1933 ACT FILE NO.:
1940 ACT FILE NO.: 811-21056
CIK NO.: 1741153

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

REGISTRATION STATEMENT ON FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2

A. Exact name of trust: ADVISORS DISCIPLINED TRUST 1921

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 ____________, 2018 at _____ pursuant to Rule 487.

-------------------------------------------------------------------------------

The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.

The information in this prospectus is not complete and may be changed. No one
may sell units of the trust until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell units and is not soliciting an offer to buy units in any state
where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS DATED SEPTEMBER 28, 2018
SUBJECT TO COMPLETION

60/40 ASSET ALLOCATION PORTFOLIO, SERIES 2019-1Q

(ADVISORS DISCIPLINED TRUST 1921)

A portfolio seeking above average
total return primarily through
price appreciation

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 above average total return primarily through price
appreciation. There is no assurance that the trust will achieve its objective.

PRINCIPAL INVESTMENT STRATEGY

The trust seeks to achieve its objective by investing in a portfolio of
equity securities of operating companies and exchange-traded funds ("ETFs" or
"funds"). As of the trust's inception, the portfolio invests approximately 60%
of its assets in the equity securities portion of the portfolio and
approximately 40% of its assets in ETFs with policies to invest primarily in
fixed-income or other income-oriented securities. Those percentages may vary
thereafter.

For the equity securities portion of the portfolio, we sought to provide
exposure to different capitalizations, styles and countries. We<F1>* did this
by starting our selection process with four different universes: (1) the S&P
500(R) Index, (2) the S&P MidCap 400(R) Index, (3) S&P SmallCap 600(R) Index and
(4) the S&P ADR Index along with other American depositary receipts ("ADRs")
with a market capitalization of greater than $10 billion as of the time of
selection. From each of the four universes, we eliminated securities of
companies that had below average revenue growth over the past year compared to
other securities in their respective sectors. We then eliminated securities of
companies with a larger than average debt-to-equity ratio compared to other
companies in their respective sectors. We selected the final portfolio of
approximately 100 equity securities (approximately 25 from each starting
universe) by choosing securities whose current valuation we believe is
attractive considering their potential to achieve above average revenue and
earnings growth over the near term.

For the fixed-income and other income-oriented ETF portion of the portfolio,
we sought to identify ETFs with the potential to provide exposure to different
asset classes and countries. We selected approximately 25 ETFs for inclusion in
the portfolio based on an analysis of each ETF's investment objective, holdings,
past performance, fees, index construction (if applicable), dividend level,
inception date, size and liquidity.

Approximately ______% of the portfolio consists of funds classified as "non-
diversified" under the Investment Company Act of 1940. These funds have the
ability to invest more than 5% of their assets in securities of a single issuer
which could reduce diversification. As a result, funds classified as "non-
diversified" may be more susceptible to volatility (and thus be more risky) than
a fund classified as "diversified".

PRINCIPAL RISKS

As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:

* SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall over
time.

* AN ISSUER MAY BE UNABLE TO MAKE INCOME AND/OR PRINCIPAL PAYMENTS, OR DECLARE
DIVIDENDS, IN THE FUTURE. This may reduce the level of income the trust
receives which would reduce your income and cause the value of your units
to fall.

* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the primary offering period.

* THE VALUE OF CERTAIN SECURITIES WILL GENERALLY FALL IF INTEREST RATES, IN
GENERAL, RISE. No one can predict whether interest rates will rise or fall
in the future.

* THE TRUST INVESTS IN SHARES OF ETFS. ETFS MAY TRADE AT A DISCOUNT OR PREMIUM
FROM THEIR NET ASSET VALUE AND ARE SUBJECT TO RISKS RELATED TO FACTORS SUCH
AS THE MANAGER'S ABILITY TO ACHIEVE A FUND'S OBJECTIVE, MARKET CONDITIONS
AFFECTING A

--------------------
<F1>* "AAM," "we" and related terms mean Advisors Asset Management, Inc., the
trust sponsor, unless the context clearly suggests otherwise.

2 Investment Summary

FUND'S INVESTMENTS AND USE OF LEVERAGE. The trust and the underlying funds
have management and operating expenses. You will bear not only your share
of the trust's expenses, but also the expenses of the underlying funds. By
investing in funds, the trust incurs greater expenses than you would incur
if you invested directly in the funds. If shares of an ETF trade at a
market price that reflects a discount to the value of the fund's underlying
assets, the discount could increase over time and when the trust liquidates
fund shares the trust will receive the current market price of shares
rather than the fund's net asset value per share.

* THE FUNDS MAY INVEST IN UNRATED SECURITIES OR SECURITIES RATED BELOW
INVESTMENT GRADE AND ARE CONSIDERED TO BE "JUNK" SECURITIES. These
securities are considered to be speculative and are subject to greater
market and credit risks. Accordingly, the risk of default is higher than
investment grade securities. In addition, these securities may be more
sensitive to interest rate changes and may be more likely to make early
returns of principal.

* THE TRUST AND/OR THE UNDERLYING FUNDS MAY INVEST IN SECURITIES OF SMALL AND
MID-SIZE COMPANIES. These securities are often more volatile and have
lower trading volumes than securities of larger companies. Small and mid-
size companies may have limited products or financial resources, management
inexperience and less publicly available information.

* SECURITIES OF FOREIGN ISSUERS HELD BY THE TRUST AND/OR THE UNDERLYING FUNDS
PRESENT RISKS BEYOND THOSE OF U.S. ISSUERS. These risks may include market
and political factors related to the issuer's foreign market, international
trade conditions, the global and country-specific political environment,
less regulation, smaller or less liquid markets, increased volatility,
differing accounting practices and changes in the value of foreign
currencies.

* WE DO NOT ACTIVELY MANAGE THE PORTFOLIO. While the funds have managed
portfolios, except in limited circumstances, the trust will hold, and
continue to buy, shares of the same funds even if their market value
declines.

Investment Summary 3

WHO SHOULD INVEST

You should consider this investment if you want:

* to own a defined portfolio of securities seeking above average total
return primarily through price appreciation.

* to diversify your overall portfolio with investments in various types of
securities.

* the potential to receive income and capital appreciation.

You should not consider this investment if you:

* are uncomfortable with the risks of an unmanaged investment in the
securities held by the trust.

* are uncomfortable with the trust's investment strategy.

* seek aggressive growth without current income.

* seek capital preservation as a primary objective.

------------------------------------------------------------

ESSENTIAL INFORMATION
---------------------

UNIT PRICE AT INCEPTION $10.0000

INCEPTION DATE ____________, ____
TERMINATION DATE ____________, ____

DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month

CUSIP NUMBERS
Standard Accounts
Cash distributions _________
Reinvest distributions _________
Fee Based Accounts
Cash distributions _________
Reinvest distributions _________

TICKER SYMBOL ______

MINIMUM INVESTMENT $1,000/100 units

TAX STRUCTURE Regulated Investment Company

------------------------------------------------------------

FEES AND EXPENSES

The amounts below are estimates of the direct and indirect expenses that you
may incur based on a $10 unit price. Actual expenses may vary.

AS A % AMOUNT
OF $1,000 PER 100
SALES FEE INVESTED UNITS
------------------------

Initial sales fee 0.00% $0.00
Deferred sales fee 1.35 13.50
Creation & development fee 0.50 5.00
------- -------
Maximum sales fee 1.85% $18.50
======= =======

ORGANIZATION COSTS _.__% $____
======= =======

AS A % AMOUNT
ANNUAL OF NET PER 100
OPERATING EXPENSES ASSETS UNITS
------------------------

Trustee fee & expenses _.__% $____
Supervisory, evaluation
and administration fees _.__ ____
Underlying fund expenses _.__ ____
------- -------
Total _.__% $____
======= =======

The initial sales fee is the difference between the total sales fee (maximum
of 1.85% of the unit offering price) and the sum of the remaining deferred
sales fee and the total creation and development fee. The deferred sales fee
is fixed at $0.135 per unit and is paid in three monthly installments beginning
____________, ____. The creation and development fee is fixed at $0.05 per
unit and is paid at the end of the initial offering period (anticipated to be
approximately three months). When the public offering price per unit is less
than or equal to $10, you will not pay an initial sales fee. When the public
offering price per unit is greater than $10 per unit, you will pay an initial
sales fee. The trust will indirectly bear the management and operating
expenses of the underlying funds. While the trust will not pay these expenses
directly out of its assets, these expenses are shown in the trust's annual
operating expenses above to illustrate the impact of these expenses.

