1933 ACT FILE NO.:
1940 ACT FILE NO.: 811-21056
CIK NO.: 1650324
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT ON 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: ADVISORS DISCIPLINED TRUST 1560
B. Name of depositor: ADVISORS ASSET MANAGEMENT, 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 SCOTT R. ANDERSON
Advisors Asset Management, 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 ____________, 2015 at _____ pursuant to Rule 487.
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The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
The information in this prospectus is not complete and may be changed. No one
may sell units of the trust until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell units and is not soliciting an offer to buy units in any state
where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS DATED AUGUST 27, 2015
SUBJECT TO COMPLETION
PREFERRED SELECT INCOME PORTFOLIO, SERIES 2015-1
(ADVISORS DISCIPLINED TRUST 1560)
A portfolio of shares of
preferred securities seeking
high current income
Units are offered only to insurance
company separate accounts to fund
benefits under bank owned life
insurance contracts
PROSPECTUS
____________, 2015
[LOGO] As with any investment, the Securities
and Exchange Commission has not approved
AAM or disapproved of these securities or
passed upon the adequacy or accuracy of
ADVISORS this prospectus. Any contrary
ASSET MANAGEMENT representation is a criminal offense.
------------------
INVESTMENT SUMMARY
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INVESTMENT OBJECTIVE
The trust seeks to provide high current income. There is no assurance the
trust will achieve its objective.
PRINCIPAL INVESTMENT STRATEGY
The trust seeks to provide high current income by investing in a diversified
portfolio of 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.
Units are offered only to insurance company separate accounts to fund
benefits under bank owned life insurance policies issued by such insurance
companies (the "Accounts"). The Accounts will invest in units of the trust
based on the terms of such insurance contracts between the insurance companies
(the "Insurance Companies") and the owners of bank owned life insurance
contracts ("Contract Owners"). Units are owned by the Accounts and the
interests of a Contract Owner are subject to the terms of their contract with
the applicable Insurance Company. The rights of the Accounts as unitholder
should be distinguished from the rights of a Contract Owner under their contract
with an Insurance Company. Contract Owners and Insurance Companies should
familiarize themselves with this prospectus.
Units are only registered and available for purchase in
___________________________________. Nothing in this prospectus constitutes an
offer or recommendation to enter into a contract for bank owned life insurance
with the Insurance Companies.
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 PREFERRED SECURITIES MAY FALL IF INTEREST RATES, IN GENERAL,
RISE. No one can predict whether interest rates will rise or fall in the
future.
* THE ISSUER OF A SECURITY MAY BE UNWILLING OR UNABLE TO MAKE INCOME PAYMENTS
IN THE FUTURE. This may reduce the level of income the trust receives
which would reduce your income and cause the value of your units to fall.
* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the primary offering period.
* CERTAIN OF THE SECURITIES HELD BY THE TRUST ARE EITHER RATED BELOW INVESTMENT
GRADE (ALSO KNOWN AS "JUNK" SECURITIES) BY ONE OR MORE RATINGS AGENCIES OR
ARE UNRATED. THESE SECURITIES MAY BE CONSIDERED TO BE SPECULATIVE AND MAY
BE SUBJECT TO GREATER MARKET AND CREDIT RISKS. ACCORDINGLY, THE RISK OF
DEFAULT MAY BE HIGHER THAN INVESTMENT GRADE SECURITIES. In addition, these
securities may be more sensitive to interest rate changes and may be more
likely to make early returns of principal.
* 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<F1>* DO NOT ACTIVELY MANAGE THE PORTFOLIO. Except in limited
circumstances, the trust will generally hold, and continue to buy, shares
of the same securities even if their market value declines.
--------------------
<F1>* "AAM," "we" and related terms mean Advisors Asset Management, 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 preferred securities.
* the potential to receive monthly distributions of income.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in preferred
securities.
* seek capital appreciation without current income.
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ESSENTIAL INFORMATION
---------------------
UNIT PRICE AT INCEPTION $10.0000
INCEPTION DATE ____________, 2015
TERMINATION DATE ____________, ____
ESTIMATED NET ANNUAL
DISTRIBUTIONS
First year* $______ per unit
Second year* $______ per unit
DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month
CUSIP NUMBERS _________
TICKER SYMBOL ______
MINIMUM INVESTMENT $1,000/100 units
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<FN>
* As of ____________, 2015 and may vary thereafter.
</FN>
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
------------------------
Maximum sales fee _.__% $_____
======= =======
ORGANIZATION COSTS _.__% $_____
======= =======
AS A % AMOUNT
ANNUAL OF NET PER 100
OPERATING EXPENSES ASSETS UNITS
------------------------
Trustee fee & expenses _.__% $____
Supervisory, evaluation
and administration fees _.__ ____
------- -------
Total _.__% $____
======= =======
The above table is intended to assist in understanding the fees and expenses
that the Accounts, and, indirectly, Contract Owners will bear. A Contract Owner
should refer to contract with the applicable Insurance Company for information
about fees and expenses that may be incurred at the Account level.
EXAMPLE
This example helps you compare the cost of this trust with other unit trusts
and mutual funds. In the example we assume that the expenses do not change and
that the trust's annual return is 5%. Your actual returns and expenses will
vary. Based on these assumptions, you would pay these expenses for every
$10,000 you invest in the trust:
1 year $_____
2 years (life of trust) $_____
These amounts are the same regardless of whether you sell your investment at the
end of a period or continue to hold your investment.
Investment Summary 3
PREFERRED SELECT INCOME PORTFOLIO, SERIES 2015-1
(ADVISORS DISCIPLINED TRUST 1560)
PORTFOLIO
AS OF THE TRUST INCEPTION DATE, ____________, 2015
PERCENTAGE OF COST OF
NUMBER AGGREGATE MARKET SECURITIES
OF OFFERING REDEMPTION VALUE PER TO
SHARES ISSUER(1) PRICE PROVISIONS(2) SHARE(3) TRUST(3)(4)
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES -- 100.00%
--------- ----------
100.00% $________
========= ==========
<FN>
See "Notes to Portfolio"
</FN>
4 Investment Summary
Notes to Portfolio
(1) Shown under this heading 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 security was originally issued with a par or stated
value per share equal to $25, with the exception of M&T Bank Corporation,
which was issued with a par or stated value per share of $1,000.
Securities are represented by contracts to purchase securities.
(2) 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.
(3) 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. In
accordance with Accounting Standards Codification 820, "Fair Value
Measurements", the trust's investments are classified as Level 1, which
refers to security prices determined using quoted prices in active markets
for identical securities.
(4) The cost of the securities to the sponsor and the sponsor's profit or
(loss) (which is the difference between the cost of the securities to the
sponsor and the cost of the securities to the trust) are $__________ and
$__________, respectively.
(5) This is a security issued by a foreign company.
Preferred securities comprise approximately 100.00% of the investments in
the trust, broken down by country of organization of the issuer as set
forth below:
(6) The security has a "make whole" call option and may be redeemable in whole
or in part at the option of the issuer at a redemption price generally
equal to the greater of (i) 100% of the aggregate principal amount of the
security or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon, discounted to the date of
redemption on a periodic basis at a set premium to the then current
applicable Treasury Rate plus accrued and unpaid interest on the principal
amount being redeemed to the date of redemption.
Investment Summary 5
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UNDERSTANDING YOUR INVESTMENT
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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.AAMLIVE.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, 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, 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.
Units are offered only to insurance company separate accounts to fund
benefits under bank owned life insurance policies issued by such insurance
companies. The Accounts will invest in units of the trust based on the terms of
such insurance contracts between Insurance Companies and Contract Owners.
Accordingly, units are owned by the Accounts and the interests of a Contract
Owner are subject to the terms of their contract with the applicable Insurance
Company. The rights of the Accounts as unitholder should be distinguished from
the rights of a Contract Owner under their contract with an Insurance Company.
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 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 securities 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
6 Understanding Your Investment
or after six months, if earlier. The value of your units will decline when the
trust pays these costs.
SALES FEE. You pay a fee in connection with purchasing units. We refer to
this fee as the "sales fee." The maximum sales fee equals ______% of the public
offering price per unit at the time of purchase. You pay the initial sales fee
at the time you buy units.
