1933 ACT FILE NO.: 333-204909
1940 ACT FILE NO.: 811-21056
CIK NO.: 1633856
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO 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 1500
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
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 ____________, 2017 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 trusts 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 MARCH 8, 2017
SUBJECT TO COMPLETION
ADVISORS CORPORATE TRUST--NAVELLIER/DIAL HIGH INCOME OPPORTUNITIES PORTFOLIO,
SERIES 119
(ADVISORS DISCIPLINED TRUST 1500)
A portfolio of investment grade
corporate bonds
seeking current income and
capital preservation
PROSPECTUS
____________, ____
[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
------------------
INVESTMENT OBJECTIVE
The trust seeks to provide current interest income and capital preservation.
There is no assurance the trust will achieve its objective.
PRINCIPAL INVESTMENT STRATEGY
The trust seeks to provide high current interest income and capital
preservation by investing in a portfolio consisting primarily of interest-
bearing corporate debt obligations rated investment grade quality as of the
trust's inception. The portfolio was selected by Navellier & Associates, Inc.
(the "Portfolio Consultant"). Dial Capital Management, LLC ("Dial") provided
assistance to the Portfolio Consultant in connection with selection of the
portfolio. The Portfolio Consultant selected the bonds in the portfolio after
detailed credit analysis in an effort to create a portfolio that it believes can
maintain adequate cash flow and good asset liability balances.
Investment grade corporate bonds are rated BBB- or higher by Standard &
Poor's or Baa3 or higher by Moody's Investor Service. Certain corporate bonds
held by the trust may be rated as investment grade by only one credit rating
organization and either unrated or below investment grade by the other. These
ratings are based upon an evaluation by a credit rating organization of the
corporation's credit history and ability to repay obligations. An investment
grade rating generally signifies that a credit rating agency considers the
current quality of a bond to be sufficient to provide reasonable assurance of
the issuer's ability to meet its obligation to bondholders.
PRINCIPAL RISKS
As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
* BOND PRICES WILL FLUCTUATE. The value of your investment may fall over time.
* THE VALUE OF THE BONDS WILL GENERALLY FALL IF INTEREST RATES, IN GENERAL,
RISE. No one can predict whether interest rates will rise or fall in the
future.
* A BOND ISSUER MAY BE UNABLE TO MAKE INTEREST AND/OR PRINCIPAL PAYMENTS IN
THE FUTURE.
* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the primary offering period.
* A BOND ISSUER MIGHT PREPAY OR "CALL" A BOND BEFORE ITS STATED MATURITY. If
this happens, the trust will distribute the principal to you but future
interest distributions will fall. A bond's call price could be less than
the price the trust paid for the bond. If enough bonds are called, the
trust could terminate earlier than expected.
* SECURITIES OF FOREIGN COMPANIES HELD BY THE TRUST PRESENT RISKS BEYOND THOSE
OF U.S. ISSUERS. These risks may include market and political factors
related to the company's foreign market, international trade conditions,
less regulation, smaller or less liquid markets, increased volatility,
differing accounting practices and changes in the value of foreign
currencies.
* WE<F1>* DO NOT ACTIVELY MANAGE THE PORTFOLIO. Except in limited
circumstances, the trust will hold, and may continue to buy, the same bonds
even if the market value declines.
--------------------
<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 securities representing interests in corporate bonds in a single
investment.
* the potential to receive monthly distributions of income with capital
preservation potential.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in corporate
bonds.
* want capital appreciation.
------------------------------------------------------------
ESSENTIAL INFORMATION
---------------------
PRINCIPAL AMOUNT OF
SECURITIES PER UNIT AT INCEPTION* $1,000.00
PUBLIC OFFERING PRICE PER UNIT
AT INCEPTION* $________
INCEPTION DATE ____________, ____
ESTIMATED CURRENT RETURN* _____%
ESTIMATED LONG-TERM RETURN* _____%
ESTIMATED NET ANNUAL INTEREST
INCOME PER UNIT* $_____
ESTIMATED INITIAL DISTRIBUTION
PER UNIT* $_____
ESTIMATED NORMAL MONTHLY
DISTRIBUTION PER UNIT* $_____
WEIGHTED AVERAGE MATURITY
OF SECURITIES* _____ years
WEIGHTED AVERAGE MODIFIED
DURATION OF SECURITIES* _____ years
DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month
INITIAL DISTRIBUTION DATE ____________, ____
INITIAL RECORD DATE ____________, ____
CUSIP NUMBER
Standard Accounts _________
Fee Based Accounts _________
TICKER SYMBOL ______
MINIMUM INVESTMENT 1 unit
TAX STRUCTURE Regulated Investment Company
------------------------------------------------------------
<FN>
* As of ____________, ____ 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 the initial unit price. Actual expenses may vary.
AS A % AMOUNT
OF $1,000 PER
SALES FEE INVESTED UNIT
------------------------
Transactional sales fee _.__% $_____
Creation & development fee _.__% 7.50
-------- --------
Maximum sales fee 3.00% $_____
======== =======
ORGANIZATION COSTS _.__% $_____
======== =======
AS A % AMOUNT
ANNUAL OF NET PER
OPERATING EXPENSES ASSETS UNIT
------------------------
Trustee fee & expenses _.__% $_____
Supervisory, evaluation
and administration fees _.__ _____
-------- -------
Total _.__% $_____
======== =======
The transactional sales fee is paid at the time of a unit purchase and is the
difference between the total sales fee (maximum of 3.00% of the unit offering
price) and the total creation and development fee. The creation and development
fee is fixed at $7.50 per unit and is paid at the earlier of the end of the
initial offering period or six months after the trust's inception date.
EXAMPLE
This example helps you compare the cost of this trust with other unit trusts
and mutual funds. In the example we assume that the expenses do not change and
that the trust's annual return is 5%. Your actual returns and expenses will
vary. Based on these assumptions, you would pay these expenses for every
$10,000 you invest in the trust:
1 year $_____
3 years $_____
5 years $_____
___ years $_____
These amounts are the same regardless of whether you sell your investment at
the end of a period or continue to hold your investment.
Investment Summary 3
ILLUSTRATION OF SALES FEE DISCOUNTS
We offer a variety of ways for you to reduce the sales fee you pay when you buy
units. The table below shows what the public offering price per unit, estimated
current return and estimated long-term return would have been as of the close
of business on the business day prior to the trust's inception date based on
certain sales fee levels. Please refer to "Understanding Your Investment--How
to Buy Units--Reducing Your Sales Fee" for details on the applicability of and
guidelines associated with all sales fee discounts. Please refer to
"Understanding Your Investment--How Your Trust Works--Estimated Current and
Long-Term Returns" for more information about estimated current and long-term
returns. The public offering price per unit and interest income received by the
trust will vary over time for various reasons. There is no assurance that the
estimated current returns or estimated long-term returns will be realized in
the future.
PUBLIC ESTIMATED
OFFERING ESTIMATED LONG-
PRICE PER CURRENT TERM
TRANSACTION: UNIT+ RETURN+ RETURN+
-------------------------------------------------------------------------------
Less than $100,000* $_____.__ _.__% _.__%
$100,000 - $249,999* _____.__ _.__ _.__
$250,000 - $499,999* _____.__ _.__ _.__
$500,000 - $999,999* _____.__ _.__ _.__
$1,000,000 or more* _____.__ _.__ _.__
"Fee Account" discount transaction _____.__ _.__ _.__
"Exchange Option" discount transaction _____.__ _.__ _.__
<FN>
+ As of ____________, ____ and will vary thereafter.
* The breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the requirement
that only whole units be issued as described under "Understanding Your
Investment--How to Buy Units--Reducing Your Sales Fee--Large Purchases."
</FN>
4 Investment Summary
ADVISORS CORPORATE TRUST--NAVELLIER/DIAL HIGH INCOME OPPORTUNITIES PORTFOLIO,
SERIES 119
(ADVISORS DISCIPLINED TRUST 1500)
PORTFOLIO
AS OF THE INITIAL DATE OF DEPOSIT, ____________, ____
COST OF
PRINCIPAL NAME OF ISSUER, INTEREST RATE REDEMPTION SECURITIES
AMOUNT AND MATURITY DATE(1)(2) FEATURE(3) TO TRUST(4)
--------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- 100.00%
------------- -------------
$_________ $_________
============= =============
<FN>
See "Notes to Portfolio"
</FN>
Investment Summary 5
Notes to Portfolio
(1) The securities are represented by contracts to purchase such securities the
performance of which is secured by an irrevocable letter of credit.
Contracts to acquire the securities were entered into during the period
from ____________, ____ to ____________, ____ and have expected settlement
dates during the period from ____________, ____ to ____________, ____.
(2) The bonds may be subject to redemption without premium at any time pursuant
to extraordinary optional or mandatory redemptions if certain events occur.
(3) This is the year in which each bond is initially or currently callable and
the call price for that year. Each bond continues to be callable at
declining prices thereafter (but not below par value) except for original
issue discount bonds which are redeemable at prices based on the issue
price plus the amount of original issue discount accreted to redemption
date plus, if applicable, some premium, the amount of which will decline in
subsequent years. "S.F." indicates a sinking fund is established with
respect to an issue of bonds. The bonds may also be subject to redemption
without premium at any time pursuant to extraordinary optional or mandatory
redemptions if certain events occur.
(4) The cost of each security is based on the current offering side evaluation
as of the close of the New York Stock Exchange on the business day prior to
the trust's inception date. During the initial offering period,
evaluations of securities are made on the basis of current offering side
evaluations of the securities. The aggregate offering price is greater
than the aggregate bid price of the securities, which is the basis on which
redemption prices will be determined for purposes of redemption of units
after the initial offering period. In accordance with Accounting Standards
Codification 820, "Fair Value Measurements", the trust's investments are
classified as Level 2, which refers to security prices determined using
significant observable inputs when quoted prices in active markets for
identical securities are not available. Observable inputs are inputs such
as quoted prices for similar securities, quoted prices for identical
securities in markets that are not active, and other inputs that are
observable or can be corroborated by observable market data. 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 security has a "make whole" call option and is redeemable in whole or
in part at any time at the option of the issuer at a redemption price that
is generally equal to the sum of the principal amount of the security, a
"make whole" amount, and any accrued and unpaid interest to the date of
redemption. The "make whole" amount is generally equal to the excess, if
any, of (i) the aggregate present value as of the date of redemption of
principal being redeemed and the amount of interest (exclusive of interest
accrued to the date of redemption) that would have been payable if
redemption had not been made, determined by discounting the remaining
principal and interest at a specified rate (which varies from bond to bond
and is generally equal to an average of yields on U.S. Treasury obligations
with maturities corresponding to the remaining life of the bond plus a
premium rate) from the dates on which the principal and interest would have
been payable if the redemption had not been made, over (ii) the aggregate
principal amount of the bonds being redeemed.
(6) Any bond marked with this note has been purchased on a "when, as and if
issued" or "delayed delivery" basis. Delivery of these bonds is expected
to take place at various dates after the first settlement date of the
trust, which is normally three business days following the trust's
inception date. Interest on these bonds begins accruing to the benefit of
unitholders on the related delivery dates for the bonds.
(7) Any bond marked with this note was issued at an original issue discount.
(8) This is a bond issued by a foreign company.
Corporate bonds comprise 100.00% of the investments in the trust, broken
down by country of organization as set forth below:
(9) This bond is subject to potential interest rate adjustments, not to exceed
2.00 percentage points above the bond's original interest rate, if either
Moody's Investor Service or Standard & Poor's (or, in certain limited
circumstances, another ratings service) downgrades their rating for this
bond (or upgrades the rating after such a downgrade). The interest rate
set forth here represents the current interest rate applicable to the bond.
(10) The interest rate payable on this bond was adjusted in the past by a one-
time increase due to a ratings downgrade related to a corporate
acquisition. Any future credit rating improvements may result in a decrease
in the interest rate payable on this bond. The interest rate set forth
here represents the current interest rate applicable to the bond.
6 Investment Summary
-----------------------------
UNDERSTANDING YOUR INVESTMENT
-----------------------------
HOW TO BUY UNITS
You can buy units of a 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. When you buy units, you pay the
public offering price of units plus accrued interest, if any. The public
offering price of units includes:
* the net asset value per unit plus
* cash to pay organization costs plus
* the sales.
The "net asset value per unit" is the value of the securities, cash and other
assets in a trust reduced by the liabilities of a trust divided by the total
units outstanding. We often refer to the public offering price of units as the
"offer price" or "purchase price." The offer price will be effective for all
orders received prior to the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time). If we receive your order prior to
the close of regular trading on the New York Stock Exchange or authorized
financial professionals receive your order prior to that time and properly
transmit the order to us by the time that we designate, then you will receive
the price computed on the date of receipt. If we receive your order after the
close of regular trading on the New York Stock Exchange, if authorized financial
professionals receive your order after that time or if orders are received by
such persons and are not transmitted to us by the time that we designate, then
you will receive the price computed on the date of the next determined offer
price provided that your order is received in a timely manner on that date. It
is the responsibility of the authorized financial professional to transmit the
orders that they receive to us in a timely manner. Certain broker-dealers may
charge a transaction or other fee for processing unit purchase orders.
ORGANIZATION COSTS. During the initial offering period, part of the value of
the units represents an amount of cash deposited to pay the costs of creating
your trust. These costs include the costs of preparing the registration
statement and legal documents, federal and state registration fees, the
Portfolio Consultant's security selection fee, the initial fees and expenses of
the trustee and the initial audit. Your trust will reimburse us for these costs
at the end of the initial offering period or after six months, if earlier. The
value of your units will decline when the trust pays these costs.
ACCRUED INTEREST. Accrued interest represents unpaid interest on a security
from the last day it paid interest. Accrued interest on the trust units
consists of two elements. The first element arises as a result of accrued
interest which is the accumulation of unpaid interest on bonds in the trust from
the last day on which interest was paid on the bonds. Interest on the bonds is
generally paid semi-annually, although the trust accrues such interest daily.
Because your trust always has an amount of interest earned but not yet
collected, the public offering price of units will have added to it the
proportionate share of accrued interest to the date of settlement. The second
element of accrued interest arises because of the structure of the trust's
interest account. The trustee has no cash for distribution to unitholders until
it receives interest payments on the bonds in the trust and may be required to
advance its own funds to make trust interest distributions. As a result,
interest account balances are established to limit the need for the trustee to
advance funds in connection with such interest
Understanding Your Investment 7
distributions. If you sell or redeem your units you will be entitled to receive
your proportionate share of the accrued interest from the purchaser of your
units.
VALUE OF THE SECURITIES. We determine the value of the securities as of the
close of regular trading on the New York Stock Exchange on each day that
exchange is open. We generally determine the value of securities during the
initial offering period based on the aggregate offering side evaluations of the
securities determined (a) on the basis of current offering prices of the
securities, (b) if offering prices are not available for any particular
security, on the basis of current offering prices for comparable securities, (c)
by determining the value of securities on the offer side of the market by
appraisal, or (d) by any combination of the above. After the initial offering
period ends, we generally determine the value of the securities as described in
the preceding sentence based on the bid side evaluations rather than the
offering side evaluations. The offering side price generally represents the
price at which investors in the market are willing to sell a security and the
bid side evaluation generally represents the price that investors in the market
are willing to pay to buy a security. The bid side evaluation is lower than the
offering side evaluation. As a result of this pricing method, unitholders
should expect a decrease in the net asset value per unit on the day following
the end of the initial offering period equal to the difference between the
current offering side evaluation and bid side evaluation of the securities.
