1933 ACT FILE NO.:
1940 ACT FILE NO.: 811-21056
CIK NO.: 1425307
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: ADVISOR'S DISCIPLINED TRUST 250
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.
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The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
The information in this prospectus is not complete and may be changed. No one
may sell units of the trust until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell units and is not soliciting an offer to buy units in any state
where the offer or sale is not permitted.
Preliminary Prospectus Dated April 9, 2008
Subject to Completion
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
A diversified portfolio of
securities seeking
above average total return
PROSPECTUS
MAY __, 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.
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INVESTMENT SUMMARY
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INVESTMENT OBJECTIVE
The trust seeks to provide above average total return.
PRINCIPAL INVESTMENT STRATEGY
The trust invests in a diversified portfolio consisting of six equally-
weighted components:
* Global Basic Materials--stocks of foreign and domestic companies within the
basic materials sector seeking dividend income and capital appreciation.
* High 50 Dividend Strategy--a specialized dividend-oriented strategy that
seeks to provide above average total return.
* International High 30 Dividend Strategy--a specialized dividend-oriented
strategy that seeks to provide above average total return.
* Monument Growth Strategy--a specialized growth-oriented strategy that seeks
above average capital appreciation.
* Preferred Dividend Income--preferred securities seeking high current income.
* Real Estate Income--stock of real estate investment trusts seeking income and
capital appreciation.
We<FN1>* selected these components in an effort to provide an enhanced total
return while reducing overall portfolio volatility through diversification of
assets and investment strategies. We selected the securities within each of
these components as described under "Understanding Your Investment--Security
Selection." We currently offer separate unit investment trusts that invest
according to the same or similar investment strategies as the components
described above. The components, portfolio securities and structure of the
trust offered in this prospectus may differ in certain respects from those of
other trusts we may be offering that use similar investment strategies.
PRINCIPAL RISKS
As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
* SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall over
time.
* THE VALUE OF CERTAIN SECURITIES MAY FALL IF INTEREST RATES, IN GENERAL, RISE.
No one can predict whether interest rates will rise or fall in the future.
* AN ISSUER MAY BE UNWILLING OR UNABLE TO MAKE INCOME PAYMENTS OR DECLARE
DIVIDENDS IN THE FUTURE, OR MAY REDUCE THE LEVEL OF DIVIDENDS DECLARED.
This may reduce the level of income the trust receives which would reduce
your income and cause the value of your units to fall.
* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the initial offering period.
* SECURITIES OF FOREIGN COMPANIES HELD BY THE TRUST PRESENT RISKS BEYOND THOSE
OF U.S. ISSUERS. These risks may include market and political factors
related to the company's foreign market, international trade conditions,
less regulation, smaller or less liquid markets, increased volatility,
differing accounting practices and changes in the value of foreign
currencies.
* THE TRUST WILL RECEIVE EARLY RETURNS OF PRINCIPAL IF SECURITIES ARE CALLED OR
SOLD BEFORE THE TRUST TERMINATION. If this happens your income will
decline and you may not be able to reinvest the money you receive at as
high a yield.
* THE TRUST IS CONSIDERED TO BE CONCENTRATED IN SECURITIES ISSUED BY COMPANIES
IN THE FINANCIAL SERVICES INDUSTRY, SUCH AS BANKS, INSURANCE COMPANIES AND
INVESTMENT FIRMS. Negative developments in the financial services industry
will affect the value of your investment more than would be the case in a
more diversified investment.
* WE DO NOT ACTIVELY MANAGE THE PORTFOLIO. Except in limited circumstances,
the trust will hold, and continue to buy, shares of the same securities
even if their market value declines.
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<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 a defined portfolio of securities selected based on six distinct
investment strategies.
* to pursue a long-term investment strategy that includes investment in
subsequent portfolios, if available.
* the potential to receive above average total return.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in the
securities held by the trust.
* are uncomfortable with the trust's strategies.
* seek aggressive growth without current income.
* seek capital preservation.
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ESSENTIAL INFORMATION
---------------------
UNIT PRICE AT INCEPTION $10.0000
INCEPTION DATE May __, 2008
TERMINATION DATE August __, 2009
ESTIMATED NET ANNUAL
DISTRIBUTIONS* $______ per unit
DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month
CUSIP NUMBERS
Standard Accounts
Cash distributions __________
Reinvest distributions __________
Fee Based Accounts
Cash distributions __________
Reinvest distributions __________
TICKER SYMBOL __________
MINIMUM INVESTMENT $1,000/100 units
* As of May __, 2008 and may vary thereafter
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FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that you
may incur based on a $10 unit price. Actual expenses may vary.
AS A % AMOUNT
OF $1,000 PER 100
SALES FEE INVESTED UNITS
------------------------
Initial sales fee 1.00% $10.00
Deferred sales fee 1.35 13.50
Creation & development fee 0.60 6.00
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Maximum sales fee 2.95% $29.50
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ORGANIZATION COSTS 0.50% $5.00
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AS A % AMOUNT
ANNUAL OF NET PER 100
OPERATING EXPENSES ASSETS UNITS
------------------------
Trustee fee & expenses _.__% $____
Supervisory, evaluation
and administration fees _.__ 1.00
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Total _.__% $____
======= =======
The initial sales fee is the difference between the total sales fee (maximum
of 2.95% of the unit offering price) and the sum of the remaining deferred sales
fee and the total creation and development fee. The deferred sales fee is fixed
at $0.135 per unit and is paid in three monthly installments beginning on
__________ 20, 2008. The creation and development fee is fixed at $0.06 per
unit and is paid at the end of the initial offering period (anticipated to be
three months).
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 years $_____
5 years $_____
10 years $_____
This example assumes that you continue to follow the trust strategy and roll
your investment, including all distributions, into a new series of the trust
each year subject to a reduced rollover sales charge of 1.95%.
Investment Summary 3
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
PORTFOLIO
AS OF THE TRUST INCEPTION DATE, MAY __, 2008
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) SECTOR PRICE SHARE(4) TO TRUST(5)
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GLOBAL BASIC MATERIALS
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HIGH 50 DIVIDEND STRATEGY
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(continued)
4 Investment Summary
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, MAY __, 2008
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) SECTOR PRICE SHARE(4) TO TRUST(5)
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HIGH 50 DIVIDEND STRATEGY (CONTINUED)
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(continued)
Investment Summary 5
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, MAY __, 2008
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) SECTOR PRICE SHARE(4) TO TRUST(5)
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INTERNATIONAL HIGH 30 DIVIDEND STRATEGY
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MONUMENT GROWTH STRATEGY
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(continued)
6 Investment Summary
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, MAY __, 2008
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) SECTOR PRICE SHARE(4) TO TRUST(5)
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MONUMENT GROWTH STRATEGY (CONTINUED)
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(continued)
Investment Summary 7
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, MAY __, 2008
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) SECTOR PRICE SHARE(4) TO TRUST(5)
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MONUMENT GROWTH STRATEGY (CONTINUED)
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PREFERRED DIVIDEND INCOME
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REAL ESTATE INCOME
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(continued)
8 Investment Summary
STRATEGIC CORE PORTFOLIO, SERIES 10
(ADVISOR'S DISCIPLINED TRUST 250)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, MAY __, 2008
PERCENTAGE
OF
NUMBER TICKER AGGREGATE MARKET COST OF
OF SYMBOL/ REDEMPTION OFFERING VALUE PER SECURITIES
SHARES CUSIP ISSUER(1) RATING(2) PROVISION(3) SECTOR PRICE SHARE(4) TO TRUST(5)
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REAL ESTATE INCOME (CONTINUED)
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100.00% $_______
======= ========
<FN>
Notes to Portfolio
(1) Securities are represented by contracts to purchase securities. Shown
under this heading for preferred securities is the stated dividend rate of
each of the securities, expressed as an annual dollar amount or as a
percentage of par or stated value. Each preferred security was originally
issued with a par or stated value per share equal to either $25 or $50.
(2) All ratings are by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. unless otherwise indicated. "*" indicates that the rating
of the security is by Moody's Investor Service, Inc. "NR" indicates that
the rating service did not provide a rating for that security. For a brief
description of the ratings see "Description of Security Ratings" in the
Information Supplement.
(3) The securities are first redeemable on such date and at such price as
listed above. Optional redemption provisions, which may be exercised in
whole or in part, are at prices of par or stated value. Optional
redemption provisions generally will occur at times when the redeemed
securities have an offering side evaluation which represents a premium over
par or stated value. To the extent that the securities were acquired at a
price higher than the redemption price, this will represent a loss of
capital when compared with the public offering price of the units when
acquired. Distributions to unitholders will generally be reduced by the
amount of the dividends which otherwise would have been paid with respect
to redeemed securities, and any principal amount received on such
redemption after satisfying any redemption requests for units received by
the trust will be distributed to unitholders. Certain of the securities
have provisions which would allow for their redemption prior to the
earliest stated call date pursuant to the occurrence of certain
extraordinary events.
(4) The value of each security is based on the most recent closing sale price
of each security as of the close of regular trading on the New York Stock
Exchange on the business day prior to the trust's inception date.
(5) The cost of the securities to the sponsor and the sponsor's profit or
(loss) (which is the difference between the cost of the securities to the
sponsor and the cost of the securities to the trust) are $__________ and
($__________), respectively.
(6) This is a security issued by a foreign company that trades on a U.S.
securities exchange.
Investment Summary 9
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UNDERSTANDING YOUR INVESTMENT
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SECURITY SELECTION
The following describes the six components of the trust's portfolio. The
initial trust portfolio seeks to invest in each component in approximately equal
weightings as of the trust's inception and the weightings will vary thereafter
in accordance with fluctuations in security prices.
GLOBAL BASIC MATERIALS. This component seeks to provide dividend income and
capital appreciation by investing in stocks of foreign and domestic companies
within the basic materials sector. Basic materials companies are engaged in the
manufacture, mining, processing, or distribution of raw materials and
intermediate goods used in the industrial sector. These companies may be
involved in the production of chemicals, construction materials, glass, paper
products, forest products and related packaging products, metals, minerals and
textiles. In selecting the securities for this component, we considered current
dividend yield, diversification of this component of the portfolio among global
regions and basic materials sub-sectors, historical consistency of dividends,
and the potential for dividend growth and capital appreciation. This component
is diversified among stocks of companies located throughout the world, including
the United States.
HIGH 50 DIVIDEND STRATEGY. This component invests in stocks selected using a
specialized dividend-oriented strategy that seeks to provide above average total
return. We selected this component using the following strategy:
* We begin with the companies included in the New York Stock Exchange (NYSE)
Composite Index, Nasdaq Composite Index and American Stock Exchange
Composite Index.
* Stocks are eliminated if at the time of selection:
* the company's stock market capitalization is $1 billion or less,
* the company's headquarters is located outside the United States,
* the stocks are securities of limited partnerships, exchange-traded
funds, investment companies or shares of beneficial interest to the
extent such securities are not otherwise excluded from the composition
of the indexes.
* Of the remaining stocks we select the five stocks in each of the ten
industry sector components with the highest dividend yields. The trust
invests in these 50 stocks.
The ten industry sectors used in the strategy are the Global Industry
Classification Standard sectors published by Standard & Poor's and MSCI Barra.
Please note that we applied the strategy to select the portfolio at a particular
time. If we create additional units of the trust after the trust's inception
date, the trust will purchase the securities originally selected by applying the
strategy. This is true even if a later application of the strategy would have
resulted in the selection of different securities. In addition, companies
which, based on publicly available information as of two business days prior to
the date of this prospectus, are the target of an announced business acquisition
which we expect will happen within six months of the date of this prospectus
have been excluded from the universe of securities from which the trust's
securities are selected.
The trust's strategy begins with the NYSE Composite Index, the Nasdaq
Composite Index
10 Understanding Your Investment
and the American Stock Exchange Composite Index. The NYSE Composite Index is
designed to measure the performance of all common stocks listed on the NYSE,
including American Depository Receipts (ADRs), real estate investment trusts
(REITs) and tracking stocks. All closed-end funds, exchange-traded funds,
limited partnerships and derivatives are excluded from the index. The Nasdaq
Composite Index measures all domestic and international based common type stocks
traded on The Nasdaq Stock Market. To be eligible for inclusion in this index
the security's U.S. listing must be exclusively on The Nasdaq Stock Market (with
certain exceptions), and have a security type of ADRs, common stock, limited
partnership interests, ordinary shares, REITs, shares of beneficial interest or
tracking stocks. Security types not included in this index are closed-end
funds, convertible debentures, exchange-traded funds, preferred stocks, rights,
warrants, units and other derivative securities. The American Stock Exchange
(AMEX) Composite Index is an index representing the aggregate value of the
common shares or ADRs of all AMEX-listed companies, REITs, master limited
partnerships and closed-end investment companies. The publishers of the indexes
are not affiliated with us and have not participated in creating the trust or
selecting the securities for the trust, nor have they reviewed or approved of
any of the information contained herein.
INTERNATIONAL HIGH 30 DIVIDEND STRATEGY. This component invests in stocks of
foreign companies selected using a specialized dividend-oriented strategy that
seeks above average total return. This strategy also seeks to outperform the
Standard & Poor's ADR Index. We selected this component using the following
strategy:
* We begin with the companies listed in the S&P ADR Index. The S&P ADR
Index is based on the non-U.S. stocks comprising the S&P Global 1200 Index.
The S&P ADR Index is made up of those companies from the S&P Global 1200
Index that offer either Level II or Level III ADRs, global shares, or
ordinary shares in the case of Canadian equities. The S&P Global 1200
Index covers 29 countries and consists of seven regional components.
* From the S&P ADR Index, we identify the three stocks in each of the ten
industry sector components of the S&P ADR Index with the highest dividend
yields.
* We select those 30 stocks for the trust's portfolio.
The ten industry sectors used in the strategy are the Global Industry
Classification Standard sectors published by Standard & Poor's and MSCI Barra.
Please note that we applied the strategy to select the portfolio at a particular
time. If we create additional units of the trust after the trust's inception
date, the trust will purchase the securities originally selected by applying the
strategy. This is true even if a later application of the strategy would have
resulted in the selection of different securities. In addition, companies
which, based on publicly available information as of two business days prior to
the date of this prospectus, are the target of an announced business combination
which we expect will happen within six months of the date of this prospectus
have been excluded from the universe of securities from which the trust's
securities are selected.
The trust strategy is based on the Standard & Poor's ADR Index. The Standard
& Poor's ADR Index is designed to track the S&P 700 Index. The S&P ADR Index
only includes securities that can be traded and settled in the U.S.
Understanding Your Investment 11
The index is made up of those companies from the S&P 700 Index that offer either
Level II or Level III ADRs, global shares, or ordinary shares in the case of
Canadian equities. (Level II and III ADRs are listed on U.S. securities
exchanges or Nasdaq and must comply with certain Securities and Exchange
Commission disclosure requirements.) The S&P 700 Index is a subset of the S&P
Global 1200 Index, representing the non-US segment of global equity markets. It
is the S&P Global 1200 Index excluding the S&P 500 Index stocks. The S&P Global
1200 Index is a composite index, comprised of seven regional and country
headline indices, many of which are the accepted leaders in their local markets.
The S&P Global 1200 Index covers 29 countries and consists of seven regional
components. The strategy is derived from stocks contained in the S&P ADR Index.
Standard & Poor's, a division of the McGraw-Hill Companies, Inc., publisher of
the S&P ADR Index, is not affiliated with us and has not participated in
creating the trust or selecting the securities for the trust, nor have they
reviewed or approved of any of the information contained herein.