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.AAMLIVE.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 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."
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 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. 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 Mellon, on any day the New York Stock Exchange is open.
The redemption price that you will receive for units is equal to the net asset
value per unit, provided that you will not pay organization costs if you redeem
units during the initial offering period. You will receive the net asset value
for a particular day if the trustee receives your completed redemption request
prior to the close of regular trading on the New York Stock Exchange.
Redemption requests received 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 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. If your request is not received in a timely 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.
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
Understanding Your Investment 7
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 at any time without notice.
EXCHANGE OPTION. You may be able to exchange your units for units of our
other unit trusts at a reduced sales fee. You can contact your financial
professional for more information about trusts currently available for
exchanges. Before you exchange units, you should read the prospectus carefully
and understand the risks and fees. You should then discuss this option with
your financial professional to determine whether your investment goals have
changed, whether current trusts suit you and to discuss tax consequences. We
may discontinue this option upon sixty days notice.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays distributions of its net
investment income along with any excess capital on each monthly distribution
date to unitholders of record on the preceding record date, provided that the
total cash held for distribution equals at least 0.1% of the trust's net asset
value as determined under the trust agreement. 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 amount of your
distributions will vary from time to time as companies change their dividends or
trust expenses change.
The issuers in the trust's portfolio make dividend payments at various times
during the year. When the trust receives dividends from issuers, the trustee
credits the dividends to the trust's accounts. Because the trust does not
necessarily receive dividends from the underlying issuers at a constant rate
throughout the year, the trust's income distributions to unitholders will
fluctuate from month to month.
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 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 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
8 Understanding Your Investment
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.
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. The securities in your trust may be subject to a greater risk of rising
interest rates than would normally be the case due to the current period of
historically low rates.
INCOME PAYMENT RISK is the risk that an issuer of a security is unwilling or
unable to meet its obligation to pay income and/or principal on the security.
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".
HIGH YIELD SECURITY RISK. The trust may invest in high yield securities or
unrated securities. High yield, high risk securities are subject to greater
market fluctuations and risk of loss than securities with higher investment
ratings. The value of these securities will decline significantly with
increases in interest rates, not only because increases in rates generally
decrease values, but also because increased rates may indicate an economic
slowdown. An economic slowdown, or a reduction in an issuer's creditworthiness,
may result in the issuer being unable to maintain earnings at a level sufficient
to maintain interest and principal payments.
High-yield or "junk" securities, the generic names for securities rated below
"BBB" by Standard & Poor's or "Baa" by Moody's, are frequently issued by
corporations in the growth stage
Understanding Your Investment 9
of their development or by established companies who are highly leveraged or
whose operations or industries are depressed. Securities rated below BBB or Baa
are considered speculative as these ratings indicate a quality of less than
investment grade. Because high-yield securities are generally subordinated
obligations and are perceived by investors to be riskier than higher rated
securities, their prices tend to fluctuate more than higher rated securities and
are affected by short-term credit developments to a greater degree.
The market for high-yield securities is smaller and less liquid than that for
investment grade securities. Due to the smaller, less liquid market for high-
yield securities, the bid-offer spread on such securities is generally greater
than it is for investment grade securities and the purchase or sale of such
securities may take longer to complete.
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, distributions are
generally treated as interest rather than dividends for federal income tax
purposes and therefore, are not eligible for the dividends-received deduction or
the lower federal tax rates applicable to qualified dividends. 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 subordinated to
bonds and other debt instruments in a company's capital structure, in terms of
priority to
10 Understanding Your Investment
corporate income, and therefore will be subject to greater credit risk than
those debt instruments.
The Dodd-Frank Wall Street Reform and Consumer Protection Act and related
changes to international banking regulations issued by the Basel Committee on
Banking Supervision, may affect the value of, and/or result in the early
redemption of, certain of the trust preferred securities held by the trust.
This new regulatory scheme eliminates trust preferred securities from the
definition of assets eligible to be treated as "Tier 1" capital on the balance
sheets of U.S. and non-U.S. banks and thrifts. This reclassification may prompt
such banks and thrifts that issued trust preferred securities that were included
in their Tier 1 capital to redeem them prior to their stated maturities in order
to replace them with securities meeting the new Tier 1 capital requirements. If
the trust preferred securities held by the trust become subject to such early
redemptions. future distributions by the trust will generally be reduced by the
amount of the income which would otherwise have been paid with respect to the
redeemed securities and unit holders will receive a distribution in the amount
of the par value of the redeemed securities. The domestic legislation will be
phased-in over a three year period beginning January 1, 2013 for all U.S. trust
preferred securities issued prior to May 19, 2010 and the international
guidelines applicable to non-U.S. trust preferred securities will be implemented
over a six year period beginning on the same date; however, it is possible that
some or all of the trust preferred securities held by the trust may be called
for redemption prior to that date.
FOREIGN ISSUER RISK. An investment in securities of foreign issuers involves
certain risks that are different in some respects from an investment in
securities of domestic issuers. These include risks associated with future
political and economic developments, international trade conditions, foreign
withholding taxes, liquidity concerns, currency fluctuations, volatility,
restrictions on foreign investments and exchange of securities, potential for
expropriation of assets, confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, potential inability to collect when a company goes
bankrupt and economic, political or social instability. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy for
reasons including differences in growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments positions. There may be less publicly available information about a
foreign issuer than is available from a domestic issuer as a result of different
accounting, auditing and financial reporting standards. Some foreign markets
are less liquid than U.S. markets which could cause securities to be bought at a
higher price or sold at a lower price than would be the case in a highly liquid
market.
Securities of certain foreign issuers may be denominated or quoted in
currencies other than the U.S. dollar. Foreign issuers also make payments and
conduct business in foreign currencies. Many foreign currencies have fluctuated
widely in value against the U.S. dollar for various economic and political
reasons. Changes in foreign currency exchange rates may affect the value of
foreign securities and income payments. Generally, when the U.S. dollar rises
in value against a foreign currency, a security denominated in that currency
loses value because the currency is worth fewer U.S. dollars. Conversely, when
the U.S. dollar decreases in value against a foreign currency, a security
denominated in that currency gains value because the currency is worth more U.S.
dollars. The U.S. dollar value of income payments on foreign securities will
fluctuate similarly with changes in foreign currency values.
Understanding Your Investment 11
Certain foreign securities may be held in the form of American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), or other similar
receipts. Depositary receipts represent receipts for foreign securities
deposited with a custodian (which may include the trustee of the trust).
Depository receipts may not be denominated in the same currency as the
securities into which they may be converted. ADRs typically trade in the U.S.
in U.S. dollars and are registered with the Securities and Exchange Commission.
GDRs are similar to ADRs, but GDRs typically trade outside of the U.S. and
outside of the country of the issuer in the currency of the country where the
GDR trades. Depositary receipts generally involve most of the same types of
risks as foreign securities held directly but typically also involve additional
expenses associated with the cost of the custodian's services. Some depositary
receipts may experience less liquidity than the underlying securities traded in
their home market. Certain depositary receipts are unsponsored (i.e. issued
without the participation or involvement of the issuer of the underlying
security). The issuers of unsponsored depositary receipts are not obligated to
disclose information that may be considered material in the U.S. Therefore,
there may be less information available regarding these issuers which can impact
the relationship between certain information impacting a security and the market
value of the depositary receipts.
CONCENTRATION RISK is the risk that the value of your trust is more
susceptible to fluctuations based on factors that impact a particular sector
because the portfolio concentrates in securities issued by companies within that
sector. A portfolio "concentrates" in s sector when securities in a particular
sector make up 25% or more of the portfolio.
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 face increased competition from
nontraditional lending sources as regulatory changes permit new entrants to
offer various financial products. Technological advances such as the Internet
allow these nontraditional lending sources to cut overhead and permit the more
efficient use of customer data. Banks are already facing tremendous pressure
from mutual funds, brokerage firms and other financial service providers in the
competition to furnish services that were traditionally offered by banks.