Capelogic, Inc., an independent pricing service, determined the initial
prices of the securities shown under "Portfolio" in this prospectus as described
above at the close of regular trading on the New York Stock Exchange on the
business day before the date of this prospectus. On the first day we sell units
we will compute the unit price as of the close of regular trading on the New
York Stock Exchange or the time the registration statement filed with the
Securities and Exchange Commission becomes effective, if later.
TRANSACTIONAL SALES FEE. You pay a fee in connection with purchasing units.
We refer to this fee as the "transactional sales fee." You pay the
transactional sales fee at the time you buy units. The maximum sales fee equals
3.00% of the public offering price per unit at the time of purchase. The
transactional sales fee is the difference between the total sales fee percentage
(maximum of 3.00% of the public offering price per unit) and the remaining fixed
dollar creation and development fee ($7.50 per unit during the initial offering
period). The transactional sales fee equals ____% of the public offering price
per unit during the initial offering period based on a $________ public offering
price per unit, which is the unit price on the day before the trust's inception
date. Since the transactional sales fee actually equals the difference between
the total sales fee and the remaining creation and development fee, the
percentage and dollar amount of the transactional sales fee will vary as the
public offering price per unit varies. The transactional sales fee does not
include the creation and development fee which is described under "Fees and
Expenses." If you purchase units after the creation and development fee is
paid, the secondary market transactional sales fee is equal to 3.00% of the
public offering price per unit.
MINIMUM PURCHASE. The minimum amount you can purchase of the trust appears
on page 3 under "Essential Information", but such amounts may vary depending on
your selling firm.
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
fee you pay. It is your financial professional's responsibility to alert us of
8 Understanding Your Investment
any discount when you order units. Except as expressly provided herein, you may
not combine discounts. Since the creation and development fee is a fixed dollar
amount per unit, your trust must charge this fee per unit regardless of any
discount. However, if you are eligible to receive a discount such that your
total sales fee is less than the fixed dollar amount of the creation and
development fee, we will credit you the difference between your total sales fee
and the fixed dollar creation and development fee at the time you buy units.
Large Purchases. You can reduce your sales fee by increasing the size of
your investment:
IF YOU PURCHASE: YOUR FEE WILL BE:
------------------------------------------
Less than $100,000 3.00%
$100,000 - $249,999 2.75
$250,000 - $499,999 2.50
$500,000 - $999,999 2.25
$1,000,000 or more 2.00
We apply these fees as a percent of the public offering price per unit at the
time of purchase. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled due the
requirement that only whole units be issued.
You aggregate initial offering period unit orders submitted by the same
person for units of any of the trusts we sponsor on any single day from any one
broker-dealer to qualify for a purchase level. If you purchase initial offering
period units that qualify for the fee account or exchange discount described
below and also purchase additional initial offering period units on a single day
from the same broker-dealer that do not qualify for the fee account or exchange
discount, you aggregate all initial offering period units purchased for purposes
of determining the applicable breakpoint level in the table above on the
additional units, but such additional units will not qualify for the fee account
or exchange discount described below. Secondary market unit purchases are not
aggregated with initial offering period unit purchases for purposes of
determining the applicable breakpoint level. You can also include these orders
as your own for purposes of this aggregation:
* orders submitted by your spouse or children (including step-children) under
21 years of age living in the same household and
* orders submitted by your trust estate or fiduciary accounts.
The discounts described above apply only to initial offering period
purchases.
Fee Accounts. Investors may purchase units through registered investment
advisers, certified financial planners or registered broker-dealers who in each
case either charge investor accounts ("Fee Accounts") periodic fees for
brokerage services, financial planning, investment advisory or asset management
services, or provide such services in connection with an investment account for
which a comprehensive "wrap fee" charge ("Wrap Fee") is imposed. You should
consult your financial professional to determine whether you can benefit from
these accounts. If units of the trust are purchased for a Fee Account and the
units are subject to a Wrap Fee in such Fee Account (i.e., the trust is "Wrap
Fee Eligible"), then investors may be eligible to purchase units of the trust in
these Fee Accounts at a reduced fee. During the initial offering period,
investors may be eligible to purchase units of the trust in these Fee Accounts
that are not subject to the transactional sales fee but will be subject to the
creation and development fee that is retained by
Understanding Your Investment 9
the sponsor. For example, this table illustrates the sales fee you will pay as
a percentage of a $______ public offering price per unit which is the unit price
on the day before the trust's inception date (the percentage will vary with the
unit price).
Transactional sales fee 0.00%
=======
Creation and development fee _.__%
-------
Total sales fee _.__%
=======
For units purchased in the secondary market, investors may be eligible to
purchase units of the trust in these Fee Accounts at the public offering price
less the regular underwriter or dealer concession. Certain Fee Account
investors may be assessed transaction or other fees on the purchase and/or
redemption of units by their broker-dealer or other processing organizations for
providing certain transaction or account activities. We reserve the right to
limit or deny purchases of units in Fee Accounts by investors or selling firms
whose frequent trading activity is determined to be detrimental to the trust.
Employees. We waive the transactional sales fee for purchases made by
officers, directors and employees (and immediate family members) of the sponsor
and its affiliates. We also waive a portion of the sales fee for purchases made
by officers, directors and employees (and immediate family members) of selling
firms. These purchases are not subject to the transactional sales fee but will
be subject to the creation and development fee. These purchases are made at the
public offering price per unit less the applicable underwriter or dealer
concession. Immediate family members for the purposes of this section include
your spouse, children (including step-children) under the age of 21 living in
the same household, and parents (including step-parents). These discounts apply
to initial offering period and secondary market purchases. All employee
discounts are subject to the policies of the related selling firm, including but
not limited to, householding policies or limitations. Only officers, directors
and employees (and their immediate family members) of selling firms that allow
such persons to participate in this employee discount program are eligible for
the discount.
Exchange Option. We waive a portion of the sales fee on units of the trust
offered in this prospectus if you buy your units with redemption or termination
proceeds from any unit investment trusts (regardless of sponsor). The
discounted public offering price per unit for these transactions is equal to the
regular public offering price per unit less 0.50%. However, if you use
redemption or termination proceeds to purchase $250,000 or more in units of the
trust, the maximum sales fee on your units will be limited to the maximum sales
fee for the applicable amount invested in the table under "Large Purchases"
above. To qualify for this discount, the termination or redemption proceeds
used to purchase units of the trust offered in this prospectus must be derived
from a transaction that occurred within 30 calendar days of your purchase of
units of the trust offered in this prospectus. In addition, the discount will
only be available for investors that utilize the same broker-dealer (or a
different broker-dealer with appropriate notification) for both the unit
purchase and the transaction resulting in the receipt of the termination or
redemption proceeds used for the unit purchase. You may be required to provide
appropriate documentation or other information to your broker-dealer to evidence
your eligibility for this sales fee discount.
Please note that if you purchase units of a trust in this manner using
redemption proceeds from trusts which assess the amount of any remaining
deferred sales fee at redemption, you should be aware that any deferred sales
fee
10 Understanding Your Investment
remaining on these units will be deducted from those redemption proceeds. These
discounts apply only to initial offering period purchases.
RETIREMENT ACCOUNTS. The portfolio may be suitable for purchase in tax-
advantaged retirement accounts. You should contact your financial professional
about the accounts offered and any additional fees imposed.
HOW TO SELL YOUR UNITS
You can sell or redeem your units on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.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 creation and
development fee or organization costs if you sell or redeem units during the
initial offering period. The sale and redemption price is sometimes referred to
as the "liquidation price". Certain broker-dealers may charge a transaction or
other fee for processing unit redemption or sale requests.
SELLING UNITS. We may maintain a secondary market for units. This means
that if you want to sell your units, we may buy them at the current net asset
value, provided that you will not pay any remaining creation and development fee
or organization costs if you sell units during the initial offering period. We
may then resell the units to other investors at the public offering price or
redeem them for the redemption price. Our secondary market repurchase price is
the same as the redemption price. Certain broker-dealers might also maintain a
secondary market in units. You should contact your financial professional for
current repurchase prices to determine the best price available. We may
discontinue our secondary market at any time without notice. Even if we do not
make a market, you will be able to redeem your units with the trustee on any
business day for the current redemption price.
REDEEMING UNITS. You may also redeem your units directly with the trustee,
The Bank of New York 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 any remaining creation and
development fee or organization costs if you redeem units during the initial
offering period. You will receive the net asset value for a particular day if
the trustee receives your completed redemption request prior to the close of
regular trading on the New York Stock Exchange. Redemption requests received by
authorized financial professionals prior to the close of regular trading on the
New York Stock Exchange that are properly transmitted to the trustee by the time
designated by the trustee, are priced based on the date of receipt. Redemption
requests received by the trustee after the close of regular trading on the New
York Stock Exchange, redemption requests received by authorized financial
professionals after that time or redemption requests received by such persons
that are not transmitted to the trustee until after the time designated by the
trustee, are priced based on the date of the next determined redemption price
provided they are received in a timely manner by the trustee on such date. It
is the responsibility of authorized financial professionals to transmit
redemption requests received by them to the trustee so they will be received in
a timely manner. If your request is not received in a timely manner or is
incomplete in any way, you will receive the next net asset value computed after
the trustee receives your completed request.
Understanding Your Investment 11
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.
EXCHANGE OPTION. You may be able to exchange your units for units of our
other unit trusts at a reduced sales fee. You can contact your financial
professional for more information about trusts currently available for
exchanges. Before you exchange units, you should read the prospectus carefully
and understand the risks and fees. You should then discuss this option with
your financial professional to determine whether your investment goals have
changed, whether current trusts suit you and to discuss tax consequences. We
may discontinue this option upon sixty days notice.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays interest from its net
investment income (pro-rated on an annual basis) along with any available
principal paid on the securities on each monthly distribution date to
unitholders of record on the preceding record date. The record and distribution
dates are shown under "Essential Information" in the "Investment Summary"
section of this prospectus. In some cases, your trust might pay a special
distribution if it holds an excessive amount of cash pending distribution. The
amount of your distributions will vary from time to time as interest and
principal payments change or trust expenses change.
Interest received by your trust, including that part of the proceeds of any
disposition of bonds which represents accrued interest, is credited by the
trustee to your trust's "interest account". Other receipts are credited to the
"principal account". After deduction of amounts sufficient to reimburse the
trustee, without interest, for any amounts advanced and paid to the sponsor as
the unitholder of record as of the first settlement date, interest received will
be distributed on each distribution date to unitholders of record as of the
preceding record date. All distributions will be net of estimated expenses.
Funds in the principal account will be distributed on each distribution date to
unitholders of record as of the preceding record date provided that the amount
available for distribution therein shall equal at least $1.00 per unit.
Because interest payments are not received by your trust at a constant rate
throughout the year and the interest rates on certain bonds in the trust may
adjust periodically, interest distributions may be more or less than the amount
credited to the interest account as of the record date. For the purpose of
minimizing fluctuations in interest distributions, the trustee is authorized to
advance amounts necessary to provide interest distributions of approximately
equal amounts. The trustee is reimbursed for these advances from funds in the
interest account on the next record date. Investors who purchase units between
a record date and a distribution date will receive their first distribution on
the second distribution date after the purchase.
ESTIMATED DISTRIBUTIONS. The estimated net annual interest income per unit,
estimated initial distribution per unit and estimated normal
12 Understanding Your Investment
monthly distribution per unit as of the close of business the day before your
trust's inception date are shown under "Essential Information" in the
"Investment Summary" section of this prospectus. We generally base these
amounts on the estimated cash flows of the bonds per unit based on the current
interest rate applicable to the bonds. Since certain of the bonds may be
subject to potential interest rate adjustments related to changes in the bonds'
ratings provided by certain ratings services, estimated distributions may
fluctuate over time and actual distributions may vary from estimated amounts.
The actual distributions that you receive will vary from these estimates with
changes in expenses, interest rates (including interest rate adjustments related
to changes in the bonds' ratings as provided by certain ratings services) and
maturity, call, default or sale of bonds. You may request the estimated cash
flows from the sponsor. The estimated cash flows are computed based on factors
described under "Understanding Your Investment--How Your Trust Works--Estimated
Current and Long-Term Returns".
REPORTS. The trustee or your financial professional will make available to
you a statement showing income and other receipts of your trust for each
distribution. Each year the trustee or your financial professional will also
provide an annual report on your trust's activity and certain tax information.
You can request copies of security evaluations to enable you to complete your
tax forms and audited financial statements for your trust, if available.
INVESTMENT RISKS
All investments involve risk. This section describes the main risks that can
impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK. Market risk is the risk that the value of the securities in
your trust will fluctuate. This could cause the value of your units to fall
below your original purchase price or below the principal value. Market value
fluctuates in response to various factors. These can include changes in
interest rates, inflation, the financial condition of a security's issuer,
perceptions of the issuer, or ratings on a security. Even though we supervise
your portfolio, you should remember that we do not manage your portfolio. Your
trust will not sell a security solely because the market value falls as is
possible in a managed fund.
INTEREST RATE RISK. Interest rate risk is the risk that the value of
securities will fall if interest rates, in general, increase. The securities in
your trust typically fall in value when interest rates, in general, rise and
rise in value when interest rates, in general, fall. Securities with longer
periods before maturity are often more sensitive to general interest rate
changes. 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.
Certain bonds in the portfolio may be subject to interest rate adjustments if
either Moody's Investor Services or Standard & Poor's (or, in certain limited
circumstances, another ratings service) downgrades the rating for such bond (or
upgrades the rating after such a downgrade). The interest rates payable on
certain bonds in the portfolio may have already been increased due to past
ratings downgrades. Any future credit rating improvements on such bonds may
result in decreases to the interest rates payable on such bonds and,
consequently, may adversely affect both the income you
Understanding Your Investment 13
receive from the securities in your trust and the value of your units. On the
other hand, increases in a bond's interest rate related to decreases in such
bond's credit rating may place additional financial strain on the bond's issuer
which could result in further decreases in financial condition and further
credit rating decreases. Additionally, an increase in a bond's interest rate
may increase the risk that the bond's issuer will prepay or "call" the bond
before its stated maturity.
CREDIT RISK. Credit risk is the risk that a security's issuer or insurer is
unable to meet its obligation to pay principal or interest on the security.
CALL RISK. Call risk is the risk that the issuer prepays or "calls" a bond
before its stated maturity. An issuer might call a bond if interest rates, in
general fall and the bond pays a higher interest rate or if it no longer needs
the money for the original purpose. If an issuer calls a bond, your trust will
distribute the principal to you but your future interest distributions will
fall. You might not be able to reinvest this principal at as high a yield. A
bond's call price could be less than the price your trust paid for the bond and
could be below the bond's par value. This means that you could receive less
than the amount you paid for your units. If enough bonds in your trust are
called, your trust could terminate early. Some or all of the bonds may also be
subject to extraordinary optional or mandatory redemptions if certain events
occur, such as certain changes in tax laws, the substantial damage or
destruction by fire or other casualty of the project for which the proceeds of
the bonds were used, and various other events. The call provisions are
described in general terms in the "Portfolio".
BOND QUALITY RISK. Bond quality risk is the risk that a bond will fall in
value if a rating agency decreases the bond's rating.
SECTOR CONCENTRATION RISK. Sector 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 companies
within that sector. A portfolio "concentrates" in a sector when securities in a
particular sector make up 25% or more of the portfolio. Refer to the "Principal
Risks" in the "Investment Summary" section in this prospectus for sector
concentrations.
LIQUIDITY RISK. Liquidity risk is the risk that the value of a security will
fall if trading in the security is limited or absent. No one can guarantee that
a liquid trading market will exist for any security because these securities
generally trade in the over-the-counter market (they are not listed on a
securities exchange).
LITIGATION AND LEGISLATION RISK. Litigation and legislation risk is the risk
that future litigation or legislation could affect the value of your trust.
Litigation could challenge an issuer's authority to issue or make payments on
securities.