EXAMPLE

This example helps you compare the cost of this trust with other unit trusts
and mutual funds. In the example we assume that the expenses do not change and
that the trust's annual return is 5%. Your actual returns and expenses will
vary. Based on these assumptions, you would pay these expenses for every
$10,000 you invest in the trust:

1 year $_____
3 years $_____
5 years $_____
10 years $_____

This example assumes that you continue to follow the trust strategy and roll
your investment, including all distributions, into a new series of the trust
each year subject to a sales charge of 1.85%.

4 Investment Summary

60/40 ASSET ALLOCATION PORTFOLIO, SERIES 2019-1Q
(ADVISORS DISCIPLINED TRUST 1921)
PORTFOLIO
AS OF THE TRUST INCEPTION DATE, ____________, ____

PERCENTAGE OF
NUMBER AGGREGATE MARKET COST OF
OF TICKER OFFERING VALUE PER SECURITIES
SHARES SYMBOL ISSUER(1) PRICE SHARE(1) TO TRUST(2)
---------------------------------------------------------------------------------------------------------------------------------

EQUITY SECURITIES -- ______%

(continued)

Investment Summary 5

60/40 ASSET ALLOCATION PORTFOLIO, SERIES 2019-1Q
(ADVISORS DISCIPLINED TRUST 1921)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, ____________, ____

(continued)

6 Investment Summary

60/40 ASSET ALLOCATION PORTFOLIO, SERIES 2019-1Q
(ADVISORS DISCIPLINED TRUST 1921)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, ____________, ____

(continued)

Investment Summary 7

60/40 ASSET ALLOCATION PORTFOLIO, SERIES 2019-1Q
(ADVISORS DISCIPLINED TRUST 1921)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, ____________, ____

INVESTMENT COMPANIES - ______%

EXCHANGE TRADED FUNDS - ______%

(continued)

8 Investment Summary

60/40 ASSET ALLOCATION PORTFOLIO, SERIES 2019-1Q
(ADVISORS DISCIPLINED TRUST 1921)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, ____________, ____

EXCHANGE TRADED FUNDS (CONTINUED)

--------- ----------
100.00% $_______
========= ==========

<FN>
Notes to Portfolio

(1) Securities are represented by contracts to purchase such securities. The
value of each security is based on the most recent closing sale price of
each security as of the close of regular trading on the New York Stock
Exchange on the business day prior to the trust's inception date. In
accordance with Accounting Standards Codification 820, "Fair Value
Measurements", the trust's investments are classified as Level 1, which
refers to security prices determined using quoted prices in active markets
for identical securities.

(2) 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.

(3) This is a non-income producing security.

(4) This is a security issued by a foreign company.

Equity securities comprise approximately ______% of the investments of the
trust, broken down by country of organization as set forth below:

</FN>

Investment Summary 9

-----------------------------
UNDERSTANDING YOUR INVESTMENT
-----------------------------

HOW TO BUY UNITS

You can buy units of the trust on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMLIVE.COM. The public offering price
of units includes:

* the net asset value per unit plus

* organization costs plus

* the sales fee.

The "net asset value per unit" is the value of the securities, cash and other
assets in the trust reduced by the liabilities of the trust divided by the total
units outstanding. We often refer to the public offering price of units as the
"offer price" or "purchase price." The offer price will be effective for all
orders received prior to the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time). If we receive your order prior to
the close of regular trading on the New York Stock Exchange 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.

VALUE OF THE SECURITIES. We determine the value of the securities as of the
close of regular trading on the New York Stock Exchange on each day that
exchange is open. We generally determine the value of securities using the last
sale price for securities traded on a national securities exchange. For this
purpose, the trustee provides us closing prices from a reporting service
approved by us. In some cases we will price a security based on its fair value
after considering appropriate factors relevant to the value of the security. We
will only do this if a security is not principally traded on a national
securities exchange or if the market quotes are unavailable or inappropriate.

We determined the initial prices of the securities shown under "Portfolio" in
this prospectus as described above at the close of regular trading on the New
York Stock Exchange on the business day before the date of this prospectus. On
the first day we sell units we will compute the unit price as of the close of
regular trading on the New York Stock Exchange or the time the registration
statement filed with the Securities and Exchange Commission becomes effective,
if later.

ORGANIZATION COSTS. During the initial offering period, part of the value of
the units represents an amount that will pay the costs of creating your trust.
These costs include the costs of preparing the registration statement and legal
documents, federal and state registration fees, the initial fees and expenses of
the trustee and the initial audit. Your trust will sell securities to reimburse
us for these costs at the end of the initial offering period or after six
months, if earlier.

10 Understanding Your Investment

The value of your units will decline when the trust pays these costs.

SALES FEE. The maximum sales fee is shown under "Fees and Expenses" for your
trust and is 1.85% of the public offering price per unit at the time of
purchase.

You pay a fee in connection with purchasing units. We refer to this fee as
the "transactional sales fee". The transactional sales fee has both an initial
and a deferred component. The transactional sales fee equals 1.35% of the
public offering price per unit based on a $10 public offering price per unit.
The percentage amount of the transactional sales fee is based on the unit price
on your trust's inception date. The transactional sales fee equals the
difference between the total sales fee and the creation and development fee. As
a result, the percentage and dollar amount of the transactional sales fee will
vary as the public offering price per unit varies. The transactional sales fee
does not include the creation and development fee which is described under "Fees
and Expenses" for your trust.

You pay the initial sales fee, if any, at the time you buy units. The
initial sales fee is the difference between the total sales fee percentage
(maximum of 1.85% of the public offering price per unit) and the sum of the
remaining fixed dollar deferred sales fee and the total fixed dollar creation
and development fee. The initial sales fee will be 0.00% of the public offering
price per unit at a public offering price per unit of $10. If the public
offering price per unit exceeds $10, you will be charged an initial sales fee
equal to the difference between the total sales fee percentage (maximum of 1.85%
of the public offering price per unit) and the sum of the remaining fixed dollar
deferred sales fee and total fixed dollar creation and development fee. The
deferred sales fee is fixed at $0.135 per unit. Your trust pays the deferred
sales fee in equal monthly installments as described under "Fees and Expenses"
for your trust. If you redeem or sell your units prior to collection of the
total deferred sales fee, you will pay any remaining deferred sales fee upon
redemption or sale of your units.

Since the deferred sales fee and creation and development fee are fixed
dollar amounts per unit, your trust must charge these amounts per unit
regardless of any decrease in net asset value. As a result, if the public
offering price per unit falls to less than $10 (resulting in the maximum sales
fee percentage being a dollar amount that is less than the combined fixed dollar
amounts of the deferred sales fee and creation and development fee) your initial
sales fee will be a credit equal to the amount by which these fixed dollar fees
exceed the sales fee at the time you buy units. In such a situation, the value
of securities per unit would exceed the public offering price per unit by the
amount of the initial sales fee credit and the value of those securities will
fluctuate, which could result in a benefit or detriment to unitholders that
purchase units at that price. The initial sales fee credit is paid by the
sponsor and is not paid by the trust.

If you purchase units after the last deferred sales fee payment has been
assessed, the secondary market sales fee is equal to 1.85% of the public
offering price and does not include deferred payments (i.e. unitholders who buy
in the secondary market after collection of the deferred sales fees are not
charged deferred sales fees).

MINIMUM PURCHASE. The minimum amount you can purchase of the trust appears
on page 4 under "Essential Information", but such amounts may vary depending on
your selling firm.

Understanding Your Investment 11

REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
fee you pay. It is your financial professional's responsibility to alert us of
any discount when you order units. Except as expressly provided herein, you may
not combine discounts. Since the deferred sales fee and the creation and
development fee are fixed dollar amounts per unit, your trust must charge these
fees per unit regardless of any discounts. However, if you are eligible to
receive a discount such that your total sales fee is less than the fixed dollar
amounts of the deferred sales fee and the creation and development fee, we will
credit you the difference between your total sales fee and these fixed dollar
fees at the time you buy units.

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 advisor to determine whether you can benefit from these
accounts. To purchase units in these Fee Accounts, your financial advisor must
purchase units designated with one of the Fee Account CUSIP numbers, if
available. Please contact your financial advisor for more information. 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
that are not subject to the transactional sales fee but will be subject to the
creation and development fee that is retained by the sponsor. For example, this
table illustrates the sales fee you will pay as a percentage of the initial $10
public offering price per unit (the percentage will vary with the unit price).