Companies engaged in investment management and broker-dealer activities are
subject to volatility in their earnings and share prices that often exceeds the
volatility of the equity market in general. Adverse changes in the direction of
the stock market, investor confidence, equity transaction volume, the level and
direction of interest rates and the outlook of emerging markets could adversely
affect the financial stability, as well as the stock prices, of these companies.
Additionally, competitive pressures, including increased competition with new
and existing competitors, the ongoing commoditization of traditional businesses
and the need for increased capital expenditures on new technology could
adversely impact the profit margins of companies in the investment management
and brokerage industries. Companies involved in investment management and
broker-dealer activities are also
12 Understanding Your Investment
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.
Financial services companies faced significant difficulty related to the
downturn in the housing and mortgage lending markets, corresponding declines in
the value of mortgage-backed securities and the resulting impact on all areas of
the financial services industry and the broader economy. These difficulties
have given rise to considerable uncertainty regarding the global economy and
financial services companies, in particular. The downturn also led to
considerable write-downs in the values of many assets held by financial services
companies and a tightening of credit markets that has been marked by a general
unwillingness of many entities to extend credit. These factors caused a
significant need for many financial services companies to raise capital to meet
obligations and to satisfy regulatory and contractual capital requirements.
Many well-established financial services companies were forced to seek
additional capital through issuances of new preferred or common equity and
certain companies were forced to agree to be acquired by other companies (or
sell some or all of their assets to other companies). In some cases government
assistance, guarantees or direct participation in investments or acquisitions
have been necessary to facilitate these transactions. In addition, concerns
regarding these issues and their potential negative impact to the U.S. and
global economies have resulted in extreme volatility in securities prices and
uncertain market conditions.
In response to these issues, government authorities in the U.S. and other
countries have initiated and may continue to engage in administrative and
legislative action, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act and resulting rulemaking intended to address both short- and
long-term difficulties facing the housing and mortgage lending markets, mortgage
backed securities, the financial services industry and the broader economy.
These government actions include, but are not limited to, restrictions on
investment activities; increased oversight, regulation and involvement in
financial services company practices; adjustments to capital requirements; the
acquisition of interests in and the extension of credit to private entities; and
increased investigation efforts into the actions of companies and individuals in
the financial service industry. No one can predict any action that might be
taken or the effect any action or inaction will have. It is possible that any
actions taken by government authorities will not address or help improve the
state of these difficulties as intended. No one can predict the impact that the
recent difficulties will have on the economy, generally or financial services
companies. The recent difficulties and corresponding government action or
inaction may have far reaching consequences and your investment may be adversely
affected by such developments.
Understanding Your Investment 13
REAL ESTATE INVESTMENT TRUSTS. The trust may invest in securities issued by
real estate investment trusts (REITs). Many factors can have an adverse impact
on the performance of a particular REIT, including its cash available for
distribution, the credit quality of a particular REIT or the real estate
industry generally. The success of REITs depends on various factors, including
the occupancy and rent levels, appreciation of the underlying property and the
ability to raise rents on those properties. Economic recession, overbuilding,
tax law changes, higher interest rates or excessive speculation can all
negatively impact REITs, their future earnings and share prices.
Risks associated with the direct ownership of real estate include, among
other factors,
* general U.S. and global as well as local economic conditions,
* decline in real estate values,
* the financial health of tenants,
* overbuilding and increased competition for tenants,
* oversupply of properties for sale,
* changing demographics,
* changes in interest rates, tax rates and other operating expenses,
* changes in government regulations,
* faulty construction and the ongoing need for capital improvements,
* regulatory and judicial requirements, including relating to liability for
environmental hazards,
* changes in neighborhood values and buyer demand, and
* the unavailability of construction financing or mortgage loans at rates
acceptable to developers.
Variations in rental income and space availability and vacancy rates in terms
of supply and demand are additional factors affecting real estate generally and
REITs in particular. Properties owned by a REIT may not be adequately insured
against certain losses and may be subject to significant environmental
liabilities, including remediation costs.
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 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 a fund acquires REIT securities at or near the top of the cycle, there is
increased risk of a decline in value of the REIT securities. Recent demand for
certain types of real estate may have inflated the value of real estate. This
may increase the risk of a substantial decline in the value of such real estate
and increase the risk of a decline in the value of the securities. REITs are
also subject to defaults by borrowers and the market's perception of the REIT
industry generally.
Because of their structure, and a current legal requirement that they
distribute at least 90% of their taxable income to shareholders annually,
14 Understanding Your Investment
REITs require frequent amounts of new funding, through both borrowing money and
issuing stock. Thus, REITs historically have frequently issued substantial
amounts of new equity shares (or equivalents) to purchase or build new
properties. This may have adversely affected REIT equity share market prices.
Both existing and new share issuances may have an adverse effect on these prices
in the future, especially if REITs continue to issue stock when real estate
prices are relatively high and stock prices are relatively low.
The value of REITs may also be affected by the downturn in the housing and
mortgage lending markets. In response, government authorities have initiated
and may continue to engage in administrative and legislative action intended to
address both short- and long-term difficulties facing the housing and mortgage
lending markets and the broader economy. No one can predict the action that
might be taken or the effect any action or inaction will have and it is possible
that any actions taken by government authorities will not address or help
improve the state of these difficulties as intended. The downturn and
corresponding government action may have far reaching consequences into many
geographic regions and, consequently, the value of securities in the portfolio
may decline in response to such developments.
LEGISLATION AND 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. 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. In addition,
litigation regarding any of the issuers of the securities or of the industries
represented by these issuers may negatively impact the share prices of these
securities. No one can predict what impact any pending or threatened litigation
will have on the share prices of the securities.
LIQUIDITY RISK is the risk that the value of a security will fall if trading
in the security is limited or absent. No one can guarantee that a liquid
trading market will exist for any security.
NO FDIC GUARANTEE. An investment in the trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
HOW THE TRUST WORKS
YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940. We created the trust under a trust agreement
between Advisors Asset Management, Inc. (as depositor/sponsor, evaluator and
supervisor) and The Bank of New York Mellon (as trustee). 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
Understanding Your Investment 15
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,
* as permitted by the trust agreement.
When your trust sells securities, the composition and diversification of the
securities in the portfolio may be altered. Your trust will generally reject any
offer for securities or other property in exchange for the securities in its
portfolio. If an offer by the issuer of any of the portfolio securities or any
other party is made to issue new securities, or to exchange securities, for
trust portfolio securities, the trustee will reject the offer. If any such
issuance, exchange or substitution occurs (regardless of any action or rejection
by the trust), any securities and/or property received will be deposited into
the trust and will be promptly sold by the trustee pursuant to the sponsor's
direction, unless the sponsor advises the trustee to keep such securities or
property. If any contract for the purchase of securities fails, the sponsor
will refund the cash and sales charge 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.
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.
Pursuant to an exemptive order, your trust may be able to purchase securities
from other trusts that we sponsor when we create additional units. Your trust
may also be able to sell securities to other trusts that we sponsor to satisfy
unit redemption, pay expenses, in connection with periodic tax compliance or in
connection with the termination of your trust. The exemption may enable each
trust to eliminate commission costs on these transactions. The price for those
securities will be the closing price on the sale date on the exchange where the
securities are principally traded as certified by us to 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
16 Understanding Your 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 Advisors Asset Management, Inc. 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 unit investment trust division at
8100 East 22nd Street North, Building 800, Suite 102, Wichita, Kansas 67226 or
by using the contacts listed on the back cover of this prospectus. AAM is a
registered broker-dealer and investment adviser, a member of the Financial
Industry Regulatory Authority, Inc. (FINRA) and Securities Investor Protection
Corporation (SIPC) and a registrant of the Municipal Securities Rulemaking Board
(MSRB). If we fail to or cannot perform our duties as sponsor or become
bankrupt, the trustee may replace us, continue to operate your trust without a
sponsor, or terminate your trust.
We and your trust have adopted a code of ethics requiring our employees who
have access to information on trust transactions to report personal securities
transactions. The purpose of the code is to avoid potential conflicts of
interest and to prevent fraud, deception or misconduct with respect to your
trust.
The sponsor or an affiliate may use the list of securities in the trust in
its independent capacity (which may include acting as an investment adviser or
broker-dealer) and distribute this information to various individuals and
entities. The sponsor or an affiliate may recommend or effect transactions in
the securities. This may also have an impact on the price your trust pays for
the securities and the price received upon unit redemption or trust termination.