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
14 Understanding Your Investment
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 dividend 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.
Brokerage and other transaction costs on foreign exchanges are often higher
than in the U.S. and there is generally less governmental supervision of
exchanges, brokers and issuers in foreign countries. The increased expense of
investing in foreign markets may reduce the amount an investor can earn on its
investments and typically results in a higher operating expense ratio than
investments in only domestic securities. Custody of certain securities may be
maintained by a global custody and clearing institution. Settlement and
clearance procedures in certain foreign markets differ significantly from those
in the U.S. Foreign settlement and clearance procedures and trade regulations
also may involve certain risks (such as delays in payment for or delivery of
securities) not typically associated with the settlement of domestic securities.
Round lot trading requirements exist in certain foreign securities markets which
could cause the proportional composition and diversification of the portfolio to
vary when the trust buys or sells securities.
"WHEN ISSUED" AND "DELAYED DELIVERY" BONDS. "When, as and if issued" bonds
are bonds that trade before they are actually issued. Bonds purchased on a
"when issued" basis have not yet been issued by the issuer on the trust's
inception date although such issuer has committed to issue such bonds. This
means that the sponsor can only deliver them to the trust "when, as and if" the
bonds are actually issued. In addition, other bonds may have been purchased by
the sponsor on a "delayed delivery" basis. These bonds are expected to be
delivered to the trust after the trust's first settlement date (normally three
business days after the trust's inception date).
Delivery of these bonds may be delayed or may not occur. Interest on these
bonds does not begin accruing to your trust until the bond is delivered to the
trust. You may have to adjust your tax basis of any bonds delivered after the
expected delivery date. Any adjustment would reflect interest that accrued
between the time you purchased your units and the delivery of the bonds to your
trust. This could lower your first year estimated current return. You may
experience gains or losses on these bonds from the time you purchase units even
though your trust has not yet received them.
ORIGINAL ISSUE DISCOUNT BONDS. Original issue discount bonds were initially
issued at a price below their face (or par) value. These bonds typically pay a
lower interest rate than comparable
Understanding Your Investment 15
bonds that were issued at or above their par value. In a stable interest rate
environment, the market value of these bonds tends to increase more slowly in
early years and in greater increments as the bonds approach maturity. The
issuers of these bonds may be able to call or redeem a bond before its stated
maturity date and at a price less than the bond's par value.
Zero coupon bonds are a type of original issue discount bond. These bonds do
not pay any current interest during their life. If an investor owns this type
of bond, the investor has the right to receive a final payment of the bond's par
value at maturity. The price of these bonds often fluctuates greatly during
periods of changing market interest rates compared to bonds that make current
interest payments. The issuers of these bonds may be able to call or redeem a
bond before its stated maturity date and at a price less than the bond's par
value.
MARKET DISCOUNT. Your trust may consist of some bonds whose current market
values were below the principal value on the trust's inception date or your unit
purchase date. A primary reason for the market value of such bonds being less
than the principal value is that the interest rate of such bonds is at a lower
rate than the current market interest rates for comparable bonds. Bonds selling
at market discounts tend to increase in market value as they approach maturity.
PREMIUM BONDS. Your trust may consist of some bonds whose current market
values were above the principal value on the trust's inception date or your unit
purchase date. A primary reason for the market value of such bonds being higher
than the principal value is that the interest rate of such bonds is at a higher
rate than the current market interest rates for comparable bonds. The current
returns of bonds trading at a market premium are initially higher than the
current returns of comparable bonds issued at currently prevailing interest
rates because premium bonds tend to decrease in market value as they approach
maturity when the principal value becomes payable. Because part of the purchase
price is effectively returned not at maturity but through current income
payments, early redemption of a premium bond at par or any other amount below
the trust's purchase price will result in a reduction in yield. Redemption
pursuant to call provisions generally will, and redemption pursuant to sinking
fund provisions may, occur at times when the bonds have a market value that
represents a premium over par or for original issue discount securities a
premium over the accreted value.
HOW YOUR 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. The
number of units, fractional interest of each unit in a trust, estimated interest
distributions per unit and estimated current and long-term returns will increase
or decrease to the extent of any adjustment.
CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed. Your trust will
generally buy and sell securities:
* to pay expenses,
16 Understanding Your Investment
* to issue additional units or redeem units,
* in limited circumstances to protect a trust,
* to make required distributions or avoid imposition of taxes on a trust, or
* 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 your trust receives securities or other property, it will either
hold the securities or property in the portfolio or sell the securities or
property and distribute the proceeds. If any contract for the purchase of
securities fails, the sponsor will refund the cash and sales fee attributable to
the failed contract to unitholders on or before the next distribution date
unless substantially all of the moneys held to cover the purchase are reinvested
in substitute securities in accordance with the trust agreement. The sponsor
may direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of the sponsor,
would make retention of the securities detrimental to the trust. In such a
case, the sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities that meet the criteria for inclusion in the
trust on the trust's inception date. The sponsor may also instruct the trustee
to take action necessary to ensure that the portfolio continues to satisfy the
qualifications of a regulated investment company.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to maintain a portfolio that replicates the
principal amounts of the securities in the portfolio. When your trust buys
securities, it may pay brokerage or other acquisition fees. You could
experience a dilution of your investment because of these fees and fluctuations
in security prices between the time we create units and the time your trust buys
the securities. Because the trusts pay the brokerage fees associated with the
creation of new units and with the sale of securities to meet redemption and
exchange requests, frequent redemption and exchange activity will likely result
in higher brokerage expenses. When your trust buys or sells securities, we may
direct that it place orders with and pay brokerage commissions to brokers that
sell units or are affiliated with your trust or the trustee.
In the event of a failure to deliver any bond that has been purchased for the
trust under a contract ("failed bonds"), the sponsor is authorized to purchase
other bonds ("replacement bonds"). The trustee shall pay for replacement bonds
out of funds held in connection with the failed bonds and will accept delivery
of such bonds to make up the original principal of a trust. The replacement
bonds must be purchased within 20 days after delivery of the notice of the
failed contract, and the purchase price (exclusive of accrued interest) may not
exceed the principal attributable to the failed bonds. Whenever a replacement
bond has been acquired for a trust, the trustee shall, within five days
thereafter, notify all unitholders of a trust of the acquisition of the
replacement bond and shall, on the next distribution date which is more than 30
days thereafter, make a pro rata distribution of the amount, if any, by which
the cost to a trust of the failed bond exceeded the cost of the replacement
bond. In addition, a replacement bond must (at the time of purchase):
* have a fixed maturity or disposition date comparable to that of the failed
bond it replaces without equity or other conversion features and having no
warrants or subscription privileges attached;
Understanding Your Investment 17
* be payable in U.S. currency; and
* be issued or guaranteed by an issuer subject to or exempt from the
reporting requirements under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (or similar provisions of law) or in effect guaranteed,
directly or indirectly, by means of a lease agreement, agreement to buy
securities, services or products, or other similar commitment of the credit
of such an issuer to the payment of the replacement bonds.
If the right of limited substitution described above shall not be used to
acquire replacement bonds in the event of a failed contract, the sponsor will
refund the sales charge attributable to such failed bonds to all unitholders of
the trust, and distribute the principal attributable to such failed bonds on the
next monthly distribution date which is more than 30 days thereafter. In the
event a replacement bond is not acquired by the trust, the estimated net annual
interest income per unit would be reduced and the estimated current and long-
term returns might be lowered.
ESTIMATED CURRENT AND LONG-TERM RETURNS. The estimated current return and
the estimated long-term return as of the business day before a trust's inception
date are shown under "Essential Information" and "Illustration of Sales Fee
Discounts" in the "Investment Summary" section for your trust. Estimated
current return is calculated by dividing the current estimated net annual
interest income per unit based on the interest rates currently applicable to the
bonds by the public offering price. The estimated net annual interest income
per unit will vary with changes in the interest rates applicable to the bonds
(some of which may be subject to adjustments related to changes in the bonds'
ratings as provided by certain ratings services), fees and expenses of your
trust and with the default, redemption, maturity, exchange or sale of bonds.
The public offering price will vary with changes in the price of the bonds.
Accordingly, there is no assurance that the present estimated current return
will be realized in the future. Estimated long-term return is calculated using
a formula which (1) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of the bonds and (2) takes into account the expenses and sales
charge associated with units. The applicable sales charge associated with units
will vary based on sales fee reductions applicable to certain unitholders.
Since the interest rates, value and estimated retirements of the bonds and the
expenses of your trust may change, there is no assurance that the present
estimated long-term return will be realized in the future. The estimated
current return and estimated long-term return are expected to differ because the
calculation of estimated long-term return reflects the estimated date and amount
of principal returned while the estimated current return calculation includes
only net annual interest income and public offering price.
In order to acquire certain bonds, it may be necessary for the sponsor or
trustee to pay amounts covering accrued interest on the bonds which exceed the
amounts which will be made available through cash furnished by the sponsor on
the trust's inception date. This cash may exceed the interest which would
accrue to the first settlement date. The trustee has agreed to pay for any
amounts necessary to cover any excess and will be reimbursed when funds become
available from interest payments on the related bonds.
18 Understanding Your Investment
WEIGHTED AVERAGE MODIFIED DURATION. The weighted average modified duration
of the securities in the trust portfolio as of the business day before the
trust's inception date is shown under "Essential Information" in the "Investment
Summary" section for your trust. Modified duration is a calculation that
expresses the measurable change in the value of a security in response to a
change in interest rates. Modified duration follows the concept that interest
rates and bond prices move in opposite directions. This formula is used to
determine the effect that a 1% change in interest rates might have on the price
of a bond. For example, if a portfolio has a duration of 3 years then that
portfolio's value is estimated to decline approximately 3% for each 1% increase
in interest rates or rise approximately 3% for each 1% decrease in interest
rates. Weighted average modified duration of the securities will vary with
changes in the value and yield of bonds and with the default, redemption,
maturity, exchange, sale or other liquidation of bonds. The weighted average
modified duration of the securities shown under "Essential Information" relates
only to the bonds in the trust and not to the trust itself or units. Modified
duration does not account for the trust sales charge or expenses and is not
intended to predict or guarantee future performance of the bonds or the trust.
AMENDING THE TRUST AGREEMENT. The sponsor and the trustee can change the
trust agreement without your consent to correct any provision that may be
defective or to make other provisions that will not materially adversely affect
your interest (as determined by the sponsor and the trustee). We cannot change
this agreement to reduce your interest in your trust without your consent.
Investors owning two-thirds of the units in your trust may vote to change this
agreement.
TERMINATION OF YOUR TRUST. Your trust will terminate upon the maturity,
payment, redemption, sale or other liquidation of all of the securities in the
portfolio. The trustee may terminate your trust early if the value of the trust
is less than 40% of the original value of the securities in the trust at the
time of deposit. At this size, the expenses of your trust may create an undue
burden on your investment. Investors owning two-thirds of the units in your
trust may also vote to terminate the trust early. The trustee will liquidate
the trust in the event that a sufficient number of units not yet sold to the
public are tendered for redemption so that the net worth of a trust would be
reduced to less than 40% of the value of the securities at the time they were
deposited in a trust. If this happens, we will refund any sales charge that you
paid.
You will receive your final distribution 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).
Understanding Your Investment 19
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 with
its principal unit investment trust division offices located at 2 Hanson Place,
12th Floor, Brooklyn, New York 11217. You can contact the trustee by calling
the telephone number on the back cover of this prospectus or by writing to its
unit investment trust office. We may remove and replace the trustee in some
cases without your consent. The trustee may also resign by notifying us and
investors.
PORTFOLIO CONSULTANT. The Portfolio Consultant, Navellier & Associates,
Inc., is a privately owned registered investment adviser. Louis G. Navellier is
the majority owner of the Portfolio Consultant which was founded in 1987 and is
based in Reno, Nevada. In addition to providing portfolio consulting services
to the trust, the Portfolio Consultant provides investment management services
to individuals, Taft-Hartley plans, corporate pension funds, endowments, and
foundations. The Portfolio Consultant is not an affiliate of the sponsor. The
Portfolio Consultant selected a list of bonds to be included in the portfolio
based on the criteria provided by the sponsor. The Portfolio Consultant makes no
representations that the bond portfolio will achieve the investment objectives
or will be profitable or suitable for any particular potential investor. The
sponsor did not select the bonds for the trust.
The Portfolio Consultant may use the list of bonds in its independent
capacity as an investment adviser and distribute this information to various
individuals and entities. The Portfolio Consultant may recommend to other
clients or otherwise effect transactions in the bonds held by the trust. This
may have an adverse effect on the prices of the bonds. This also may have an
impact on the price the trust pays for the bonds and the price received upon
unit redemptions or liquidation of the bonds. The Portfolio
20 Understanding Your Investment
Consultant also issues reports and makes recommendations on securities, which
may include the bonds in the trust.
Neither the Portfolio Consultant nor the sponsor manages the trust. Opinions
expressed by the Portfolio Consultant are not necessarily those of the sponsor,
and may not actually come to pass. The Portfolio Consultant is being
compensated for its portfolio consulting services, including selection of the
trust portfolio.
The Portfolio Consultant has a consulting agreement with Dial which covers
the assistance provided for the portfolio selection for the trust among other
things. Dial is not being compensated by the trust or the sponsor. Dial is a
privately owned investment adviser registered in the state of Texas. Dial was
founded in 2002 and is based in The Woodlands, Texas. The principal executive
officer of Dial is Mike Lanier, who has over 30 years experience in the credit
markets. Dial is not an affiliate of the sponsor.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. These distribution firms each receive part of the sales fee
when they sell units. Units will be distributed to the public by these firms at
the public offering price per unit as described under "How to Buy Units".
During the initial offering period the broker-dealer concession or agency
commission for broker-dealers and other firms is as follows:
CONCESSION
OR AGENCY
TRANSACTION AMOUNT COMMISSION
-------------------------------------------
Less than $100,000 2.25%
$100,000 - $249,999 2.00
$250,000 - $499,999 1.75
$500,000 - $999,999 1.50
$1,000,000 or more 1.25
We apply these concessions as a percent of the public offering price per unit
at the time of the transaction. The breakpoints will be adjusted to take into
consideration purchase orders stated in dollars which cannot be completely
fulfilled due to the requirement that only whole units be issued.
For transactions involving unitholders of other unit investment trusts who
use their redemption or termination proceeds to purchase units of the trust
offered in this prospectus, the concession or agency commission is 1.75% of the
public offering price per unit. After the initial offering period, the broker-
dealer concession or agency commission for secondary market transactions is
equal to 2.50% of the public offering price. No broker-dealer concession or
agency commission is paid to broker-dealers, investment advisers or other
selling firms in connection with unit sales in Fee Accounts that charge a Wrap
Fee.
Any sales fee discount is borne by the broker-dealer or selling firm out of
the concession or agency commission, except as stated above. We reserve the
right to change the amount of concessions or agency commissions from time to
time.
Broker-dealers and other firms that sell units of certain unit investment
trusts for which AAM acts as sponsor are eligible to receive additional
compensation for volume sales. The sponsor offers two separate volume
concession structures for certain trusts that are referred to as "Volume
Concession A" and "Volume Concession B." The trust offered in this prospectus
is a Volume Concession B trust. Broker-dealers and other firms that sell units
of any Volume Concession B trust are eligible to receive the additional
compensation described below. Such payments will be in addition to the regular
concessions paid to firms as set forth in the applicable trust's prospectus. The
additional concession is based on total initial
Understanding Your Investment 21
offering period sales of all Volume Concession B trusts during a calendar
quarter as set forth in the following table:
INITIAL OFFERING PERIOD SALES VOLUME
DURING CALENDAR QUARTER CONCESSION
---------------------------------------------------------
Less than $100,000,000 0.000%
$100,000,000 but less than $250,000,000 0.050
$250,000,000 or more 0.100
This volume concession will be paid on units of all Volume Concession B trust
units sold in the initial offering period, except as described below.
