee. Therefore, there will generally remain an item of accrued interest
that is added to the daily value of the units. If unitholders sell or redeem
all or a portion of their units, they will be paid their proportionate share of
the accrued interest to, but not including, the third business day after the
date of a sale or to the date of tender in the case of a redemption.
Unitholders of record on the first record date will receive an interest
distribution on the first distribution date. Because the period of time between
the first distribution date and the regular distribution dates may not be a full
period, the first regular distributions may be partial distributions.
Persons who purchase units between a record date and a distribution date
will receive their first distribution on the second distribution date following
their purchase of units. Since interest on securities in the trust is payable
at varying intervals and distributions are made to unitholders at different
intervals from receipt of interest, the interest accruing to a trust may not be
equal to the amount of money received and available for distribution from the
Interest Account. Therefore, on each distribution date the amount of interest
actually deposited in the Interest Account and available for distribution may be
slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such variances,
the trustee is authorized by the trust agreement to advance such amounts as may
be necessary to provide interest distributions of approximately equal amounts.
The trustee will be reimbursed, without interest, for any such advances from
funds available in the Interest Account.
The trustee will distribute on each distribution date or shortly
thereafter, to each unitholder of record on the preceding record date, an amount
substantially equal to such holder's pro rata share of the available cash
balance, if any, in the Principal Account computed as of the
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close of business on the preceding record date. However, no distribution will
be required if the balance in the Principal Account is less than $.01 per unit.
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 Interest Account:
(1) Income received;
(2) Deductions for applicable taxes and for fees and expenses of the trust
and for redemptions of units, if any; and
(3) The balance remaining after such distributions and deductions,
expressed in each case both as a total dollar amount and as a dollar
amount representing the pro rata share of each unit outstanding on the
last business day of such calendar year; and
(B) As to the Principal Account:
(1) The dates of disposition of any securities and the net proceeds
received therefrom;
(2) Deductions for payment of applicable taxes and fees and expenses of
the trust and for redemptions of units, if any; and
(3) The balance remaining after such distributions and deductions
expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each unit outstanding on the last
business day of such calendar year; and
(C) The following information:
(1) A list of the securities as of the last business day of such calendar
year;
(2) The number of units outstanding on the last business day of such
calendar year;
(3) The redemption price based on the last evaluation made during such
calendar year;
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(4) The amount actually distributed during such calendar year from the
Interest and Principal Accounts separately stated, expressed both as
total dollar amounts and as dollar amounts per unit outstanding on the
record dates for each such distribution.
RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of 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
maturity, liquidation, redemption or other disposition of the last of the
securities held in the trust but in no event is it to
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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. 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.
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 Interest and Principal Accounts of the trust.
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
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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 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, Inc.
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, Inc., 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 and
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.
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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 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 Principal and Interest Accounts since these Accounts are non-interest
bearing and the amounts
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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 for 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 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 Interest Account of the related trust to the extent funds are
available and then from the Principal 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
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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 Interest and Principal 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.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. During the initial offering period, the public offering price
per unit is equal to the net asset value per unit (generally based on the
offering side evaluations of the securities) plus the applicable sales fee
referred to in the prospectus plus cash deposited to pay organization costs plus
accrued interest, if any. The public offering price for secondary market
transactions, on the other hand, is based on the net asset value per unit
(generally based on the bid side evaluations of the securities) plus a sales fee
plus cash deposited to pay organization costs plus accrued interest, if any.
The sales fee as a percentage of the public offering price and the net amount
invested is set forth in the prospectus. During the initial offering period, a
portion of the public offering price includes an amount of cash or 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. Following the end of the initial offering period, the
public offering price for secondary market transactions is based on the net
asset value per unit (generally based on the bid side evaluations of the
securities) plus a sales fee plus cash deposited to pay organization costs plus
accrued interest, if any. 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 as discussed in the prospectus. Orders received by the trustee,
sponsor or any authorized financial professionals 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 as discussed in the
prospectus.