The sponsor may act as agent or principal in connection with the purchase and
sale of securities, including those held by the trust, and may act as a
specialist market maker in the securities. The sponsor may also issue reports
and make recommendations on the securities in the trust. The sponsor or an
affiliate may have participated in a public offering of one or more of the
securities in the trust. The sponsor, an affiliate or their employees may have
a long or short position in these securities or related securities. An officer,
director or employee of the sponsor or an affiliate may be an officer or
director for the issuers of the securities.
THE TRUSTEE. The Bank of New York Mellon is the trustee of your trust. Its
principal unit investment trust division office is located at 2 Hanson Place,
12th Floor, Brooklyn, New York 11217. You can contact the trustee by
Understanding Your Investment 17
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. Units are distributed at the public offering price
per unit as described under "How to Buy Units".
Units are offered only to insurance company separate accounts to fund
benefits under bank owned life insurance policies issued by such insurance
companies. The Accounts will invest in units of the trust based on the terms of
the contracts between Insurance Companies and Contract Owners. Accordingly,
units are owned by the Accounts and the interests of a Contract Owner are
subject to the terms of such insurance contract with the applicable Insurance
Company. The rights of the Accounts as unitholder should be distinguished from
the rights of a Contract Owner under their contract with an Insurance Company.
Units are registered for sale only in _________________________________. 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.
TAXES
This section summarizes some of the main U.S. federal income tax consequences
of owning units of the trust. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example,
these summaries generally do not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or other investor with special
circumstances. In addition, this section does not describe your state, local or
foreign tax consequences. The trust intends to comply with the diversification
requirements of Internal Revenue Code Section 817(h) related to the tax-deferred
status of insurance company separate accounts. Contract owners should refer to
their contracts and related materials and consult with their own tax advisor for
information regarding the tax consequences of owning such contracts.
This federal income tax summary is based in part on the advice and opinion 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.
ASSETS OF THE TRUST. The trust is expected to hold shares of stock in
corporations (the "Stocks") that are treated as equity for federal income tax
purposes. It is possible that the trust will also
18 Understanding Your Investment
hold other assets, including assets that are treated differently for federal
income tax purposes from those described above, in which case you will have
federal income tax consequences different from or in addition to those described
in this section. All of the assets held by the trust constitute the "Trust
Assets." Neither our counsel nor we have analyzed the proper federal income tax
treatment of the Trust Assets and thus neither our counsel nor we have reached a
conclusion regarding the federal income tax treatment of the Trust Assets.
TRUST STATUS. If the trust is at all times operated in accordance with the
documents establishing the trust and certain requirements of federal income tax
law are met, the trust will not be taxed as a corporation for federal income tax
purposes. As a unit owner, you will be treated as the owner of a pro rata
portion of each of the Trust Assets, and as such you will be considered to have
received a pro rata share of income (e.g., dividends and capital gains, if any)
from each Trust Asset when such income would be considered to be received by you
if you directly owned the Trust Assets. This is true even if you elect to have
your distributions reinvested into additional units. In addition, the income
from Trust Assets that you must take into account for federal income tax
purposes is not reduced by amounts used to pay sales charges or trust expenses.
Income from the trust may also be subject to a 3.8 percent "medicare tax". This
tax generally applies to your net investment income if your adjusted gross
income exceeds certain threshold amounts, which are $250,000 in the case of
married couples filing joint returns and $200,000 in the case of single
individuals.
YOUR TAX BASIS AND INCOME OR LOSS UPON DISPOSITION. If your trust disposes
of Trust Assets, you will generally recognize gain or loss. If you dispose of
your units or redeem your units for cash, you will also generally recognize gain
or loss. To determine the amount of this gain or loss, you must subtract your
tax basis in the related Trust Assets from your share of the total amount
received in the transaction. You can generally determine your initial tax basis
in each Trust Asset by apportioning the cost of your units, including sales
charges, among the Trust Assets ratably according to their values on the date
you acquire your units. In certain circumstances, however, you may have to
adjust your tax basis after you acquire your units (for example, in the case of
certain dividends that exceed a corporation's accumulated earnings and profits).
If you are an individual, the maximum marginal stated federal tax rate for
net capital gain is generally 20% for taxpayers in the 39.6% tax bracket, 15%
for taxpayers in the 25%, 28%, 33% and 35% tax brackets and 0% for taxpayers in
the 10% and 15% tax brackets. Capital gains may also be subject to the
"medicare tax" described above.
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. 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, however, treats certain capital
gains as ordinary income in special situations.
DIVIDENDS FROM STOCKS. Certain dividends received with respect to the Stocks
may qualify to be taxed at the same rates that apply to net capital gain (as
discussed above), provided certain holding period requirements are satisfied.
Understanding Your Investment 19
DIVIDENDS RECEIVED DEDUCTION. Generally, a domestic corporation owning units
in a trust may be eligible for the dividends received deduction with respect to
such unit owner's pro rata portion of certain types of dividends received by the
trust. However, a corporation generally will not be entitled to the dividends
received deduction with respect to dividends from most foreign corporations.
IN-KIND DISTRIBUTIONS. Under certain circumstances as described in this
prospectus, you may request an In-Kind Distribution of Trust Assets when you
redeem your units or at your trust's termination. By electing to receive an In-
Kind Distribution, you will receive Trust Assets plus, possibly, cash. You will
not recognize gain or loss if you only receive whole Trust Assets in exchange
for the identical amount of your pro rata portion of the same Trust Assets held
by your trust. However, if you also receive cash in exchange for a Trust Asset
or a fractional portion of a Trust Asset, you will generally recognize gain or
loss based on the difference between the amount of cash you receive and your tax
basis in such Trust Asset or fractional portion.
ROLLOVERS AND 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 you incur in
connection with the exchange of your units of your trust for units of the next
series will generally be disallowed with respect to this deemed sale and
subsequent deemed repurchase, to the extent the two trusts have substantially
identical Trust Assets under the wash sale provisions of the Internal Revenue
Code.
LIMITATIONS ON THE DEDUCTIBILITY OF TRUST EXPENSES. Generally, for federal
income tax purposes, you must take into account your full pro rata share of your
trust's income, even if some of that income is used to pay trust expenses. You
may deduct your pro rata share of each expense paid by your trust to the same
extent as if you directly paid the expense. You may be required to treat some
or all of the expenses of your trust as miscellaneous itemized deductions.
Individuals may only deduct certain miscellaneous itemized deductions to the
extent they exceed 2% of adjusted gross income. Some individuals may also be
subject to further limitations on the amount of their itemized deductions,
depending on their income.
FOREIGN INVESTORS, TAXES AND INVESTMENTS. Distributions by your trust that
are treated as U.S. source income (e.g., dividends received on Stocks of
domestic corporations) will generally be subject to U.S. income taxation and
withholding in the case of Units held by nonresident alien individuals, foreign
corporations or other non-U.S. persons, subject to any applicable treaty. 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 may not be
subject to U.S. federal income taxes, including withholding taxes, on some or
all of the income from your trust or on any gain from the sale or redemption of
your Units, provided that certain conditions are met. You should consult your
tax advisor with respect to the conditions you must meet in order to be exempt
for U.S. tax purposes. Distributions in respect of units may be subject to a
U.S. withholding tax of 30% in the case of distributions to (i) certain non-U.S.
financial institutions that have not entered into an agreement with the U.S.
Treasury to collect and disclose certain information and are not resident in a
jurisdiction that has entered into such an agreement
20 Understanding Your Investment
with the U.S. Treasury and (ii) certain other non-U.S. entities that do not
provide certain certifications and information about the entity's U.S. owners.
Dispositions of units by such persons may be subject to such withholding after
December 31, 2016. You should also consult your tax advisor with respect to
other U.S. tax withholding and reporting requirements.
Some distributions by your trust may be subject to foreign withholding taxes.
Any income withheld will still be treated as income to you. Under the grantor
trust rules, you are considered to have paid directly your share of any foreign
taxes that are paid. Therefore, for U.S. tax purposes, you may be entitled to a
foreign tax credit or deduction for those foreign taxes.