Currently, series of Advisors Corporate Trust Global Investment Grade Bond
Portfolio, Advisors Corporate Trust High Yield Bond Portfolio, Advisors
Corporate Trust--Navellier/Dial High Income Opportunities Portfolio, Build
America Bond Limited Maturity Portfolio, Build America Bond Portfolio,
CreditSights High Yield Bond Portfolio, Insured Tax Exempt Municipal Portfolio,
Maturing Bond Portfolio, Municipal Opportunities Portfolio, Tax Exempt Municipal
Portfolio and Tax Exempt Securities Trust are classified as Volume Concession B
trusts; however, other trusts may be classified as Volume Concession B trusts in
the future and eligible for this additional compensation for calendar quarter
sales as disclosed in the applicable trust prospectus. For a trust to be
eligible for this additional Volume Concession B compensation for calendar
quarter sales, the trust's prospectus must include disclosure related to this
additional Volume Concession B compensation. A trust is not eligible for this
additional Volume Concession B compensation if the prospectus for such trust
does not include disclosure related to this additional Volume Concession B
compensation. Other trusts sponsored by AAM are eligible to receive different
categories of additional compensation for volume sales as set forth in the
applicable trust's prospectus. Broker dealer-firms will not receive
compensation unless they sell at least $100 million of units of Volume
Concession B trusts during a calendar quarter. For example, if a firm sells
$99.5 million of units of Volume Concession B trusts during a calendar quarter,
the firm will not receive any additional compensation with respect to such
trusts. Once a firm reaches a particular breakpoint during a quarter, the firm
will receive the stated volume concession on all initial offering period sales
of Volume Concession B trust units during the applicable quarter. For example,
if a firm sells $115 million of units of Volume Concession B trusts in the
initial offering period during a calendar quarter, the firm will receive
additional compensation of 0.05% of $115 million and if a firm sells $275
million of units of Volume Concession B trusts in the initial offering period
during a calendar quarter, the firm will receive additional compensation of
0.10% of $275 million. In addition, selling firms will not receive the
additional compensation on the sale of units which are not subject to a
transactional sales charge. However, such sales will be included in determining
whether a firm has met the volume sales concession breakpoints subject to the
policies of the related selling firm. Secondary market sales of units are
excluded for purposes of the additional compensation. We will pay these amounts
out of our own assets within a reasonable time following each calendar quarter.
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
22 Understanding Your Investment
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
representatives 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 and the
volume concessions described above, 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.
We generally register units for sale in various states in the U.S. We do not
register units for sale in any foreign country. This prospectus does not
constitute an offer of units in any state or country where units cannot be
offered or sold lawfully. We may reject any order for units in whole or in
part.
We may gain or lose money when we hold units in the primary or secondary
market due to fluctuations in unit prices. The gain or loss is equal to the
difference between the price we pay for units and the price at which we sell or
redeem them. We may also gain or lose money when we deposit securities to
create units.
TAXES
This section summarizes some of the main U.S. federal income tax consequences
of owning units of the trust. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example,
these summaries generally do not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or other investor with special
circumstances. In addition, this section does not describe your state, local or
foreign tax consequences.
This federal income tax summary is based in part on the advice of counsel to
the sponsor. The Internal Revenue Service could disagree with any conclusions
set forth in this section. In addition, our counsel was not asked to review,
and has not reached a conclusion with respect to the federal income tax
treatment of the assets to be deposited in your trust. This may not be
sufficient for you to use for the purpose of avoiding penalties under federal
tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
TRUST STATUS. Your trust intends to qualify as a "regulated investment
company" under the federal tax laws. If your trust qualifies as a regulated
investment company and distributes its income as required by the tax law, your
trust generally will not pay federal income taxes.
DISTRIBUTIONS. Trust distributions are generally taxable. After the end of
each year, you will
Understanding Your Investment 23
receive a tax statement that separates your trust's distributions into three
categories, ordinary income distributions, capital gain dividends and return of
capital. Ordinary income distributions are generally taxed at your ordinary tax
rate. Generally, you will treat all capital gain dividends as long-term capital
gains regardless of how long you have owned your units. To determine your
actual tax liability for your capital gain dividends, you must calculate your
total net capital gain or loss for the tax year after considering all of your
other taxable transactions, as described below. In addition, your trust may
make distributions that represent a return of capital for tax purposes and thus
will generally not be taxable to you. A return of capital, although not
initially taxable to you, will result in a reduction in the basis in your units
and subsequently result in higher levels of taxable capital gains in the future.
In addition, if the non-dividend distribution exceeds your basis in your units,
you will have long-term or short-term gain depending upon your holding period.
The tax status of your distributions from your trust is not affected by whether
you reinvest your distributions in additional units or receive them in cash.
The income from your trust that you must take into account for federal income
tax purposes is not reduced by amounts used to pay a deferred sales fee, if any.
The tax laws may require you to treat distributions made to you in January as if
you had received them on December 31 of the previous year. Income from your
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.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns units generally will
not be entitled to the dividends received deduction with respect to many
dividends received from your trust because the dividends received deduction is
generally not available for distributions from regulated investment companies.
SALE OR REDEMPTION OF UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this
gain or loss, you must subtract your tax basis in your units from the amount you
receive in the transaction. Your tax basis in your units is generally equal to
the cost of your units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your units.
CAPITAL GAINS AND LOSSES. If you are an individual, the maximum marginal
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. However, if you receive a
capital gain dividend from your trust and sell your unit at a loss after holding
it for six months or less, the loss will be recharacterized as long-term capital
loss to the extent of the capital gain dividend received. The tax rates for
capital gains realized from assets held for one year or less are generally the
same as for ordinary income. The Internal Revenue Code treats certain capital
gains as ordinary income in special situations.
24 Understanding Your Investment
ROLLOVERS AND EXCHANGES. If you elect to have your proceeds from your trust
rolled over into a future trust, the exchange would generally be considered a
sale for federal income tax purposes.
DEDUCTIBILITY OF TRUST EXPENSES. Expenses incurred and deducted by your
trust will generally not be treated as income taxable to you. In some cases,
however, you may be required to treat your portion of these trust expenses as
income. In these cases you may be able to take a deduction for these expenses.
However, certain miscellaneous itemized deductions, such as investment expenses,
may be deducted by individuals only to the extent that all of these deductions
exceed 2% of the individual's adjusted gross income. Some individuals may also
be subject to further limitations on the amount of their itemized deductions,
depending on their income.
FOREIGN TAX CREDIT. If your trust invests in any foreign securities, the tax
statement that you receive may include an item showing foreign taxes your trust
paid to other countries. In this case, dividends taxed to you will include your
share of the taxes your trust paid to other countries. You may be able to
deduct or receive a tax credit for your share of these taxes.
FOREIGN INVESTORS. If you are a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from your trust will be characterized as dividends for federal
income tax purposes (other than dividends which your trust properly reports as
capital gain dividends) and will be subject to U.S. income taxes, including
withholding taxes, subject to certain exceptions described below. However,
distributions received by a foreign investor from your trust that are properly
reported by your trust as capital gain dividends may not be subject to U.S.
federal income taxes, including withholding taxes, provided that your trust
makes certain elections and certain other conditions are met. Distributions
from your trust that are properly reported by the trust as an interest-related
dividend attributable to certain interest income received by the trust or as a
short-term capital gain dividend attributable to certain net short-term capital
gain income received by the trust may not be subject to U.S. federal income
taxes, including withholding taxes when received by certain foreign investors,
provided that the trust makes certain elections and certain other conditions are
met. In addition, 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 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, 2018. You should
also consult your tax advisor with respect to other U.S. tax withholding and
reporting requirements.
EXPENSES
Your trust will pay various expenses to conduct its operations. The "Fees
and Expenses" section of the "Investment Summary" in this prospectus shows the
estimated amount of these expenses.
The sponsor will receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives,
Understanding Your Investment 25
policies, composition and size, selecting service providers and information
services and for providing other similar administrative and ministerial
functions. This "creation and development fee" is a charge of $7.50 per unit.
The trustee will deduct this amount from your trust's assets as of the close of
the initial offering period. No portion of this fee is applied to the payment
of distribution expenses or as compensation for sales efforts. This fee will
not be deducted from proceeds received upon a repurchase, redemption or exchange
of units before the close of the initial public offering period.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing accounts.
Your trust will reimburse us as supervisor, evaluator and sponsor for providing
portfolio supervisory services, for evaluating your portfolio and for providing
bookkeeping and administrative services. Our reimbursements may exceed the
costs of the services we provide to your trust but will not exceed the costs of
services provided to all of our unit investment trusts in any calendar year.
All of these fees may adjust for inflation without your approval.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and the
sponsor, legal fees and expenses and expenses incurred in contacting you. Your
trust may pay the costs of updating its registration statement each year. Your
trust will pay a license fee for the use of certain service marks, trademarks,
trade names and/or other property of Navellier & Associates, Inc. and Dial
Capital Management, LLC. The trustee will generally pay trust expenses from
interest income and principal payments received on the securities but in some
cases may sell securities to pay trust expenses.
EXPERTS
LEGAL MATTERS. Chapman and Cutler LLP acts as counsel for the trust and has
given an opinion that the units are validly issued. Dorsey & Whitney LLP acts
as counsel for the trustee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Grant Thornton LLP,
independent registered public accounting firm, audited the statement of
financial condition and the portfolio in this prospectus.
ADDITIONAL INFORMATION
This prospectus does not contain all the information in the registration
statement that your trust filed with the Securities and Exchange Commission.
The Information Supplement, which was filed with the Securities and Exchange
Commission, includes more detailed information about the securities in your
portfolio, investment risks and general information about your trust. You can
obtain the Information Supplement by contacting us or the Securities and
Exchange Commission as indicated on the back cover of this prospectus. This
prospectus incorporates the Information Supplement by reference (it is legally
considered part of this prospectus).
26 Understanding Your Investment
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISORS DISCIPLINED TRUST 1500
We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 6 through 8, of Advisors Disciplined Trust 1500, as of
____________, 2017, 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 ____________, 2017. 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 1500 as of ____________, 2017, in conformity with accounting principles
generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
____________, 2017
ADVISORS DISCIPLINED TRUST 1500
STATEMENT OF FINANCIAL CONDITION AS OF ____________, 2017
------------------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . $
Accrued interest to first settlement date (1) . . . . . . . . . . . . . . .
Cash (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
===========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Accrued interest payable to sponsor (1) . . . . . . . . . . . . . . . . . $
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Creation and development fee (4) . . . . . . . . . . . . . . . . . . . . .
-----------
-----------
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: organization costs and creation and development fee (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 offer side evaluations as
determined by the evaluator. The trustee will advance the amount of net
interest accrued to the first settlement date to the trust for distribution
to the sponsor as unitholder of record as of such date.
(2) Cash or an irrevocable letter of credit has been deposited with the trustee
covering the funds (aggregating $__________) necessary for the purchase of
securities in the trust represented by purchase contracts.
(3) A portion of the public offering price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing the trust.
These costs have been estimated at $____ per unit for the trust. A
distribution will be made as of the earlier of the close of the initial
offering period or six months following the trust's inception date to an
account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent the actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be reimbursed to the sponsor
and deducted from the assets of the trust.
(4) The total sales fee consists of a transactional sales fee and a creation
and development fee. The transactional sales fee is equal to the
difference between the maximum sales fee and the creation and development
fee. The maximum sales fee is equal to 3.00% of the public offering price.
The creation and development fee is equal to $7.50 per unit. A portion of
the public offering price per unit consists of an amount of cash to pay
this fee.
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees.
</FN>
Understanding Your Investment 27
CONTENTS
INVESTMENT SUMMARY
----------------------------------------------------------------------
A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
3 Who Should Invest
3 Essential Information
3 Fees and Expenses
4 Illustration of Sales Fee Discounts
5 Portfolio
UNDERSTANDING YOUR INVESTMENT
----------------------------------------------------------------------
Detailed information to 7 How to Buy Units
help you understand 11 How to Sell Your Units
your investment 12 Distributions
13 Investment Risks
16 How Your Trust Works
23 Taxes
25 Expenses
26 Experts
26 Additional Information
27 Report of Independent Registered
Public Accounting Firm
27 Statement of Financial Condition
WHERE TO LEARN MORE
----------------------------------------------------------------------
You can contact us for VISIT US ON THE INTERNET
free information about http://www.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 1500
Securities Act file number: 333-204909
Investment Company Act file number: 811-21056
ADVISORS CORPORATE
TRUST--NAVELLIER/DIAL
HIGH INCOME OPPORTUNITIES
PORTFOLIO,
SERIES 119
PROSPECTUS
____________, ____
[LOGO]
AAM
ADVISORS
ASSET MANAGEMENT
ADVISORS DISCIPLINED TRUST 1500
ADVISORS CORPORATE TRUST--NAVELLIER/DIAL HIGH INCOME OPPORTUNITIES PORTFOLIO,
SERIES 119
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 at
www.aamlive.com or by contacting your financial professional Advisors Asset
Management, Inc. at 18925 Base Camp Road, Suite 203, Monument, Colorado 80132,
or 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 7
Administration of the Trust 15
Purchase, Redemption and Pricing of Units 22
Performance Information 29
Description of Securities Ratings 30
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. The number of units, fractional interest of each unit in
the trust and estimated interest distributions per unit will increase or
decrease to the extent of any adjustment. Additional units of each trust may be
issued from time to time by depositing in the trust additional securities (or
contracts for the purchase thereof together with cash or irrevocable letters of
credit) or cash (including a letter of credit or the equivalent) with
instructions to purchase additional securities. As additional units are issued
by a trust as a result of the deposit of additional securities by the sponsor,
the aggregate value of the securities in the trust will be increased and the
fractional undivided interest in the trust represented by each unit will be
decreased. The sponsor may continue to make additional deposits of securities
into a trust, provided that such additional deposits will be in principal
amounts which will generally maintain the same original percentage relationship
among the principal amounts of the securities in such trust established by the
initial deposit of the securities. Thus, although additional units will be
issued, each unit will generally continue to represent the same principal amount
of each security, and the percentage relationship among the principal amount of
each security in the related trust will generally remain the same. If the
sponsor deposits cash to purchase additional securities, existing and new
investors may experience a dilution of their investments and a reduction in
their anticipated income because of fluctuations in the prices of the securities
between the time of the cash deposit and the purchase of the securities and
because the trust will pay any associated brokerage fees.
Each unit initially offered represents an undivided interest in the related
trust. To the extent that any units are redeemed by the trustee or additional
units are issued as a result of additional securities being deposited by the
sponsor, the fractional undivided interest in a trust represented by each
unredeemed unit will increase or decrease accordingly, although the actual
interest in such trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the trustee by
unitholders, which may include the sponsor, or until the termination of the
trust agreement.
A trust consists of (a) the securities listed under "Portfolio" in the
prospectus as may continue to be held from time to time in the trust, (b) any
additional securities acquired and held by the trust pursuant to the provisions
of the trust agreement and (c) any cash held in the accounts of the trust.
Neither the sponsor nor the trustee shall be liable in any way for any failure
in any of the securities. However, should any contract for the purchase of any
of the securities initially deposited in a trust fail, the sponsor will, unless
substantially all of the moneys held in the trust to cover such purchase are
reinvested in substitute securities in accordance with the trust agreement,
-2-
refund the cash and sales fee attributable to such failed contract to all
unitholders on the next distribution date.