MONUMENT GROWTH STRATEGY. This component invests in stocks selected using a
specialized growth-oriented strategy that seeks above average capital
appreciation. We selected this component using the following strategy:
* We begin with the companies included in the NYSE Composite Index, Nasdaq
Composite Index and American Stock Exchange Composite Index.
* Companies are eliminated if they do not satisfy the following criteria:
* a market capitalization exceeding $150 million;
* a price-to-sales ratio less than 1.5 and greater than 0.1 (this ratio is
computed by dividing the market value of the security by the issuer's
most recently reported 12 month sales);
* a positive net profit margin;
* reported annual earnings that are higher than the previous year.
* We rank the remaining stocks by 12-month relative strength and select the
top 325 securities and then rank these stocks by 6-month relative strength
and select the top 250 securities. We then rank the remaining stocks by 3-
month relative strength and select the 50 stocks with the highest 3-month
relative strength as of the selection date for the trust portfolio,
excluding securities of affiliates of the sponsor, limited partnerships,
exchange-traded funds, investment companies and certain shares of
beneficial interest to the extent such securities are not otherwise
excluded from the composition of the indexes. Relative strength is equal
to the closing price of a stock on the selection date divided by the
closing price 12, 6 or 3 months prior to the selection date.
Please note that we applied the strategy to select the portfolio at a
particular time. If we create additional units of the trust after the trust's
inception date, the trust will purchase the securities originally selected by
applying the strategy. This is true even if a later application of the strategy
would have resulted in the selection of different securities. In addition,
companies which, based on publicly available information as of two business days
prior to the date of this prospectus, are the target of an announced business
acquisition which we expect will happen within six
12 Understanding Your Investment
months of the date of this prospectus have been excluded from the universe of
securities from which the trust's securities are selected.
This strategy begins with the NYSE Composite Index, the Nasdaq Composite
Index and the AMEX Composite Index. Each index is described above in connection
with the High 50 Dividend Strategy.
PREFERRED DIVIDEND INCOME. This component seeks to provide high current
income by investing in preferred securities. Preferred securities combine some
of the characteristics of both stocks and bonds. Like bonds, the preferred
securities selected for the portfolio pay a fixed rate of income and are sold on
the basis of yield. However, like common stocks, they are traded on major
exchanges. Preferred securities are "senior securities" which have preference
over common stocks, but not debt, of an issuer. Generally, the issuing company
must pay all income payments on its preferred securities before additional
earnings are made available for distribution to common stockholders. Preferred
securities often have a yield advantage over common stocks as well as comparably
rated fixed income investments.
REAL ESTATE INCOME. This component invests in stocks of real estate
investment trusts. A REIT is a company that buys, develops, and/or manages
income producing real estate such as apartments, shopping centers, offices, and
warehouses. In short, a REIT is an entity that pools the capital of many
investors to purchase one or more forms of real estate.
We selected this component in an effort to offer investors diversification
among different types of properties as well as regional diversification. This
type of diversification may help to reduce some of the fluctuations in the real
estate market as a result of economic downturns or changes in supply and demand
in a specific region or type of property. REITs are currently required to
distribute a majority of their income annually as dividends to shareholders.
Historically, this has made REITs a source of relatively steady income for
investors who did not wish to manage the properties themselves. Compared to
traditional privately held real estate, which may be difficult to sell, REITs
are traded on major stock exchanges, generally making them highly liquid. REIT
investors also gain the advantage of skilled management since REIT management
teams tend to be experts within their specific type of property or geographic
niches.
HOW TO BUY UNITS
You can buy units of the trust on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMPORTFOLIOS.COM. The public offering
price of units includes:
* the net asset value per unit plus
* organization costs plus
* the sales fee.
The "net asset value per unit" is the value of the securities, cash and other
assets in the trust reduced by the liabilities of the trust divided by the total
units outstanding. We often refer to the public offering price of units as the
"offer price" or "purchase price." 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
Understanding Your Investment 13
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.
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 using the last
sale price for securities traded on a national securities exchange. For this
purpose, the trustee provides us closing prices from a reporting service
approved by us. In some cases we will price a security based on its fair value
after considering appropriate factors relevant to the value of the security. We
will only do this if a security is not principally traded on a national
securities exchange or if the market quotes are unavailable or inappropriate.
We determined the initial prices of the securities shown under "Portfolio" in
this prospectus as described above at the close of regular trading on the New
York Stock Exchange on the business day before the date of this prospectus. On
the first day we sell units we will compute the unit price as of the close of
regular trading on the New York Stock Exchange or the time the registration
statement filed with the Securities and Exchange Commission becomes effective,
if later.
ORGANIZATION COSTS. During the initial offering period, part of the value of
the units represents an amount that will pay the costs of creating your trust.
These costs include the costs of preparing the registration statement and legal
documents, federal and state registration fees, the initial fees and expenses of
the trustee and the initial audit. Your trust will sell securities to reimburse
us for these costs at the end of the initial offering period or after six
months, if earlier. The value of your units will decline when the trust pays
these costs.
TRANSACTIONAL SALES FEE. You pay a fee in connection with purchasing units.
We refer to this fee as the "transactional sales fee." The transactional sales
fee has both an initial and a deferred component and equals 2.35% of the public
offering price per unit based on a $10 public offering price per unit. This
percentage amount of the transactional sales fee is based on the unit price on
the trust's inception date. The transactional sales fee equals the difference
between the total sales fee and the creation and development fee. As a result,
the percentage and dollar amount of the transactional sales fee will vary as the
public offering price per unit varies. The transactional sales fee does not
include the creation and development fee which is described under "Expenses."
The maximum sales fee equals 2.95% of the public offering price per unit at
the time of purchase. You pay the initial sales fee at the time you buy units.
The initial sales fee is the difference between the total sales fee percentage
(maximum of 2.95% of the public offering price per unit) and the sum of the
remaining fixed dollar deferred sales fee and the total fixed dollar creation
and development fee. The initial sales fee will be approximately 1.00% of the
public offering price per unit depending on the public offering price per unit.
The deferred sales fee is fixed at $0.135 per unit. Your trust pays the
deferred
14 Understanding Your Investment
sales fee in equal monthly installments as described on page 3. If you redeem
or sell your units prior to collection of the total deferred sales fee, you will
pay any remaining deferred sales fee upon redemption or sale of your units.
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
fee you pay. It is your financial professional's responsibility to alert us of
any discount when you order units. Since the deferred sales fee and the
creation and development fee are fixed dollar amounts per unit, your trust must
charge these fees per unit regardless of any discounts. However, if you are
eligible to receive a discount such that your total sales fee is less than the
fixed dollar amounts of the deferred sales fee and the creation and development
fee, we will credit you the difference between your total sales fee and these
fixed dollar fees at the time you buy units.
Large Purchases. You can reduce your sales fee by increasing the size of
your investment:
IF YOU PURCHASE: YOUR FEE WILL BE:
------------------------------------------
Less than $100,000 2.95%
$100,000 - $249,999 2.70
$250,000 - $499,999 2.45
$500,000 - $999,999 2.20
$1,000,000 or more 1.95
We apply these fees as a percent of the public offering price per unit at the
time of purchase. We also apply the different purchase levels on a unit basis
using a $10 unit equivalent. For example, if you purchase between 10,000 and
24,999 units, your fee is 2.70% of your public offering price per unit.
You may AGGREGATE unit orders submitted by the same person for units of any
of the trusts we sponsor on any single day from any one broker-dealer to qualify
for a purchase level. You can also include these orders as your own for
purposes of this aggregation:
* orders submitted by your spouse or minor children living in the same
household and
* orders submitted by your trust estate or fiduciary accounts.
The discounts described above apply during the initial offering period.
Fee Accounts. We waive the transactional sales fee for purchases made
through registered investment advisers, certified financial planners or
registered broker-dealers who charge periodic fees in lieu of commissions or who
charge for financial planning or for investment advisory or asset management
services or provide these services as part of an investment account where a
comprehensive "wrap fee" is imposed. You should consult your financial advisor
to determine whether you can benefit from these accounts. To purchase units in
these fee-based accounts, your financial advisor must purchase units designated
with one of the fee account CUSIP numbers, if available. Please contact your
financial advisor for more information. Fee account purchases are not subject
to the transactional sales fee but will be subject to the creation and
development fee that is retained by the sponsor. For example, this table
illustrates the sales fee you will pay as a percentage of the initial $10 public
offering price per unit (the percentage will vary with the unit price).
Initial sales fee 0.00%
Deferred sales fee 0.00%
-------
Transactional sales fee 0.00%
=======
Creation and development fee 0.60%
-------
Total sales fee 0.60%
=======
Understanding Your Investment 15
This discount applies only during the initial offering period. Certain fee
account investors may be assessed transaction or other fees on the purchase
and/or redemption of units by their broker-dealer or other processing
organizations for providing certain transaction or account activities. We
reserve the right to limit or deny purchases of units in fee accounts by
investors or selling firms whose frequent trading activity is determined to be
detrimental to the trust.
Employees. We waive the transactional sales fee for purchases made by
officers, directors and employees of the sponsor and its affiliates and their
family members (spouses, children and parents). These purchases are not subject
to the transactional sales fee but will be subject to the creation and
development fee.
We also waive a portion of the sales fee for purchases made by registered
representatives of selling firms and their family members (spouses, children and
parents). These purchases may be made at the public offering price per unit
less the applicable regular dealer concession.
These discounts apply during the initial offering period and in the secondary
market.
Rollover/Exchange Option. We waive a portion of the sales fee on units of
the trust offered in this prospectus if you buy your units with redemption or
termination proceeds from any of our other unit trusts. You may also purchase
units of the trust offered in this prospectus at this reduced fee if you
purchase your units with (1) termination proceeds from an unaffiliated unit
trust or (2) redemption proceeds from an unaffiliated unit trust if such trust
is scheduled to terminate within 30 days of the redemption. The discounted
public offering price per unit for these transactions is equal to the regular
public offering price per unit less 1.00%. However, if you invest redemption or
termination proceeds of $1,000,000 or more in units of the trust, the maximum
sales fee on your units will be limited to the maximum sales fee for the
applicable amount invested in the table under "Large Purchases" above. To
qualify for this discount, the termination or redemption proceeds used to
purchase units of the trust offered in this prospectus must be derived from a
transaction that occurred within 30 days of your purchase of units of the trust
offered in this prospectus. In addition, the discount will only be available
for investors that utilize the same broker-dealer (or a different broker-dealer
with appropriate notification) for both the unit purchase and the transaction
resulting in the receipt of the termination or redemption proceeds used for the
unit purchase. You may be required to provide appropriate documentation or
other information to your broker-dealer to evidence your eligibility for this
sales fee discount.
Please note that if you purchase units of the trust in this manner using
redemption proceeds from trusts which assess the amount of any remaining
deferred sales fee at redemption, you should be aware that any deferred sales
fee remaining on these units will be deducted from those redemption proceeds.
This discount applies only during the initial offering period.
Dividend Reinvestment Plan. We do not charge any sales fee when you reinvest
distributions from your trust into additional units of the trust. This sales
fee discount applies during the initial offering period and in the secondary
market. Since the deferred sales fee and the creation and development fee are
fixed dollar amounts per unit, your trust must charge these fees per unit
regardless of this discount. If you elect the distribution reinvestment plan,
we will credit you with additional units with a dollar value sufficient to
16 Understanding Your Investment
cover the amount of any remaining deferred sales fee or creation and development
fee that will be collected on such units at the time of reinvestment. The
dollar value of these units will fluctuate over time.
RETIREMENT ACCOUNTS. The portfolio may be suitable for purchase in tax-
advantaged retirement accounts. You should contact your financial professional
about the accounts offered and any additional fees imposed.
HOW TO SELL YOUR UNITS
You can sell or redeem your units on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMPORTFOLIOS.COM or through your
financial professional. The sale and redemption price of units is equal to the
net asset value per unit, provided that you will not pay any remaining creation
and development fee or organization costs if you sell or redeem units during the
initial offering period. The sale and redemption price is sometimes referred to
as the "liquidation price." You pay any remaining deferred sales fee when you
sell or redeem your units. Certain broker-dealers may charge a transaction 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 any remaining creation and development fee
or 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 any remaining creation and development
fee or organization costs if you redeem units during the initial offering
period. You will pay any remaining deferred sales fee at the time you redeem
units. 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
Understanding Your Investment 17
manner or is incomplete in any way, you will receive the next net asset value
computed after the trustee receives your completed request.
If you redeem your units, the trustee will generally send you a payment for
your units no later than seven days after it receives all necessary
documentation (this will usually only take three business days). The only time
the trustee can delay your payment is if the New York Stock Exchange is closed
(other than weekends or holidays), the Securities and Exchange Commission
determines that trading on that exchange is restricted or an emergency exists
making sale or evaluation of the securities not reasonably practicable, and for
any other period that the Securities and Exchange Commission permits.
To redeem your units, you must send the trustee any certificates for your
units. You must properly endorse your certificates or sign a written transfer
instrument with a signature guarantee. The trustee may require additional
documents such as a certificate of corporate authority, trust documents, a death
certificate, or an appointment as executor, administrator or guardian. The
trustee cannot complete your redemption or send your payment to you until it
receives all of these documents in complete form.
You can request an in-kind distribution of the securities underlying your
units if you tender at least 2,500 units for redemption (or such other amount as
required by your financial professional's firm). This option is generally
available only for securities traded and held in the United States. The trustee
will make any in-kind distribution of securities by distributing applicable
securities in book entry form to the account of your financial professional at
Depository Trust Company. You will receive whole shares of the applicable
securities and cash equal to any fractional shares. You may not request this
option in the last 30 days of your trust's life. We may discontinue this option
upon sixty days notice.
EXCHANGE OPTION. You may be able to exchange your units for units of our
unit trusts at a reduced sales fee. You can contact your financial professional
for more information about trusts currently available for exchanges. Before you
exchange units, you should read the prospectus carefully and understand the
risks and fees. You should then discuss this option with your financial
professional to determine whether your investment goals have changed, whether
current trusts suit you and to discuss tax consequences. We may discontinue
this option at any time upon sixty days notice.
ROLLOVER OPTION. The trust strategy is a long-term investment strategy
designed to be followed on an annual basis. You may achieve more consistent
long-term investment results by following the strategy. As part of the
strategy, we currently intend to offer a subsequent series of the trust for a
rollover when the current trust terminates. When the trust terminates you will
have the option to (1) participate in a rollover and have your units reinvested
into a subsequent trust series through a cash rollover as described in this
section, (2) receive an in-kind distribution of securities or (3) receive a cash
distribution.
If you elect to participate in a rollover, your units will be redeemed on the
trust's termination date. As the redemption proceeds become available, the
proceeds (including dividends) will be invested in a new trust series, if
available, at the public offering price for the new trust. The trustee will
attempt to sell securities to satisfy the redemption as quickly as practicable
on the termination date. We do not anticipate that the sale period will be
longer than one day, however, certain factors could affect the ability to sell
the
18 Understanding Your Investment
securities and could impact the length of the sale period. The liquidity of any
security depends on the daily trading volume of the security and the amount
available for redemption and reinvestment on any day.