If any U.S. investor is treated as owning directly or indirectly 10 percent
or more of the combined voting power of the stock of a foreign corporation, and
all U.S. shareholders of that corporation collectively own more than 50 percent
of the vote or value of the stock of that corporation, the foreign corporation
may be treated as a controlled foreign corporation (CFC). If you own 10 percent
or more of a CFC (through the trust and in combination with your other
investments) or possibly if the trust owns 10 percent or more of a CFC, you will
be required to include certain types of the CFC's income in your taxable income
for federal income tax purposes whether or not such income is distributed to the
trust or to you.
A foreign corporation will generally be treated as a passive foreign
investment company (PFIC) if 75 percent or more of its income is passive income
or if 50 percent or more of its assets are held to produce passive income. If
the trust purchases shares in a PFIC, you may be subject to U.S. federal income
tax on a portion of certain distributions or on gains from the disposition of
such shares at rates that were applicable in prior years and any gain may be
recharacterized as ordinary income that is not eligible for the lower net
capital gains tax rate. Additional charges in the nature of interest may also
be imposed on you. Certain elections may be available with respect to PFICs
that would limit these consequences. However, these elections would require you
to include certain income of the PFIC in your taxable income even if not
distributed to the trust or to you, or require you to annually recognize as
ordinary income any increase in the value of the shares of the PFIC, thus
requiring you to recognize income for federal income tax purposes in excess of
your actual distributions from PFICs and proceeds from dispositions of PFIC
stock during a particular year. Dividends paid by PFICs are not eligible to be
taxed at the net capital gains tax rate.
NEW YORK TAX STATUS. Under the existing income tax laws of the State and
City of New York, your trust will not be taxed as a corporation subject to the
New York state franchise tax or the New York City general corporation tax. You
should consult your tax advisor regarding potential foreign, state or local
taxation with respect to your units.
EXPENSES
Your trust will pay various expenses to conduct its operations. The "Fees
and Expenses" section of the "Investment Summary" in this prospectus shows the
estimated amount of these expenses.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing accounts.
Your trust will reimburse us as supervisor, evaluator and sponsor for providing
portfolio supervisory services, for evaluating your portfolio and for providing
bookkeeping and administrative
Understanding Your Investment 21
services. Our reimbursements may exceed the costs of the services we provide to
your trust but will not exceed the costs of services provided to all of our unit
investment trusts in any calendar year. All of these fees may adjust for
inflation without your approval.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and the
sponsor, legal fees and expenses, expenses incurred in contacting you and costs
incurred to reimburse the trustee for advancing funds to meet distributions.
Your trust may pay the costs of updating its registration statement each year.
The trustee will generally pay trust expenses from distributions received on the
securities but in some cases may sell securities to pay trust expenses.
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).
22 Understanding Your Investment
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISORS DISCIPLINED TRUST 1560
We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 4 and 5, of Advisors Disciplined Trust 1560 as of
____________, 2015, 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. We were
not engaged to perform an audit of the trust's 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 Mellon, 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 ____________, 2015. 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 Advisors Disciplined
Trust 1560 as of ____________, 2015, in conformity with accounting principles
generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
____________, 2015
ADVISORS DISCIPLINED TRUST 1560
STATEMENT OF FINANCIAL CONDITION AS OF ____________, 2015
-----------------------------------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . . . . . . . . . . $
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: organization costs (3)(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Net interest of investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
==========
Net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
<FN>
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the evaluator.
(2) Cash or an irrevocable letter of credit has been deposited with the
trustee covering the funds (aggregating $__________) necessary for the
purchase of securities in the trust represented by purchase contracts.
(3) A portion of the public offering price represents an amount sufficient
to pay for all or a portion of the costs incurred in establishing and
offering the trust. These costs have been estimated at $______ per unit
for the trust. A distribution will be made as of the earlier of the close
of the initial offering period or six months following the trust's
inception date to an account maintained by the trustee from which this
obligation of the investors will be satisfied. To the extent the actual
organization costs are greater than the estimated amount, only the
estimated organization costs added to the public offering price will be
reimbursed to the sponsor and deducted from the assets of the trust.
(4) The sales fee is equal to the ______% of the Public Offering price.
(5) The aggregate cost to investors includes the applicable sales fee
assuming no reduction of sales fees.
</FN>
Understanding Your Investment 23
CONTENTS
INVESTMENT SUMMARY
-----------------------------------------------------------------------
A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
3 Who Should Invest
3 Essential Information
3 Fees and Expenses
4 Portfolio
UNDERSTANDING YOUR INVESTMENT
-----------------------------------------------------------------------
Detailed information to 6 How to Buy Units
help you understand 7 How to Sell Your Units
your investment 8 Distributions
9 Investment Risks
15 How the Trust Works
18 Taxes
21 Expenses
22 Experts
22 Additional Information
23 Report of Independent Registered
Public Accounting Firm
23 Statement of Financial Condition
WHERE TO LEARN MORE
-----------------------------------------------------------------------
You can contact us for VISIT US ON THE INTERNET
free information about http://www.AAMlive.com
this and other investments, CALL ADVISORS ASSET
including the Information MANAGEMENT, INC.
Supplement (877) 858-1773
CALL THE BANK OF NEW YORK MELLON
(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:
ADVISORS DISCIPLINED TRUST 1560
Securities Act file number: 333-__________
Investment Company Act file number: 811-21056
PREFERRED SELECT
INCOME PORTFOLIO,
SERIES 2015-1
PROSPECTUS
____________, 2015
[LOGO]
AAM
ADVISORS
ASSET MANAGEMENT
ADVISORS DISCIPLINED TRUST 1560
PREFERRED SELECT INCOME PORTFOLIO, SERIES 2015-1
INFORMATION SUPPLEMENT
This Information Supplement provides additional information concerning each
trust described in the prospectus for the Advisors 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 unit investment
trust division of Advisors Asset Management, Inc. at 18925 Base Camp Road, Suite
203, Monument, Colorado 80132, at 8100 East 22nd Street North, Building 800,
Suite 102, Wichita, Kansas 67226 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 4
Administration of the Trust 13
Portfolio Transactions and Brokerage Allocation 21
Purchase, Redemption and Pricing of Units 22
Performance Information 27
GENERAL INFORMATION
Each trust is one of a series of separate unit investment trusts created
under the name Advisors 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 Advisors Asset
Management, Inc. (as sponsor, evaluator and supervisor) and The Bank of New York
Mellon (as trustee).
When your trust was created, the sponsor delivered to the trustee
securities or contracts for the purchase thereof for deposit in the trust and
the trustee delivered to the sponsor documentation evidencing the ownership of
units of the trust. At the close of the New York Stock Exchange on the trust's
inception date, the number of units may be adjusted so that the public offering
price per unit equals $10. The number of units, fractional interest of each
unit in the trust and estimated interest distributions per unit will increase or
decrease to the extent of any adjustment. Additional units of each trust may be
issued from time to time by depositing in the trust additional securities (or
contracts for the purchase thereof together with cash or irrevocable letters of
credit) or cash (including a letter of credit or the equivalent) with
instructions to purchase additional securities. As additional units are issued
by a trust as a result of the deposit of additional securities by the sponsor,
the aggregate value of the securities in the trust will be increased and the
fractional undivided interest in the trust represented by each unit will be
decreased. The sponsor may continue to make additional deposits of securities
into a trust, provided that such additional deposits will be in amounts, which
will generally maintain the existing relationship among the shares of the
securities in such trust. Thus, although additional units will be issued, each
unit will generally continue to represent the same number of shares of each
security. If the sponsor deposits cash to purchase additional securities,
existing and new investors may experience a dilution of their investments and a
reduction in their anticipated income because of fluctuations in the prices of
the securities between the time of the deposit and the purchase of the
securities and because the trust will pay any associated brokerage fees.
The trustee has not participated in the selection of the securities
deposited in the trust and has no responsibility for the composition of the
trust portfolio.
Each unit initially offered represents an undivided interest in the related
trust. To the extent that any units are redeemed by the trustee or additional
units are issued as a result of additional securities being deposited by the
sponsor, the fractional undivided interest in a trust represented by each
unredeemed unit will increase or decrease accordingly, although the actual
interest in such trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the trustee by
unitholders, which may include the sponsor, or until the termination of the
trust agreement.