INVESTMENT OBJECTIVE AND POLICIES
The trust seeks to provide monthly distributions of interest income and
capital preservation by investing in a portfolio primarily consisting of
investment grade interest-bearing corporate debt obligations. 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 the special circumstances discussed herein
regarding the substitution of replacement securities for any failed securities.
Thus, with the exception of the redemption or maturity of securities in
accordance with their terms, the assets of a trust will remain unchanged under
normal circumstances.
The sponsor may direct the trustee to dispose of securities the value of
which has been affected by certain adverse events including institution of
certain legal proceedings or decline in price or the occurrence of other market
factors, including advance refunding, so that in the opinion of the sponsor the
retention of such securities in a trust would be detrimental to the interest of
the unitholders. The proceeds from any such sales, exclusive of any portion
which represents accrued interest, will be credited to the Principal Account of
such trust for distribution to the unitholders.
The sponsor is required to instruct the trustee to reject any offer made by
an issuer of securities to issue new securities, or to exchange securities, for
trust securities, the trustee shall reject such offer. However, should any
issuance, exchange or substitution be effected notwithstanding such rejection or
without an initial offer, any securities or property received shall be deposited
in the trust and shall be promptly sold by the trustee unless the sponsor
advises the trustee to keep such securities or properties. The excess cash
proceeds of any such sales will be distributed to unitholders.
If your trust receives securities or other property, it will either hold
the securities or property in the portfolio or sell the securities or property
and distribute the proceeds. If any contract for the purchase of securities
fails, the sponsor will refund the cash and sales fee attributable to the failed
contract to unitholders on or before the next distribution date unless
substantially all of the moneys held to cover the purchase are reinvested in
substitute securities in accordance with the trust agreement. The sponsor may
direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of
-3-
the sponsor, would make retention of the securities detrimental to the trust. In
such a case, the sponsor may, but is not obligated to, direct the reinvestment
of sale proceeds in any other securities that meet the criteria for inclusion in
the trust on the trust's inception date. The sponsor may also instruct the
trustee to take action necessary to ensure that the portfolio continues to
satisfy the qualifications of a regulated investment company.
The trustee may sell securities, designated by the sponsor, from a trust
for the purpose of redeeming units of such trust tendered for redemption and the
payment of expenses.
In addition, if a trust has elected to be taxed as a regulated investment
company, the trustee may dispose of certain securities and take such further
action as may be needed from time to time to ensure that a trust continues to
satisfy the qualifications of a regulated investment company, including the
requirements with respect to diversification under Section 851 of the Internal
Revenue Code, and as may be needed from time to time to avoid the imposition of
any tax on a trust or undistributed income of a trust as a regulated investment
company.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Principal
Account of a trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided herein, in the prospectus or in the
trust agreement, the acquisition by a trust of any securities other than the
portfolio securities is prohibited.
Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or redeemed or will mature in
accordance with their terms and because the proceeds from such events will be
distributed to unitholders and will not be reinvested, no assurance can be given
that a trust will retain for any length of time its present size and
composition. Neither the sponsor nor the trustee shall be liable in any way for
any default, failure or defect in any security. In the event of a failure to
deliver any security that has been purchased for a trust under a contract,
including those securities purchased on a "when, as and if issued" basis
("Failed Securities"), the sponsor is authorized under the trust agreement to
direct the trustee to acquire other securities ("Replacement Securities") to
make up the original corpus of such trust.
Securities in certain of the trusts may have been purchased on a "when, as
and if issued" or delayed delivery basis with delivery expected to take place
after the first settlement date. Accordingly, the delivery of such securities
may be delayed or may not occur. Interest on these securities begins accruing
to the benefit of unitholders on their respective dates of delivery.
Unitholders of all trusts will be "at risk" with respect to any "when, as and if
issued" or "delayed delivery" securities included in their respective trust
(i.e., may derive either gain or loss from fluctuations in the evaluation of
such securities) from the date they commit for units.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities (i) shall be bonds,
debentures, notes or other straight debt obligations (whether secured or
unsecured and whether senior or subordinated) without equity or other conversion
features, with
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fixed maturity dates substantially the same as those of the Failed Securities,
having no warrants or subscription privileges attached; (ii) shall be payable in
United States currency; (iii) shall not be "when, as and if issued" obligations
or restricted securities; (iv) shall be issued after July 18, 1984 if interest
thereon is United States source income; (v) shall be issued or guaranteed by an
issuer subject to or exempt from the reporting requirements under Section 13 or
15(d) of the Securities Exchange Act of 1934 (or similar provisions of law) or
in effect guaranteed, directly or indirectly, by means by of a lease agreement,
agreement to buy securities, services or products, or other similar commitment
of the credit of such an issuer to the payment of the Replacement Securities;
(vi) if the prospectus for the related trust provides that an objective of such
trust is to provide income exempt from United States federal taxation, shall be
securities issued by states or territories of the United States or political
subdivisions thereof which shall have the benefit of an exemption from United
States federal taxation of interest to an extent equal to or greater than that
of the Securities they replace and, if the prospectus for the related trust
provides that an objective of such trust is to provide income exempt from state
taxation, shall have the benefit of an exemption from state taxation to an
extent equal to or greater than that of the Securities they replace; and
(vii) shall not cause the units of the related trust to cease to be rated "AAA"
by Standard & Poor's, a division of S&P Global Inc. if the units are so rated.
The purchase price of the Replacement Securities (exclusive of accrued interest)
shall not exceed the principal attributable to the Failed Securities. In
addition, no substitution of Replacement Securities will be made without an
opinion of counsel that such substitution will not adversely affect the federal
income tax status of the related trust, if such Replacement Securities when
added to all previously purchased Replacement Securities in the related trust
exceed 15% of the principal amount of Securities initially deposited in the
related trust. Whenever a Replacement Security is acquired for a trust, the
trustee shall, within five days thereafter, notify all unitholders of the trust
of the acquisition of the Replacement Security and shall, on the next monthly
distribution date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the trust of the Failed
Security exceeded the cost of the Replacement Security. Once all of the
securities in a trust are acquired, the trustee will have no power to vary the
investments of the trust, i.e., the trustee will have no managerial power to
take advantage of market variations to improve a unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the sponsor will refund the sales fee attributable to such Failed
Securities to all unitholders of the trust and the trustee will distribute the
principal and accrued interest attributable to such Failed Securities not more
than 30 days after the date on which the trustee would have been required to
purchase a Replacement Security. In addition, unitholders should be aware that,
at the time of receipt of such principal, they may not be able to reinvest such
proceeds in other securities at a yield equal to or in excess of the yield which
such proceeds would have earned for unitholders of such trust.
Whether or not a Replacement Security is acquired, an amount equal to the
accrued interest (at the coupon rate of the Failed Securities) will be paid to
unitholders of the trust to the date the sponsor removes the Failed Securities
from the trust if the sponsor determines not to purchase a Replacement Security
or to the date of substitution if a Replacement Security is purchased. All such
interest paid to unitholders which accrued after the date of settlement for a
purchase of units will be paid by the sponsor. In the event a Replacement
Security could not be
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acquired by a trust, the net annual interest income per unit for such trust
would be reduced and the estimated current return and estimated long-term return
might be lowered.
Subsequent to the trust's inception, a security may cease to be rated or
its rating may be reduced below any minimum required as of the trust's
inception. Neither event requires the elimination of such investment from a
trust, but may be considered in the sponsor's determination to direct the
trustee to dispose of such investment.
The sponsor may not alter the portfolio of a trust except upon the
happening of certain extraordinary circumstances. Certain of the securities may
be subject to optional call or mandatory redemption pursuant to sinking fund
provisions, in each case prior to their stated maturity. A bond subject to
optional call is one which is subject to redemption or refunding prior to
maturity at the option of the issuer, often at a premium over par. A refunding
is a method by which a bond issue is redeemed, at or before maturity, by the
proceeds of a new bond issue. A bond subject to sinking fund redemption is one
which is subject to partial call from time to time at par with proceeds from a
fund accumulated for the scheduled retirement of a portion of an issue to
maturity. Special or extraordinary redemption provisions may provide for
redemption at par of all or a portion of an issue upon the occurrence of certain
circumstances. Redemption pursuant to optional call provisions is more likely
to occur, and redemption pursuant to special or extraordinary redemption
provisions may occur, when the securities have an offering side evaluation which
represents a premium over par, that is, when they are able to be refinanced at a
lower cost. The proceeds from any such call or redemption pursuant to sinking
fund provisions, as well as proceeds from the sale of securities and from
securities which mature in accordance with their terms from a trust, unless
utilized to pay for units tendered for redemption, will be distributed to
unitholders of such trust and will not be used to purchase additional securities
for such trust. Accordingly, any such call, redemption, sale or maturity will
reduce the size and diversity of a trust and the net annual interest income of
such trust and may reduce the estimated current return and the estimated long-
term return. The call, redemption, sale or maturity of securities also may have
tax consequences to a unitholder.
Certain of the securities in certain of the trusts may have been acquired
at a market discount from par value at maturity. The coupon interest rates on
the discount securities at the time they were purchased and deposited in the
trusts were lower than the current market interest rates for newly issued bonds
of comparable rating and type. If such interest rates for newly issued
comparable securities increase, the market discount of previously issued
securities will become greater, and if such interest rates for newly issued
comparable securities decline, the market discount of previously issued
securities will be reduced, other things being equal. Investors should also
note that the value of securities purchased at a market discount will increase
in value faster than securities purchased at a market premium if interest rates
decrease. Conversely, if interest rates increase, the value of securities
purchased at a market discount will decrease faster than securities purchased at
a market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium securities and the prepayment benefit for lower
yielding, discount securities will be reduced. A discount security held to
maturity will have a larger portion of its total return in the form of taxable
income and capital gain and loss in the form of tax-exempt interest income than
a comparable security newly issued at current market rates. Market discount
attributable to interest changes does not indicate a lack of market
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confidence in the issue. Neither the sponsor nor the trustee shall be liable in
any way for any default, failure or defect in any of the securities.
Certain of the securities in the trust may be "zero coupon" bonds, i.e., an
original issue discount bond that does not provide for the payment of current
interest. Zero coupon bonds are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the maturity of the bond
and does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the zero
coupon bonds) is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount earned during the life of such
obligation. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest the income on such obligation at a rate as
high as the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future. For
this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
securities of comparable quality which pay interest currently.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security which might reasonably be
expected to have a material adverse effect on the trust. At any time after the
trust's inception, litigation may be instituted on a variety of grounds with
respect to the securities. The sponsor is unable to predict whether any such
litigation may be instituted, or if instituted, whether such litigation might
have a material adverse effect on the trust. The sponsor and the trustee shall
not be liable in any way for any default, failure or defect in any security.
RISK FACTORS
MARKET DISCOUNT. Certain of the bonds may have been acquired at a market
discount from par value at maturity. The coupon interest rates on discount bonds
at the time they were purchased and deposited in a trust were lower than the
current market interest rates for newly issued bonds of comparable rating and
type. If such interest rates for newly issued comparable bonds increase, the
market discount of previously issued bonds will become greater, and if such
interest rates for newly issued comparable bonds decline, the market discount of
previously issued bonds will be reduced, other things being equal. Investors
should also note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value of bonds
purchased at a market discount will decrease faster than bonds purchased at a
market premium. In addition, if interest rates rise, the prepayment risk of
higher yielding, premium bonds and the prepayment benefit for lower yielding,
discount bonds will be reduced. Market discount attributable to interest changes
does not indicate a lack of market confidence in the issue. Neither the sponsor
nor the trustee shall be liable in any way for any default, failure or defect in
any of the bonds.
PREMIUM BONDS. Certain of the bonds held by the trust may have been
acquired at a market premium from par value at maturity. The coupon interest
rates on the premium bonds at the time they were purchased by the trust were
higher than the current market interest rates for newly issued bonds of
comparable rating and type. If such interest rates for newly issued and
-7-
otherwise comparable bonds decrease, the market premium of previously issued
bonds will be increased, and if such interest rates for newly issued comparable
bonds increase, the market premium of previously issued bonds will be reduced,
other things being equal. The current returns of bonds trading at a market
premium are initially higher than the current returns of comparable bonds of a
similar type issued at currently prevailing interest rates because premium bonds
tend to decrease in market value as they approach maturity when the face amount
becomes payable. Because part of the purchase price is thus returned not at
maturity but through current income payments, early redemption of a premium bond
at par or early prepayments of principal will result in a reduction in yield.
Redemption pursuant to call provisions generally will, and redemption pursuant
to sinking fund provisions may, occur at times when the redeemed bonds have an
offering side valuation which represents a premium over par or for original
issue discount bonds a premium over the accreted value.
ORIGINAL ISSUE DISCOUNT BONDS. Certain of the bonds may be "zero coupon"
bonds. Zero coupon bonds are purchased at a deep discount because the buyer
receives only the right to receive a final payment at the maturity of the bond
and does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the zero
coupon bonds) is that a fixed yield is earned not only on the original
investment but also, in effect, on all discount earned during the life of such
obligation. This implicit reinvestment of earnings at the same rate eliminates
the risk of being unable to reinvest the income on such obligation at a rate as
high as the implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the future. For
this reason, zero coupon bonds are subject to substantially greater price
fluctuations during periods of changing market interest rates than are
securities of comparable quality which pay interest.
"WHEN ISSUED" AND "DELAYED DELIVERY" BONDS. Certain of the bonds may have
been purchased on a "when, as and if issued" or "delayed delivery" basis. See
"Notes to Portfolio" in the prospectus. The delivery of any such bonds may be
delayed or may not occur. Interest on these Bonds begins accruing to the benefit
of unitholders on their respective dates of delivery. To the extent any bonds
are actually delivered to a trust after their respective expected dates of
delivery, unitholders who purchase their unit prior to the date such bonds are
actually delivered to the trustee would be required to adjust their tax basis in
their unit for a portion of the interest accruing on such bonds during the
interval between their purchase of unit and the actual delivery of such bonds.
As a result of any such adjustment, the Estimated Current Returns during the
first year would be slightly lower than those stated in the Prospectus which
would be the returns after the first year, assuming the portfolio of a trust and
estimated annual expenses other than that of the trustee (which may be reduced
in the first year only) do not vary from that set forth in the prospectus.
Unitholders will be "at risk" with respect to all bonds in the portfolios
including "when, as and if issued" and "delayed delivery" bonds (i.e., may
derive either gain or loss from fluctuations in the evaluation of such bonds)
from the date they commit for unit.
FINANCIAL SERVICES INDUSTRY. Your trust may concentrate in securities of
issuers in the financial services industry.
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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
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
-9-
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 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
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been enacted. Under the legislation, banks are able to purchase or establish
subsidiary banks in any state. Since mid-1997, banks have been allowed to turn
existing banks into branches. Consolidation may continue. The Securities and
Exchange Commission and the Financial Accounting Standards Board require the
expanded use of market value accounting by banks and have imposed rules
requiring market accounting for investment securities held in trading accounts
or available for sale. Adoption of additional such rules may result in increased
volatility in the reported health of the industry, and mandated regulatory
intervention to correct such problems. Additional legislative and regulatory
changes may be forthcoming. For example, the bank regulatory authorities have
proposed substantial changes to the Community Reinvestment Act and fair lending
laws, rules and regulations, and there can be no certainty as to the effect, if
any, that such changes would have on the Securities in the Trust's portfolio. In
addition, from time to time the deposit insurance system is reviewed by Congress
and federal regulators, and proposed reforms of that system could, among other
things, further restrict the ways in which deposited moneys can be used by banks
or reduce the dollar amount or number of deposits insured for any depositor.