Initial sales fee 0.00%
Deferred sales fee 0.00%
-------
Transactional sales fee 0.00%
=======
Creation and development fee 0.50%
-------
Total sales fee 0.50%
=======

This discount applies only during the initial offering period. Certain Fee
Account investors may be assessed transaction or other fees on the purchase
and/or redemption of units by their broker-dealer or other processing
organizations for providing certain transaction or account activities. We
reserve the right to limit or deny purchases of units in Fee Accounts by
investors or selling firms whose frequent trading activity is determined to be
detrimental to the trust.

Employees. We waive the transactional sales fee for purchases made by
officers, directors and employees (and immediate family members) of the sponsor
and its affiliates. These purchases are not subject to the transactional sales
fee but will be subject to the creation and development fee. We also waive a
portion of the sales fee for purchases made by officers, directors and employees
(and immediate family members) of selling firms. These purchases are made at
the public offering price per unit less the applicable regular 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

12 Understanding Your Investment

firms that allow such persons to participate in this employee discount program
are eligible for the discount.

Dividend Reinvestment Plan. We do not charge any sales fee when you reinvest
distributions from your trust into additional units of the trust. This sales
fee discount applies to initial offering period and secondary market purchases.
Since the deferred sales fee and the creation and development fee are fixed
dollar amounts per unit, your trust must charge these fees per unit regardless
of this discount. If you elect the distribution reinvestment plan, we will
credit you with additional units with a dollar value sufficient to cover the
amount of any remaining deferred sales fee or creation and development fee that
will be collected on such units at the time of reinvestment. The dollar value
of these units will fluctuate over time.

RETIREMENT ACCOUNTS. The portfolio may be suitable for purchase in tax-
advantaged retirement accounts. You should contact your financial professional
about the accounts offered and any additional fees imposed.

HOW TO SELL YOUR UNITS

You can sell or redeem your units on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.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." You pay any remaining deferred sales fee when you
sell or redeem your units. Certain broker-dealers may charge a transaction fee
for processing unit redemption or sale requests.

SELLING UNITS. We may maintain a secondary market for units. This means
that if you want to sell your units, we may buy them at the current net asset
value, provided that you will not pay any remaining creation and development fee
or organization costs if you redeem units during the initial offering period.
We may then resell the units to other investors at the public offering price or
redeem them for the redemption price. Our secondary market repurchase price is
the same as the redemption price. Certain broker-dealers might also maintain a
secondary market in units. You should contact your financial professional for
current repurchase prices to determine the best price available. We may
discontinue our secondary market at any time without notice. Even if we do not
make a market, you will be able to redeem your units with the trustee on any
business day for the current redemption price.

REDEEMING UNITS. You may also redeem your units directly with the trustee,
The Bank of New York 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 pay any remaining deferred sales fee at the time you
redeem units. You will receive the net asset value for a particular day if the
trustee receives your completed redemption request prior to the close of regular
trading on the New York Stock Exchange. Redemption requests received by
authorized financial professionals prior to the close of regular trading on the
New York Stock Exchange that are properly transmitted to the trustee by the time

Understanding Your Investment 13

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.

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 two business days). The only time
the trustee can delay your payment is if the New York Stock Exchange is closed
(other than weekends or holidays), the Securities and Exchange Commission
determines that trading on that exchange is restricted or an emergency exists
making sale or evaluation of the securities not reasonably practicable, and for
any other period that the Securities and Exchange Commission permits.

You can request an in-kind distribution of the securities underlying your
units if you tender at least 2,500 units for redemption (or such other amount as
required by your financial professional's firm). This option is generally
available only for securities traded and held in the United States. The trustee
will make any in-kind distribution of securities by distributing applicable
securities in book entry form to the account of your financial professional at
Depository Trust Company. You will receive whole shares of the applicable
securities and cash equal to any fractional shares. You may not request this
option in the last 30 days of your trust's life. We may discontinue this option
at any time without notice.

DISTRIBUTIONS

MONTHLY DISTRIBUTIONS. Your trust generally pays distributions of its net
investment income (pro-rated on an annual basis) along with any excess capital
on each monthly distribution date to unitholders of record on the preceding
record date. The record and distribution dates are shown under "Essential
Information" in the "Investment Summary" section of this prospectus. In some
cases, your trust might pay a special distribution if it holds an excessive
amount of cash pending distribution. For example, this could happen as a result
of a merger or similar transaction involving a company whose stock is in your
portfolio. The trust will also generally make required distributions or
distributions to avoid imposition of tax at the end of each year because it is
structured as a "regulated investment company" for federal tax purposes. The
amount of your distributions will vary from time to time as companies change
their dividends or trust expenses change.

When the trust receives dividends from a portfolio security, the trustee
credits the dividends to the trust's accounts. In an effort to make relatively
regular income distributions, the trust's monthly income distribution is equal
to one-twelfth of the estimated net annual dividends to be received by the trust
after deduction of trust operating expenses. Because the trust does not
necessarily receive dividends from the portfolio securities at a constant rate
throughout the year, the trust's income distributions to unitholders

14 Understanding Your Investment

may be more or less than the amount credited to the trust accounts as of the
record date. For the purpose of minimizing fluctuation in income distributions,
the trustee is authorized to advance such amounts as may be necessary to provide
income distributions of approximately equal amounts. The trustee will be
reimbursed, without interest, for any such advances from available income
received by the trust on the ensuing record date.

REPORTS. The trustee or your financial professional will make available to
you a statement showing income and other receipts of your trust for each
distribution. Each year the trustee will also provide an annual report on your
trust's activity and certain tax information. You can request copies of
security evaluations to enable you to complete your tax forms and audited
financial statements for your trust, if available.

INVESTMENT RISKS

All investments involve risk. This section describes the main risks that can
impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.

MARKET RISK. Market risk is the risk that the value of the securities in
your trust will fluctuate. This could cause the value of your units to fall
below your original purchase price. Market value fluctuates in response to
various factors. These can include changes in interest rates, inflation, the
financial condition of a security's issuer, perceptions of the issuer, or
ratings on a security. Even though we supervise your portfolio, you should
remember that we do not manage your portfolio. Your trust will not sell a
security solely because the market value falls as is possible in a managed fund.

SELECTION RISK. Selection risk is the risk that the securities selected for
inclusion by the trust or by a fund's management will underperform the markets,
relevant indices or the securities selected by other funds with similar
investment objectives and investment strategies. This means you may lose money
or earn less money than other comparable investments.

EQUITY SECURITIES. The trust and/or certain funds held by the trust may
invest in securities representing equity ownership of a company. Investments in
such securities are exposed to risks associated with the companies issuing the
securities, the sectors and geographic locations they are involved in and the
markets that such securities are traded on among other risks as described
herein.

FIXED INCOME SECURITIES. Certain funds held by the trust may invest in fixed
income securities and similar securities. Fixed income securities involve
certain unique risks such as credit risk and interest rate risk among other
things as described in greater detail below.

DIVIDEND PAYMENT RISK. Dividend payment risk is the risk that an issuer of a
security is unwilling or unable to pay income on a security. Stocks represent
ownership interests in the issuers and are not obligations of the issuers.
Common stockholders have a right to receive dividends only after the company has
provided for payment of its creditors, bondholders and preferred stockholders.
Common stocks do not assure dividend payments. Dividends are paid only when
declared by an issuer's board of directors and the amount of any dividend may
vary over time.

Understanding Your Investment 15

CREDIT RISK. Credit risk is the risk that a borrower is unable to meet its
obligation to pay principal or interest on a security held by a fund. This
could cause the value of your units to fall and may reduce the level of
dividends a fund pays which would reduce your income.

INTEREST RATE RISK. Interest rate risk is the risk that the value of fixed
income securities and similar securities held by a fund will fall if interest
rates increase. Bonds and other fixed income securities typically fall in value
when interest rates rise and rise in value when interest rates fall. Securities
with longer periods before maturity are often more sensitive to interest rate
changes. 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.