A trust consists of (a) the securities listed under "Portfolio" in the
prospectus as may continue to be held from time to time in the trust, (b) any
additional securities acquired and held by the trust pursuant to the provisions
of the trust agreement and (c) any cash held in the accounts of the trust.
Neither the sponsor nor the trustee shall be liable in any way for any failure
in any of the securities. However, should any contract for the purchase of any
of the securities initially
-2-
deposited in a trust fail, the sponsor will, unless substantially all of the
moneys held in the trust to cover such purchase are reinvested in substitute
securities in accordance with the trust agreement, refund the cash and sales fee
attributable to such failed contract to all unitholders on the next distribution
date.
INVESTMENT OBJECTIVE AND POLICIES
The trust seeks to provide high current income. There is, of course, no
guarantee that the trust will achieve its objective. The prospectus provides
additional information regarding the trust's objective and investment strategy.
The trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analysis. The portfolio of a trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from a portfolio.
The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in 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 or acquisition has been announced
affecting a security, the trustee may either sell the security or accept a
tender offer for cash if the supervisor determines that the sale or tender is in
the best interest of unitholders. The trustee will distribute any excess cash
proceeds to unitholders. Pursuant to the trust agreement and with limited
exceptions, the trustee may sell any securities or other properties acquired in
exchange for securities such as those acquired in connection with a merger or
other transaction. If offered such new or exchanged securities or property
other than cash, trustee shall generally reject the offer. However, in the
event such securities or property are nonetheless acquired by the trust, they
may be accepted for deposit in a trust and either sold by the trustee or held in
a trust pursuant to the direction of the sponsor.
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.
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
-3-
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 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 stocks, you should understand
the risks of investing in stocks 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 stocks (and therefore units)
will fall. Stocks are especially susceptible to general stock market movements.
The value of stocks often rises or falls rapidly and unpredictably as market
-4-
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 stocks 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 stocks in response to
market fluctuations as is common in managed investments. In addition, because
some trusts hold a relatively small number of stocks, you may encounter greater
market risk than in a more diversified investment.
DIVIDENDS. Stocks represent ownership interests in a company and are not
obligations of the company. Common stockholders have a right to receive
payments from the company that is subordinate to the rights of creditors,
bondholders or preferred stockholders of the company. This means that common
stockholders have a right to receive dividends only if a company's board of
directors declares a dividend and the company has provided for payment of all of
its creditors, bondholders and preferred stockholders. If a company issues
additional debt securities or preferred stock, the owners of these securities
will have a claim against the company's assets before common stockholders if the
company declares bankruptcy or liquidates its assets even though the common
stock was issued first. As a result, the company may be less willing or able to
declare or pay dividends on its common stock.
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 securities are limited-life preferred
securities that are typically issued by corporations, generally
-5-
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 and therefore, are not eligible for the dividends-received
deduction or the lower federal tax rates applicable to qualified dividends.
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.
The Dodd-Frank Wall Street Reform and Consumer Protection Act and related
changes to international banking regulations issued by the Basel Committee on
Banking Supervision, may affect the value of, and/or result in the early
redemption of, certain of the trust preferred securities held by the trust. This
new regulatory scheme eliminates trust preferred securities from the definition
of assets eligible to be treated as "Tier 1" capital on the balance sheets of
U.S. and non-U.S. banks and thrifts. This reclassification may prompt such banks
and thrifts that issued trust preferred securities that were included in their
Tier 1 capital to redeem them prior to their stated maturities in order to
replace them with securities meeting the new Tier 1 capital requirements. If the
trust preferred securities held by the trust become subject to such early
redemptions. future distributions by the trust will generally be reduced by the
amount of the income which would otherwise have been paid with respect to the
redeemed securities and unit holders will receive a distribution in the amount
of the par value of the redeemed securities. The domestic legislation will be
phased-in over a three year period beginning January 1, 2013 for all U.S. trust
preferred securities issued prior to May 19, 2010 and the international
guidelines
-6-
applicable to non-U.S. trust preferred securities will be implemented over a six
year period beginning on the same date; however, it is possible that some or all
of the trust preferred securities held by the trust may be called for redemption
prior to that date.
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. 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 Gramm-Leach-Bliley financial services overhaul legislation,
permit new entrants to offer various financial products. Technological advances
such as the Internet allow these nontraditional lending sources to cut overhead
and permit the more efficient use of customer data. Banks are already facing
tremendous pressure from mutual funds, brokerage firms and other financial
service providers in the competition to furnish services that were traditionally
offered by banks.
Companies engaged in investment management and broker-dealer activities are
subject to volatility in their earnings and share prices that often exceeds the
volatility of the equity market in general. Adverse changes in the direction of
the stock market, investor confidence, equity transaction volume, the level and
direction of interest rates and the outlook of emerging markets could adversely
affect the financial stability, as well as the stock prices, of these companies.
Additionally, competitive pressures, including increased competition with new
and existing competitors, the ongoing commoditization of traditional businesses
and the need for increased capital expenditures on new technology could
adversely impact the profit margins of companies in the investment management
and brokerage industries. Companies involved in investment management and
broker-dealer activities are also subject to extensive regulation by government
agencies and self-regulatory organizations, and changes in laws, regulations or
rules, or in the interpretation of such laws, regulations and rules could
adversely affect the stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management
industry 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.
Financial services companies have faced significant difficulty related to
the downturn in the housing and mortgage lending markets, corresponding declines
in the value of mortgage-backed securities and the resulting impact on all areas
of the financial services industry and the broader economy. These difficulties
have given rise to considerable uncertainty regarding the global economy and
financial services companies, in particular. The downturn has also led to
-7-
considerable write-downs in the values of many assets held by financial services
companies and a tightening of credit markets that has been marked by a general
unwillingness of many entities to extend credit. These factors have caused a
significant need for many financial services companies to raise capital to meet
obligations and to satisfy regulatory and contractual capital requirements.
Many well-established financial services companies have been forced to seek
additional capital through issuances of new preferred or common equity and
certain companies have been forced to agree to be acquired by other companies
(or sell some or all of their assets to other companies). In some cases
government assistance, guarantees or direct participation in investments or
acquisitions have been necessary to facilitate these transactions. In
addition, concerns regarding these issues and their potential negative impact to
the U.S. and global economies have resulted in extreme volatility in securities
prices and uncertain market conditions.
In response to these issues, government authorities in the U.S. and other
countries have initiated and may continue to engage in administrative and
legislative action intended to address both short- and long-term difficulties
facing the housing and mortgage lending markets, mortgage backed securities, the
financial services industry and the broader economy. These government actions
may include, but are not limited to, restrictions on investment activities;
increased oversight, regulation and involvement in financial services company
practices; adjustments to capital requirements; the acquisition of interests in
and the extension of credit to private entities; and increased investigation
efforts into the actions of companies and individuals in the financial service
industry. No one can predict any action that might be taken or the effect any
action or inaction will have. It is possible that any actions taken by
government authorities will not address or help improve the state of these
difficulties as intended. No one can predict the impact that the difficulties
will have on the economy, generally or financial services companies. The
difficulties and corresponding government action or inaction may have far
reaching consequences and your investment may be adversely affected by such
developments.
Banks and their holding companies are subject to extensive federal
regulation and, when such institutions are state-chartered, to state regulation
as well. Such regulations impose strict capital requirements and limitations on
the nature and extent of business activities that banks may pursue. Furthermore,
bank regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose significant
risks to the soundness of such institution or the safety of the federal deposit
insurance fund. Regulatory actions, such as increases in the minimum capital
requirements applicable to banks and increases in deposit insurance premiums
required to be paid by banks and thrifts to the Federal Deposit Insurance
Corporation ("FDIC"), can negatively impact earnings and the ability of a
company to pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or their
holding companies, or insures against any risk of investment in the securities
issued by such institutions.
The statutory requirements applicable to, and regulatory supervision of,
banks and their holding companies have increased significantly and have
undergone substantial change in the past. To a great extent, these changes are
embodied in the Financial Institutions Reform, Recovery and Enforcement Act,
enacted in August 1989; the Federal Deposit Insurance
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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 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
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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 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:
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* 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.