We intend to make subsequent trust series available for sale at various times
during the year. Of course, we cannot guarantee that a subsequent trust or
sufficient units will be available or that any subsequent trusts will offer the
same investment strategies or objectives as the current trust. We cannot
guarantee that a rollover will avoid any negative market price consequences
resulting from trading large volumes of securities. Market price trends may
make it advantageous to sell or buy securities more quickly or more slowly than
permitted by the trust procedures. We may, in our sole discretion, modify a
rollover or stop creating units of a trust at any time regardless of whether all
proceeds of unitholders have been reinvested in a rollover. We may decide not
to offer the rollover option upon sixty days notice. Cash which has not been
reinvested in a rollover will be distributed to unitholders shortly after the
termination date. Rollover participants may receive taxable dividends or
realize taxable capital gains which are reinvested in connection with a rollover
but may not be entitled to a deduction for capital losses due to the "wash sale"
tax rules. Due to the reinvestment in a subsequent trust, no cash will be
distributed to pay any taxes. See "Taxes."
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays distributions of its net
investment income (pro-rated on an annual basis) along with any excess capital
on each monthly distribution date to unitholders of record on the preceding
record date. The record and distribution dates are shown under "Essential
Information" in the "Investment Summary" section of this prospectus. In some
cases, your trust might pay a special distribution if it holds an excessive
amount of cash pending distribution. For example, this could happen as a result
of a merger or similar transaction involving a company whose stock is in your
portfolio. The trust will also generally make required distributions or
distributions to avoid imposition of tax at the end of each year because it is
structured as a "regulated investment company" for federal tax purposes. The
amount of your distributions will vary from time to time as companies change
their dividends or trust expenses change.
When the trust receives dividends or other income payments from a portfolio
security, the trustee credits the dividends or other income payments to the
trust's accounts. In an effort to make relatively regular income distributions,
the trust's monthly income distribution is equal to one-twelfth of the estimated
net annual income to be received by the trust after deduction of trust operating
expenses. Because the trust does not receive dividends from the portfolio
securities at a constant rate throughout the year, the trust's income
distributions to unitholders may be more or less than the amount credited to the
trust accounts as of the record date. For the purpose of minimizing fluctuation
in income distributions, the trustee is authorized to advance such amounts as
may be necessary to provide income distributions of approximately equal amounts.
The trustee will be reimbursed, without interest, for any such advances from
available income received by the trust on the ensuing record date.
ESTIMATED ANNUAL DISTRIBUTIONS. The estimated net annual distributions are
shown under "Essential Information" in the "Investment Summary" section of this
prospectus. We generally base the estimate of the income the trust
Understanding Your Investment 19
may receive on annualizing the most recent ordinary dividend declared by an
issuer (or adding the most recent interim and final dividends declared for
certain foreign issuers) or on scheduled income payments. However, dividend
conventions for certain companies and/or certain countries differ from those
typically used in the United States and in certain instances, dividends paid or
declared over several years or other periods were used to estimate annual
distributions. Due to this and various other factors, actual income payments
received by the trust will most likely differ from the most recent annualized
dividends or scheduled income payments. The actual net annual distributions you
will receive will vary with changes in the trust's fees and expenses, in income
payments received and with the sale of securities.
REPORTS. The trustee or your financial professional will make available to
you a statement showing income and other receipts of your trust for each
distribution. Each year the trustee will also provide an annual report on your
trust's activity and certain tax information. You can request copies of
security evaluations to enable you to complete your tax forms and audited
financial statements for your trust, if available.
INVESTMENT RISKS
All investments involve risk. This section describes the main risks that can
impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK is the risk that the value of the securities in your trust will
fluctuate. This could cause the value of your units to fall below your original
purchase price. Market value fluctuates in response to various factors. These
can include changes in interest rates, inflation, the financial condition of a
security's issuer, perceptions of the issuer, or ratings on a security. Even
though we supervise your portfolio, you should remember that we do not manage
your portfolio. Your trust will not sell a security solely because the market
value falls as is possible in a managed fund.
DIVIDEND PAYMENT RISK is the risk that an issuer of a security is unwilling
or unable to pay income on a security. Stocks represent ownership interests in
the issuers and are not obligations of the issuers. Common stockholders have a
right to receive dividends only after the company has provided for payment of
its creditors, bondholders and preferred stockholders. Common stocks do not
assure dividend payments. Dividends are paid only when declared by an issuer's
board of directors and the amount of any dividend may vary over time.
CREDIT RISK is the risk that an issuer of a preferred security in the trust
is unable or unwilling to make dividend and/or principal payments. Trust
preferred securities are subject to unique risks which include the fact that
dividend payments will only be paid if interest payments on the underlying
obligations are made. Such interest payments are dependent on the financial
condition of the issuer. Dividend payments for both preferred stocks and trust
preferred securities may not be paid at all or may generally be deferred without
default.
INTEREST RATE RISK is the risk that the value of the securities will fall if
interest rates increase. Securities that pay a fixed rate of return typically
fall in value when interest rates rise and rise in value when interest rates
fall.
20 Understanding Your Investment
CALL RISK is the risk that the issuer redeems or "calls" a security. An
issuer might call a security if interest rates fall and the security pays a
higher interest or dividend rate or if it no longer needs the money for the
original purpose. If an issuer calls a security, the trust will distribute the
proceeds to you but your future income distributions will fall. You might not
be able to reinvest these proceeds at as high a yield. A security's call price
could be less than the price the trust paid for the security and could be below
the security's original par or face value. You could also receive less than the
amount you paid for your units. If enough securities in the trust are called,
the trust could terminate early. Some or all of the securities may also be
subject to extraordinary optional or mandatory redemptions if certain events
occur, such as certain changes in tax laws, the substantial damage or
destruction by fire or other casualty of the project for which the proceeds of
the securities were used, and various other events. The call provisions are
described in general terms in the "Portfolio" under "Redemption Provisions."
PREFERRED SECURITIES. The trust invests in preferred securities including
preferred stocks, trust preferred securities or other similar securities.
Preferred stocks are unique securities that combine some of the characteristics
of both common stocks and bonds. Preferred stocks generally pay a fixed rate of
return and are sold on the basis of current yield, like bonds. However, because
they are equity securities, preferred stocks provide equity ownership of a
company and the income is paid in the form of dividends. Preferred stocks
typically have a yield advantage over common stocks as well as comparably-rated
fixed income investments. Preferred stocks are typically subordinated to bonds
and other debt instruments in a company's capital structure, in terms of
priority to corporate income, and therefore will be subject to greater credit
risk than those debt instruments.
Trust preferred securities are limited-life preferred securities typically
issued by corporations, generally in the form of interest-bearing notes or
preferred securities, or by an affiliated business trust of a corporation,
generally in the form of beneficial interests in subordinated debentures or
similarly structured securities. Distribution payments of the trust preferred
securities generally coincide with interest payments on the underlying
obligations. Trust preferred securities generally have a yield advantage over
traditional preferred stocks, but unlike preferred stocks, in some cases
distributions are treated as interest rather than dividends for federal income
tax purposes and therefore, are not eligible for the dividends-received
deduction. Trust preferred securities prices fluctuate for several reasons
including changes in investors' perception of the financial condition of an
issuer or the general condition of the market for trust preferred securities, or
when political or economic events affecting the issuers occur. Trust preferred
securities are also sensitive to interest rate fluctuations, as the cost of
capital rises and borrowing costs increase in a rising interest rate environment
and the risk that a trust preferred security may be called for redemption in a
falling interest rate environment. Trust preferred securities are also subject
to unique risks which include the fact that dividend payments will only be paid
if interest payments on the underlying obligations are made, which interest
payments are dependent on the financial condition of the issuer and may be
deferred for up to 20 consecutive quarters. During any deferral period,
investors are generally taxed as if the Portfolio had received current income.
In such a case, unitholders will have income taxes due prior to receiving cash
distributions to pay such taxes. In addition, the underlying obligations, and
thus the trust preferred securities, may be prepaid after a stated call date or
as a result of certain tax or regulatory events. Preferred securities are
typically
Understanding Your Investment 21
subordinated to bonds and other debt instruments in a company's capital
structure, in terms of priority to corporate income, and therefore will be
subject to greater credit risk than those debt instruments.
FOREIGN ISSUER RISK. Because the trust invests in stocks of foreign
companies, the trust involves additional risks that differ from an investment
exclusively in domestic stocks. These risks include the risk of losses due to
future political and economic developments, international trade conditions,
foreign withholding taxes and restrictions on foreign investments and exchange
of securities. The trust also involves the risk that fluctuations in exchange
rates between the U.S. dollar and foreign currencies may negatively affect the
value of the stocks. The trust involves the risk that information about the
stocks is not publicly available or is inaccurate due to the absence of uniform
accounting and financial reporting standards. In addition, some foreign
securities markets are less liquid than U.S. markets. This could cause the
trust to buy stocks at a higher price or sell stocks at a lower price than would
be the case in a highly liquid market. Foreign securities markets are often
more volatile and involve higher trading costs than U.S. markets, and foreign
companies, securities markets and brokers are also generally not subject to the
same level of supervision and regulation as in the U.S. Certain stocks may be
held in the form of ADRs or other similar receipts. ADRs represent receipts for
foreign common stock deposited with a custodian (which may include the trustee
of your trust). The ADRs in the trust, if any, trade in the U.S. in U.S.
dollars and are registered with the Securities and Exchange Commission. ADRs
generally involve the same types of risks as foreign common stock held directly.
Some ADRs may experience less liquidity than the underlying common stocks traded
in their home market.
FINANCIAL SERVICES COMPANIES. The trust invests significantly in financial
services companies or related subsidiaries. Any negative impact on this
industry will have a greater impact on the value of units than on a portfolio
diversified over several industries. You should understand the risks of this
industry before you invest.
The trust invests significantly in banks and other financial services
companies or related subsidiaries. Banks and their holding companies are
especially subject to the adverse effects of economic recession; volatile
interest rates; portfolio concentrations in geographic markets and in commercial
and residential real estate loans; and competition from new entrants in their
fields of business. In addition, banks and their holding companies are
extensively regulated at both the federal and state level and may be adversely
affected by increased regulations.
Banks will face increased competition from nontraditional lending sources as
regulatory changes, such as the recently enacted Gramm-Leach-Bliley financial
services overhaul legislation, permit new entrants to offer various financial
products. Technological advances such as the Internet allow these
nontraditional lending sources to cut overhead and permit the more efficient use
of customer data. Banks are already facing tremendous pressure from mutual
funds, brokerage firms and other financial service providers in the competition
to furnish services that were traditionally offered by banks.
Companies engaged in investment management and broker-dealer activities are
subject to volatility in their earnings and share prices that often exceeds the
volatility of the equity market in general. Adverse changes in the direction of
the stock market, investor confidence, equity transaction volume, the level and
direction of interest
22 Understanding Your Investment
rates and the outlook of emerging markets could adversely affect the financial
stability, as well as the stock prices, of these companies. Additionally,
competitive pressures, including increased competition with new and existing
competitors, the ongoing commoditization of traditional businesses and the need
for increased capital expenditures on new technology could adversely impact the
profit margins of companies in the investment management and brokerage
industries. Companies involved in investment management and broker-dealer
activities are also subject to extensive regulation by government agencies and
self-regulatory organizations, and changes in laws, regulations or rules, or in
the interpretation of such laws, regulations and rules could adversely affect
the stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management industry
underwrite, sell or distribute property, casualty and business insurance. Many
factors affect insurance, reinsurance and risk management company profits,
including interest rate movements, the imposition of premium rate caps, a
misapprehension of the risks involved in given underwritings, competition and
pressure to compete globally, weather catastrophes or other disasters and the
effects of client mergers. Already extensively regulated, insurance companies'
profits may be adversely affected by increased government regulations or tax law
changes.
SMALL COMPANIES. The trust invests significantly in stocks issued by small
companies, which generally include those with market capitalizations of less
than $1 billion. The share prices of these small-cap companies are often more
volatile than those of larger companies as a result of several factors common to
many such issuers, including limited trading volumes, products or financial
resources, management inexperience and less publicly available information.
STRATEGY CORRELATION RISK is the risk that the performance of the components
of the trust based on a defined quantitative investment strategy will not
sufficiently correspond with the hypothetical performance of that investment
strategy. These components include the High 50 Dividend Strategy, International
High 30 Dividend Strategy and the Monument Growth Strategy. This can happen for
reasons such as:
* the impracticability of owning each of the strategy stocks with the exact
weightings at a given time,
* strategy performance is based on a calendar year strategy while trusts may
be created at various times during the year and generally have 15 month
terms,
* the trust may not be fully invested at all times, and
* trust fees and expenses.
TAX AND LEGISLATION RISK. Tax legislation proposed by the President or
Congress, tax regulations proposed by the U.S. Treasury or positions taken by
the Internal Revenue Service could affect the value of the trust by changing the
taxation or tax characterizations of the securities or dividends and other
income paid by or related to such securities. Congress has considered such
proposals in the past and may do so in the future. No one can predict whether
any legislation will be proposed, adopted or amended and no one can predict the
impact that any legislation might have on the trust or its portfolio securities.
LEGISLATION OR LITIGATION RISK is the risk that various legislative
initiatives will be proposed from time to time in the United States and abroad
which may have a negative impact on certain of the companies represented in the
trust. In addition,
Understanding Your Investment 23
litigation regarding any of the issuers of the securities or of the industries
represented by these issuers may negatively impact the share prices of these
securities. No one can predict what impact any pending or threatened litigation
will have on the share prices of the securities.
LIQUIDITY RISK is the risk that the value of a security will fall if trading
in the security is limited or absent. No one can guarantee that a liquid
trading market will exist for any security.
NO FDIC GUARANTEE. An investment in the trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
HOW THE TRUST WORKS
YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940. We created the trust under a trust agreement
between Fixed Income Securities, 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 $10.
The number of units and fractional interest of each unit in the trust will
increase or decrease to the extent of any adjustment.
CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed. Your trust will
generally buy and sell securities:
* to pay expenses,
* to issue additional units or redeem units,
* in limited circumstances to protect the trust,
* to make required distributions or avoid imposition of taxes on the trust,
or
* as permitted by the trust agreement.
When your trust sells securities, the composition and diversity of the
securities in the portfolio may be altered. If a public tender offer has been
made for a security or a merger, acquisition or similar transaction has been
announced affecting a security, the trustee may either sell the security or
accept a tender offer if the supervisor determines that the action is in the
best interest of unitholders. The trustee will distribute any cash proceeds to
unitholders. If your trust receives securities or other property, it will
either hold the securities or property in the portfolio or sell the securities
or property and distribute the proceeds. If any contract for the purchase of
securities fails, the sponsor will refund the cash and sales fee attributable to
the failed contract to unitholders on or before the next distribution date
unless substantially all of the moneys held to cover the purchase are reinvested
in substitute securities in accordance with the trust agreement. The sponsor
may direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of the sponsor,
would make retention of the securities detrimental to the trust. In such a
case, the sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities
24 Understanding Your Investment
that meet the criteria for inclusion in the trust on the trust's inception date.
The sponsor may also instruct the trustee to take action necessary to ensure
that the portfolio continues to satisfy the qualifications of a regulated
investment company.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to replicate the existing portfolio. When your
trust buys securities, it may pay brokerage or other acquisition fees. You
could experience a dilution of your investment because of these fees and
fluctuations in security prices between the time we create units and the time
your trust buys the securities. When your trust buys or sells securities, we
may direct that it place orders with and pay brokerage commissions to brokers
that sell units or are affiliated with us, your trust or the trustee.