EXCHANGE TRADED FUNDS. The trust invests in shares of exchange-traded funds.
Exchange-traded funds are investment pools that hold other securities. The ETFs
that may be included in the trust are open-end funds or unit investment trusts
("UITs") registered under the Investment Company Act of 1940. Unlike typical
open-end funds or UITs, ETFs generally do not sell or redeem their individual
shares at net asset value. ETFs generally sell and redeem shares in large
blocks (often known as "Creation Units"), however the sponsor does not intend to
sell or redeem ETF shares in this manner. In addition, securities exchanges
list ETF shares for trading, which allows investors to purchase and sell
individual ETF shares among themselves at market prices throughout the day. The
trust will purchase and sell ETF shares on these securities exchanges. ETFs
therefore possess characteristics of traditional open-end funds and UITs, which
issue redeemable shares, and of corporate common stocks, which generally issue
shares that trade at negotiated prices on securities exchanges and are not
redeemable.

ETFs can provide exposure to broad-based indices, growth and value styles,
market cap segments, sectors and industries, and specific countries or regions
of the world. The securities comprising ETFs may be common equity securities or
fixed income securities. In general, ETFs contain anywhere from fewer than 20
securities to more than 1000 securities. As a result, investors in ETFs (and
investors in the trust) obtain exposure to a much greater number of securities
than an individual investor would typically be able to obtain on their own. The
performance of ETFs is generally highly correlated with the indices or sectors
which they are designed to track.

Shares of ETFs may trade at a discount from their net asset value in the
secondary market. This risk is separate and distinct from the risk that the net
asset value of fund shares may decrease. The amount of such discount from net
asset value is subject to change from time to time in response to various
factors. If shares of an ETF trade at a market price that reflects a discount
to the value of the fund's underlying assets, the discount could increase over
time and when the trust liquidates fund shares the trust will receive the
current market price of shares rather than the fund's net asset value per share.
ETFs are subject to various risks, including management's ability to meet the
fund's investment objective, and to manage the fund's portfolio when the
underlying securities are redeemed or sold, during the periods of market turmoil
and as investors' perceptions regarding ETFs or their underlying investment
change. The trust and the underlying funds have operating expenses. You will
bear not only your share of the trust's expenses, but also the expenses of the
underlying funds. By investing in the other funds, the trust incurs greater
expenses than you would incur if you invested directly in the funds.

16 Understanding Your Investment

ETFs also face index correlation risk which is the risk that the performance
of an ETF will vary from the actual performance of the fund's target index,
known as "tracking error." This can happen due to transaction costs, market
impact, corporate actions (such as mergers and spin-offs) and timing variances.
Some funds use a technique called "representative sampling," which means that
the fund invests in a representative sample of securities in its target index
rather than all of the index securities. This could increase the risk of
tracking error.

Only the trustee may vote the shares of the ETFs held in the trust. The
trustee will vote the shares in the same general proportion as shares held by
other shareholders of each fund. Your trust may be required, however, to reject
any offer for securities or other property in exchange for portfolio securities
as described under "How the Trust Works--Changing Your Portfolio".

NON-DIVERSIFICATION RISK. Certain funds held by the trust may be classified
as "non-diversified". Such funds may be more exposed to the risks associated
with and developments affecting an individual issuer, industry and/or asset
class than a fund that invests more widely.

BUSINESS DEVELOPMENT COMPANY RISK. Certain funds held by the trust may
invest in business development companies ("BDCs"). BDCs are closed-end
investment companies that have elected to be treated as business development
companies under the Investment Company Act of 1940. BDCs are required to hold
at least 70% of their investments in eligible assets which include, among other
things, (i) securities of eligible portfolio companies (generally, domestic
companies that are not investment companies and that cannot have a class of
securities listed on a national securities exchange or have securities that are
marginable that are purchased from that company in a private transaction), (ii)
securities received by the BDC in connection with its ownership of securities of
eligible portfolio companies, or (iii) cash, cash items, government securities,
or high quality debt securities maturing one year or less from the time of
investment. BDCs' ability to grow and their overall financial condition is
impacted significantly by their ability to raise capital. In addition to
raising capital through the issuance of common stock, BDCs may engage in
borrowing. This may involve using revolving credit facilities, the
securitization of loans through separate wholly-owned subsidiaries and issuing
of debt and preferred securities. BDCs are less restricted than other closed-
end funds as to the amount of debt they can have outstanding. These borrowings,
also known as leverage, magnify the potential for gain or loss on amounts
invested and, accordingly, the risks associated with investing in BDC
securities. While the value of a BDC's assets increases, leveraging would cause
the net value per share of BDC common stock to increase more sharply than it
would have had such BDC not leveraged. However, if the value of a BDC's assets
decreases, leveraging would cause net asset value to decline more sharply than
it otherwise would have had such BDC not leveraged. In addition to decreasing
the value of a BDC's common stock, it could also adversely impact a BDC's
ability to make dividend payments. A BDC's credit rating may change over time
which could adversely affect its ability to obtain additional credit and/or
increase the cost of such borrowing. Agreements governing a BDC's credit
facilities and related funding and service agreements may contain various
covenants that limit the BDC's discretion in operating its business along with
other limitations. Any defaults may restrict the BDC's ability to manage assets
securing related assets, which may adversely impact the BDC's liquidity and
operations. BDCs may enter into hedging transaction and utilize derivative
instruments such as forward contracts, options

Understanding Your Investment 17

and swaps. Unanticipated movements and improper correlation of hedging
instruments may prevent a BDC from hedging against exposure to risk of loss.
BDCs may issue options, warrants, and rights to convert to voting securities to
its officers, employees and board members. Any issuance of derivative
securities requires the approval of the company's board of directors and
authorization by the company's shareholders. A BDC may operate a profit-sharing
plan for its employees, subject to certain restrictions.

BDC investments are frequently not publicly traded and, as a result, there is
uncertainty as to the value and liquidity of those investments. BDCs may use
independent valuation firms to value their investments and such valuations may
be uncertain, be based on estimates and/or differ materially from that which
would have been used if a ready market for those investments existed. The value
of a BDC could be adversely affected if its determinations regarding the fair
value of investments was materially higher than the value realized upon sale of
such investments. Due to the relative illiquidity of certain BDC investments,
if a BDC is required to liquidate all or a portion of its portfolio quickly, it
may realize significantly less than the value at which such investments are
recorded. Further restrictions may exist on the ability to liquidate certain
assets to the extent that subsidiaries or related parties have material non-
public information regarding such assets. BDCs are required to make available
significant managerial assistance to their portfolio companies. Significant
managerial assistance refers to any arrangement whereby a BDC provides
significant guidance and counsel concerning the management, operations, or
business objectives and policies of a portfolio company. Examples of such
activities include arranging financing, managing relationships with financing
sources, recruiting management personnel, and evaluating acquisition and
divestiture opportunities. BDCs are frequently externally managed by an
investment adviser which may also provide this external managerial assistance to
portfolio companies. Such investment adviser's liability may be limited under
its investment advisory agreement, which may lead such investment adviser to
act in a riskier manner than it would were it investing for its own account.
Such investment advisers may be entitled to incentive compensation which may
cause such adviser to make more speculative and riskier investments than it
would if investing for its own account. Such compensation may be due even in
the case of declines to the value of a BDC's investments.

BDCs frequently have high expenses which may include, but are not limited to,
the payment of management fees, administration expenses, taxes, interest payable
on debt, governmental charges, independent director fees and expenses, valuation
expenses, and fees payable to third parties relating to or associated with
making investments. The trust will indirectly bear these expenses. These
expenses may fluctuate significantly over time. If a BDC fails to maintain its
status as a BDC it may be regulated as a closed-end fund which would subject
such BDC to additional regulatory restrictions and significantly decrease its
operating flexibility. In addition, such failure could trigger an event of
default under certain outstanding indebtedness which could have a material
adverse impact on its business.

COVERED CALL OPTION STRATEGIES. Certain funds held by the trust may invest
using covered call option strategies. You should understand the risks of these
strategies before you invest. In employing a covered call strategy, a fund will
generally write (sell) call options on a significant portion of the fund's
managed assets. These call options will give the option holder the right, but
not the obligation, to purchase a security from the fund at the strike

18 Understanding Your Investment

price on or prior to the option's expiration date. The ability to successfully
implement the fund's investment strategy depends on the fund adviser's ability
to predict pertinent market movements, which cannot be assured. Thus, the use
of options may require a fund to sell portfolio securities at inopportune times
or for prices other than current market values, may limit the amount of
appreciation the fund can realize on an investment, or may cause the fund to
hold a security that it might otherwise sell. The writer (seller) of an option
has no control over the time when it may be required to fulfill its obligation
as a writer (seller) of the option. Once an option writer (seller) has received
an exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
security at the exercise price. As the writer (seller) of a covered call
option, a fund forgoes, during the option's life, the opportunity to profit from
increases in the market value of the security underlying the call option above
the sum of the premium and the strike price of the call option, but has retained
the risk of loss should the price of the underlying security decline. The value
of the options written (sold) by a fund, which will be marked-to-market on a
daily basis, will be affected by changes in the value and dividend rates of the
underlying securities, an increase in interest rates, changes in the actual or
perceived volatility of securities markets and the underlying securities and the
remaining time to the options' expiration. The value of the options may also be
adversely affected if the market for the options becomes less liquid or smaller.