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.
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The value of securities issued by financial services companies may also be
affected by the downturn in the housing and mortgage lending markets,
corresponding declines in the value of mortgage backed securities and the
resulting impact on all areas of the financial services industry. In response,
government authorities have initiated and may continue to engage in
administrative and legislative action intended to address both short- and long-
term difficulties facing the housing and mortgage lending markets, mortgage
backed securities, the financial services industry and the broader economy.
These government actions may include, but are not limited to, restrictions on
investment options, increased oversight, regulation and involvement in financial
services company practices, adjustments to capital requirements, the acquisition
of interests in and the extension of credit to private entities and increased
investigation efforts into the actions of companies and individuals in the
financial service industry. No one can predict the action that might be taken
or the effect any action or inaction will have and it is possible that any
actions taken by government authorities will not address or help improve the
state of these difficulties as intended. The downturn and corresponding
government action may have far reaching consequences into many geographic
regions and areas of financial services companies and, consequently, the value
of securities in the portfolio may decline in response to such developments.
HIGH YIELD SECURITY RISK. The trust may invest in high yield securities or
unrated securities. High yield, high risk securities are subject to greater
market fluctuations and risk of loss than securities with higher investment
ratings. The value of these securities will decline significantly with
increases in interest rates, not only because increases in rates generally
decrease values, but also because increased rates may indicate an economic
slowdown. An economic slowdown, or a reduction in an issuer's creditworthiness,
may result in the issuer being unable to maintain earnings at a level sufficient
to maintain interest and principal payments.
High-yield or "junk" securities, the generic names for securities rated
below "BBB" by Standard & Poor's or "Baa" by Moody's, are frequently issued by
corporations in the growth stage of their development or by established
companies who are highly leveraged or whose operations or industries are
depressed. Securities rated below BBB or Baa are considered speculative as
these ratings indicate a quality of less than investment grade. Because high-
yield securities are generally subordinated obligations and are perceived by
investors to be riskier than higher rated securities, their prices tend to
fluctuate more than higher rated securities and are affected by short-term
credit developments to a greater degree.
The market for high-yield securities is smaller and less liquid than that
for investment grade securities. Due to the smaller, less liquid market for
high-yield securities, the bid-offer spread on such securities is generally
greater than it is for investment grade securities and the purchase or sale of
such securities may take longer to complete.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities
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between the time of the 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. Unitholders will receive an amount substantially equal
to their pro rata share of the available balance of the Income Account of 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 on each distribution
date or shortly thereafter to unitholders of record on the preceding record
date. The trustee is not required to make a distribution from the Income
Account or the Capital Account unless the total cash held for distribution
equals at least 0.1% of the trust's net asset value as determined under the
trust agreement. 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 $1.00 per
unit. The trustee is not required to pay interest on funds held in the Capital
or Income Accounts (but may itself earn interest thereon and therefore benefits
from the use of such funds).
The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to the unitholders' pro rata share of the available
balance of the Income Account of 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.
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STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will
furnish to each unitholder a statement of the amount of income and the amount of
other receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust are required to be audited annually, at the related
trust's expense, by independent public accountants designated by the sponsor,
unless the sponsor determines that such an audit would not be in the best
interest of the unitholders of the trust. The accountants' report will be
furnished by the trustee to any unitholder upon written request. Within a
reasonable period of time after the end of each calendar year, the trustee shall
furnish to each person who at any time during the calendar year was a unitholder
of a trust a statement, covering the calendar year, setting forth for the trust:
(A) As to the Income Account:
(1) the amount of income received on the securities (including income
received as a portion of the proceeds of any disposition of
securities);
(2) the amounts paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Income Account for payment into
the Reserve Account;
(4) the deductions for applicable taxes and fees and expenses of the
trustee, the depositor, the evaluator, the supervisor, counsel,
auditors and any other expenses paid by the trust;
(5) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(6) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(7) the aggregate distributions to unitholders; and
(8) the balance remaining after such deductions and distributions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year;
(B) As to the Capital Account:
(1) the net proceeds received due to sale, maturity, redemption,
liquidation or disposition of any of the securities, excluding
any portion thereof credited to the Income Account;
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(2) the amount paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Capital Account for payments
into the Reserve Account;
(4) the deductions for payment of applicable taxes and fees and
expenses of the trustee, the depositor, the evaluator, the
supervisor, counsel, auditors and any other expenses paid by the
trust;
(5) the deductions for payment of the depositor's expenses of
organizing the trust;
(6) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(7) the deductions for payment of deferred sales fee and creation and
development fee, if any;
(8) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(9) the aggregate distributions to unitholders; and
(10) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year; and
(C) the following information:
(1) a list of the securities held as of the last business day of such
calendar year and a list which identifies all securities sold or
other securities acquired during such calendar year, if any;
(2) the number of units outstanding on the last business day of such
calendar year;
(3) the unit value based on the last trust evaluation of such trust
made during such calendar year; and
(4) the amounts actually distributed during such calendar year from
the Income and Capital Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for such distributions.
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RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
AMENDMENT AND TERMINATION. The trust agreement may be amended from time to
time by the sponsor and trustee or their respective successors, without the
consent of any of the unitholders, (i) to cure any ambiguity or to correct or
supplement any provision which may be defective or inconsistent with any other
provision contained in the trust agreement, (ii) to make such other provision in
regard to matters or questions arising under the trust agreement as shall not
materially adversely affect the interests of the unitholders or (iii) to make
such amendments as may be necessary (a) for the trust to continue to qualify as
a regulated investment company for federal income tax purposes if the trust has
elected to be taxed as such under the United States Internal Revenue Code of
1986, as amended, or (b) to prevent the trust from being deemed an association
taxable as a corporation for federal income tax purposes if the trust has not
elected to be taxed as a regulated investment company under the United States
Internal Revenue Code of 1986, as amended. The trust agreement may not be
amended, however, without the consent of all unitholders then outstanding, so as
(1) to permit, except in accordance with the terms and conditions thereof, the
acquisition hereunder of any securities other than those specified in the
schedules to the trust agreement or (2) to reduce the percentage of units the
holders of which are required to consent to certain of such amendments. The
trust agreement may not be amended so as to reduce the interest in a trust
represented by units without the consent of all affected unitholders. Except
for the amendments, changes or modifications described above, neither the
sponsor nor the trustee may consent to any other amendment, change or
modification of the trust agreement without the giving of notice and the
obtaining of the approval or consent of unitholders representing at least 66
2/3% of the units then outstanding of the affected trust. No amendment may
reduce the aggregate percentage of units the holders of which are required to
consent to any amendment, change or modification of the trust agreement without
the consent of the unitholders of all of the units then outstanding of the
affected trust and in no event may any amendment be made which would (1) alter
the rights to the unitholders as against each other, (2) provide the trustee
with the power to engage in business or investment activities other than as
specifically provided in the trust agreement, (3) adversely affect the tax
status of the trust for federal income tax purposes or result in the units being
deemed to be sold or exchanged for federal income tax purposes or (4) unless the
trust has elected to be taxed as a regulated investment company for federal
income tax purposes, result in a variation of the investment of unitholders in
the trust. The trustee will notify unitholders of the substance of any such
amendment.
The trust agreement provides that a trust shall terminate upon the
liquidation, redemption or other disposition of the last of the securities held
in the trust but in no event is it to continue beyond the mandatory termination
date. If the value of a trust shall be less than the applicable minimum value
stated in the prospectus (generally 40% of the total value of securities
deposited in the trust during the initial offering period), the trustee may, in
its discretion, and shall, when so directed by the sponsor, terminate the trust.
A trust may be terminated at any time by the holders
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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.
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 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
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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 Mellon, a trust company
organized under the laws of New York. The Bank of New York Mellon 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 Mellon is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System, and
its deposits are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust
agreement, the trustee shall keep records of all transactions at its office.