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
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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 securities and the amount of
accrued interest on the units. Net asset value per unit is determined by
dividing the value of a trust's portfolio securities (including any accrued
interest), cash and other assets, less all liabilities (including accrued
expenses), by the total number of units outstanding. The portfolio securities
are valued at their current market value or their fair value as determined in
good faith by the Evaluator. The aggregate bid and offering side evaluations of
the securities shall be determined (a) on the basis of current bid or offering
prices of the securities, (b) if bid or offering prices are not available for
any particular security, on the basis of current bid or offering prices for
comparable securities, (c) by determining the value of securities on the bid or
offer side of the market by appraisal, or (d) by any combination of the above.
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.
The interest on the securities deposited in a trust, less the related
estimated fees and expenses, will accrue daily. The amount of net interest
income which accrues per unit may change as securities mature or are redeemed,
exchanged or sold, or as the expenses of a trust change or the number of
outstanding units of a trust changes.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of units on the 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.
ACCRUED INTEREST. Accrued interest is the accumulation of unpaid interest
on a security from the last day on which interest thereon was paid. Interest on
securities generally is paid monthly or semi-annually although a trust accrues
such interest daily. Because of this, a trust always has an amount of interest
earned but not yet collected by the trustee. For this reason, with respect to
sales settling subsequent to the first settlement date, the public offering
price of units of a trust will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of a trust the amount, if any, of accrued interest paid
on their units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the public offering price in the sale of units to
the public, the trustee will advance the amount of accrued interest as of the
first settlement date and the same will be distributed to the sponsor as the
unitholder of record as of the first settlement date. Consequently, the amount
of accrued interest to be added to the public offering price of units will
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include only accrued interest from the first settlement date to the date of
settlement, less any distributions from the Interest Account subsequent to the
first settlement date.
Because of the varying interest payment dates of securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the applicable trusts and distributed to unitholders.
Therefore, there will always remain an item of accrued interest that is added to
the value of the units. If a unitholder sells or redeems all or a portion of
his units, he will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his units. Since the trustee has the use of the
funds held in the Interest Account for distributions to unitholders and since
such account is non-interest-bearing to unitholders, the trustee benefits
thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the net
asset value of units during the initial offering period will generally be
determined on the basis of the current offering prices of the securities in a
trust, after the initial offering period the net asset value of units will
generally be determined on the basis of the current bid prices of the
securities. As of the close of business on the business day before the trust's
inception date, the public offering price per unit exceeded the redemption price
at which units could have been redeemed by the amount of the sales fee. The bid
prices for on securities similar to those in the trust are lower than the
offering prices thereof. For this reason, among others (including fluctuations
in the market prices of the securities and the fact that the public offering
price includes a sales fee), the amount realized by a unitholder upon any
redemption of units may be less than the price paid for such units.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the Financial Industry Regulatory Authority, 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
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resulting from the difference between the purchase prices of the securities to
the sponsor and the cost of such securities to a trust, which is based on the
offering side evaluation of the securities. The sponsor may also realize
profits or losses with respect to securities deposited in a trust which were
acquired from underwriting syndicates of which the sponsor was a member. An
underwriter or underwriting syndicate purchases securities from the issuer on a
negotiated or competitive bid basis, as principal, with the motive of marketing
such securities to investors at a profit. The sponsor may realize additional
profits or losses during the initial offering period on unsold units as a result
of changes in the daily evaluation of the securities in a trust.
MARKET FOR UNITS. After the initial offering period, while not obligated
to do so, the sponsor 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 based on the aggregate
bid prices of the underlying securities in the trust, together with any accrued
interest to the expected dates of settlement. To the extent that a market is
maintained during the initial offering period, the prices at which units will be
repurchased will be based upon the aggregate offering side evaluation of the
securities in the trust. The aggregate bid prices of the underlying securities
in each trust are expected to be less than the related aggregate offering prices
(which is generally the evaluation method used during the initial public
offering period). Accordingly, 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.
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. If the amount of the redemption is $500 or less and
the proceeds are payable to the unitholder(s) of record at the address of
record, no signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional documentation may be
requested, and a signature guarantee is always required, from corporations,
executors, administrators, trustees, guardians or associations. The signatures
must be guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other 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.
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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 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. 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 Interest 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 Principal Account for a trust.