AMENDING THE TRUST AGREEMENT. The sponsor and the trustee can change the
trust agreement without your consent to correct any provision that may be
defective or to make other provisions that will not materially adversely affect
your interest (as determined by the sponsor and the trustee). We cannot change
this agreement to reduce your interest in your trust without your consent.
Investors owning two-thirds of the units in your trust may vote to change this
agreement.
TERMINATION OF YOUR TRUST. Your trust will terminate on the termination date
set forth under "Essential Information" in the "Investment Summary" section of
this prospectus. The trustee may terminate your trust early if the value of the
trust is less than 40% of the original value of the securities in the trust at
the time of deposit. At this size, the expenses of your trust may create an
undue burden on your investment. Investors owning two-thirds of the units in
your trust may also vote to terminate the trust early. The trustee will
liquidate the trust in the event that a sufficient number of units not yet sold
to the public are tendered for redemption so that the net worth of the trust
would be reduced to less than 40% of the value of the securities at the time
they were deposited in the trust. If this happens, we will refund any sales
charge that you paid.
The trustee will notify you of any termination and sell any remaining
securities. The trustee will send your final distribution to you within a
reasonable time following liquidation of all the securities after deducting
final expenses. Your termination distribution may be less than the price you
originally paid for your units.
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 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
Understanding Your Investment 25
to prevent fraud, deception or misconduct with respect to your trust.
THE TRUSTEE. The Bank of New York is the trustee of your trust with its
principal unit investment trust division offices located at 2 Hanson Place, 12th
Floor, Brooklyn, New York 11217. You can contact the trustee by calling the
telephone number on the back cover of this prospectus or by writing to its unit
investment trust office. We may remove and replace the trustee in some cases
without your consent. The trustee may also resign by notifying us and
investors.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. We pay part of the sales fee to these distribution firms when
they sell units. During the initial offering period, the distribution fee (the
broker-dealer concession or agency commission) for broker-dealers and other
firms is as follows:
TRANSACTION CONCESSION OR
AMOUNT: AGENCY COMMISSION:
------------------------------------------
Less than $100,000 2.25%
$100,000 - $249,999 2.00
$250,000 - $499,999 1.75
$500,000 - $999,999 1.50
$1,000,000 or more 1.25
We apply these concessions or agency commissions as a percent of the public
offering price per unit at the time of the transaction. We also apply the
different levels on a unit basis using a $10 unit equivalent. The broker-dealer
concession or agency commission is 65% of the sales fee for secondary market
sales. For transactions involving unitholders of other unit investment trusts
who use their redemption or termination proceeds to purchase units of the trust,
the distribution fee is 1.30% of the public offering price per unit. No
distribution fee is paid to broker-dealers or other selling firms in connection
with unit sales in investment accounts that charge a "wrap fee" or periodic fees
for investment advisory, financial planning or asset management services in lieu
of commissions.
Broker-dealers and other firms that sell units of all Advisor's Disciplined
Trusts are eligible to receive additional compensation for volume sales. Such
payments will be in addition to the regular concessions paid to firms as set
forth in the applicable trust's prospectus. The additional concession is based
on total initial offering period sales of all Advisor's Disciplined Trusts
during a calendar quarter as set forth in the following table:
INITIAL OFFERING PERIOD SALES VOLUME
DURING CALENDAR QUARTER CONCESSION
-------------------------------------------------------
Less than $5,000,000 0.000%
$5,000,000 but less than $10,000,000 0.050
$10,000,000 but less than $25,000,000 0.075
$25,000,000 but less than $50,000,000 0.100
$50,000,000 but less than $100,000,000 0.125
$100,000,000 but less than $1,000,000,000 0.150
$1,000,000,000 or more 0.175
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
unless they sell at least $5.0 million of units during a calendar quarter. For
example, if a firm sells $4.5 million of units in the initial offering period
during a calendar quarter, the firm will not receive any additional
compensation. Once a firm reaches a particular
26 Understanding Your Investment
breakpoint during a quarter, the firm will receive the stated volume concession
on all initial offering period sales during the applicable quarter. For
example, if a firm sells $7.5 million of units in the initial offering period
during a calendar quarter, the firm will receive additional compensation of
0.05% of $7.5 million and if a firm sells $12.5 million of units in the initial
offering period during a calendar quarter, the firm will receive additional
compensation of 0.075% of $12.5 million.
In addition, dealer firms will not receive volume concessions on the sale of
units which are not subject to a transactional sales charge. However, such
sales will be included in determining whether a firm has met the sales level
breakpoints for volume concessions. Secondary market sales of all unit trusts
are excluded for purposes of these volume concessions. We will pay these
amounts out of our own assets within a reasonable time following each calendar
quarter.
Any sales fee discount is borne by the broker-dealer or selling firm out of
the distribution fee. We reserve the right to change the amount of concessions
or agency commissions from time to time.
We may provide, at our own expense and out of our own profits, additional
compensation and benefits to broker-dealers who sell units of this trust and our
other products. This compensation is intended to result in additional sales of
our products and/or compensate broker-dealers and financial advisors for past
sales. We may make these payments for marketing, promotional or related
expenses, including, but not limited to, expenses of entertaining retail
customers and financial advisors, advertising, sponsorship of events or
seminars, obtaining shelf space in broker-dealer firms and similar activities
designed to promote the sale of the our products. These arrangements will not
change the price you pay for your units. 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 lawfully. We may reject any order for units in whole or in
part.
We may gain or lose money when we hold units in the primary or secondary
market due to fluctuations in unit prices. The gain or loss is equal to the
difference between the price we pay for units and the price at which we sell or
redeem them. We may also gain or lose money when we deposit securities to
create units. The amount of our profit or loss on the initial deposit of
securities into the trust is shown in the "Notes to Portfolio."
TAXES
This section summarizes some of the main U.S. federal income tax consequences
of owning units of the trust. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example,
these summaries generally do not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or
Understanding Your Investment 27
other investor with special circumstances. In addition, this section does not
describe your state, local or foreign tax consequences.
This federal income tax summary is based in part on the advice of counsel to
the sponsor. The Internal Revenue Service could disagree with any conclusions
set forth in this section. In addition, our counsel was not asked to review,
and has not reached a conclusion with respect to the federal income tax
treatment of the assets to be deposited in the trust. This may not be
sufficient for you to use for the purpose of avoiding penalties under federal
tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
TRUST STATUS. The trust intends to qualify as a "regulated investment
company" under the federal tax laws. If the trust qualifies as a regulated
investment company and distributes its income as required by the tax law, the
trust generally will not pay federal income taxes.
DISTRIBUTIONS. Trust distributions are generally taxable. After the end of
each year, you will receive a tax statement that separates your trust's
distributions into two categories, ordinary income distributions and capital
gains dividends. Ordinary income distributions are generally taxed at your
ordinary tax rate, however, as further discussed below, certain ordinary income
distributions received from the trust may be taxed at the capital gains tax
rates. Generally, you will treat all capital gains dividends as long-term
capital gains regardless of how long you have owned your units. To determine
your actual tax liability for your capital gains dividends, you must calculate
your total net capital gain or loss for the tax year after considering all of
your other taxable transactions, as described below. In addition, the trust may
make distributions that represent a return of capital for tax purposes and thus
will generally not be taxable to you. The tax status of your distributions from
your trust is not affected by whether you reinvest your distributions in
additional units or receive them in cash. The income from your trust that you
must take into account for federal income tax purposes is not reduced by amounts
used to pay a deferred sales fee, if any. The tax laws may require you to treat
distributions made to you in January as if you had received them on December 31
of the previous year.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns units generally will
not be entitled to the dividends received deduction with respect to many
dividends received from the trust because the dividends received deduction is
generally not available for distributions from regulated investment companies.
However, certain ordinary income dividends on units that are attributable to
qualifying dividends received by the trust from certain corporations may be
designated by the trust as being eligible for the dividends received deduction.
SALE OR REDEMPTION OF UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this
gain or loss, you must subtract your tax basis in your units from the amount you
receive in the transaction. Your tax basis in your units is generally equal to
the cost of your units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your units.
CAPITAL GAINS AND LOSSES AND CERTAIN ORDINARY INCOME DIVIDENDS. If you are
an individual, the maximum marginal federal tax rate for net
28 Understanding Your Investment
capital gain is generally 15% (generally 5% for certain taxpayers in the 10% and
15% tax brackets). These new capital gains rates are generally effective for
taxable years beginning before January 1, 2011. For later periods, if you are
an individual, the maximum marginal federal tax rate for net capital gain is
generally 20% (10% for certain taxpayers in the 10% and 15% tax brackets). The
20% rate is reduced to 18% and the 10% rate is reduced to 8% for long-term
capital gains from most property acquired after December 31, 2000 with a holding
period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the date you
purchase your units to determine your holding period. However, if you receive a
capital gain dividend from your trust and sell your unit at a loss after holding
it for six months or less, the loss will be recharacterized as long-term capital
loss to the extent of the capital gain dividend received. The tax rates for
capital gains realized from assets held for one year or less are generally the
same as for ordinary income. The Internal Revenue Code treats certain capital
gains as ordinary income in special situations.
Ordinary income dividends received by an individual unitholder from a
regulated investment company such as the trust are generally taxed at the same
rates that apply to net capital gain (as discussed above), provided certain
holding period requirements are satisfied and provided the dividends are
attributable to qualifying dividends received by the trust itself. These
special rules relating to the taxation of ordinary income dividends from
regulated investment companies generally apply to taxable years beginning before
January 1, 2011. The trust will provide notice to its unitholders of the amount
of any distribution which may be taken into account as a dividend which is
eligible for the new capital gains tax rates.
IN-KIND DISTRIBUTIONS. Under certain circumstances, as described in this
prospectus, you may receive an in-kind distribution of trust securities when you
redeem units or when your trust terminates. This distribution is subject to
taxation and you will recognize gain or loss, generally based on the value at
that time of the securities and the amount of cash received.
EXCHANGES. If you elect to have your proceeds from your trust rolled over
into a future trust, it is considered a sale for federal income tax purposes and
any gain on the sale will be treated as a capital gain, and any loss will be
treated as a capital loss. However, any loss realized on a sale or exchange
will be disallowed to the extent that units disposed of are replaced (including
through reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after disposition of units or to the extent that the
unitholder, during such period, acquires or enters into an option or contract to
acquire, substantially identical stock or securities. In such a case, the basis
of the units acquired will be adjusted to reflect the disallowed loss.
DEDUCTIBILITY OF TRUST EXPENSES. Generally, expenses incurred by your trust
will be deducted 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
Understanding Your Investment 29
those expenses, even though you do not receive a corresponding cash
distribution. In this case you may be able to take a deduction for these
expenses; however, certain miscellaneous itemized deductions, such as investment
expenses, may be deducted by individuals only to the extent that all of these
deductions exceed 2% of the individual's adjusted gross income.
FOREIGN TAX CREDIT. If your trust invests in any foreign securities, the tax
statement that you receive may include an item showing foreign taxes your trust
paid to other countries. In this case, dividends taxed to you will include your
share of the taxes your trust paid to other countries. You may be able to
deduct or receive a tax credit for your share of these taxes.
FOREIGN INVESTORS. If you are a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from the trust will be characterized as dividends for federal
income tax purposes (other than dividends which the trust designates as capital
gain dividends) and will be subject to U.S. income taxes, including withholding
taxes, subject to certain exceptions described below. However, distributions
received by a foreign investor from the trust that are properly designated by
the trust as capital gain dividends may not be subject to U.S. federal income
taxes, including withholding taxes, provided that the trust makes certain
elections and certain other conditions are met.
EXPENSES
Your trust will pay various expenses to conduct its operations. The "Fees
and Expenses" section of the "Investment Summary" in this prospectus shows the
estimated amount of these expenses.
The sponsor will receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. This "creation and
development fee" is a charge of $0.06 per unit. The trustee will deduct this
amount from your trust's assets as of the close of the initial offering period.
No portion of this fee is applied to the payment of distribution expenses or as
compensation for sales efforts. This fee will not be deducted from proceeds
received upon a repurchase, redemption or exchange of units before the close of
the initial public offering period.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing 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
30 Understanding Your Investment
each year. The trustee will generally pay trust expenses from distributions
received on the securities but in some cases may sell securities to pay trust
expenses.
EXPERTS
LEGAL MATTERS. Chapman and Cutler LLP acts as counsel for the trust and has
given an opinion that the units are validly issued. Dorsey & Whitney LLP acts
as counsel for the trustee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Grant Thornton LLP,
independent registered public accounting firm, audited the statement of
financial condition and the portfolio included in this prospectus.
ADDITIONAL INFORMATION
This prospectus does not contain all the information in the registration
statement that your trust filed with the Securities and Exchange Commission.
The Information Supplement, which was filed with the Securities and Exchange
Commission, includes more detailed information about the securities in your
portfolio, investment risks and general information about your trust. You can
obtain the Information Supplement by contacting us or the Securities and
Exchange Commission as indicated on the back cover of this prospectus. This
prospectus incorporates the Information Supplement by reference (it is legally
considered part of this prospectus).
Understanding Your Investment 31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISOR'S DISCIPLINED TRUST 250
We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 4 through 9, of Advisor's Disciplined Trust 250, as of
May __, 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. The
trust is not required to have, nor were we engaged to perform an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of financial condition, assessing the accounting
principles used and significant estimates made by the sponsor, as well as
evaluating the overall statement of financial condition presentation. Our
procedures included confirmation with The Bank of New York, trustee, of cash or
an irrevocable letter of credit deposited for the purchase of securities as
shown in the statement of financial condition as of May __, 2008. 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 250 as of May __, 2008, in conformity with accounting
principles generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
May __, 2008
ADVISOR'S DISCIPLINED TRUST 250
STATEMENT OF FINANCIAL CONDITION AS OF MAY __, 2008
- -------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . . . . . . . . . . $
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred sales fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creation and development fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
----------
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: initial sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: deferred sales fee, creation and development fee and organization costs (3)(4)(5) . .
----------
Net interest of investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
==========
Net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
<FN>
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the evaluator.
(2) Cash or an irrevocable letter of credit has been deposited with the trustee
covering the funds (aggregating $__________) necessary for the purchase of
securities in the trust represented by purchase contracts.
(3) A portion of the public offering price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing the trust.
These costs have been estimated at $0.05 per unit for the trust. A
distribution will be made as of the earlier of the close of the initial
offering period or six months following the trust's inception date to an
account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent the actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be reimbursed to the sponsor
and deducted from the assets of the trust.
(4) The total sales fee consists of an initial sales fee, a deferred sales fee
and a creation and development fee. The initial sales fee is equal to the
difference between the maximum sales fee and the sum of the remaining
deferred sales fee and the total creation and development fee. The maximum
sales fee is 2.95% of the public offering price per unit. The deferred
sales fee is equal to $0.135 per unit and the creation and development fee
is equal to $0.06 per unit.
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees.
32 Understanding Your Investment
CONTENTS
INVESTMENT SUMMARY
- -------------------------------------------------------------------
A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
3 Who Should Invest
3 Essential Information
3 Fees and Expenses
4 Portfolio
UNDERSTANDING YOUR INVESTMENT
- -------------------------------------------------------------------
Detailed information to 10 Security Selection
help you understand 13 How to Buy Units
your investment 17 How to Sell Your Units
19 Distributions
20 Investment Risks
24 How the Trust Works
27 Taxes
30 Expenses
31 Experts
31 Additional Information
32 Report of Independent Registered
Public Accounting Firm
32 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 250
Securities Act file number: 333-__________
Investment Company Act file number: 811-21056
STRATEGIC CORE
PORTFOLIO,
SERIES 10
PROSPECTUS
MAY __, 2008
[LOGO]
ADVISOR'S
ASSET MANAGEMENT
A DIVISION OF FIXED INCOME SECURITIES, INC.