Such records shall include the name and address of, and the number of units held
by, every unitholder of a trust. Such books and records shall be open to
inspection by any unitholder at all reasonable times during usual business
hours. The trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute, rule or
regulation. The trustee shall keep a certified copy or duplicate original of
the trust agreement on file in its office available for inspection at all
reasonable times during usual business hours by any unitholder, together with a
current list of the securities held in each trust. Pursuant to the trust
agreement, the trustee may employ one or more agents for the purpose of custody
and safeguarding of securities comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor.
The trustee or successor trustee must mail a copy of the notice of
resignation to all unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. In case at any time the
trustee shall not meet the requirements set forth in the trust agreement, or
shall become incapable of acting, or if a court having jurisdiction in the
premises shall enter a decree or order for relief in respect of the trustee in
an involuntary case, or the trustee shall commence a voluntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the trustee or for any substantial part of its
property shall be appointed, or the trustee shall generally fail to pay its
debts as they become due, or shall fail to meet such written standards for the
trustee's performance as shall be established from time to time by the sponsor,
or if the sponsor determines in good faith that there has occurred either (1) a
material deterioration in the creditworthiness of the trustee or (2) one or more
grossly negligent acts on the part of the trustee with respect to a trust, the
sponsor, upon sixty days' prior written notice, may remove the trustee and
appoint a successor trustee, as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the trustee so removed and
one
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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 Advisors Asset Management, Inc.
acting through its unit investment trust 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 unit investment trust division at 8100 East 22nd
Street North, Building 800, Suite 102, Wichita, Kansas 67226 or by using the
contacts listed on the back cover of the prospectus. The sponsor is a
registered broker-dealer and investment adviser and a member of the Financial
Industry Regulatory Authority, Inc. (FINRA) and the Securities Investor
Protection Corporation (SIPC), and a registrant of the Municipal Securities
Rulemaking Board (MSRB).
If at any time the sponsor shall fail to perform any of its duties under
the trust agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, (b) terminate the trust agreement and liquidate any trust as
provided therein, or (c) continue to act as trustee without terminating the
trust agreement.
THE EVALUATOR AND SUPERVISOR. Advisors Asset Management, 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
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faith or willful misconduct, or its reckless disregard for its duties under the
trust agreement, nor shall the trustee be liable or responsible in any way for
depreciation or loss incurred by reason of the sale by the trustee of any
securities. In the event that the sponsor shall fail to act, the trustee may
act and shall not be liable for any such action taken by it in good faith. The
trustee shall not be personally liable for any taxes or other governmental
charges imposed upon or in respect of the securities or upon the interest
thereof. In addition, the trust agreement contains other customary provisions
limiting the liability of the trustee.
The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides that the determinations made by the evaluator shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the evaluator shall be under no liability to the trustee or
unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
EXPENSES OF THE TRUST. The sponsor will not charge a trust any fees for
services performed as sponsor. The sponsor will receive a portion of the sale
commissions paid in connection with the purchase of units and will share in
profits, if any, related to the deposit of securities in the trust.
The 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.
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For providing bookkeeping and administrative services to a trust, the
sponsor shall receive an administration fee in an amount not to exceed that
amount set forth in the prospectus but in no event will such compensation, when
combined with all compensation from other unit investment trusts for which the
sponsor acts as sponsor and provides evaluation services, exceed the aggregate
cost of providing such services. Such fee shall be based on the total number of
units of the related trust outstanding as of January 1 for any annual period,
except during the initial offering period the fee will be based on the units
outstanding at the end of each month.
The trustee's fee, sponsor's fee for providing bookkeeping and
administrative services to the trust, supervisor's fee and evaluator's fee are
deducted from the Income Account of the related trust to the extent funds are
available and then from the Capital Account. Each such fee (other than any
creation and development fee, if any) 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.
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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. 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.
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.
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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.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the Financial Industry Regulatory Authority, Inc. and through others. Sales
may be made to or through dealers at prices which represent discounts from the
public offering price as set forth in the prospectus. Certain commercial banks
may be making units available to their customers on an agency basis. The
sponsor reserves the right to change the discounts from time to time.
We currently 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. A number of factors are considered in determining
whether to pay these additional amounts. Such factors may include, but are not
limited to, the level or type of services provided by the intermediary, the
level or expected level of sales of our products by the intermediary or its
agents, the placing of our products on a preferred or recommended product list
and access to an intermediary's personnel. 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 information about the breakdown of
unit sales among an intermediary's representations or offices, obtaining shelf
space in broker-dealer firms and similar activities designed to promote the sale
of our products. We make such payments to a substantial majority of
intermediaries that sell our products. We may also make certain payments to, or
on behalf of, intermediaries to defray a portion of their costs incurred for the
purpose of facilitating unit sales, such as the costs of developing or
purchasing trading systems to process unit trades. Payments of such additional
compensation described in this paragraph, some of which may be characterized as
"revenue sharing," may create an incentive for financial intermediaries and
their agents to sell or recommend our products, including this trust, over other
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.
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
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negotiated or competitive bid basis, as principal, with the motive of marketing
such securities to investors at a profit. The sponsor may realize additional
profits or losses during the initial offering period on unsold units as a result
of changes in the daily evaluation of the securities in a trust.
MARKET FOR UNITS. After the initial offering period, while not obligated
to do so, the sponsor may, subject to change at any time, maintain a market for
units of the trust offered hereby and to continuously offer to purchase said
units at the net asset value determined by the evaluator, provided that the
repurchase price will not be reduced by any remaining creation and development
fee or organization costs during the initial offering period, if any. 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. 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.
Unitholders must sign the request exactly as their names appear on the records
of the trustee. 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.
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. Certain broker-dealers may charge a transaction fee for processing
redemption requests.
Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and
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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.
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)
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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, if any; 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. Units may be purchased 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.
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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 Index (an
unmanaged diversified index of 500 stocks) or similar measurement standards
during the same period of time.
-27-
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following:
The facing sheet
The prospectus and information supplement
The signatures
The consents of evaluator, independent auditors 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 Amendment of Certificate of Incorporation and Certificate
of Merger of Advisors Asset Management, Inc. Reference is made to
Exhibit 1.2 to the Registration Statement on Form S-6 for Advisors
Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011.
1.3 Bylaws of Advisors Asset Management, Inc. Reference is made to
Exhibit 1.3 to the Registration Statement on Form S-6 for Advisors
Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011.
1.5 Form of Dealer Agreement. Reference is made to Exhibit 1.5 to the
Registration Statement on Form S-6 for Advisors Disciplined Trust 262
(File No. 333-150575) as filed of June 17, 2008.
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).
3.3 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 Advisors Asset Management, Inc. Reference is
made to Exhibit 6.1 to the Registration Statement on Form S-6 for
Advisors Disciplined Trust 1485 (File No. 333-203629) as filed on
May 15, 2015.
7.1 Power of Attorney. Reference is made to Exhibit 7.1 to the Registration
Statement on Form S-6 for Advisors Disciplined Trust 1485
(File No. 333-203629) as filed on May 15, 2015.
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Advisors Disciplined Trust 1560 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 August 27, 2015.
ADVISORS DISCIPLINED TRUST 1560
By ADVISORS ASSET MANAGEMENT, INC., DEPOSITOR
By /s/ ALEX R MEITZNER
-----------------------------
Alex R. Meitzner
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on August 27, 2015 by the
following persons in the capacities indicated.
SIGNATURE TITLE
Scott I. Colyer Director of Advisors Asset )
Management, Inc. )
Lisa A. Colyer Director of Advisors Asset )
Management, Inc. )
James R. Costas Director of Advisors Asset )
Management, Inc. )
Christopher T. Genovese Director of Advisors Asset )
Management, Inc. )
Randy J. Pegg Director of Advisors Asset )
Management, Inc. )
R. Scott Roberg Director of Advisors Asset )
Management, Inc. )
S-2
Jack Simkin Director of Advisors Asset )
Management, Inc. )
Andrew Williams Director of Advisors Asset )
Management, Inc. )
Bart P. Daniel Director of Advisors Asset )
Management, Inc. )
By /s/ ALEX R MEITZNER
-----------------------------
Alex R. Meitzner
Attorney-in-Fact*
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*An executed copy of each of the related powers of attorney is filed
herewith or incorporated herein by reference as Exhibit 7.1.
S-3