An option is generally considered "covered" if a fund owns the security
underlying the call option or has an absolute and immediate right to acquire
that security without additional cash consideration (or, if required, liquid
cash or other assets are segregated by the fund) upon conversion or exchange of
other securities held by the fund. In certain cases, a call option may also be
considered covered if a fund holds a call option on the same security as the
call option written (sold) provided that certain conditions are met. By writing
(selling) covered call options, a fund generally seeks to generate income, in
the form of the premiums received for writing (selling) the call options.
Investment income paid by a fund to its shareholders (such as the trust) may be
derived primarily from the premiums it receives from writing (selling) call
options and, to a lesser extent, from the dividends and interest it receives
from the equity securities or other investments held in the fund's portfolio and
short-term gains thereon. Premiums from writing (selling) call options and
dividends and interest payments made by the securities in a fund's portfolio can
vary widely over time.

MLPS. The trust and/or certain funds held by the trust may invest in master
limited partnerships ("MLPs"). MLPs are limited partnership or limited
liability companies that are generally taxed as partnership whose interests are
generally traded on securities exchanges. An MLP consists of a general partner
and limited partners. The general partner manages the partnership, has an
ownership stake in the partnership and is eligible to receive an incentive
distribution. The limited partners provide capital to the partnership, have a
limited (if any) role in the operation and management of the partnership and
receive cash distributions. Unlike stockholders of a corporation, limited
partners do not elect directors annually and generally have the right to vote
only on certain significant events, such as mergers, a sale of substantially all
of the partnership assets, removal of the general partner or material amendments
to the partnership agreement. Limited partners generally have first right to a
minimum quarterly distribution prior to distributions to the convertible
subordinated unit holders or the general partner

Understanding Your Investment 19

(including incentive distributions) and typically have arrearage rights if the
minimum quarterly distribution is not met. Most MLPs generally operate in the
energy natural resources or real estate sector and are subject to the risks
generally applicable to companies in those sectors. Those risks include, but
are not limited to, commodity pricing risk, supply and demand risk, depletion
risk and exploration risk. MLPs are also subject to the risk that authorities
could challenge the tax treatment of MLPs for federal income tax purposes which
could have a negative impact on the after-tax income available for distribution
by the MLPs and/or the value of the trust's investments.

SENIOR LOANS. Certain funds held by the trust may invest in senior loans and
similar transactions. Senior loans are issued by banks, other financial
institutions and other investors to corporations, partnerships, limited
liability companies and other entities to finance leveraged buyouts,
recapitalizations, mergers, acquisitions, stock repurchases, debt refinancings
and, to a lesser extent, for general operating and other purposes. An
investment by the funds in senior loans and similar transactions involves risk
that the borrowers under such transactions may default on their obligations to
pay principal or interest when due. Although senior loans may be secured by
specific collateral, there can be no assurance that liquidation of collateral
would satisfy the borrower's obligation in the event of non-payment or that such
collateral could be readily liquidated. Senior loans are typically structured
as floating rate instruments in which the interest rate payable on the
obligation fluctuates with interest rate changes. As a result, the yield on
funds investing in senior loans will generally decline in a falling interest
rate environment and increase in a rising interest rate environment. Senior
loans are generally below investment grade quality and may be unrated at the
time of investment; are generally not registered with the SEC or state
securities commissions; and are generally not listed on any securities exchange.
In addition, the amount of public information available on senior loans is
generally less extensive than that available for other types of securities.

BOND QUALITY RISK. Bond quality risk is the risk that a bond will fall in
value if a rating agency decreases or withdraws the bond's rating.

PREPAYMENT RISK. When interest rates fall, among other factors, the issuer
of a security may prepay their obligations earlier than expected. Such amounts
will result in early distributions to the fund and such funds may be unable to
reinvest such amounts at the yields originally invested which could adversely
impact the funds and the trust. Certain bonds held by the funds include call
provisions which expose such funds and the trust to 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, a fund holding such bond will receive
principal but future interest distributions will fall. Such fund might not be
able to reinvest this principal at as high a yield. A bond's call price could
be less than the price paid for the bond and could be below the bond's par
value. Certain 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.

EXTENSION RISK. When interest rates rise, among other factors, issues of a
security may pay off obligations more slowly than expected causing the value of
such obligations to fall.

20 Understanding Your Investment

MARKET DISCOUNT. Certain funds held by the trust may invest in bonds whose
current market values were below the principal value on the 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. Certain funds held by the trust may invest in bonds whose
current market values were above the principal value on the 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 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.

MUNICIPAL BONDS. Certain funds held by the trust may invest in municipal
bonds. Municipal bonds are debt obligations issued by states or by political
subdivisions or authorities of states. Municipal bonds are typically designated
as general obligation bonds, which are general obligations of a governmental
entity that are backed by the taxing power of such entity, or revenue bonds,
which are payable from the income of a specific project or authority and are not
supported by the issuer's power to levy taxes. Municipal bonds are long-term
fixed rate debt obligations that generally decline in value with increases in
interest rates, when an issuer's financial condition worsens or when the rating
on a bond is decreased. Many municipal bonds may be called or redeemed prior to
their stated maturity, an event which is more likely to occur when interest
rates fall. In such an occurrence, a fund may not be able to reinvest the money
it receives in other bonds that have as high a yield or as long a maturity.
Many municipal bonds are subject to continuing requirements as to the actual use
of the bond proceeds or manner of operation of the project financed from bond
proceeds that may affect the exemption of interest on such bonds from federal
income taxation. The market for municipal bonds is generally less liquid than
for other securities and therefore the price of municipal bonds may be more
volatile and subject to greater price fluctuations than securities with greater
liquidity. In addition, an issuer's ability to make income distributions
generally depends on several factors including the financial condition of the
issuer and general economic conditions. Any of these factors may negatively
impact the price of municipal bonds held by a fund and would therefore impact
the price of both the fund shares and the trust units.

SOVEREIGN DEBT. Certain funds held by the trust may invest in sovereign
debt. Sovereign debt instruments are subject to the risk that a governmental
entity may delay or refuse to pay interest or repay principal on its sovereign
debt, due, for example, to cash flow problems, insufficient foreign currency
reserves, political considerations, the relative size of the governmental

Understanding Your Investment 21

entity's debt position in relation to the economy or the failure to put in place
required economic reforms. If a governmental entity defaults, it may ask for
more time in which to pay or for further loans. There is no legal process for
collecting sovereign debt that a government does not pay nor are there
bankruptcy proceedings through which all or part of the sovereign debt that a
governmental entity has not repaid may be collected.

U.S. GOVERNMENT OBLIGATIONS RISK. Certain funds held by the trust may invest
in obligations of the U.S. Government. Obligations of U.S. Government agencies,
authorities, instrumentalities and sponsored enterprises have historically
involved little risk of loss of principal if held to maturity. However, not all
U.S. Government securities are backed by the full faith and credit of the United
States. Obligations of certain agencies, authorities, instrumentalities and
sponsored enterprises of the U.S. Government are backed by the full faith and
credit of the United States (e.g., the Government National Mortgage
Association); other obligations are backed by the right of the issuer to borrow
from the U.S. Treasury (e.g., the Federal Home Loan Banks) and others are
supported by the discretionary authority of the U.S. Government to purchase an
agency's obligations. Still others are backed only by the credit of the agency,
authority, instrumentality or sponsored enterprise issuing the obligation. No
assurance can be given that the U.S. Government would provide financial support
to any of these entities if it is not obligated to do so by law.

U.S. TREASURY OBLIGATIONS. Certain funds held by the trust may invest in
U.S. Treasury obligations. U.S. Treasury obligations are direct obligations of
the United States which are backed by the full faith and credit of the United
States. The value of U.S. Treasury obligations will be adversely affected by
decreases in bond prices and increases in interest rates.