Such reforms could reduce profitability, as investment opportunities available
to bank institutions become more limited and as consumers look for savings
vehicles other than bank deposits. Banks face significant competition from other
financial institutions such as mutual funds, credit unions, mortgage banking
companies and insurance companies, and increased competition may result from
legislative broadening of regional and national interstate banking powers. Among
other benefits, such legislation allows banks and bank holding companies to
acquire across previously prohibited state lines and to consolidate their
various bank subsidiaries into one unit. Neither the Sponsor nor the Underwriter
makes any prediction as to what, if any, manner of bank regulatory actions might
ultimately be adopted or what ultimate effect such actions might have on the
Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5% of the
outstanding shares of any class of voting securities of a bank or bank holding
company, (2) acquiring control of a bank or another bank holding company, (3)
acquiring all or substantially all the assets of a bank, or (4) merging or
consolidating with another bank holding company, without first obtaining Federal
Reserve Board ("FRB") approval. In considering an application with respect to
any such transaction, the FRB is required to consider a variety of factors,
including the potential anti-competitive effects of the transaction, the
financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws. In addition, the federal
Change In Bank Control Act and various state laws impose limitations on the
ability of one or more individuals or other entities to acquire control of banks
or bank holding companies.
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
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borrowing. The FRB also may impose limitations on the payment of dividends as a
condition to its approval of certain applications, including applications for
approval of mergers and acquisitions. Neither the Sponsor nor the Underwriter
makes any prediction as to the effect, if any, such laws will have on the
Securities or whether such approvals, if necessary, will be obtained.
Companies engaged in investment management and brokerage activities are
subject to the adverse effects of economic recession, volatile interest rates,
and competition from new entrants in their fields of business. Adverse changes
in the direction of the stock market, investor confidence, the financial health
of customers, equity transaction volume, the level and direction of interest
rates and the outlook of emerging markets could adversely affect the financial
stability, as well as the stock prices, of these companies. Additionally,
competitive pressures, including increased competition from new and existing
competitors, the ongoing commoditization of traditional businesses and the need
for increased capital expenditures on new technology could adversely impact the
profit margins of companies in the investment management and brokerage
industries. Companies involved in investment management and brokerage activities
are also subject to extensive regulation by government agencies and self-
regulatory organizations, and changes in laws, regulations or rules, or in the
interpretation of such laws, regulations and rules could adversely affect the
stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management
industry underwrite, sell or distribute property, casualty and business
insurance. Many factors affect insurance, reinsurance and risk management
company profits, including but not limited to interest rate movements, the
imposition of premium rate caps, a misapprehension of the risks involved in
given underwritings, competition and pressure to compete globally, weather
catastrophes or other natural or man-made disasters and the effects of client
mergers. Individual companies may be exposed to material risks including reserve
inadequacy and the inability to collect from reinsurance carriers. Insurance
companies are subject to extensive governmental regulation, including the
imposition of maximum rate levels, which may not be adequate for some lines of
business. Proposed or potential tax law changes may also adversely affect
insurance companies' policy sales, tax obligations and profitability. In
addition to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressure to compete globally.
In addition to the normal risks of business, companies involved in the
insurance and risk management industry are subject to significant risk factors,
including those applicable to regulated insurance companies, such as:
* the inherent uncertainty in the process of establishing property-liability
loss reserves, and the fact that ultimate losses could materially exceed
established loss reserves, which could have a material adverse effect on
results of operations and financial condition;
-12-
* 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.
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
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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.
CONSUMER PRODUCT AND SERVICES INDUSTRY. The trust may invest significantly
in bonds of issuers that manufacture or sell consumer products or provide
consumer services. The profitability of these companies will be affected by
various factors including the general state of the economy and consumer spending
trends. In the past, there have been major changes in the retail environment due
to the declaration of bankruptcy by some of the major corporations involved in
the retail industry, particularly the department store segment. The continued
viability of the retail industry will depend on the industry's ability to adapt
and to compete in changing economic and social conditions, to attract and retain
capable management, and to finance expansion. Weakness in the banking or real
estate industry, a recessionary economic climate with the consequent slowdown in
employment growth, less favorable trends in unemployment or a marked
deceleration in real disposable personal income growth could result in
significant pressure on both consumer wealth and consumer confidence, adversely
affecting consumer spending habits. In addition, competitiveness of the retail
industry will require large capital outlays for investment in the installation
of automated checkout equipment to control inventory, to track the sale of
individual items and to gauge the success of sales campaigns. Increasing
employee and retiree benefit costs may also have an adverse effect on the
industry. In many sectors of the retail industry, competition may be fierce due
to market saturation, converging consumer tastes and other factors. Because of
these factors and the recent increase in trade opportunities with other
countries, various retailers are now entering global markets which entail added
risks such as sudden weakening of foreign economies, difficulty in adapting to
local conditions and constraints and added research costs.
INDUSTRIALS ISSUERS. The trust may invest significantly in industrials
companies. General risks of industrials companies include the general state of
the economy, intense competition, consolidation, domestic and international
politics, excess capacity and consumer spending trends. In addition, capital
goods companies may also be significantly affected by overall capital spending
levels, economic cycles, technical obsolescence, delays in modernization,
limitations on supply of key materials, labor relations, government regulations,
government contracts and ecommerce initiatives. Furthermore, certain companies
involved in the industry have also faced scrutiny for alleged accounting
irregularities that may have led to the overstatement of their financial
results, and other companies in the industry may face similar scrutiny.
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Industrials companies may also be affected by factors more specific to
their individual industries. Industrial machinery manufacturers may be subject
to declines in commercial and consumer demand and the need for modernization.
Aerospace and defense companies may be influenced by decreased demand for new
equipment, aircraft order cancellations, disputes over or ability to obtain or
retain government contracts, or changes in government budget priorities, changes
in aircraft-leasing contracts and cutbacks in profitable business travel. The
number of housing starts, levels of public and non-residential construction
including weakening demand for new office and retail space, and overall
construction spending may adversely affect construction equipment manufacturers.
MATERIALS. The trust may invest significantly in securities issued by
companies involved in the materials industry. Companies in the materials sector
are engaged in the manufacture, mining, processing, or distribution of raw
materials and intermediate goods used in the industrial sector. These may
include materials and products such as chemicals, commodities, forestry
products, paper products, copper, iron ore, nickel, steel, aluminum, precious
metals, textiles, cement, and gypsum. Materials companies may be affected by the
volatility of commodity prices, exchange rates, import controls, worldwide
competition, depletion of resources, and mandated expenditures for safety and
pollution control devices. In addition, they may be adversely affected by
technical progress, labor relations, and governmental regulation. These
companies are also at risk for environmental damage and product liability
claims. Production of industrial materials often exceeds demand as a result of
over-building or economic downturns, which may lead to poor investment returns.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities between the time of the cash deposit and the
purchase of the securities and because a trust will pay the associated brokerage
fees and other acquisition costs.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Interest received by a trust, including any
portion of the proceeds from a disposition of securities which represents
accrued interest, is credited by the trustee to the Interest Account for the
trust. All other receipts are credited by the trustee to a separate Principal
Account for the trust. The trustee normally has no cash for distribution to
unitholders until it receives interest payments on the securities in the trust.
On the dates set forth under "Essential Information" in the prospectus, the
trustee will commence distributions, in part from funds advanced by the trustee.
On or shortly after each monthly distribution date for a trust, the trustee
shall make distributions as described below by mail to or upon the order of each
unitholder of record of such trust as of the close of business on the preceding
monthly record date at the post office address appearing on the registration
books of the trustee. As of the "Initial distribution date" set forth
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under "Investment Summary--Essential Information" in the prospectus, the trustee
shall distribute funds from the Interest Account of a Trust to each unitholder
of record of such trust as of the close of business on the "Initial record date"
set forth under "Investment Summary--Essential Information" in the prospectus
the amount specified under "Investment Summary--Essential Information--Estimated
initial distribution per unit" in the prospectus. Thereafter, subsequent
distributions of funds from the Interest Account of a trust to each unitholder
shall consist of such unitholder's pro rata share of the balance of the Interest
Account calculated as of the monthly record date on the basis of one-twelfth of
the estimated annual interest income to such trust for the ensuing twelve months
after deduction of the estimated costs and expenses of such trust to be incurred
and chargeable to the Interest Account during the twelve month period for which
the interest income is to be estimated. However, interest earned at any point
in time will generally be greater than the amount actually received by the
trustee. Therefore, there will generally remain an item of accrued interest
that is added to the daily value of the units. If unitholders sell or redeem
all or a portion of their units, they will be paid their proportionate share of
the accrued interest from the purchaser of such units. Unitholders of record on
the first record date will receive an interest distribution on the first
distribution date. Because the period of time between the first distribution
date and the regular distribution dates may not be a full period, the first
regular distributions may be partial distributions.
Persons who purchase units between a record date and a distribution date
will receive their first distribution on the second distribution date following
their purchase of units. Since interest on securities in the trust is payable
at varying intervals and distributions are made to unitholders at different
intervals from receipt of interest, the interest accruing to a trust may not be
equal to the amount of money received and available for distribution from the
Interest Account. Therefore, on each distribution date the amount of interest
actually deposited in the Interest Account and available for distribution may be
slightly more or less than the interest distribution made. In order to
eliminate fluctuations in interest distributions resulting from such variances,
the trustee is authorized by the trust agreement to advance such amounts as may
be necessary to provide interest distributions of approximately equal amounts.
The trustee will be reimbursed, without interest, for any such advances from
funds available in the Interest Account.
The trustee will distribute on each distribution date or shortly
thereafter, to each unitholder of record on the preceding record date, an amount
substantially equal to such holder's pro rata share of the available cash
balance, if any, in the Principal Account computed as of the close of business
on the preceding record date. However, no distribution will be required if the
balance in the Principal Account is less than $1.00 per unit.
STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will
furnish to each unitholder a statement of the amount of income and the amount of
other receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust are required to be audited annually, at the related
trust's expense, by independent public accountants designated by the sponsor,
unless the sponsor determines that such an audit would not be in the best
interest of the unitholders of the trust. The accountants' report will be
furnished by the trustee to any unitholder upon written request. Within a
reasonable period of time after the end of each calendar year, the trustee shall
furnish to each
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person who at any time during the calendar year was a unitholder of a trust a
statement, covering the calendar year, setting forth for the trust:
(A) As to the Interest Account:
(1) Income received;
(2) Deductions for applicable taxes and for fees and expenses of the trust
and for redemptions of units, if any; and
(3) The balance remaining after such distributions and deductions,
expressed in each case both as a total dollar amount and as a dollar
amount representing the pro rata share of each unit outstanding on the
last business day of such calendar year; and
(B) As to the Principal Account:
(1) The dates of disposition of any securities and the net proceeds
received therefrom;
(2) Deductions for payment of applicable taxes and fees and expenses of
the trust and for redemptions of units, if any; and
(3) The balance remaining after such distributions and deductions expressed
both as a total dollar amount and as a dollar amount representing the
pro rata share of each unit outstanding on the last business day of
such calendar year; and
(C) The following information:
(1) A list of the securities as of the last business day of such calendar
year;
(2) The number of units outstanding on the last business day of such
calendar year;
(3) The redemption price based on the last evaluation made during such
calendar year;
(4) The amount actually distributed during such calendar year from the
Interest and Principal Accounts separately stated, expressed both as
total dollar amounts and as dollar amounts per unit outstanding on the
record dates for each such distribution.
RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
AMENDMENT AND TERMINATION. The trust agreement may be amended from time to
time by the sponsor and trustee or their respective successors, without the
consent of any of the
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unitholders, (i) to cure any ambiguity or to correct or supplement any provision
which may be defective or inconsistent with any other provision contained in the
trust agreement, (ii) to make such other provision in regard to matters or
questions arising under the trust agreement as shall not materially adversely
affect the interests of the unitholders or (iii) to make such amendments as may
be necessary (a) for the trust to continue to qualify as a regulated investment
company for federal income tax purposes if the trust has elected to be taxed as
such under the United States Internal Revenue Code of 1986, as amended, or (b)
to prevent the trust from being deemed an association taxable as a corporation
for federal income tax purposes if the trust has not elected to be taxed as a
regulated investment company under the United States Internal Revenue Code of
1986, as amended. The trust agreement may not be amended, however, without the
consent of all unitholders then outstanding, so as (1) to permit, except in
accordance with the terms and conditions thereof, the acquisition hereunder of
any securities other than those specified in the schedules to the trust
agreement or (2) to reduce the percentage of units the holders of which are
required to consent to certain of such amendments. The trust agreement may not
be amended so as to reduce the interest in a trust represented by units without
the consent of all affected unitholders. Except for the amendments, changes
or modifications described above, neither the sponsor nor the trustee may
consent to any other amendment, change or modification of the trust agreement
without the giving of notice and the obtaining of the approval or consent of
unitholders representing at least 66 2/3% of the units then outstanding of the
affected trust. No amendment may reduce the aggregate percentage of units the
holders of which are required to consent to any amendment, change or
modification of the trust agreement without the consent of the unitholders of
all of the units then outstanding of the affected trust and in no event may any
amendment be made which would (1) alter the rights to the unitholders as against
each other, (2) provide the trustee with the power to engage in business or
investment activities other than as specifically provided in the trust
agreement, (3) adversely affect the tax status of the trust for federal income
tax purposes or result in the units being deemed to be sold or exchanged for
federal income tax purposes or (4) unless the trust has elected to be taxed as a
regulated investment company for federal income tax purposes, result in a
variation of the investment of unitholders in the trust. The trustee will
notify unitholders of the substance of any such amendment.
The trust agreement provides that a trust shall terminate upon the
maturity, liquidation, redemption or other disposition of the last of the
securities held in the trust but in no event is it to continue beyond the
mandatory termination date. If the value of a trust shall be less than the
applicable minimum value stated in the prospectus (generally 40% of the total
value of securities deposited in the trust during the initial offering period),
the trustee may, in its discretion, and shall, when so directed by the sponsor,
terminate the trust. A trust may be terminated at any time by the holders of
units representing 66 2/3% of the units thereof then outstanding. A trust
will be liquidated by the trustee in the event that a sufficient number of units
of the trust not yet sold are tendered for redemption by the sponsor, so that
the net worth of the trust would be reduced to less than 40% of the value of the
securities at the time they were deposited in the trust. If a trust is
liquidated because of the redemption of unsold units by the sponsor, the sponsor
will refund to each purchaser of units the entire sales fee paid by such
purchaser.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust and, after paying all expenses and charges
incurred by the trust, will distribute to
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unitholders thereof their pro rata share of the balances remaining in the
Interest and Principal Accounts of the trust.
THE TRUSTEE. The trustee is The Bank of New York 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.
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
and trustee is to use its best efforts to appoint a satisfactory successor.
Such resignation or removal shall become effective upon acceptance of
appointment by the successor evaluator. If upon resignation of the evaluator no
successor has accepted appointment within thirty days after notice of
resignation, the evaluator may apply to a court of competent jurisdiction for
the appointment of a successor. Notice of such resignation or removal and
appointment shall be mailed by the trustee to each unitholder.
LIMITATIONS ON LIABILITY. The sponsor, evaluator, and supervisor are
liable for the performance of their obligations arising from their
responsibilities under the trust agreement but will be under no liability to the
unitholders for taking any action or refraining from any action in good faith
pursuant to the trust agreement or for errors in judgment, except in cases of
its own gross negligence, bad faith or willful misconduct or its reckless
disregard for its duties thereunder. The sponsor shall not be liable or
responsible in any way for depreciation or loss incurred by reason of the sale
of any securities.