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,
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 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
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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 (the net
asset value) 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; (2) the aggregate value of each issue of the securities
(including "when issued" contracts, if any) held in the trust as determined
by the evaluator on the basis of bid prices therefor; and (3) interest
accrued and unpaid on the securities in the trust as of the date of
computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account; (2) an amount representing estimated accrued expenses of the
trust, including but not limited to fees and expenses of the trustee
(including legal and auditing fees and any insurance costs), the evaluator,
the sponsor and bond counsel, if any; (3) cash held for distribution to
unitholders of record as of the business day prior to the evaluation being
made; and (4) other liabilities incurred by the trust, provided that the
redemption price will not be reduced by any 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 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 may 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
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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.
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
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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 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.
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PERFORMANCE INFORMATION
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of
the close of business on the business day before the trust's inception date, the
estimated long-term return and the estimated current return, if applicable, for
each trust were as set forth in the "Essential Information" for each trust in
the prospectus. Estimated current return is calculated by dividing the
estimated net annual interest income per unit by the public offering price. The
estimated net annual interest income per unit will vary with changes in fees and
expenses of the trustee, the sponsor and the evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of the securities while the
public offering price will vary with changes in the offering price of the
underlying securities and accrued interest; therefore, there is no assurance
that the present estimated current return will be realized in the future.
Estimated long-term return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums and
the accretion of discounts) and estimated retirements or average life of all of
the securities in a trust and (2) takes into account the expenses and sales fee
associated with each trust unit. Since the market values and estimated
retirements of the securities and the expenses of a trust will change, there is
no assurance that the present estimated long-term return will be realized in the
future. Estimated current return and estimated long-term return are expected to
differ because the calculation of estimated long-term return reflects the
estimated date and amount of principal returned while estimated current return
calculations include only net annual interest income and public offering price.
GENERAL. 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
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.
DESCRIPTION OF SECURITIES RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES. A Standard &
Poor's issue credit rating is a current opinion of the creditworthiness of an
obligor with respect to a specific financial obligation, a specific class of
financial obligations, or a specific financial program (including ratings on
medium-term note programs and commercial paper programs). It
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takes into consideration the creditworthiness of guarantors, insurers, or other
forms of credit enhancement on the obligation and takes into account the
currency in which the obligation is denominated. The issue credit rating is not
a recommendation to purchase, sell, or hold a financial obligation, inasmuch as
it does not comment as to market price or suitability for a particular investor.
Issue credit ratings are based on current information furnished by the
obligors or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
credit rating and may, on occasion, rely on unaudited financial information.
Credit ratings may be changed, suspended, or withdrawn as a result of changes
in, or unavailability of, such information, or based on other circumstances.
Issue credit ratings can be either long term or short term. Short-term
ratings are generally assigned to those obligations considered short-term in the
relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days, including commercial paper. Short-
term ratings are also used to indicate the creditworthiness of an obligor with
respect to put features on long-term obligations. The result is a dual rating,
in which the short-term rating addresses the put feature, in addition to the
usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following
considerations:
* Likelihood of payment capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation;
* Nature of and provisions of the obligation;
* Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above. (Such differentiation applies when an entity has
both senior and subordinated obligations, secured and unsecured obligations, or
operating company and holding company obligations.) Accordingly, in the case of
junior debt, the rating may not conform exactly with the category definition.
AAA--An obligation rated 'AAA' has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA--An obligation rated 'AA' differs from the highest-rated obligations only to
a small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
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A--An obligation rated 'A' is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher-
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB--An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB--An obligation rated 'BB' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B--An obligation rated 'B' is more vulnerable to nonpayment than obligations
rated 'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC--An obligation rated 'CCC' is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC--An obligation rated 'CC' is currently highly vulnerable to nonpayment.
C--A subordinated debt or preferred stock obligation rated 'C' is currently
highly vulnerable to nonpayment. The 'C' rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action taken, but payments
on this obligation are being continued. A 'C' also will be assigned to a
preferred stock issue in arrears on dividends or sinking fund payments, but that
is currently paying.
D--An obligation rated 'D' is in payment default. The 'D' rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
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Plus (+) or minus (-)--The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within the
major rating categories.
N.R.--This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.
Active Qualifiers (Currently applied and/or outstanding)
i--This subscript is used for issues in which the credit factors, terms, or
both, that determine the likelihood of receipt of payment of interest are
different from the credit factors, terms or both that determine the likelihood
of receipt of principal on the obligation. The 'i' subscript indicates that the
rating addresses the interest portion of the obligation only. The 'i' subscript
will always be used in conjunction with the 'p' subscript, which addresses
likelihood of receipt of principal. For example, a rated obligation could be
assigned ratings of "AAAp N.R.i" indicating that the principal portion is rated
"AAA" and the interest portion of the obligation is not rated.