ADVISOR'S DISCIPLINED TRUST 250
STRATEGIC CORE PORTFOLIO, SERIES 10
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 5
Administration of the Trust 14
Portfolio Transactions and Brokerage Allocation 23
Purchase, Redemption and Pricing of Units 23
Taxation 29
Performance Information 31
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 $10. The number of units, fractional interest of each
unit in the trust and estimated income distributions per unit will increase or
decrease to the extent of any adjustment. Additional units of each trust may be
issued from time to time by depositing in the trust additional securities (or
contracts for the purchase thereof together with cash or irrevocable letters of
credit) or cash (including a letter of credit or the equivalent) with
instructions to purchase additional securities. As additional units are issued
by a trust as a result of the deposit of additional securities by the sponsor,
the aggregate value of the securities in the trust will be increased and the
fractional undivided interest in the trust represented by each unit will be
decreased. The sponsor may continue to make additional deposits of securities
into a trust, provided that such additional deposits will be in amounts, which
will generally maintain the existing relationship among the shares of the
securities in such trust. Thus, although additional units will be issued, each
unit will generally continue to represent the same number of shares of each
security. If the sponsor deposits cash to purchase additional securities,
existing and new investors may experience a dilution of their investments and a
reduction in their anticipated income because of fluctuations in the prices of
the securities between the time of the deposit and the purchase of the
securities and because the trust will pay any associated brokerage fees.
The trustee has not participated in the selection of the securities
deposited in the trust and has no responsibility for the composition of the
trust portfolio.
Each unit initially offered represents an undivided interest in the related
trust. To the extent that any units are redeemed by the trustee or additional
units are issued as a result of additional securities being deposited by the
sponsor, the fractional undivided interest in a trust represented by each
unredeemed unit will increase or decrease accordingly, although the actual
interest in such trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the trustee by
unitholders, which may include the sponsor, or until the termination of the
trust agreement.
A trust consists of (a) the securities listed under "Portfolio" in the
prospectus as may continue to be held from time to time in the trust, (b) any
additional securities acquired and held by the trust pursuant to the provisions
of the trust agreement and (c) any cash held in the accounts of the trust.
Neither the sponsor nor the trustee shall be liable in any way for any failure
in any of
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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 above average total return. The trust invests in a
diversified portfolio consisting of the components described in the prospectus.
There is, of course, no guarantee that the trust will achieve its objectives.
The trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analysis. The portfolio of a trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from a portfolio.
The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in special circumstances as provided in the
trust agreement. Thus, the assets of a trust will generally remain unchanged
under normal circumstances. The trust agreement provides that the sponsor may
(but need not) direct the trustee to dispose of a security in certain events
such as the issuer having defaulted on the payment on any of its outstanding
obligations or the price of a security has declined to such an extent or other
such credit factors exist so that in the opinion of the supervisor the retention
of such securities would be detrimental to the trust.
If a public tender offer has been made for a security or a merger,
acquisition or similar transaction has been announced affecting a security, the
trustee may either sell the security or accept a tender offer if the supervisor
determines that the action is in the best interest of unitholders. The trustee
will distribute any excess cash proceeds to unitholders. If your trust receives
securities or other property, it will either hold the securities or property in
the portfolio or sell the securities or property and distribute the proceeds.
The sponsor may direct the reinvestment of security sale proceeds if the sale is
the direct result of serious adverse credit factors which, in the opinion of the
sponsor, would make retention of the securities detrimental to the trust. In
such a case, the sponsor may, but is not obligated to, direct the reinvestment
of sale proceeds in any other securities that meet the criteria for inclusion in
the trust on the trust's inception date. The sponsor may also instruct the
trustee to take action necessary to ensure that the portfolio continues to
satisfy the qualifications of a regulated investment company for federal tax
purposes if the trust has elected to be taxed as a regulated investment company.
The trustee may sell securities, designated by the supervisor, from a trust
for the purpose of redeeming units of such trust tendered for redemption and the
payment of expenses.
In addition, if a trust has elected to be taxed as a regulated investment
company, the trustee may dispose of certain securities and take such further
action as may be needed from time to time to ensure that a trust continues to
satisfy the qualifications of a regulated investment
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company, including the requirements with respect to diversification under
Section 851 of the Internal Revenue Code, and as may be needed from time to time
to avoid the imposition of any tax on a trust or undistributed income of a trust
as a regulated investment company.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Capital
Account of a trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided herein, in the prospectus or in the
trust agreement, the acquisition by a trust of any securities other than the
portfolio securities is prohibited.
Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or otherwise liquidated and because the
proceeds from such events will be distributed to unitholders and will not be
reinvested, no assurance can be given that a trust will retain for any length of
time its present size and composition. Neither the sponsor nor the trustee
shall be liable in any way for any default, failure or defect in any security.
In the event of a failure to deliver any security that has been purchased for a
trust under a contract ("Failed Securities"), the sponsor is authorized under
the trust agreement to direct the trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such trust.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities must be equity securities of
the type selected for the trust and must not adversely affect the federal income
tax status of the trust. Whenever a Replacement Security is acquired for a
trust, the trustee shall notify all unitholders of the trust of the acquisition
of the Replacement Security and shall, on the next monthly distribution date
which is more than 30 days thereafter, make a pro rata distribution of the
amount, if any, by which the cost to the trust of the Failed Security exceeded
the cost of the Replacement Security. Once all of the securities in a trust are
acquired, the trustee will have no power to vary the investments of the trust,
i.e., the trustee will have no managerial power to take advantage of market
variations to improve a unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the sponsor will refund the sales fee attributable to such Failed
Securities to all unitholders of the trust and the trustee will distribute the
cash attributable to such Failed Securities not more than 30 days after the date
on which the trustee would have been required to purchase a Replacement
Security. In addition, unitholders should be aware that, at the time of receipt
of such cash, they may not be able to reinvest such proceeds in other securities
at a return equal to or in excess of the return which such proceeds would have
earned for unitholders of such trust.
In the event that a Replacement Security is not acquired by a trust, the
income for such trust may be reduced.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security that might reasonably be
expected to have a material adverse effect on the trust. At any time after the
trust's inception, litigation may be instituted on a variety
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of grounds with respect to the securities. The sponsor is unable to predict
whether any such litigation may be instituted, or if instituted, whether such
litigation might have a material adverse effect on the trust. The sponsor and
the trustee shall not be liable in any way for any default, failure or defect in
any security.
RISK FACTORS
MARKET RISK. Because the trust invests in securities, you should understand
the risks of investing in securities before purchasing units. These risks
include the risk that the financial condition of the company or the general
condition of the stock market may worsen and the value of the securities (and
therefore units) will fall. Securities are especially susceptible to general
stock market movements. The value of securities often rises or falls rapidly and
unpredictably as market confidence and perceptions of companies change. These
perceptions are based on factors including expectations regarding government
economic policies, inflation, interest rates, economic expansion or contraction,
political climates and economic or banking crises. The value of units will
fluctuate with the value of the securities in the trust and may be more or less
than the price you originally paid for your units. As with any investment, we
cannot guarantee that the performance of the trust will be positive over any
period of time. Because the trust is unmanaged, the Trustee will not sell
securities in response to market fluctuations as is common in managed
investments. In addition, because some trusts hold a relatively small number of
securities, you may encounter greater market risk than in a more diversified
investment.
PREFERRED STOCK RISKS. Preferred stocks may be susceptible to general stock
market movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions are based
on unpredictable factors, including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, market liquidity, and global or regional political, economic or
banking crises. Preferred stocks are also vulnerable to Congressional reductions
in the dividends-received deduction which would adversely affect the after-tax
return to the investors who can take advantage of the deduction. Such a
reduction might adversely affect the value of preferred stocks in general.
Holders of preferred stocks, as owners of the entity, have rights to receive
payments from the issuers of those preferred stocks that are generally
subordinate to those of creditors of, or holders of debt obligations or, in some
cases, other senior preferred stocks of, such issuers. Preferred stocks do not
represent an obligation of the issuer and, therefore, do not offer any assurance
of income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or senior preferred
stocks will create prior claims for payment of principal and interest and senior
dividends which could adversely affect the ability and inclination of the issuer
to declare or pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market fluctuations for
as long as the preferred stocks remain outstanding, and thus the value of the
securities may be expected to fluctuate over the life of the trust to values
higher or lower than those prevailing on the trust's inception date.
TRUST PREFERRED SECURITIES RISKS. Holders of trust preferred securities
incur risks in addition to or slightly different than the typical risks of
holding preferred stocks. Trust preferred
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securities are limited-life preferred securities that are typically issued by
corporations, generally in the form of interest-bearing notes or preferred
securities issued by corporations, or by an affiliated business trust of a
corporation, generally in the form of beneficial interests in subordinated
debentures issued by the corporation, or similarly structured securities. The
maturity and dividend rate of the trust preferred securities are structured to
match the maturity and coupon interest rate of the interest-bearing notes,
preferred securities or subordinated debentures. Trust preferred securities
usually mature on the stated maturity date of the interest-bearing notes,
preferred securities or subordinated debentures and may be redeemed or
liquidated prior to the stated maturity date of such instruments for any reason
on or after their stated call date or upon the occurrence of certain
circumstances at any time. Trust preferred securities generally have a yield
advantage over traditional preferred stocks, but unlike preferred stocks,
distributions on the trust preferred securities are generally treated as
interest rather than dividends for federal income tax purposes. Unlike most
preferred stocks, distributions received from trust preferred securities are
generally not eligible for the dividends received deduction. Certain of the
risks unique to trust preferred securities include: (i) distributions on trust
preferred securities will be made only if interest payments on the interest-
bearing notes, preferred securities or subordinated debentures are made; (ii) a
corporation issuing the interest-bearing notes, preferred securities or
subordinated debentures may defer interest payments on these instruments for up
to 20 consecutive quarters and if such election is made, distributions will not
be made on the trust preferred securities during the deferral period; (iii)
certain tax or regulatory events may trigger the redemption of the interest-
bearing notes, preferred securities or subordinated debentures by the issuing
corporation and result in prepayment of the trust preferred securities prior to
their stated maturity date; (iv) future legislation may be proposed or enacted
that may prohibit the corporation from deducting its interest payments on the
interest-bearing notes, preferred securities or subordinated debentures for tax
purposes, making redemption of these instruments likely; (v) a corporation may
redeem the interest-bearing notes, preferred securities or subordinated
debentures in whole at any time or in part from time to time on or after a
stated call date; (vi) trust preferred securities holders have very limited
voting rights; and (vii) payment of interest on the interest-bearing notes,
preferred securities or subordinated debentures, and therefore distributions on
the trust preferred securities, is dependent on the financial condition of the
issuing corporation.
FOREIGN ISSUERS. Because a trust may invest in foreign stocks, they involve
additional risks that differ from an investment in domestic stocks. Investments
in foreign securities may involve a greater degree of risk than those in
domestic securities. There is generally less publicly available information
about foreign companies in the form of reports and ratings similar to those that
are published about issuers in the United States. Also, foreign issuers are
generally not subject to uniform accounting, auditing and financial reporting
requirements comparable to those applicable to United States issuers. With
respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the trust, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, industrial foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Foreign securities markets are generally not as developed or
efficient as those in the United
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States. While growing in volume, they usually have substantially less volume
than the New York Stock Exchange, and securities of some foreign issuers are
less liquid and more volatile than securities of comparable United States
issuers. Fixed commissions on foreign exchanges are generally higher than
negotiated commissions on United States exchanges. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed issuers than in the United States.
A trust may also involve the risk that fluctuations in exchange rates
between the U.S. dollar and foreign currencies may negatively affect the value
of the stocks. For example, if a foreign stock rose 10% in price but the U.S.
dollar gained 5% against the related foreign currency, a U.S. investor's return
would be reduced to about 5%. This is because the foreign currency would "buy"
fewer dollars or, conversely, a dollar would buy more of the foreign currency.
Many foreign currencies have fluctuated widely against the U.S. dollar for a
variety of reasons such as supply and demand of the currency, investor
perceptions of world or country economies, political instability, currency
speculation by institutional investors, changes in government policies, buying
and selling of currencies by central banks of countries, trade balances and
changes in interest rates. A trust's foreign currency transactions will be
conducted with foreign exchange dealers acting as principals on a spot (i.e.,
cash) buying basis. These dealers realize a profit based on the difference
between the price at which they buy the currency (bid price) and the price at
which they sell the currency (offer price). The evaluator will estimate the
currency exchange rates based on current activity in the related currency
exchange markets, however, due to the volatility of the markets and other
factors, the estimated rates may not be indicative of the rate a trust might
obtain had the trustee sold the currency in the market at that time.
SMALL-CAP AND MID-CAP COMPANIES. Small and mid-size company stocks have
customarily involved more investment risk than large company stocks. Small and
mid-size companies may have limited product lines, markets or financial
resources; may lack management depth or experience; and may be more vulnerable
to adverse general market or economic developments than large companies. Some of
these companies may distribute, sell or produce products which have recently
been brought to market and may be dependent on key personnel.
The prices of small and mid-size company securities are often more volatile
than prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less publicly
available information. Also, because small and mid-size companies normally have
fewer shares outstanding and these shares trade less frequently than large
companies, it may be more difficult for a trust which contains these securities
to buy and sell significant amounts of such shares without an unfavorable impact
on prevailing market prices.
BASIC MATERIALS. An investment in units should be made with an
understanding of the problems and risks an investment in securities of companies
involved in the basic materials industry may entail. Companies in the basic
materials sector are engaged in the manufacture, mining, processing, or
distribution of raw materials and intermediate goods used in the industrial
sector. These may include materials and products such as chemicals, commodities,
forestry products, paper products, copper, iron ore, nickel, steel, aluminum,
precious metals, textiles,
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cement, and gypsum. Basic materials companies may be affected by the volatility
of commodity prices, exchange rates, import controls, worldwide competition,
depletion of resources, and mandated expenditures for safety and pollution
control devices. In addition, they may be adversely affected by technical
progress, labor relations, and governmental regulation. These companies are also
at risk for environmental damage and product liability claims. Production of
industrial materials often exceeds demand as a result of over-building or
economic downturns, which may lead to poor investment returns.
CONSUMER PRODUCT AND RETAIL ISSUERS. The trust may invest significantly in
issuers that manufacture or sell consumer products. The profitability of these
companies will be affected by various factors including the general state of the
economy and consumer spending trends. In the past, there have been major changes
in the retail environment due to the declaration of bankruptcy by some of the
major corporations involved in the retail industry, particularly the department
store segment. The continued viability of the retail industry will depend on the
industry's ability to adapt and to compete in changing economic and social
conditions, to attract and retain capable management, and to finance expansion.
Weakness in the banking or real estate industry, a recessionary economic climate
with the consequent slowdown in employment growth, less favorable trends in
unemployment or a marked deceleration in real disposable personal income growth
could result in significant pressure on both consumer wealth and consumer
confidence, adversely affecting consumer spending habits. In addition,
competitiveness of the retail industry will require large capital outlays for
investment in the installation of automated checkout equipment to control
inventory, to track the sale of individual items and to gauge the success of
sales campaigns. Increasing employee and retiree benefit costs may also have an
adverse effect on the industry. In many sectors of the retail industry,
competition may be fierce due to market saturation, converging consumer tastes
and other factors. Because of these factors and the recent increase in trade
opportunities with other countries, various retailers are now entering global
markets which entail added risks such as sudden weakening of foreign economies,
difficulty in adapting to local conditions and constraints and added research
costs.