The trust agreement provides that the trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys, securities or certificates
except by reason of its own gross negligence, bad faith or willful misconduct,
or its reckless disregard for its duties under the trust agreement, nor
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shall the trustee be liable or responsible in any way for depreciation or loss
incurred by reason of the sale by the trustee of any securities. In the event
that the sponsor shall fail to act, the trustee may act and shall not be liable
for any such action taken by it in good faith. The trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the securities or upon the interest thereof. In addition, the trust
agreement contains other customary provisions limiting the liability of the
trustee.
The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides that the determinations made by the evaluator shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the evaluator shall be under no liability to the trustee or
unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
EXPENSES OF THE TRUST. The sponsor will not charge a trust any fees for
services performed as sponsor. The sponsor will receive a portion of the sale
commissions paid in connection with the purchase of units and will share in
profits, if any, related to the deposit of securities in the trust.
The sponsor may receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. The amount, if any, of
this "creation and development fee" is set forth in the prospectus. The trustee
will deduct this amount from your trust's assets as of the close of the initial
offering period. No portion of this fee is applied to the payment of
distribution expenses or as compensation for sales efforts. This fee will not be
deducted from proceeds received upon a repurchase, redemption or exchange of
units before the close of the initial public offering period.
The trustee receives for its services that fee set forth in the prospectus.
The trustee's fee which is calculated and paid monthly is based on the total
number of units of the related trust outstanding as of January 1 for any annual
period, except during the initial offering period the fee will be based on the
units outstanding at the end of each month. The trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Principal and Interest Accounts since these Accounts are non-interest
bearing and the amounts earned by the trustee are retained by the trustee. Part
of the trustee's compensation for its services to a trust is expected to result
from the use of these funds.
The supervisor will charge a trust a surveillance fee for services
performed for the trust in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the sponsor for providing such services. Such fee shall be based on the
total number of units of the related trust outstanding as of January 1 for any
annual period, except during the initial offering period the fee will be based
on the units outstanding at the end of each month.
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For evaluation of the securities in a trust, the evaluator shall receive an
evaluation fee in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation from other unit investment trusts for which the sponsor acts as
sponsor and provides evaluation services, exceed the aggregate cost of providing
such services. Such fee shall be based on the total number of units of the
related trust outstanding as of January 1 for any annual period, except during
the initial offering period the fee will be based on the units outstanding at
the end of each month.
For providing bookkeeping and administrative services to a trust, the
sponsor shall receive an administration fee in an amount not to exceed that
amount set forth in the prospectus but in no event will such compensation, when
combined with all compensation from other unit investment trusts for which the
sponsor acts as sponsor and provides evaluation services, exceed the aggregate
cost of providing such services. Such fee shall be based on the total number of
units of the related trust outstanding as of January 1 for any annual period,
except during the initial offering period the fee will be based on the units
outstanding at the end of each month.
The trustee's fee, sponsor's fee for providing bookkeeping and
administrative services to the trust, supervisor's fee and evaluator's fee are
deducted from the Interest Account of the related trust to the extent funds are
available and then from the Principal Account. Each such fee (other than any
creation and development fee) may be increased without approval of unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index or
any equivalent index substituted therefor.
The following additional charges are or may be incurred by the trust:
(a) fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses and reimbursement of the cost of advances
to the trust for payment of expenses and distributions, but not including any
fees and expenses charged by an agent for custody and safeguarding of
securities) and of counsel, if any; (c) various governmental charges;
(d) expenses and costs of any action taken by the trustee to protect the trust
or the rights and interests of the unitholders; (e) indemnification of the
trustee for any loss, liability or expense incurred by it in the administration
of the trust not resulting from negligence, bad faith or willful misconduct on
its part or its reckless disregard of its obligations under the trust agreement;
(f) indemnification of the sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct or its reckless disregard for its obligations under the trust
agreement; and (g) expenditures incurred in contacting unitholders upon
termination of the trust. The fees and expenses set forth herein are payable
out of a trust and, when owing to the trustee, are secured by a lien on the
trust. If the balances in the Interest and Principal Accounts are insufficient
to provide for amounts payable by the trust, the trustee has the power to sell
securities to pay such amounts. These sales may result in capital gains or
losses to unitholders. A trust may pay the costs of updating its registration
statement each year.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. During the initial offering period, the public offering price
per unit is equal to the net asset value per unit (generally based on the
offering side evaluations of the securities) plus the applicable
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sales fee referred to in the prospectus plus cash deposited to pay organization
costs. The transactional sales fee is equal to the difference between the
maximum sales fee and the total remaining creation and development fee, if any.
The public offering price for secondary market transactions, on the other hand,
is based on the net asset value per unit (generally based on the bid side
evaluations of the securities) plus a sales fee plus cash deposited to pay
organization costs. The sales fee as a percentage of the public offering price
and the net amount invested is set forth in the prospectus. The creation and
development fee, if any, is a fixed dollar amount and will be collected at the
end of the initial offering period as described in the prospectus. Units sold
or redeemed prior to such time as the entire applicable creation and development
fee has been collected will not be assessed the remaining creation and
development fee at the time of such sale or redemption. During the initial
offering period, a portion of the public offering price includes an amount of
cash or securities to pay for all or a portion of the costs incurred in
establishing a trust. These costs include the cost of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the Securities and Exchange Commission and states, the
initial audit of the trust portfolio, legal fees and the initial fees and
expenses of the trustee. These costs will be deducted from a trust as of the
end of the initial offering period or after six months, if earlier. Following
the end of the initial offering period, the public offering price for secondary
market transactions is based on the net asset value per unit (generally based on
the bid side evaluations of the securities) plus a sales fee. The cost to
investors of units of the trust for secondary market transactions is the public
offering price of units plus accrued interest, if any. Certain broker-dealers
may charge a transaction or other fee for processing unit purchases.
As indicated above, the initial public offering price of the units was
established by dividing the aggregate underlying value of the securities by the
number of units outstanding. Such price determination as of the opening of
business on the date a trust was created was made on the basis of an evaluation
of the securities in the trust prepared by the evaluator. After the opening of
business on this date, the evaluator will appraise or cause to be appraised
daily the value of the underlying securities as of the close of regular trading
on the New York Stock Exchange on days the New York Stock Exchange is open and
will adjust the public offering price of the units commensurate with such
valuation. Such public offering price will be effective for all orders received
at or prior to the close of regular trading on the New York Stock Exchange on
each such day as discussed in the prospectus. Orders received by the trustee,
sponsor or any authorized financial professionals for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price as discussed in the
prospectus.
Had units of a trust been available for sale at the close of business on
the business day before the inception date of the trust, the public offering
price would have been as shown under "Essential Information" in the prospectus.
The public offering price per unit of a trust on the date of the prospectus or
on any subsequent date will vary from the amount stated under "Essential
Information" in the prospectus in accordance with fluctuations in the prices of
the underlying securities and the amount of accrued interest on the units. Net
asset value per unit is determined by dividing the value of a trust's portfolio
securities (including any accrued interest), cash and other assets, less all
liabilities (including accrued expenses), by the total number of units
outstanding. The portfolio securities are valued at their current market value
or their fair value as
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determined in good faith by the Evaluator. The aggregate bid and offering side
evaluations of the securities shall be determined (a) on the basis of current
bid or offering prices of the securities, (b) if bid or offering prices are not
available for any particular security, on the basis of current bid or offering
prices for comparable securities, (c) by determining the value of securities on
the bid or offer side of the market by appraisal, or (d) by any combination of
the above.
The foregoing evaluations and computations shall be made as of the close of
regular trading on the New York Stock Exchange, on each business day commencing
with the trust's inception date of the securities, effective for all sales made
during the preceding 24-hour period.
The interest on the securities deposited in a trust, less the related
estimated fees and expenses, will accrue daily. The amount of net interest
income which accrues per unit may change as securities mature or are redeemed,
exchanged or sold, or as the expenses of a trust change or the number of
outstanding units of a trust changes.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of units on the date of settlement provided payment has been received.
Cash, if any, made available to the sponsor prior to the date of settlement for
the purchase of units may be used in the sponsor's business and may be deemed to
be a benefit to the sponsor, subject to the limitations of the Securities
Exchange Act of 1934.
ACCRUED INTEREST. Accrued interest consists of two elements. The first
element arises as a result of accrued interest which is the accumulation of
unpaid interest on a security from the last day on which interest thereon was
paid. Interest on securities generally is paid monthly or semi-annually
although a trust accrues such interest daily. Because of this, a trust always
has an amount of interest earned but not yet collected by the trustee. For this
reason, with respect to sales settling subsequent to the first settlement date,
the public offering price of units of a trust will have added to it the
proportionate share of accrued interest to the date of settlement.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the public offering price in the sale of units to
the public, the trustee will advance the amount of accrued interest as of the
first settlement date and the same will be distributed to the sponsor as the
unitholder of record as of the first settlement date. Consequently, the amount
of accrued interest to be added to the public offering price of units will
include only accrued interest arising after the first settlement date to the
date of settlement, less any distributions from the Interest Account subsequent
to the first settlement date.
The second element of accrued interest arises because of the structure of
the Interest Account. The trustee has no cash for distribution to unitholders
until it receives interest payments on the bonds in a trust. The trustee is
obligated to provide its own funds, at times, in order to advanced interest
distributions. The trustee will recover these advancements when such interest
is received. Interest Account balances are established to limit the extent to
which it may be necessary for the trustee to advance its own funds in connection
with such interest distributions. The Interest Account balances are also
structured so that there will generally be positive cash balances.
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Because of the varying interest payment dates of securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by the applicable trusts and distributed to unitholders.
Therefore, there will always remain an item of accrued interest that is added to
the value of the units. If a unitholder sells or redeems all or a portion of
his units, he will be entitled to receive his proportionate share of the accrued
interest from the purchaser of his units. Since the trustee has the use of the
funds held in the Interest Account for distributions to unitholders and since
such account is non-interest-bearing to unitholders, the trustee benefits
thereby.
COMPARISON OF PUBLIC OFFERING PRICE AND REDEMPTION PRICE. While the net
asset value of units during the initial offering period will generally be
determined on the basis of the current offering prices of the securities in a
trust, after the initial offering period the net asset value of units will
generally be determined on the basis of the current bid prices of the
securities. As of the close of business on the business day before the trust's
inception date, the public offering price per unit exceeded the redemption price
at which units could have been redeemed by the amount of the sales fee. The bid
prices for on securities similar to those in the trust are lower than the
offering prices thereof. For this reason, among others (including fluctuations
in the market prices of the securities and the fact that the public offering
price includes a sales fee), the amount realized by a unitholder upon any
redemption of units may be less than the price paid for such units.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the Financial Industry Regulatory Authority, Inc. and through others. Sales
may be made to or through dealers at prices which represent discounts from the
public offering price as set forth in the prospectus. Certain commercial banks
may be making units available to their customers on an agency basis. The
sponsor reserves the right to change the discounts from time to time.
We 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 and the volume concessions described
above, some of which may be characterized as "revenue sharing," may
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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, which is based on the offering side
evaluation of the securities. The sponsor may also realize profits or losses
with respect to securities deposited in a trust which were acquired from
underwriting syndicates of which the sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated or
competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The sponsor may realize additional profits
or losses during the initial offering period on unsold units as a result of
changes in the daily evaluation of the securities in a trust.
MARKET FOR UNITS. After the initial offering period, while not obligated
to do so, the sponsor may, subject to change at any time, maintain a market for
units of the trust offered hereby and to continuously offer to purchase said
units at the net asset value, determined by the evaluator based on the aggregate
bid prices of the underlying securities in the trust, together with any accrued
interest to the expected dates of settlement, provided that the repurchase price
will not be reduced by any remaining creation and development fee or
organization costs during the initial offering period. While the sponsor may
repurchase units from time to time, it does not currently intend to maintain an
active secondary market for units. To the extent that a market is maintained
during the initial offering period, the prices at which units will be
repurchased will be based upon the aggregate offering side evaluation of the
securities in the trust. The aggregate bid prices of the underlying securities
in each trust are expected to be less than the related aggregate offering prices
(which is generally the evaluation method used during the initial public
offering period). Accordingly, unitholders who wish to dispose of their units
should inquire of their broker as to current market prices in order to determine
whether there is in existence any price in excess of the redemption price and,
if so, the amount thereof.
The offering price of any units resold by the sponsor will be in accord
with that described in the currently effective prospectus describing such units.
Any profit or loss resulting from the resale of such units will belong to the
sponsor. If the sponsor decides to maintain a secondary market, it may suspend
or discontinue purchases of units of the trust if the supply of units exceeds
demand, or for other business reasons.
REDEMPTION. A unitholder who does not dispose of units in the secondary
market described above may cause units to be redeemed by the trustee by making a
written request to the trustee at its unit investment trust division office.
Unitholders must sign the request exactly as their names appear on the records
of the trustee. If the amount of the redemption is $500 or less
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and the proceeds are payable to the unitholder(s) of record at the address of
record, no signature guarantee is necessary for redemptions by individual
account owners (including joint owners). Additional documentation may be
requested, and a signature guarantee is always required, from corporations,
executors, administrators, trustees, guardians or associations. The signatures
must be guaranteed by a participant in the Securities Transfer Agents Medallion
Program ("STAMP") or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the trustee.
Redemption shall be made by the trustee no later than the seventh day
following the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the redemption price, determined as set
forth below under "Computation of Redemption Price," as of the close of regular
trading on the New York Stock Exchange next following such tender, multiplied by
the number of units being redeemed. Any units redeemed shall be canceled and
any undivided fractional interest in the related trust extinguished. The price
received upon redemption might be more or less than the amount paid by the
unitholder depending on the value of the securities in the trust at the time of
redemption. Certain broker-dealers may charge a transaction fee for processing
redemption requests.
Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the unitholder only when filing a tax return. Under normal circumstances the
trustee obtains the unitholder's tax identification number from the selling
broker. However, any time a unitholder elects to tender units for redemption,
such unitholder should make sure that the trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
In the event the trustee has not been previously provided such number, one must
be provided at the time redemption is requested. Any amounts paid on redemption
representing interest shall be withdrawn from the Interest Account of a trust to
the extent that funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Principal Account for a trust.
The trustee is empowered to sell securities in order to make funds
available for the redemption of units. To the extent that securities are sold,
the size of a trust will be, and the diversity of a trust may be, reduced but
each remaining unit will continue to represent approximately the same
proportional interest in each security. Sales may be required at a time when
securities would not otherwise be sold and may result in lower prices than might
otherwise be realized. The price received upon redemption may be more or less
than the amount paid by the unitholder depending on the value of the securities
in the portfolio at the time of redemption.
The trustee is irrevocably authorized in its discretion, if the sponsor
does not elect to purchase any unit tendered for redemption, in lieu of
redeeming such units, to sell such units in the over-the-counter market for the
account of tendering unitholders at prices which will return to the unitholders
amounts in cash, net after brokerage commissions, transfer taxes and other
charges, equal to or in excess of the redemption price for such units. In the
event of any such
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sale, the trustee shall pay the net proceeds thereof to the unitholders on the
day they would otherwise be entitled to receive payment of the redemption price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which (as determined by the Securities
and Exchange Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of which
disposal by the trustee of securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying
securities in accordance with the trust agreement; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The trustee is
not liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The redemption price for units (the net
asset value) of each trust is computed by the evaluator as of the evaluation
time stated in the prospectus next occurring after the tendering of a unit for
redemption and on any other business day desired by it, by:
A. adding: (1) the cash on hand in the trust other than cash deposited in the
trust to purchase securities not applied to the purchase of such
securities; (2) the aggregate value of each issue of the securities
(including "when issued" contracts, if any) held in the trust as determined
by the evaluator on the basis of bid prices therefor; and (3) interest
accrued and unpaid on the securities in the trust as of the date of
computation;
B. deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account; (2) an amount representing estimated accrued expenses of the
trust, including but not limited to fees and expenses of the trustee
(including legal and auditing fees and any insurance costs), the evaluator,
the sponsor and bond counsel, if any; (3) cash held for distribution to
unitholders of record as of the business day prior to the evaluation being
made; and (4) other liabilities incurred by the trust, provided that the
redemption price will not be reduced by any creation and development fee or
organization costs during the initial offering period; and
C. finally dividing the results of such computation by the number of units of
the trust outstanding as of the date thereof.