L--Ratings qualified with 'L' apply only to amounts invested up to federal
deposit insurance limits.
p--This subscript is used for issues in which the credit factors, the terms, or
both, that determine the likelihood of receipt of payment of principal are
different from the credit factors, terms or both that determine the likelihood
of receipt of interest on the obligation. The 'p' subscript indicates that the
rating addresses the principal portion of the obligation only. The 'p' subscript
will always be used in conjunction with the 'i' subscript, which addresses
likelihood of receipt of interest. For example, a rated obligation could be
assigned ratings of "AAAp N.R.i" indicating that the principal portion is rated
"AAA" and the interest portion of the obligation is not rated.
pi--Ratings with a 'pi' subscript are based on an analysis of an issuer's
published financial information, as well as additional information in the public
domain. They do not, however, reflect in-depth meetings with an issuer's
management and are therefore based on less comprehensive information than
ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed
annually based on a new year's financial statements, but may be reviewed on an
interim basis if a major event occurs that may affect the issuer's credit
quality.
pr--The letters 'pr' indicate that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful, timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of or the risk of default
upon failure of such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
t--This symbol indicates termination structures that are designed to honor their
contracts to full maturity or, should certain events occur, to terminate and
cash settle all their contracts before their final maturity date.
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MOODY'S INVESTORS SERVICE, INC. Long-Term Obligation Ratings
Moody's long-term obligation ratings are opinions of the relative credit
risk of fixed-income obligations with an original maturity of one year or more.
They address the possibility that a financial obligation will not be honored as
promised. Such ratings reflect both the likelihood of default and any financial
loss suffered in the event of default.
Long-Term Rating Definitions:
Aaa--Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.
Aa--Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.
A--Obligations rated A are considered upper-medium grade and are subject to low
credit risk.
Baa--Obligations rated Baa are subject to moderate credit risk. They are
considered medium-grade and as such may possess certain speculative
characteristics.
Ba--Obligations rated Ba are judged to have speculative elements and are subject
to substantial credit risk.
B--Obligations rated B are considered speculative and are subject to high credit
risk.
Caa--Obligations rated Caa are judged to be of poor standing and are subject to
very high credit risk.
Ca--Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
C--Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.
Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
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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 Incorporation of Fixed Income Securities, Inc.
Reference is made to Exhibit 1.2 to the Registration Statement on
Form S-6 for Advisor's Disciplined Trust 213 (File No. 333-148484) as
filed on January 4, 2008.
1.3 Bylaws of Fixed Income Securities, Inc. Reference is made to Exhibit 1.3
to the Registration Statement on Form S-6 for Advisor's Disciplined
Trust 213 (File No. 333-148484) as filed on January 4, 2008.
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 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 Directors and Officers of Fixed Income Securities, Inc. Reference is
made to Exhibit 6.1 to the Registration Statement on Form S-6 for
Advisor's Disciplined Trust 213 (File No. 333-148484) as filed on
January 4, 2008.
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 213
(File No. 333-148484) as filed on January 4, 2008.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Advisor's Disciplined Trust 230 has duly caused this Amendment No. 1 to
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 20th day of
February, 2008.
ADVISOR'S DISCIPLINED TRUST 230
By FIXED INCOME SECURITIES, INC., DEPOSITOR
By /s/ ALEX R MEITZNER
-----------------------------
Alex R. Meitzner
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below on February 20, 2008 by the
following persons in the capacities indicated:
SIGNATURE TITLE
Scott I. Colyer Director of Fixed Income )
Securities, Inc. )
Lisa A. Colyer Director of Fixed Income )
Securities, Inc. )
James R. Costas Director of Fixed Income )
Securities, Inc. )
Christopher T. Genovese Director of Fixed Income )
Securities, Inc. )
Randy J. Pegg Director of Fixed Income )
Securities, Inc. )
R. Scott Roberg Director of Fixed Income )
Securities, Inc. )
S-2
Jack Simkin Director of Fixed Income )
Securities, Inc. )
Andrew Williams Director of Fixed Income )
Securities, Inc. )
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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