FINANCIAL SERVICES INDUSTRY. Your trust may concentrate in securities of
issuers in the financial services industry.
Banks and their holding companies are especially subject to the adverse
effects of economic recession, volatile interest rates, portfolio concentrations
in geographic markets and in commercial and residential real estate loans, and
competition from new entrants in their fields of business. Banks are highly
dependent on net interest margin. Bank profits have come under pressure as net
interest margins have contracted. There is no certainty that such conditions
will continue. Banks receive significant consumer mortgage fee income as a
result of activity in mortgage and refinance markets. If initial home purchasing
and refinancing activity were to subside as a result of increasing interest
rates and other factors, this income would diminish. Economic conditions in the
real estate markets, which have been weak in the past, can have a substantial
effect upon banks because they generally have a portion of their assets invested
in loans secured by real estate.
Banks and their holding companies are subject to extensive federal
regulation and, when such institutions are state-chartered, to state regulation
as well. Such regulations impose strict
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capital requirements and limitations on the nature and extent of business
activities that banks may pursue. Furthermore, bank regulators have a wide range
of discretion in connection with their supervisory and enforcement authority and
may substantially restrict the permissible activities of a particular
institution if deemed to pose significant risks to the soundness of such
institution or the safety of the federal deposit insurance fund. Regulatory
actions, such as increases in the minimum capital requirements applicable to
banks and increases in deposit insurance premiums required to be paid by banks
and thrifts to the Federal Deposit Insurance Corporation ("FDIC"), can
negatively impact earnings and the ability of a company to pay dividends.
Neither federal insurance of deposits nor governmental regulations, however,
insures the solvency or profitability of banks or their holding companies, or
insures against any risk of investment in the securities issued by such
institutions.
The statutory requirements applicable to, and regulatory supervision of,
banks and their holding companies have increased significantly and have
undergone substantial change in the past. To a great extent, these changes are
embodied in the Financial Institutions Reform, Recovery and Enforcement Act,
enacted in August 1989; the Federal Deposit Insurance Corporation Improvement
Act of 1991, and the regulations promulgated under these laws. The impact of
these laws on the business, financial condition and prospects of the Securities
in the Trust's portfolio cannot be predicted with certainty. The Gramm-Leach-
Bliley financial services overhaul legislation allows banks, securities firms
and insurance companies to form one-stop financial conglomerates marketing a
wide range of financial service products to investors. This legislation will
likely result in increased merger activity and heightened competition among
existing and new participants in the field. Legislation to liberalize interstate
banking has also been enacted. Under the legislation, banks are able to purchase
or establish subsidiary banks in any state. Since mid-1997, banks have been
allowed to turn existing banks into branches. Consolidation may continue. The
Securities and Exchange Commission and the Financial Accounting Standards Board
require the expanded use of market value accounting by banks and have imposed
rules requiring market accounting for investment securities held in trading
accounts or available for sale. Adoption of additional such rules may result in
increased volatility in the reported health of the industry, and mandated
regulatory intervention to correct such problems. Additional legislative and
regulatory changes may be forthcoming. For example, the bank regulatory
authorities have proposed substantial changes to the Community Reinvestment Act
and fair lending laws, rules and regulations, and there can be no certainty as
to the effect, if any, that such changes would have on the Securities in the
Trust's portfolio. In addition, from time to time the deposit insurance system
is reviewed by Congress and federal regulators, and proposed reforms of that
system could, among other things, further restrict the ways in which deposited
moneys can be used by banks or reduce the dollar amount or number of deposits
insured for any depositor. Such reforms could reduce profitability, as
investment opportunities available to bank institutions become more limited and
as consumers look for savings vehicles other than bank deposits. Banks face
significant competition from other financial institutions such as mutual funds,
credit unions, mortgage banking companies and insurance companies, and increased
competition may result from legislative broadening of regional and national
interstate banking powers. Among other benefits, such legislation allows banks
and bank holding companies to acquire across previously prohibited state lines
and to consolidate their various bank subsidiaries into one unit. Neither the
Sponsor nor the Underwriter makes any prediction as
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to what, if any, manner of bank regulatory actions might ultimately be adopted
or what ultimate effect such actions might have on the Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5% of the
outstanding shares of any class of voting securities of a bank or bank holding
company, (2) acquiring control of a bank or another bank holding company, (3)
acquiring all or substantially all the assets of a bank, or (4) merging or
consolidating with another bank holding company, without first obtaining Federal
Reserve Board ("FRB") approval. In considering an application with respect to
any such transaction, the FRB is required to consider a variety of factors,
including the potential anti-competitive effects of the transaction, the
financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws. In addition, the federal
Change In Bank Control Act and various state laws impose limitations on the
ability of one or more individuals or other entities to acquire control of banks
or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company experiencing earnings weaknesses should not pay cash
dividends which exceed its net income or which could only be funded in ways that
would weaken its financial health, such as by borrowing. The FRB also may impose
limitations on the payment of dividends as a condition to its approval of
certain applications, including applications for approval of mergers and
acquisitions. Neither the Sponsor nor the Underwriter makes any prediction as to
the effect, if any, such laws will have on the Securities or whether such
approvals, if necessary, will be obtained.
Companies engaged in investment management and brokerage activities are
subject to the adverse effects of economic recession, volatile interest rates,
and competition from new entrants in their fields of business. Adverse changes
in the direction of the stock market, investor confidence, the financial health
of customers, equity transaction volume, the level and direction of interest
rates and the outlook of emerging markets could adversely affect the financial
stability, as well as the stock prices, of these companies. Additionally,
competitive pressures, including increased competition from new and existing
competitors, the ongoing commoditization of traditional businesses and the need
for increased capital expenditures on new technology could adversely impact the
profit margins of companies in the investment management and brokerage
industries. Companies involved in investment management and brokerage activities
are also subject to extensive regulation by government agencies and self-
regulatory organizations, and changes in laws, regulations or rules, or in the
interpretation of such laws, regulations and rules could adversely affect the
stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management
industry underwrite, sell or distribute property, casualty and business
insurance. Many factors affect
-10-
insurance, reinsurance and risk management company profits, including but not
limited to interest rate movements, the imposition of premium rate caps, a
misapprehension of the risks involved in given underwritings, competition and
pressure to compete globally, weather catastrophes or other natural or man-made
disasters and the effects of client mergers. Individual companies may be exposed
to material risks including reserve inadequacy and the inability to collect from
reinsurance carriers. Insurance companies are subject to extensive governmental
regulation, including the imposition of maximum rate levels, which may not be
adequate for some lines of business. Proposed or potential tax law changes may
also adversely affect insurance companies' policy sales, tax obligations and
profitability. In addition to the foregoing, profit margins of these companies
continue to shrink due to the commoditization of traditional businesses, new
competitors, capital expenditures on new technology and the pressure to compete
globally.
In addition to the normal risks of business, companies involved in the
insurance and risk management industry are subject to significant risk factors,
including those applicable to regulated insurance companies, such as:
* the inherent uncertainty in the process of establishing property-liability
loss reserves, and the fact that ultimate losses could materially exceed
established loss reserves, which could have a material adverse effect on
results of operations and financial condition;
* the fact that insurance companies have experienced, and can be expected in
the future to experience, catastrophic losses, which could have a material
adverse impact on their financial conditions, results of operations and
cash flow;
* the inherent uncertainty in the process of establishing property-liability
loss reserves due to changes in loss payment patterns caused by new claim
settlement practices;
* the need for insurance companies and their subsidiaries to maintain
appropriate levels of statutory capital and surplus, particularly in light
of continuing scrutiny by rating organizations and state insurance
regulatory authorities, and in order to maintain acceptable financial
strength or claims-paying ability ratings;
* the extensive regulation and supervision to which insurance companies are
subject, and various regulatory and other legal actions;
* the adverse impact that increases in interest rates could have on the value
of an insurance company's investment portfolio and on the attractiveness of
certain of its products; and
* the uncertainty involved in estimating the availability of reinsurance and
the collectibility of reinsurance recoverables.
-11-
The state insurance regulatory framework has, during recent years, come
under increased federal scrutiny, and certain state legislatures have considered
or enacted laws that alter and, in many cases, increase state authority to
regulate insurance companies and insurance holding company systems. Further, the
National Association of Insurance Commissioners ("NAIC") and state insurance
regulators are re-examining existing laws and regulations, specifically focusing
on insurance companies, interpretations of existing laws and the development of
new laws. In addition, Congress and certain federal agencies have investigated
the condition of the insurance industry in the United States to determine
whether to promulgate additional federal regulation. The Sponsor is unable to
predict whether any state or federal legislation will be enacted to change the
nature or scope of regulation of the insurance industry, or what effect, if any,
such legislation would have on the industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the amount of
investments in certain investment categories. Failure to comply with these laws
and regulations would cause non-conforming investments to be treated as non-
admitted assets for purposes of measuring statutory surplus and, in some
instances, would require divestiture.
INDUSTRIALS ISSUERS. The trust may invest significantly in industrials
companies. General risks of industrials companies include the general state of
the economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer spending trends. In addition, capital
goods companies may also be significantly affected by overall capital spending
levels, economic cycles, technical obsolescence, delays in modernization,
limitations on supply of key materials, labor relations, government regulations,
government contracts and ecommerce initiatives. Furthermore, certain companies
involved in the industry have also faced scrutiny for alleged accounting
irregularities that may have led to the overstatement of their financial
results, and other companies in the industry may face similar scrutiny.
Industrials companies may also be affected by factors more specific to
their individual industries. Industrial machinery manufacturers may be subject
to declines in commercial and consumer demand and the need for modernization.
Aerospace and defense companies may be influenced by decreased demand for new
equipment, aircraft order cancellations, disputes over or ability to obtain or
retain government contracts, or changes in government budget priorities, changes
in aircraft-leasing contracts and cutbacks in profitable business travel. The
number of housing starts, levels of public and non-residential construction
including weakening demand for new office and retail space, and overall
construction spending may adversely affect construction equipment manufacturers.
REAL ESTATE INVESTMENT TRUSTS. Many factors can have an adverse impact on
the performance of a particular real estate investment trust ("REIT"), including
its cash available for distribution, the credit quality of a particular REIT or
the real estate industry generally. The success of REITs depends on various
factors, including the occupancy and rent levels, appreciation of the underlying
property and the ability to raise rents on those properties. Economic recession,
overbuilding, tax law changes, higher interest rates or excessive speculation
can all negatively impact REITs, their future earnings and share prices.
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Risks associated with the direct ownership of real estate include, among
other factors,
* general U.S. and global as well as local economic conditions,
* decline in real estate values,
* the financial health of tenants,
* overbuilding and increased competition for tenants,
* oversupply of properties for sale,
* changing demographics,
* changes in interest rates, tax rates and other operating expenses,
* changes in government regulations,
* changes in zoning laws,
* the ability of the owner to provide adequate management, maintenance and
insurance,
* faulty construction and the ongoing need for capital improvements,
* the cost of complying with the Americans with Disabilities Act,
* regulatory and judicial requirements, including relating to liability for
environmental hazards,
* natural or man-made disasters,
* changes in the perception of prospective tenants of the safety, convenience
and attractiveness of the properties changes in neighborhood values and
buyer demand, and
* the unavailability of construction financing or mortgage loans at rates
acceptable to developers.
Variations in rental income and space availability and vacancy rates in
terms of supply and demand are additional factors affecting real estate
generally and REITs in particular. Properties owned by a REIT may not be
adequately insured against certain losses and may be subject to significant
environmental liabilities, including remediation costs.
The value of real estate investments may also be affected by the downturn
in the subprime mortgage lending market in the United States. Subprime loans
have higher defaults and losses than prime loans. Subprime loans also have
higher serious delinquency rates than prime loans. The downturn in the subprime
mortgage lending market may have far-reaching
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consequences into many aspects and geographic regions of the real estate
business, and consequently, the value of the portfolio may decline in response
to such developments.
You should also be aware that REITs may not be diversified and are subject
to the risks of financing projects. The real estate industry may be cyclical,
and, if the Trust acquires REIT Securities at or near the top of the cycle,
there is increased risk of a decline in value of the REIT Securities and
therefore the value of the Units. REITs are also subject to defaults by
borrowers and the market's perception of the REIT industry generally.
Because of their structure, and the legal requirement that they distribute
at least 90% of their taxable income to shareholders annually, REITs require
frequent amounts of new funding, through both borrowing money and issuing stock.
Thus, REITs historically have frequently issued substantial amounts of new
equity shares (or equivalents) to purchase or build new properties. This may
have adversely affected REIT equity share market prices. Both existing and new
share issuances may have an adverse effect on these prices in the future,
especially when REITs continue to issue stock when real estate prices are
relatively high and stock prices are relatively low.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities between the time of the deposit and the purchase
of the securities and because a trust will pay the associated brokerage fees and
other acquisition costs.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Income received by a trust is credited by
the trustee to the Income Account for the trust. All other receipts are
credited by the trustee to a separate Capital Account for the trust. The
trustee will normally distribute any income received by a trust on each
distribution date or shortly thereafter to unitholders of record on the
preceding record date. The trust will also generally make required distributions
or distributions to avoid imposition of tax at the end of each year if it has
elected to be taxed as a "regulated investment company" for federal tax
purposes. Unitholders will receive an amount substantially equal to their pro
rata share of the estimated net annual income distributions to be received by
the trust. All distributions will be net of applicable expenses. There is no
assurance that any actual distributions will be made since all dividends
received may be used to pay expenses. In addition, excess amounts from the
Capital Account of a trust, if any, will be distributed at least annually to the
unitholders then of record. Proceeds received from the disposition of any of
the securities after a record date and prior to the following distribution date
will be held in the Capital Account and not distributed until the next
distribution date applicable to the Capital Account. The trustee shall be
required to make a distribution from the Capital Account if the cash balance on
deposit therein available for distribution shall be sufficient to distribute at
least $0.01 per unit. The trustee is not required to
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pay interest on funds held in the Capital or Income Accounts (but may itself
earn interest thereon and therefore benefits from the use of such funds).
The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the unitholders' pro rata share of
the estimated annual income distributions to be received by the trust after
deducting estimated expenses. Because dividends are not received by a trust at
a constant rate throughout the year, such distributions to unitholders are
expected to fluctuate. Persons who purchase units will commence receiving
distributions only after such person becomes a record owner. A person will
become the owner of units, and thereby a unitholder of record, on the date of
settlement provided payment has been received. Notification to the trustee of
the transfer of units is the responsibility of the purchaser, but in the normal
course of business the selling broker-dealer provides such notice.
The trustee will periodically deduct from the Income Account of a trust
and, to the extent funds are not sufficient therein, from the Capital Account of
a trust amounts necessary to pay the expenses of the trust. The trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of a trust.
Amounts so withdrawn shall not be considered a part of a trust's assets until
such time as the trustee shall return all or any part of such amounts to the
appropriate accounts. In addition, the trustee may withdraw from the Income and
Capital Accounts of a trust such amounts as may be necessary to cover
redemptions of units.