HIGH YIELD OR "JUNK" SECURITIES. Certain funds held by the trust may invest
in high yield securities or unrated securities. High yield, high risk
securities are subject to greater market fluctuations and risk of loss than
securities with higher investment ratings. The value of these securities will
decline significantly with increases in interest rates, not only because
increases in rates generally decrease values, but also because increased rates
may indicate an economic slowdown. An economic slowdown, or a reduction in an
issuer's creditworthiness, may result in the issuer being unable to maintain
earnings at a level sufficient to maintain interest and principal payments.
High yield or "junk" securities, the generic names for securities rated below
"BBB" by Standard & Poor's or "Baa" by Moody's, are frequently issued by
corporations in the growth stage of their development or by established
companies who are highly leveraged or whose operations or industries are
depressed. Securities rated below BBB or Baa are considered speculative as
these ratings indicate a quality of less than investment grade. Because high
yield securities are generally subordinated obligations and are perceived by
investors to be riskier than higher rated securities, their prices tend to
fluctuate more than higher rated securities and are affected by short-term
credit developments to a greater degree. The market for high yield securities
is smaller and less liquid than that for investment grade securities. High
yield securities are generally not listed on a national securities exchange but
trade in the over-the-counter markets. Due to the smaller, less liquid market
for high yield securities, the bid-offer spread on such securities is generally
greater than it is for investment grade securities and the purchase or sale of
such securities may take longer to complete.

22 Understanding Your Investment

CONVERTIBLE SECURITIES. Certain funds held by the trust may invest in
convertible securities. Convertible securities generally offer lower interest
or dividend yields than non-convertible fixed-income securities of similar
credit quality because of the potential for capital appreciation. The market
values of convertible securities tend to decline as interest rates increase and,
conversely, to increase as interest rates decline. However, a convertible
security's market value also tends to reflect the market price of the common
stock of the issuing company, particularly when that stock price is greater than
the convertible security's "conversion price." The conversion price is defined
as the predetermined price or exchange ratio at which the convertible security
can be converted or exchanged for the underlying common stock. As the market
price of the underlying common stock declines below the conversion price, the
price of the convertible security tends to be increasingly influenced more by
the yield of the convertible security. Thus, it may not decline in price to the
same extent as the underlying common stock. In the event of a liquidation of
the issuing company, holders of convertible securities would be paid before that
company's common stockholders. Consequently, an issuer's convertible securities
generally entail less risk than its common stock. However, convertible
securities fall below debt obligations of the same issuer in order of preference
or priority in the event of a liquidation and are typically unrated or rated
lower than such debt obligations.

Mandatory convertible securities are distinguished as a subset of convertible
securities because the conversion is not optional and the conversion price at
maturity is based solely upon the market price of the underlying common stock,
which may be significantly less than par or the price (above or below par) paid.
For these reasons, the risks associated with investing in mandatory convertible
securities most closely resemble the risks inherent in common stocks. Mandatory
convertible securities customarily pay a higher coupon yield to compensate for
the potential risk of additional price volatility and loss upon conversion.
Because the market price of a mandatory convertible security increasingly
corresponds to the market price of its underlying common stock, as the
convertible security approaches its conversion date, there can be no assurance
that the higher coupon will compensate for a potential loss.

FLOATING RATE INSTRUMENTS. Certain funds held by the trust may invest in
floating rate securities. A floating rate security is an instrument in which
the interest rate payable on the obligation fluctuates on a periodic basis based
upon changes in a benchmark, often related to interest rates. As a result, the
yield on such a security will generally decline with negative changes to the
benchmark, causing the trust to experience a reduction in the income it receives
from such securities. A sudden and significant increase in the applicable
benchmark may increase the risk of payment defaults and cause a decline in the
value of the security.

INVESTMENT IN OTHER INVESTMENT COMPANIES. As with other investments,
investments in other investment companies are subject to market and selection
risk. In addition, when the trust acquires shares of investment companies
shareholders bear both their proportionate share of fees and expenses in the
trust and, indirectly, the expenses of the underlying investment companies.
Investment companies' expenses are subject to the risk of fluctuation including
in response to fluctuation in a fund's assets. Accordingly, a fund's actual
expenses may vary from what is indicated at the time of investment by the trust.
There are certain regulatory limitations on the ability of the

Understanding Your Investment 23

trust to hold other investment companies which may impact the trust's ability to
invest certain funds, may impact the weighting of a fund in the trust's
portfolio and may impact the trust's ability to issue additional units in the
future.

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 of this prospectus for your trust for
sector concentrations.

FOREIGN ISSUER RISK. An investment in securities of foreign issuers involves
certain risks that are different in some respects from an investment in
securities of domestic issuers. These include risks associated with future
political and economic developments, international trade conditions, foreign
withholding taxes, liquidity concerns, currency fluctuations, volatility,
restrictions on foreign investments and exchange of securities, potential for
expropriation of assets, confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, potential inability to collect when a company goes
bankrupt and economic, political or social instability. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy for
reasons including differences in growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments positions. There may be less publicly available information about a
foreign issuer than is available from a domestic issuer as a result of different
accounting, auditing and financial reporting standards. Some foreign markets
are less liquid than U.S. markets which could cause securities to be bought at a
higher price or sold at a lower price than would be the case in a highly liquid
market.

Securities of certain foreign issuers may be denominated or quoted in
currencies other than the U.S. dollar. Foreign issuers also make payments and
conduct business in foreign currencies. Many foreign currencies have fluctuated
widely in value against the U.S. dollar for various economic and political
reasons. Changes in foreign currency exchange rates may affect the value of
foreign securities and income payments. Generally, when the U.S. dollar rises
in value against a foreign currency, a security denominated in that currency
loses value because the currency is worth fewer U.S. dollars. Conversely, when
the U.S. dollar decreases in value against a foreign currency, a security
denominated in that currency gains value because the currency is worth more U.S.
dollars. The U.S. dollar value of income payments on foreign securities will
fluctuate similarly with changes in foreign currency values.

Certain foreign securities may be held in the form of American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), or other similar
receipts. Depositary receipts represent receipts for foreign securities
deposited with a custodian (which may include the trustee of your trust).
Depository receipts may not be denominated in the same currency as the
securities into which they may be converted. ADRs typically trade in the U.S.
in U.S. dollars and are registered with the Securities and Exchange Commission.
GDRs are similar to ADRs, but GDRs typically trade outside of the U.S. and
outside of the country of the issuer in the currency of the country where the
GDR trades. Depositary receipts generally involve most of the same types of
risks as foreign securities held directly but typically also involve additional
expenses associated with the cost of the custodian's services. Some depositary

24 Understanding Your Investment

receipts may experience less liquidity than the underlying securities traded in
their home market. Certain depositary receipts are unsponsored (i.e. issued
without the participation or involvement of the issuer of the underlying
security). The issuers of unsponsored depositary receipts are not obligated to
disclose information that may be considered material in the U.S. Therefore,
there may be less information available regarding these issuers which can impact
the relationship between certain information impacting a security and the market
value of the depositary receipts.

CURRENCY RISK. Because securities of foreign issuers not listed on a U.S.
securities exchange generally pay income and trade in foreign currencies, the
U.S. dollar value of these securities and income will vary with fluctuations in
foreign exchange rates. Most foreign currencies have fluctuated widely in value
against the U.S. dollar for various economic and political reasons. 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. This risk, generally known as
"currency risk," means that a strong U.S. dollar will reduce returns for U.S.
investors while a weak U.S. dollar will increase those returns.

DEPOSITARY RECEIPTS RISK. Certain stocks held by the trust and/or the funds
may be held in the form of depositary receipts. Depositary receipts represent
receipts for foreign common stock deposited with a custodian (which may include
the trustee of your trust). Depositary receipts generally involve the same
types of risks as foreign common stock held directly. Some depositary receipts
may experience less liquidity than the underlying common stocks traded in their
home market. Certain depositary receipts are unsponsored (i.e. issued without
the participation or involvement of the issuer of the underlying security). The
issuers of unsponsored depositary receipts are not obligated to disclose
information that may be considered material in the U.S. Therefore, there may be
less information available regarding these issuers and, as a result, there may
not be a correlation between certain information impacting a security and the
market value of the depositary receipts.