RETIREMENT PLANS. A trust may be suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received under each of the foregoing
plans are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered
by brokerage firms and other financial institutions. The
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trust may lower the minimum investment requirement for IRA accounts. Fees and
charges with respect to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units will not be evidenced by
certificates. 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.
PERFORMANCE INFORMATION
INTEREST, ESTIMATED LONG-TERM RETURN AND ESTIMATED CURRENT RETURN. As of
the close of business on the business day before the trust's inception date, the
estimated long-term return and the estimated current return, if applicable, for
each trust were as set forth in the "Essential Information" for each trust in
the prospectus. Estimated current return is calculated by dividing the current
estimated net annual interest income per unit based on the interest rates
currently applicable to the bonds by the public offering price. The estimated
net annual interest income per unit will vary with changes in the interest rates
applicable to the bonds (some of which may be subject to adjustments related to
changes in the bonds' ratings as provided by certain ratings services) fees and
expenses of the trustee, the sponsor and the evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of the securities while the
public offering price will vary with changes in the offering price of the
underlying securities and accrued interest; therefore, there is no assurance
that the present estimated current return will be realized in the future.
Estimated long-term return is calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums and
the accretion of discounts) and estimated retirements or average life of all of
the securities in a trust and (2) takes into account the expenses and sales fee
associated with each trust unit. Since the interest rates, market values and
estimated retirements of the securities and the expenses of a trust may change,
there is no assurance that the present estimated long-term return will be
realized in the future. Estimated current return and estimated long-term return
are expected to differ because the calculation of estimated long-term return
reflects the estimated date and amount of principal returned while estimated
current return calculations include only net annual interest income and public
offering price.
GENERAL. Information contained in this Information Supplement or in the
prospectus, as it currently exists or as further updated, may also be included
from time to time in other prospectuses or in advertising material. Information
on the performance of a trust strategy or the actual performance of a trust may
be included from time to time in other prospectuses or advertising material and
may reflect sales fees and expenses of a trust. The performance of a trust may
also be compared to the performance of money managers as reported in SEI Fund
Evaluation Survey or of mutual funds as reported by Lipper Analytical Services
Inc. (which calculates total return using actual dividends on ex-dates
accumulated for the quarter and reinvested at quarter end), Money Magazine Fund
Watch (which rates fund performance over a specified time period after sales fee
and assuming all dividends reinvested) or Wiesenberger Investment Companies
Service (which states fund performance annually on a total return basis) or of
the New York Stock Exchange Composite Index, the American Stock Exchange Index
(unmanaged indices of stocks traded on the New York and American Stock
Exchanges,
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respectively), the Dow Jones Industrial Average (an index of 30 widely traded
industrial common stocks) or the Standard & Poor's 500 Index (an unmanaged
diversified index of 500 stocks) or similar measurement standards during the
same period of time.
DESCRIPTION OF SECURITIES RATINGS
STANDARD & POOR'S FINANCIAL SERVICES LLC, A DIVISION OF S&P GLOBAL INC. An
S&P Global Ratings issue credit rating is a forward-looking opinion about the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations, or a specific financial program
(including ratings on medium-term note programs and commercial paper programs).
It takes into consideration the creditworthiness of guarantors, insurers, or
other forms of credit enhancement on the obligation and takes into account the
currency in which the obligation is denominated. The opinion reflects S&P Global
Ratings' view of the obligor's capacity and willingness to meet its financial
commitments as they come due, and may assess terms, such as collateral security
and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term
ratings are generally assigned to those obligations considered short-term in the
relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days--including commercial paper. Short-
term ratings are also used to indicate the creditworthiness of an obligor with
respect to put features on long-term obligations. Medium-term notes are assigned
long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on S&P Global Ratings'
analysis of the following considerations:
* The likelihood of payment--the capacity and willingness of the obligor to
meet its financial commitment on a financial obligation in accordance with
the terms of the obligation;
* The nature and provisions of the financial obligation, and the promise we
impute; and
* The protection afforded by, and relative position of, the financial
obligation in the event of a bankruptcy, reorganization, or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
Issue ratings are an assessment of default risk, but may incorporate an
assessment of relative seniority or ultimate recovery in the event of default.
Junior obligations are typically rated lower than senior obligations, to reflect
the lower priority in bankruptcy, as noted above. (Such differentiation may
apply when an entity has both senior and subordinated obligations, secured and
unsecured obligations, or operating company and holding company obligations.)
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AAA--An obligation rated 'AAA' has the highest rating assigned by S&P Global
Ratings. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA--An obligation rated 'AA' differs from the highest-rated obligations only to
a small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A--An obligation rated 'A' is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher-
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB--An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB--An obligation rated 'BB' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B--An obligation rated 'B' is more vulnerable to nonpayment than obligations
rated 'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC--An obligation rated 'CCC' is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC--An obligation rated 'CC' is currently highly vulnerable to nonpayment. The
'CC' rating is used when a default has not yet occurred, but S&P Global Ratings
expects default to be a virtual certainty, regardless of the anticipated time to
default.
C--An obligation rated 'C' is currently highly vulnerable to nonpayment, and the
obligation is expected to have lower relative seniority or lower ultimate
recovery compared to obligations that are rated higher.
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D--An obligation rated 'D' is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the 'D' rating category is used when payments on
an obligation are not made on the date due, unless S&P Global Ratings believes
that such payments will be made within five business days in the absence of a
stated grace period or within the earlier of the stated grace period or 30
calendar days. The 'D' rating also will be used upon the filing of a bankruptcy
petition or the taking of similar action and where default on an obligation is a
virtual certainty, for example due to automatic stay provisions. An obligation's
rating is lowered to 'D' if it is subject to a distressed exchange offer.
N.R.-- This indicates that no rating has been requested, or that there is
insufficient information on which to base a rating, or that S&P Global Ratings
does not rate a particular obligation as a matter of policy.
The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Active Qualifiers (Currently applied and/or outstanding)
S&P Global Ratings uses the following qualifiers that limit the scope of a
rating. The structure of the transaction can require the use of a qualifier such
as a 'p' qualifier, which indicates the rating addressed the principal portion
of the obligation only. A qualifier appears as a suffix and is part of the
rating.
L--Ratings qualified with 'L' apply only to amounts invested up to federal
deposit insurance limits.
p--This suffix is used for issues in which the credit factors, the terms, or
both, that determine the likelihood of receipt of payment of principal are
different from the credit factors, terms or both that determine the likelihood
of receipt of interest on the obligation. The 'p' suffix indicates that the
rating addresses the principal portion of the obligation only and that the
interest is not rated.
prelim--Preliminary ratings, with the 'prelim' suffix, may be assigned to
obligors or obligations, including financial programs, in the circumstances
described below. Assignment of a final rating is conditional on the receipt by
S&P Global Ratings of appropriate documentation. S&P Global Ratings reserves the
right not to issue a final rating. Moreover, if a final rating is issued, it may
differ from the preliminary rating.
* Preliminary ratings may be assigned to obligations, most commonly
structured and project finance issues, pending receipt of final
documentation and legal opinions.
* Preliminary ratings may be assigned to obligations that will likely be
issued upon the obligor's emergence from bankruptcy or similar
reorganization, based on late-stage reorganization plans, documentation and
discussions with the obligor. Preliminary ratings may also be assigned to
the obligors. These ratings consider the anticipated general credit quality
of the reorganized or post-bankruptcy issuer as well as attributes of the
anticipated obligation(s).
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* Preliminary ratings may be assigned to entities that are being formed or
that are in the process of being independently established when, in S&P
Global Ratings' opinion, documentation is close to final. Preliminary
ratings may also be assigned to the obligations of these entities.
* Preliminary ratings may be assigned when a previously unrated entity is
undergoing a well-formulated restructuring, recapitalization, significant
financing or other transformative event, generally at the point that
investor or lender commitments are invited. The preliminary rating may be
assigned to the entity and to its proposed obligation(s). These preliminary
ratings consider the anticipated general credit quality of the obligor, as
well as attributes of the anticipated obligation(s), assuming successful
completion of the transformative event. Should the transformative event not
occur, S&P Global Ratings would likely withdraw these preliminary ratings.
* A preliminary recovery rating may be assigned to an obligation that has a
preliminary issue credit rating.
t--This symbol indicates termination structures that are designed to honor their
contracts to full maturity or, should certain events occur, to terminate and
cash settle all their contracts before their final maturity date.
cir--This symbol indicates a Counterparty Instrument Rating (CIR), which is a
forward-looking opinion about the creditworthiness of an issuer in a
securitization structure with respect to a specific financial obligation to a
counterparty (including interest rate swaps, currency swaps, and liquidity
facilities). The CIR is determined on an ultimate payment basis; these opinions
do not take into account timeliness of payment.
MOODY'S INVESTORS SERVICE, INC. Long-Term Obligation Ratings
Ratings assigned on Moody's global long-term and short-term rating scales
are forward-looking opinions of the relative credit risks of financial
obligations issued by non-financial corporates, financial institutions,
structured finance vehicles, project finance vehicles, and public sector
entities. Long-term ratings are assigned to issuers or obligations with an
original maturity of one year or more and reflect both on the likelihood of a
default on contractually promised payments and the expected financial loss
suffered in the event of default. Short-term ratings are assigned to
obligations with an original maturity of thirteen months or less and reflect
both on the likelihood of a default on contractually promised payments and the
expected financial loss suffered in the event of default.
Long-Term Rating Definitions:
Aaa--Obligations rated Aaa are judged to be of the highest quality, subject to
the lowest level of credit risk.
Aa--Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.
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A--Obligations rated A are judged to be upper-medium grade and are subject to
low credit risk.
Baa--Obligations rated Baa are judged to be medium-grade and subject to moderate
credit risk and as such may possess certain speculative characteristics.
Ba--Obligations rated Ba are judged to be speculative and are subject to
substantial credit risk.
B--Obligations rated B are considered speculative and are subject to high credit
risk.
Caa--Obligations rated Caa are judged to be speculative of poor standing and are
subject to very high credit risk.
Ca--Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
C--Obligations rated C are the lowest rated and are typically in default, with
little prospect for recovery of principal or interest.
Note: Moody's appends numerical modi?ers 1, 2, and 3 to each generic rating
classi?cation from Aa through Caa. The modi?er 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modi?er 2 indicates
a mid-range ranking; and the modi?er 3 indicates a ranking in the lower end of
that generic rating category. Additionally, a "(hyb)" indicator is appended to
all ratings of hybrid securities issued by banks, insurers, ?nance companies,
and securities ?rms.
FITCH RATINGS LTD., International Long-Term Credit Ratings
A Fitch International Long-Term Credit Ratings ("LTCR") may also be
referred to as long-term ratings. When assigned to most issuers, it is used as a
benchmark measure of probability of default and is formally described as an
issuer default rating ("IDR"). The major exception is within public finance,
where IDRs will not be assigned as market convention has always focused on
timeliness and does not draw analytical distinctions between issuers and their
underlying obligations. When applied to issues or securities, the LTCR may be
higher or lower than the IDR to reflect relative differences in recovery
expectations. The following rating scale applies to foreign currency and local
currency ratings:
Investment Grade Ratings
AAA--Highest credit quality. "AAA" ratings denote the lowest expectation of
default risk. They are assigned only in cases of exceptionally strong capacity
for payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA--Very high credit quality. "AA" ratings denote expectations of very low
default risk. They indicate very strong capacity for payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
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A--High credit quality. "A" ratings denote expectations of low default risk. The
capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher ratings.
BBB--Good credit quality. "BBB" ratings indicate that expectations of default
risk are currently low. The capacity for payment of financial commitments is
considered adequate but adverse business or economic conditions are more likely
to impair this capacity.
Speculative Grade
BB--Speculative. "BB" ratings indicate an elevated vulnerability to default
risk, particularly in the event of adverse changes in business or economic
conditions over time; however, business or financial flexibility exists which
supports the servicing of financial commitments.
B--Highly speculative. "B" ratings indicate that material default risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is vulnerable to
deterioration in the business and economic environment.
CCC--Substantial credit risk. "CCC" ratings indicate that default is a real
possibility.
CC--Very high levels of credit risk. "CC" ratings indicate that default of some
kind appears probable.
C--Exceptionally high levels of credit risk. "C" ratings indicate default is
imminent or inevitable, or the issuer is in standstill. Conditions that are
indicative of a 'C' category rating for an issuer include:
* the issuer has entered into a grace or cure period following non-payment of
a material financial obligation;
* the issuer has entered into a temporary negotiated waiver or standstill
agreement following a payment default on a material financial obligation;
or
* Fitch Ratings otherwise believes a condition of 'RD' or 'D' to be imminent
or inevitable, including through the formal announcement of a distressed
debt exchange.
RD--Restricted default. "RD" ratings indicate an issuer that in Fitch Ratings'
opinion has experienced an uncured payment default on a bond, loan or other
material financial obligation but which has not entered into bankruptcy filings,
administration, receivership, liquidation or other formal winding-up procedure,
and which has not otherwise ceased operating. This would include:
* the selective payment default on a specific class or currency of debt;
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* the uncured expiry of any applicable grace period, cure period or default
forbearance period following a payment default on a bank loan, capital
markets security or other material financial obligation;
* the extension of multiple waivers or forbearance periods upon a payment
default on one or more material financial obligations, either in series or
in parallel; or
* execution of a distressed debt exchange on one or more material financial
obligations.
D--Default. "D" ratings indicate an issuer that in Fitch Ratings' opinion has
entered into bankruptcy filings, administration, receivership, liquidation or
other formal winding-up procedure, or which has otherwise ceased business.
Default ratings are not assigned prospectively to entities or their
obligations; within this context, non-payment on an instrument that contains a
deferral feature or grace period will generally not be considered a default
until after the expiration of the deferral or grace period, unless a default is
otherwise driven by bankruptcy or other similar circumstance, or by a distressed
debt exchange.
"Imminent" default typically refers to the occasion where a payment default
has been intimated by the issuer, and is all but inevitable. This may, for
example, be where an issuer has missed a scheduled payment, but (as is typical)
has a grace period during which it may cure the payment default. Another
alternative would be where an issuer has formally announced a distressed debt
exchange, but the date of the exchange still lies several days or weeks in the
immediate future.
In all cases, the assignment of a default rating reflects the agency's
opinion as to the most appropriate rating category consistent with the rest of
its universe of ratings, and may differ from the definition of default under the
terms of an issuer's financial obligations or local commercial practice.
Note: The modifiers "+" or "-" may be appended to a rating to denote
relative status within major rating categories. Such suffixes are not added to
the "AAA" Long-Term IDR category, or to Long-Term IDR categories below "B."
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CONTENTS OF REGISTRATION STATEMENT
This Amendment to the 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 Advisors Disciplined Trust 1737
(File No. 333-213361) as filed on November 3, 2016.
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 1701 (File No. 333-211573) as filed on
August 5, 2016.
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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Advisors Disciplined Trust 1500 has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Wichita and State of Kansas on March 8, 2017.
ADVISORS DISCIPLINED TRUST 1500
By ADVISORS ASSET MANAGEMENT, INC., DEPOSITOR
By /s/ ALEX R MEITZNER
-----------------------------
Alex R. Meitzner
Senior Vice President
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Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on March 8, 2017 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. )
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.
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