DISTRIBUTION REINVESTMENT. Unitholders may reinvest distributions into
additional units of their trust without a sales fee. Your trust will pay any
deferred sales fee and creation and development fee per unit regardless of any
sales fee discounts. However, if you are eligible to receive a discount such
that the sales fee you must pay is less than the applicable deferred sales fee
and creation and development fee, you will be credited the difference between
your sales fee and the deferred sales fee and the creation and development fee
at the time you buy your units. Accordingly, if you reinvest distributions into
additional units of your trust, you will be credited the amount of any remaining
deferred sales fee and creation and development fee on such units at the time of
reinvestment.
STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will
furnish to each unitholder a statement of the amount of income and the amount of
other receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust are required to be audited annually, at the related
trust's expense, by independent public accountants designated by the sponsor,
unless the sponsor determines that such an audit would not be in the best
interest of the unitholders of the trust. The accountants' report will be
furnished by the trustee to any unitholder upon written request. Within a
reasonable period of time after the end of each calendar year, the trustee shall
furnish to each person who at any time during the calendar year was a unitholder
of a trust a statement, covering the calendar year, setting forth for the trust:
(A) As to the Income Account:
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(1) the amount of income received on the securities (including income
received as a portion of the proceeds of any disposition of
securities);
(2) the amounts paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Income Account for payment into
the Reserve Account;
(4) the deductions for applicable taxes and fees and expenses of the
trustee, the depositor, the evaluator, the supervisor, counsel,
auditors and any other expenses paid by the trust;
(5) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(6) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(7) the aggregate distributions to unitholders; and
(8) the balance remaining after such deductions and distributions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year;
(B) As to the Capital Account:
(1) the net proceeds received due to sale, maturity, redemption,
liquidation or disposition of any of the securities, excluding
any portion thereof credited to the Income Account;
(2) the amount paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Capital Account for payments
into the Reserve Account;
(4) the deductions for payment of applicable taxes and fees and
expenses of the trustee, the depositor, the evaluator, the
supervisor, counsel, auditors and any other expenses paid by the
trust;
(5) the deductions for payment of the depositor's expenses of
organizing the trust;
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(6) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(7) the deductions for payment of deferred sales fee and creation and
development fee, if any;
(8) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(9) the aggregate distributions to unitholders; and
(10) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year; and
(C) the following information:
(1) a list of the securities held as of the last business day of such
calendar year and a list which identifies all securities sold or
other securities acquired during such calendar year, if any;
(2) the number of units outstanding on the last business day of such
calendar year;
(3) the unit value based on the last trust evaluation of such trust
made during such calendar year; and
(4) the amounts actually distributed during such calendar year from
the Income and Capital Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for such distributions.
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
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as may be necessary (a) for the trust to continue to qualify as a regulated
investment company for federal income tax purposes if the trust has elected to
be taxed as such under the United States Internal Revenue Code of 1986, as
amended, or (b) to prevent the trust from being deemed an association taxable as
a corporation for federal income tax purposes if the trust has not elected to be
taxed as a regulated investment company under the United States Internal Revenue
Code of 1986, as amended. The trust agreement may not be amended, however,
without the consent of all unitholders then outstanding, so as (1) to permit,
except in accordance with the terms and conditions thereof, the acquisition
hereunder of any securities other than those specified in the schedules to the
trust agreement or (2) to reduce the percentage of units the holders of which
are required to consent to certain of such amendments. The trust agreement may
not be amended so as to reduce the interest in a trust represented by units
without the consent of all affected unitholders. Except for the amendments,
changes or modifications described above, neither the sponsor nor the trustee
may consent to any other amendment, change or modification of the trust
agreement without the giving of notice and the obtaining of the approval or
consent of unitholders representing at least 66 2/3% of the units then
outstanding of the affected trust. No amendment may reduce the aggregate
percentage of units the holders of which are required to consent to any
amendment, change or modification of the trust agreement without the consent of
the unitholders of all of the units then outstanding of the affected trust and
in no event may any amendment be made which would (1) alter the rights to the
unitholders as against each other, (2) provide the trustee with the power to
engage in business or investment activities other than as specifically provided
in the trust agreement, (3) adversely affect the tax status of the trust for
federal income tax purposes or result in the units being deemed to be sold or
exchanged for federal income tax purposes or (4) unless the trust has elected to
be taxed as a regulated investment company for federal income tax purposes,
result in a variation of the investment of unitholders in the trust. The
trustee will notify unitholders of the substance of any such amendment.
The trust agreement provides that a trust shall terminate upon the
liquidation, redemption or other disposition of the last of the securities held
in the trust but in no event is it to continue beyond the mandatory termination
date. If the value of a trust shall be less than the applicable minimum value
stated in the prospectus (generally 40% of the total value of securities
deposited in the trust during the initial offering period), the trustee may, in
its discretion, and shall, when so directed by the sponsor, terminate the trust.
A trust may be terminated at any time by the holders of units representing 66
2/3% of the units thereof then outstanding. In addition, the sponsor may
terminate a trust if it is based on a security index and the index is no longer
maintained. A trust will be liquidated by the trustee in the event that a
sufficient number of units of the trust not yet sold are tendered for redemption
by the sponsor, so that the net worth of the trust would be reduced to less than
40% of the value of the securities at the time they were deposited in the trust.
If a trust is liquidated because of the redemption of unsold units by the
sponsor, the sponsor will refund to each purchaser of units the entire sales fee
paid by such purchaser.
Beginning nine business days prior to, but no later than, the scheduled
termination date described in the prospectus, the trustee may begin to sell all
of the remaining underlying securities on behalf of unitholders in connection
with the termination of the trust. The sponsor may assist the trustee in these
sales and receive compensation to the extent permitted by applicable law. The
sale proceeds will be net of any incidental expenses involved in the sales.
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The sponsor will generally instruct the trustee to sell the securities as
quickly as practicable during the termination proceedings without in its
judgment materially adversely affecting the market price of the securities, but
it is expected that all of the securities will in any event be disposed of
within a reasonable time after a trust's termination. The sponsor does not
anticipate that the period will be longer than one month, and it could be as
short as one day, depending on the liquidity of the securities being sold. The
liquidity of any security depends on the daily trading volume of the security
and the amount that the sponsor has available for sale on any particular day.
Of course, no assurances can be given that the market value of the securities
will not be adversely affected during the termination proceedings.
Approximately thirty days prior to termination of a trust, the trustee will
notify unitholders of the termination and provide a form allowing qualifying
unitholders to elect an in-kind distribution. A unitholder who owns the minimum
number of units described in the prospectus may request an in-kind distribution
from the trustee instead of cash. The trustee will make an in-kind distribution
through the distribution of each of the securities of the trust in book entry
form to the account of the unitholder's bank or broker-dealer at Depository
Trust Company. The unitholder will be entitled to receive whole shares of each
of the securities comprising the portfolio of a trust and cash from the Capital
Account equal to the fractional shares to which the unitholder is entitled. The
trustee may adjust the number of shares of any security included in a
unitholder's in-kind distribution to facilitate the distribution of whole
shares. The sponsor may terminate the in-kind distribution option at any time
upon notice to the unitholders. Special federal income tax consequences will
result if a unitholder requests an in-kind distribution.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust and, after paying all expenses and charges
incurred by the trust, will distribute to unitholders thereof (upon surrender
for cancellation of certificates for units, if issued) their pro rata share of
the balances remaining in the Income and Capital Accounts of the trust.
The sponsor may, but is not obligated to, offer for sale units of a
subsequent series of a trust at approximately the time of the mandatory
termination date. If the sponsor does offer such units for sale, unitholders
may be given the opportunity to purchase such units at a public offering price
that includes a reduced sales fee. There is, however, no assurance that units
of any new series of a trust will be offered for sale at that time, or if
offered, that there will be sufficient units available for sale to meet the
requests of any or all unitholders.
THE TRUSTEE. The trustee is The Bank of New York, a trust company
organized under the laws of New York. The Bank of New York has its principal
unit investment trust division offices at 2 Hanson Place, 12th Floor, Brooklyn,
New York 11217, (800) 848-6468. The Bank of New York is subject to supervision
and examination by the Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured
by the Federal Deposit Insurance Corporation to the extent permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust
agreement, the trustee shall keep records of all transactions at its office.
Such records shall include the name and address of, and the number of units held
by, every unitholder of a trust. Such books and records shall be open to
inspection by
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any unitholder at all reasonable times during usual business hours. The trustee
shall make such annual or other reports as may from time to time be required
under any applicable state or federal statute, rule or regulation. The trustee
shall keep a certified copy or duplicate original of the trust agreement on file
in its office available for inspection at all reasonable times during usual
business hours by any unitholder, together with a current list of the securities
held in each trust. Pursuant to the trust agreement, the trustee may employ one
or more agents for the purpose of custody and safeguarding of securities
comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor.
The trustee or successor trustee must mail a copy of the notice of
resignation to all unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. In case at any time the trustee
shall not meet the requirements set forth in the trust agreement, or shall
become incapable of acting, or if a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the trustee in an
involuntary case, or the trustee shall commence a voluntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the trustee or for any substantial part of its
property shall be appointed, or the trustee shall generally fail to pay its
debts as they become due, or shall fail to meet such written standards for the
trustee's performance as shall be established from time to time by the sponsor,
or if the sponsor determines in good faith that there has occurred either (1) a
material deterioration in the creditworthiness of the trustee or (2) one or more
grossly negligent acts on the part of the trustee with respect to a trust, the
sponsor, upon sixty days' prior written notice, may remove the trustee and
appoint a successor trustee, as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the trustee so removed and
one copy to the successor trustee. Notice of such removal and appointment shall
be mailed to each unitholder by 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
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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 or
trustee is to use its best efforts to appoint a satisfactory successor. Such
resignation or removal shall become effective upon acceptance of appointment by
the successor evaluator. If upon resignation of the evaluator no successor has
accepted appointment within thirty days after notice of resignation, the
evaluator may apply to a court of competent jurisdiction for the appointment of
a successor. Notice of such resignation or removal and appointment shall be
mailed by the trustee to each unitholder.
LIMITATIONS ON LIABILITY. The sponsor, evaluator, and supervisor are
liable for the performance of their obligations arising from their
responsibilities under the trust agreement but will be under no liability to the
unitholders for taking any action or refraining from any action in good faith
pursuant to the trust agreement or for errors in judgment, except in cases of
its own gross negligence, bad faith or willful misconduct or its reckless
disregard for its duties thereunder. The sponsor shall not be liable or
responsible in any way for depreciation or loss incurred by reason of the sale
of any securities.
The trust agreement provides that the trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys, securities or certificates
except by reason of its own gross negligence, bad faith or willful misconduct,
or its reckless disregard for its duties under the trust agreement, nor 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.
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EXPENSES OF THE TRUST. The sponsor will not charge a trust any fees for
services performed as sponsor. The sponsor will receive a portion of the sale
commissions paid in connection with the purchase of units and will share in
profits, if any, related to the deposit of securities in the trust.
The sponsor may receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. The amount of this
"creation and development fee" is set forth in the prospectus. The trustee will
deduct this amount from your trust's assets as of the close of the initial
offering period. No portion of this fee is applied to the payment of
distribution expenses or as compensation for sales efforts. This fee will not be
deducted from proceeds received upon a repurchase, redemption or exchange of
units before the close of the initial public offering period.
The trustee receives for its services that fee set forth in the prospectus.
The trustee's fee which is calculated and paid monthly is based on the total
number of units of the related trust outstanding as of January 1 for any annual
period, except during the initial offering period the fee will be based on the
units outstanding at the end of each month. The trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Capital and Income Accounts since these Accounts are non-interest bearing
and the amounts earned by the trustee are retained by the trustee. Part of the
trustee's compensation for its services to a trust is expected to result from
the use of these funds.
The supervisor will charge a trust a surveillance fee for services
performed for the trust in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the sponsor of providing such services. Such fee shall be based on the
total number of units of the related trust outstanding as of January 1 for any
annual period, except during the initial offering period the fee will be based
on the units outstanding at the end of each month.
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
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units of the related trust outstanding as of January 1 for any annual period,
except during the initial offering period the fee will be based on the units
outstanding at the end of each month.
The trustee's fee, sponsor's fee for providing bookkeeping and
administrative services to the trust, supervisor's fee and evaluator's fee are
deducted from the Income Account of the related trust to the extent funds are
available and then from the Capital Account. Each such fee (other than any
creation and development fee) may be increased without approval of unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index or
any equivalent index substituted therefor.
The following additional charges are or may be incurred by the trust:
(a) fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses and reimbursement of the cost of advances
to the trust for payment of expenses and distributions, but not including any
fees and expenses charged by an agent for custody and safeguarding of
securities) and of counsel, if any; (c) various governmental charges;
(d) expenses and costs of any action taken by the trustee to protect the trust
or the rights and interests of the unitholders; (e) indemnification of the
trustee for any loss, liability or expense incurred by it in the administration
of the trust not resulting from negligence, bad faith or willful misconduct on
its part or its reckless disregard of its obligations under the trust agreement;
(f) indemnification of the sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct or its reckless disregard for its obligations under the trust
agreement; and (g) expenditures incurred in contacting unitholders upon
termination of the trust. The fees and expenses set forth herein are payable
out of a trust and, when owing to the trustee, are secured by a lien on the
trust. If the balances in the Income and Capital Accounts are insufficient to
provide for amounts payable by the trust, the trustee has the power to sell
securities to pay such amounts. These sales may result in capital gains or
losses to unitholders. A trust may pay the costs of updating its registration
statement each year.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
When a trust sells securities, the composition and diversity of the
securities in the trust may be altered. In order to obtain the best price for a
trust, it may be necessary for the sponsor to specify minimum amounts in which
blocks of securities are to be sold. In effecting purchases and sales of a
trust's portfolio securities, the sponsor may direct that orders be placed with
and brokerage commissions be paid to brokers, including brokers which may be
affiliated with the trust, the sponsor or dealers participating in the offering
of units.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. The public offering price per unit is equal to the net asset
value per unit plus organization costs plus the applicable sales fee referred to
in the prospectus. The initial sales fee is equal to the difference between the
maximum sales fee and the sum of the remaining deferred sales fee and the total
creation and development fee. The sales fee as a percentage of the public
offering price and the net amount invested is set forth in the prospectus. The
deferred sales fee is a fixed dollar
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amount and will be collected in installments as described in the prospectus. The
creation and development fee is a fixed dollar amount and will be collected at
the end of the initial offering period as described in the prospectus. Units
purchased after the initial deferred sales fee payment will be subject to the
remaining deferred sales fee payments. Units sold or redeemed prior to such
time as the entire applicable deferred sales fee has been collected will be
assessed the remaining deferred sales fee at the time of such sale or
redemption. Units sold or redeemed prior to such time as the entire applicable
creation and development fee has been collected will not be assessed the
remaining creation and development fee at the time of such sale or redemption.
During the initial offering period, a portion of the public offering price
includes an amount of securities to pay for all or a portion of the costs
incurred in establishing a trust. These costs include the cost of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the Securities and Exchange Commission and states, the
initial audit of the trust portfolio, legal fees and the initial fees and
expenses of the trustee. These costs will be deducted from a trust as of the
end of the initial offering period or after six months, if earlier. Certain
broker-dealers may charge a transaction fee for processing unit purchases.