EMERGING MARKETS. The trust and/or certain funds held by the trust may
invest in certain securities issued by entities located in emerging markets.
Emerging markets are generally defined as countries in the initial states of
their industrialization cycles with low per capita income. The markets of
emerging markets countries are generally more volatile than the markets of
developed countries with more mature economies. All of the risks of investing
in foreign securities described above are heightened by investing in emerging
markets countries.

SUPRANATIONAL ENTITIES' SECURITIES. Certain funds held by the trust may
invest in obligations issued by supranational entities such as the International
Bank for Reconstruction and Development (the World Bank). The government
members, or "stockholders," usually make initial capital contributions to
supranational entities and in many cases are committed to make additional
capital contributions if a supranational entity is unable to repay its
borrowings. There is no guarantee that one or more stockholders of a
supranational entity will continue to make any necessary additional capital
contributions. If such contributions are not made, the entity may be unable to
pay interest or repay principal on its debt securities, and a fund may lose
money on such investments.

Understanding Your Investment 25

SMALL AND MID-SIZE COMPANIES. The trust and/or certain funds held by the
trust may invest in securities issued by small and mid-size companies. The
share prices of these companies are often more volatile than those of larger
companies as a result of several factors common to many such issuers, including
limited trading volumes, products or financial resources, management
inexperience and less publicly available information. In particular, companies
with smaller capitalizations may be less financially secure, depend on a smaller
number of key personnel and generally be subject to more unpredictable price
changes than larger, more established companies and the markets as a whole.
Smaller capitalization and emerging growth companies may be particularly
sensitive to changes in interest rates, borrowing costs and earnings.

REAL ESTATE INVESTMENT TRUSTS. The trust and/or certain funds may invest in
securities issued by real estate investment trusts ("REITs"). REITs may be
exposed to the risks associated with the ownership of real estate which include,
among other factors, changes in general U.S., global and local economic
conditions, declines in real estate values, changes in the financial health of
tenants, overbuilding and increased competition for tenants, oversupply of
properties for sale, changing demographics, changes in interest rates, tax rates
and other operating expenses, changes in government regulations, faulty
construction and the ongoing need for capital improvements, regulatory and
judicial requirements including relating to liability for environmental hazards,
changes in neighborhood values and buyer demand, and the unavailability of
construction financing or mortgage loans at rates acceptable to developers.

Many factors can have an adverse impact on the performance of a REIT,
including its cash available for distribution, the credit quality of the REIT or
the real estate industry generally. The success of a REIT depends on various
factors, including the occupancy and rent levels, appreciation of the underlying
property and the ability to raise rents on those properties. Economic
recession, overbuilding, tax law changes, higher interest rates or excessive
speculation can all negatively impact REITs, their future earnings and share
prices. Variations in rental income and space availability and vacancy rates in
terms of supply and demand are additional factors affecting real estate
generally and REITs in particular. Properties owned by a REIT may not be
adequately insured against certain losses and may be subject to significant
environmental liabilities, including remediation costs. You should also be
aware that REITs may not be diversified and are subject to the risks of
financing projects. The real estate industry may be cyclical, and, if REIT
securities are acquired at or near the top of the cycle, there is increased risk
of a decline in value of the REIT securities. At various points in time, demand
for certain types of real estate may inflate the value of real estate. This may
increase the risk of a substantial decline in the value of such real estate and
increase the risk of a decline in the value of the securities. REITs are also
subject to defaults by borrowers and the market's perception of the REIT
industry generally. Because of their structure, and a current legal requirement
that they distribute at least 90% of their taxable income to shareholders
annually, REITs require frequent amounts of new funding, through both borrowing
money and issuing stock. Thus, REITs historically have frequently issued
substantial amounts of new equity shares (or equivalents) to purchase or build
new properties. This may adversely affect REIT equity share market prices.
Both existing and new share issuances may have an adverse effect on these prices
in the future, especially if REITs issue stock when real estate prices are
relatively high and stock prices are relatively low.

26 Understanding Your Investment

Mortgage REITs engage in financing real estate, purchasing or originating
mortgages and mortgage-backed securities and earning income from the interest on
these investments. Such REITs face risks similar to those of other financial
firms, such as changes in interest rates, general market conditions and credit
risk, in addition to risks associated with an investment in real estate.

ASSET-BACKED SECURITIES. Certain funds held by the trust may invest in asset-
backed securities ("ABS"). ABS are securities backed by pools of loans or other
receivables. ABS are created from many types of assets, including auto loans,
credit card receivables, home equity loans, and student loans. ABS are issued
through special purpose vehicles that are bankruptcy remote from the issuer of
the collateral. The credit quality of an ABS transaction depends on the
performance of the underlying assets. To protect ABS investors from the
possibility that some borrowers could miss payments or even default on their
loans, ABS include various forms of credit enhancement. Some ABS, particularly
home equity loan transactions, are subject to interest rate risk and prepayment
risk. A change in interest rates can affect the pace of payments on the
underlying loans, which in turn, affects total return on the securities. ABS
also carry credit or default risk. If many borrowers on the underlying loans
default, losses could exceed the credit enhancement level and result in losses
to investors in an ABS transaction. Finally, ABS have structure risk due to a
unique characteristic known as early amortization, or early payout, risk. Built
into the structure of most ABS are triggers for early payout, designed to
protect investors from losses. These triggers are unique to each transaction
and can include: a big rise in defaults on the underlying loans, a sharp drop in
the credit enhancement level, or even the bankruptcy of the originator. Once
early amortization begins, all incoming loan payments (after expenses are paid)
are used to pay investors as quickly as possible based upon a predetermined
priority of payment.

MORTGAGE-BACKED SECURITIES. Certain funds held by the trust may invest in
mortgage-backed securities. Mortgage-backed securities are a type of ABS
representing direct or indirect participations in, or are secured by and payable
from, mortgage loans secured by real property and can include single- and multi-
class pass-through securities and collateralized mortgage obligations.
Mortgage-backed securities are based on different types of mortgages, including
those on commercial real estate or residential properties. These securities
often have stated maturities of up to thirty years when they are issued,
depending upon the length of the mortgages underlying the securities. In
practice, however, unscheduled or early payments of principal and interest on
the underlying mortgages may make the securities' effective maturity shorter
than this. Rising interest rates tend to extend the duration of mortgage-backed
securities, making them more sensitive to changes in interest rates, and may
reduce the market value of the securities. In addition, mortgage-backed
securities are subject to prepayment risk, the risk that borrowers may pay off
their mortgages sooner than expected, particularly when interest rates decline.
This can reduce the funds', and therefore the trust's, returns because the funds
may have to reinvest that money at lower prevailing interest rates.

RESTRICTED SECURITIES. Certain funds held by the trust may invest in
securities that may only be resold pursuant to Rule 144A under the Securities
Act of 1933. Such securities may not be readily marketable. Restricted
securities may be sold only to purchasers meeting certain eligibility
requirements in privately negotiated transactions or in a public offering with
respect to which a registration

Understanding Your Investment 27

statement is in effect under the Securities Act. Where registration of such
securities under the Securities Act is required, a fund may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the fund might obtain a less
favorable price than that which prevailed when it decided to sell.

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.

PREFERRED SECURITIES. Certain funds held by your trust may invest in
preferred securities including preferred stocks, trust preferred securities,
subordinated or junior notes and debentures and other similarly structured
securities. Preferred securities combine some of the characteristics of common
stocks and bonds. Preferred securities generally pay fixed or adjustable rate
income in the form of dividends or interest to investors. Preferred securities
generally have preference over common stock in the payment of income and the
liquidation of a company's assets. However, preferred securities are typically
subordinated to bonds and other debt instruments in a company's capital
structure and therefore will be subject to greater credit risk than those debt
instruments. Because of their subordinated position in the capital structure of
an issuer, the ability to defer dividend or interest payments for extended
periods of time without triggering an event of default for the issuer, and
certain other features, preferred securities are often treated as equity-like
instruments by both issuers and investors, as their quality and value are
heavily dependent on the profitability and cash flows of the issuer rather than
on any legal claims to specific assets. Most retail-available preferred
securities have a $25 par (or "face") value but can also have par values of $50
or $1,000. Preferred securities are often callable at their par value at some
point in time after their original issuance date. Income payments on preferred
securities are generally stated as a percentage of these par values although
certain preferred securities provide for variable or additional participation
payments.