As indicated above, the initial public offering price of the units was
established by dividing the aggregate underlying value of the securities by the
number of units outstanding. Such price determination as of the opening of
business on the date a trust was created was made on the basis of an evaluation
of the securities in the trust prepared by the evaluator. After the opening of
business on this date, the evaluator will appraise or cause to be appraised
daily the value of the underlying securities as of the close of regular trading
on the New York Stock Exchange on days the New York Stock Exchange is open and
will adjust the public offering price of the units commensurate with such
valuation. Such public offering price will be effective for all orders received
at or prior to the close of regular trading on the New York Stock Exchange on
each such day as discussed in the prospectus. Orders received by the trustee,
sponsor or 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 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. Net asset value per unit is determined by dividing
the value of a trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of units outstanding. The portfolio securities
are valued by the evaluator as follows: If the security is listed on a national
securities exchange, the evaluation will generally be based on the last sale
price on the exchange (unless the evaluator deems the price inappropriate as a
basis for evaluation). If the security is not so listed or, if so listed and
the principal market for the security is other than on the exchange, the
evaluation will generally be made by the evaluator in good faith based on an
appraisal of the fair value of the securities using recognized pricing methods.
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The foregoing evaluations and computations shall be made as of the close of
regular trading on the New York Stock Exchange, on each business day commencing
with the trust's inception date of the securities, effective for all sales made
during the preceding 24-hour period.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of units on the date of settlement provided payment has been received.
Cash, if any, made available to the sponsor prior to the date of settlement for
the purchase of units may be used in the sponsor's business and may be deemed to
be a benefit to the sponsor, subject to the limitations of the Securities
Exchange Act of 1934. If a unitholder desires to have certificates representing
units purchased, such certificates will be delivered as soon as possible
following his written request therefor.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the National Association of Securities Dealers, Inc. and through others.
Sales may be made to or through dealers at prices which represent discounts from
the public offering price as set forth in the prospectus. Certain commercial
banks may be making units available to their customers on an agency basis. The
sponsor reserves the right to change the discounts from time to time.
We may provide, at our own expense and out of our own profits, additional
compensation and benefits to broker-dealers who sell shares of units of this
trust and our other products. This compensation is intended to result in
additional sales of our products and/or compensate broker-dealers and financial
advisors for past sales. We may make these payments for marketing, promotional
or related expenses, including, but not limited to, expenses of entertaining
retail customers and financial advisors, advertising, sponsorship of events or
seminars, obtaining shelf space in broker-dealer firms and similar activities
designed to promote the sale of the our products. These arrangements will not
change the price you pay for your units.
The sponsor reserves the right to reject, in whole or in part, any order
for the purchase of units.
PROFITS OF SPONSOR. The sponsor will receive gross sales fees equal to the
percentage of the offering price of the units of such trusts stated in the
prospectus and will pay a portion of such sales fees to dealers and agents. In
addition, the sponsor may realize a profit or a loss resulting from the
difference between the purchase prices of the securities to the sponsor and the
cost of such securities to a trust. The sponsor may also realize profits or
losses with respect to securities deposited in a trust which were acquired from
underwriting syndicates of which the sponsor was 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
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evaluator, provided that the repurchase price will not be reduced by any
remaining creation and development fee or organization costs during the initial
offering period. While the sponsor may repurchase units from time to time, it
does not currently intend to maintain an active secondary market for units.
Unitholders who wish to dispose of their units should inquire of their broker as
to current market prices in order to determine whether there is in existence any
price in excess of the redemption price and, if so, the amount thereof.
Unitholders who sell or redeem units prior to such time as the entire deferred
sales fee on such units has been collected will be assessed the amount of the
remaining deferred sales fee at the time of such sale or redemption. Unitholders
who sell or redeem units prior to such time as the entire creation and
development fee on such units has been collected will not be assessed the amount
of the remaining creation and development fee at the time of such sale or
redemption. The offering price of any units resold by the sponsor will be in
accord with that described in the currently effective prospectus describing such
units. Any profit or loss resulting from the resale of such units will belong
to the sponsor. If the sponsor decides to maintain a secondary market, it may
suspend or discontinue purchases of units of the trust if the supply of units
exceeds demand, or for other business reasons.
REDEMPTION. A unitholder who does not dispose of units in the secondary
market described above may cause units to be redeemed by the trustee by making a
written request to the trustee at its unit investment trust division office and,
in the case of units evidenced by a certificate, by tendering such certificate
to the trustee properly endorsed or accompanied by a written instrument or
instruments of transfer in form satisfactory to the trustee. Unitholders must
sign the request, and such certificate or transfer instrument, exactly as their
names appear on the records of the trustee and on any certificate representing
the units to be redeemed. Additional documentation may be requested, and a
signature guarantee is always required, from corporations, executors,
administrators, trustees, guardians or associations. The signatures must be
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the trustee. A certificate
should only be sent by registered or certified mail for the protection of the
unitholder. Since tender of the certificate is required for redemption when one
has been issued, units represented by a certificate cannot be redeemed until the
certificate representing such units has been received by the purchasers.
Redemption shall be made by the trustee no later than the seventh day
following the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the redemption price, determined as set
forth below under "Computation of Redemption Price," as of the close of regular
trading on the New York Stock Exchange next following such tender, multiplied by
the number of units being redeemed. Any units redeemed shall be canceled and
any undivided fractional interest in the related trust extinguished. The price
received upon redemption might be more or less than the amount paid by the
unitholder depending on the value of the securities in the trust at the time of
redemption. Unitholders who sell or redeem units prior to such time as the
entire deferred sales fee on such units has been collected will be assessed the
amount of the remaining deferred sales fee at the time of such sale or
redemption. Unitholders who sell or redeem units prior to such time as the
entire creation and development fee on such units has been collected will not be
assessed the amount of the remaining creation and development fee at the time of
such sale or redemption. Certain broker-dealers may charge a transaction fee
for processing redemption requests.
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Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the unitholder only when filing a tax return. Under normal circumstances, the
trustee obtains the unitholder's tax identification number from the selling
broker. However, any time a unitholder elects to tender units for redemption,
such unitholder should make sure that the trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
In the event the trustee has not been previously provided such number, one must
be provided at the time redemption is requested. Any amounts paid on redemption
representing interest shall be withdrawn from the Income Account of a trust to
the extent that funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Capital Account for a trust.
Unitholders tendering units for redemption may request a distribution in
kind (a "Distribution In Kind") from the trustee in lieu of cash redemption of
an amount and value of securities per unit equal to the redemption price per
unit as determined as of the evaluation time next following the tender, provided
that the tendering unitholder meets the requirements stated in the prospectus
and the unitholder has elected to redeem at least thirty days prior to the
termination of the trust. If the unitholder meets these requirements, a
Distribution In Kind will be made by the trustee through the distribution of
each of the securities of the trust in book entry form to the account of the
unitholder's bank or broker-dealer at Depository Trust Company. The tendering
unitholder shall be entitled to receive whole shares of each of the securities
comprising the portfolio of the trust and cash from the Capital Account equal to
the fractional shares to which the tendering unitholder is entitled. The
trustee shall make any adjustments necessary to reflect differences between the
redemption price of the units and the value of the securities distributed in
kind as of the date of tender. If funds in the Capital Account are insufficient
to cover the required cash distribution to the tendering unitholder, the trustee
may sell securities. The in kind redemption option may be terminated by the
sponsor at any time.
The trustee is empowered to sell securities in order to make funds
available for the redemption of units. To the extent that securities are sold
or redeemed in-kind, the size of a trust will be, and the diversity of a trust
may be, reduced but each remaining unit will continue to represent approximately
the same proportional interest in each security. Sales may be required at a
time when securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. The price received upon redemption may be
more or less than the amount 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.
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The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which (as determined by the Securities
and Exchange Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of which
disposal by the trustee of securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying
securities in accordance with the trust agreement; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The trustee is
not liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The redemption price for units of each
trust is computed by the evaluator as of the evaluation time stated in the
prospectus next occurring after the tendering of a unit for redemption and on
any other business day desired by it, by:
A. Adding: (1) the cash on hand in the trust other than cash deposited in the
trust to purchase securities not applied to the purchase of such securities
and (2) the aggregate value of each issue of the securities held in the
trust as determined by the evaluator as described above;
B. Deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account; (2) an amount representing estimated accrued expenses, including
but not limited to fees and expenses of the trustee (including legal and
auditing fees), the evaluator, the sponsor and counsel, if any; (3) cash
held for distribution to unitholders of record as of the business day prior
to the evaluation being made; and (4) other liabilities incurred by the
trust, provided that the redemption price will not be reduced by any
remaining creation and development fee or organization costs during the
initial offering period; and
C. Finally dividing the results of such computation by the number of units of
the trust outstanding as of the date thereof.
RETIREMENT PLANS. A trust may be suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received under each of the foregoing
plans are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered
by brokerage firms and other financial institutions. The trust will lower the
minimum investment requirement for IRA accounts. Fees and charges with respect
to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units will not be evidenced by
certificates unless a unitholder, the unitholder's registered broker/dealer or
the clearing agent for such broker/dealer makes a written request to the
trustee. Units are transferable by making a written request to the
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trustee and, in the case of units evidenced by a certificate, by presenting and
surrendering such certificate to the trustee properly endorsed or accompanied by
a written instrument or instruments of transfer which should be sent by
registered or certified mail for the protection of the unitholder. Unitholders
must sign such written request, and such certificate or transfer instrument,
exactly as their names appear on the records of the trustee and on any
certificate representing the units to be transferred. Such signatures must be
guaranteed as described above.
Units may be purchased and certificates, if requested, will be issued in
denominations of one unit or any multiple thereof, subject to the minimum
investment requirement. Fractions of units, if any, will be computed to three
decimal places. Any certificate issued will be numbered serially for
identification, issued in fully registered form and will be transferable only on
the books of the trustee. The trustee may require a unitholder to pay a
reasonable fee, to be determined in the sole discretion of the trustee, for each
certificate re-issued or transferred and to pay any governmental charge that may
be imposed in connection with each such transfer or interchange. The trustee at
the present time does not intend to charge for the normal transfer or
interchange of certificates. Destroyed, stolen, mutilated or lost certificates
will be replaced upon delivery to the trustee of satisfactory indemnity
(generally amounting to 3% of the market value of the units), affidavit of loss,
evidence of ownership and payment of expenses incurred.
TAXATION
The prospectus contains a discussion of certain U.S. federal income tax
issues concerning your trust and the purchase, ownership and disposition of
trust units. The discussion below supplements the prospectus discussion and is
qualified in its entirety by the prospectus discussion. Prospective investors
should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of trust units, as well
as the tax consequences arising under the laws of any state, locality, non-U.S.
country, or other taxing jurisdiction.
The federal income tax summary below and in the prospectus is based in part
on the advice of counsel to your trust. The Internal Revenue Service could
disagree with any conclusions set forth in these discussions. In addition, our
counsel was not asked to review, and has not reached a conclusion with respect
to the federal income tax treatment of the assets to be held by your trust. This
may not be sufficient for prospective investors to use for the purpose of
avoiding penalties under federal tax law.
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
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currencies, and net income from certain publicly traded partnerships; (b)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the trust's assets is represented by
cash and cash items (including receivables), U.S. government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer generally limited for the purposes of
this calculation to an amount not greater than 5% of the value of the trust's
total assets and not greater than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities (other than U.S. government securities or the
securities of other regulated investment companies) of any one issuer, or two or
more issuers which the trust controls and are engaged in the same, similar or
related trades or businesses, or the securities of certain publicly traded
partnerships; and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net short-
term capital gains in excess of net long-term capital losses but excludes net
capital gain, if any) and at least 90% of its net tax-exempt interest income
each taxable year.
As a regulated investment company, your trust generally will not be subject
to U.S. federal income tax on its investment company taxable income (as that
term is defined in the Code, but without regard to the deduction for dividends
paid) and net capital gain (the excess of net long-term capital gain over net
short term capital loss), if any, that it distributes to unitholders. The trusts
intend to distribute to its unitholders, at least annually, substantially all of
its investment company taxable income and net capital gain. If your trust
retains any net capital gain or investment company taxable income, it will
generally be subject to federal income tax at regular corporate rates on the
amount retained. In addition, amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax unless, generally, your trust distributes during
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of the calendar year, and (3) any ordinary income and capital gains
for previous years that were not distributed during those years. To prevent
application of the excise tax, your trust intends to make its distributions in
accordance with the calendar year distribution requirement. Further, if your
trust retains any net capital gain, the trust may designate the retained amount
as undistributed capital gains in a notice to unitholders who, if subject to
federal income tax on long-term capital gains (i) will be required to include in
income for federal income tax purposes, as long-term capital gain, their share
of such undistributed amount, and (ii) will be entitled to credit their
proportionate share of the tax paid by the trust against their federal income
tax liabilities if any, and to claim refunds to the 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
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distributions out of earnings and profits would be taxed to unitholders as
ordinary dividend income.
If the trust is treated as holding directly or indirectly 10 percent or
more of the combined voting power of the stock of a foreign corporation, and all
U.S. shareholders collectively own more than 50 percent of the vote or value of
the stock of such corporation, the foreign corporation may be treated as a
"controlled foreign corporation" (a "CFC") from a U.S. tax perspective. In such
circumstances, the trust will be required to include certain types of passive
income and certain other types of income relating to insurance, sales and
services with related parties and oil related income in the trust's taxable
income whether or not such income is distributed.
If the trust holds an equity interest in any "passive foreign investment
companies" ("PFICs"), which are generally certain foreign corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rents and royalties or capital gains) or that hold
at least 50% of their assets in investments producing such passive income, the
trust could be subject to U.S. federal income tax and additional interest
charges on gains and certain distributions with respect to those equity
interests, even if all the income or gain is timely distributed to its
unitholders. The trust will not be able to pass through to its unitholders any
credit or deduction for such taxes. The trust may be able to make an election
that could ameliorate these adverse tax consequences. In this case, the trust
would recognize as ordinary income any increase in the value of such PFIC
shares, and as ordinary loss any decrease in such value to the extent it did not
exceed prior increases included in income. Under this election, the trust might
be required to recognize in a year income in excess of its distributions from
PFICs and its proceeds from dispositions of PFIC stock during that year, and
such income would nevertheless be subject to the distribution requirement and
would be taken into account for purposes of the 4% excise tax (described above).
Dividends paid by PFICs will not be treated as qualified dividend income.
PERFORMANCE INFORMATION
Information contained in this Information Supplement or in the prospectus,
as it currently exists or as further updated, may also be included from time to
time in other prospectuses or in advertising material. Information on the
performance of a trust strategy or the actual performance of a trust may be
included from time to time in other prospectuses or advertising material and may
reflect sales fees and expenses of a trust. The performance of a trust may also
be compared to the performance of money managers as reported in SEI Fund
Evaluation Survey or of mutual funds as reported by Lipper Analytical Services
Inc. (which calculates total return using actual dividends on ex-dates
accumulated for the quarter and reinvested at quarter end), Money Magazine Fund
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
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Index (an unmanaged diversified index of 500 stocks) or similar measurement
standards during the same period of time.
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CONTENTS OF REGISTRATION STATEMENT
This 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.
1.5 Form of Dealer Agreement. Reference is made to Exhibit 1.5 to the
Registration Statement on Form S-6 for Advisor's Disciplined 230
(File No. 333-149300) as filed on March 6, 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 250 has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wichita and State of Kansas on the 9th day of April, 2008.
ADVISOR'S DISCIPLINED TRUST 250
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
Registration Statement has been signed below on April 9, 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*
- -------------------------------------------------------------------------------
*An executed copy of each of the related powers of attorney is filed
herewith or incorporated herein by reference as Exhibit 7.1.
S-3