While some preferred securities are issued with a final maturity date, others
are perpetual in nature. In certain instances, a final maturity date may be
extended and/or the final payment of principal may be deferred at the issuer's
option for a specified time without triggering an event of default for the
issuer. Preferred securities generally may be subject to provisions that allow
an issuer, under certain conditions, to skip ("non-cumulative" preferred
securities) or defer ("cumulative" preferred securities) distributions. The
issuer of a non-cumulative preferred security does not have an obligation to
make up any arrearages to holders of such securities and non-cumulative
preferred securities can defer distributions indefinitely. Cumulative preferred
securities typically contain provisions that allow an issuer, at its discretion,
to defer distributions payments for up to 10 years. If a preferred security is
deferring its distribution, investors may be required to recognize income for
tax purposes while they are not receiving any income. In certain circumstances,
an issuer of preferred securities may redeem the securities during their life.
For certain types of preferred securities, a redemption may be triggered by a
change in federal income tax or securities laws. As with call provisions, a
redemption by the issuer may negatively impact the return of the security.
Preferred security holders generally have no voting rights with respect to the
issuing

28 Understanding Your Investment

company except in very limited situations, such as if the issuer fails to make
income payments for a specified period of time or if a declaration of default
occurs and is continuing. Preferred securities may be substantially less liquid
than many other securities, such as U.S. government securities or common stock.
The federal income tax treatment of preferred securities may not be clear or may
be subject to recharacterization by the Internal Revenue Service. Issuers of
preferred securities may be in industries that are heavily regulated and that
may receive government funding. The value of preferred securities issued by
these companies may be affected by changes in government policy, such as
increased regulation, ownership restrictions, deregulation or reduced government
funding.

Preferred stocks are a category of preferred securities that are typically
considered equity securities and make income payments from an issuer's after-tax
profits that are treated as dividends for tax purposes. While they generally
provide for specified income payments as a percentage of their par value, these
payments generally do not carry the same set of guarantees afforded to
bondholders and have higher risks of non-payment or deferral.

Certain preferred securities may be issued by trusts or other special purpose
entities established by operating companies, and are therefore not direct
obligations of operating companies. At the time a trust or special purpose
entity sells its preferred securities to investors, the trust or special purpose
entity generally purchases debt of the operating company with terms comparable
to those of the trust or special purpose entity securities. The trust or
special purpose entity, as the holder of the operating company's debt, has
priority with respect to the operating company's earnings and profits over the
operating company's common shareholders, but is typically subordinated to other
classes of the operating company's debt. Distribution payments of trust
preferred securities generally coincide with interest payments on the underlying
obligations. Distributions from trust preferred securities are typically
treated as interest rather than dividends for federal income tax purposes and
therefore, are not eligible for the dividends-received deduction or the lower
federal tax rates applicable to qualified dividends. Trust preferred securities
generally involve the same risks as traditional preferred stocks but are also
subject to unique risks, including risks associated with income payments only
being made if payments on the underlying obligations are made. Typically, a
trust preferred security will have a rating that is below that of its
corresponding operating company's senior debt securities due to its subordinated
nature.

Subordinated or junior notes or debentures are securities that generally have
priority to common stock and other preferred securities in a company's capital
structure but are subordinated to other bonds and debt instruments in a
company's capital structure. As a result, these securities will be subject to
greater credit risk than those senior debt instruments and will not receive
income payments or return of principal in the event of insolvency until all
obligations on senior debt instruments have been made. Distributions from these
securities are typically treated as interest rather than dividends for federal
income tax purposes and therefore, are not eligible for the dividends-received
deduction or the lower federal tax rates applicable to qualified dividends.
Investments in subordinated or junior notes or debentures also generally involve
risks similar to risks of other preferred securities described above.

REAL ESTATE RELATED SECURITIES. The trust and/or certain funds held by the
trust may invest

Understanding Your Investment 29

in securities providing exposure to real estate investments. Risks associated
with the ownership of real estate include, among other factors, changes in
general U.S., global and local economic conditions, decline in real estate
values, changes in the financial health of tenants, overbuilding and increased
competition for tenants, oversupply of properties for sale, changing
demographics, changes in interest rates, tax rates and other operating expenses,
changes in government regulations, faulty construction and the ongoing need for
capital improvements, regulatory and judicial requirements, including relating
to liability for environmental hazards, changes in neighborhood values and buyer
demand, and the unavailability of construction financing or mortgage loans at
rates acceptable to developers.

DERIVATIVES RISK. Certain funds held by the trust may engage in transactions
in derivatives. Derivatives are subject to counterparty risk which is the risk
that the other party in a transaction may be unable or unwilling to meet
obligations when due. Use of derivatives may increase volatility of a fund and
the trust and reduce returns. Fluctuations in the value of derivatives may not
correspond with fluctuations of underlying exposures. Unanticipated market
movements could result in significant losses on derivative positions including
greater losses than amounts originally invested and potentially unlimited losses
in the case of certain derivatives. There are no assurances that there will be
a secondary market available in any derivative position which could result in
illiquidity and the inability of a fund to liquidate or terminate positions as
valued. Valuation of derivative positions may be difficult and increase during
times of market turmoil. Certain derivatives may be used as a hedge against
other securities positions however hedging can be subject to the risk of
imperfect alignment and there are no assurances that a hedge will be achieved as
intended which can pose significant loss to a fund and the trust. Recent
legislation has called for significant increases to the regulation of the
derivatives market. Regulatory changes and rulemaking is ongoing and the full
impact may not be known for some time. This increased regulation may make
derivatives more costly, limit the availability of derivatives or otherwise
adversely affect the value or performance of derivatives. Examples of increased
regulation include, but are not limited to the imposition of clearing and
reporting requirements on transactions that fall within the definition of "swap"
and "security-based swap", increased recordkeeping and reporting requirements,
changing definitional and registration requirements, and changes to the way that
funds' use of derivatives is regulated. We cannot predict the effects of any
new governmental regulation that may be implemented on the ability of a fund to
use any financial derivative product, and there can be no assurance that any new
governmental regulation will not adversely affect a fund's ability to achieve
its investment objective. The federal income tax treatment of a derivative may
not be as favorable as a direct investment in the asset that a derivative
provides exposure to which may adversely impact the timing, character and amount
of income a fund realizes from its investment. The tax treatment of certain
derivatives is unsettled and may be subject to future legislation, regulation or
administrative pronouncements.

SWAPS. Certain funds held by the trust may invest in swaps. In addition to
general risks associated with derivatives described above, swap agreements
involve the risk that the party with whom a fund has entered into the swap will
default on its obligation to pay a fund and the risk that a fund will not be
able to meet its obligations to pay the other party to the agreement.

30 Understanding Your Investment

Swaps entered into by a fund may include, but are not limited to, interest rate
swaps, total return swaps and/or credit default swaps. In an interest rate swap
transaction, two parties exchange rights to receive interest payments, such as
exchanging the right to receive floating rate payments based on a reference
interest rate for the right to receive fixed rate payments. In addition to the
general risks associated with derivatives and swaps described above, interest
rate swaps are subject to interest rate risk and credit risk. In a total return
swap transaction, one party agrees to pay another party an amount equal to the
total return on a reference asset during a specified period of time in return
for periodic payments based on a fixed or variable interest rate or on the total
return from a different reference asset. In addition to the general risks
associated with derivatives and swaps described above, total return swaps could
result in losses if the reference asset does not perform as anticipated and
these swaps can have the potential for unlimited losses. In a credit default
swap transaction, one party makes one or more payments over the term of the
contract to the counterparty, provided that no event of default with respect to
a specific obligation or issuer has occurred. In return, upon any event of
default, such party would receive from the counterparty a payment equal to the
par (or other agreed-upon) value of such specified obligation. In addition to
general risks associated with derivatives and swaps described above, credit
default swaps involve special risks because they are difficult to value, are
highly susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default by
the issuer of the underlying obligation (as opposed to a credit downgrade or
other indication of financial difficulty).

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Certain funds held by the trust
may may engage in forward foreign currency exchange transactions. Forward
foreign exchange transactions are contracts to purchase or sell a specified
amount of a specified currency or multinational currency unit at a price and
future date set at the time of the contract. Forward foreign currency exchange
contracts do not eliminate fluctuations in the value of non-U.S. securities but
rather allow a fund to establish a fixed rate of exchange for a future point in
time. This strategy can have the effect of reducing returns and minimizing
opportunities for gain.

INDEXED AND INVERSE SECURITIES. Certain funds held by the trust may invest
in indexed and inverse securities. In addition to general risks associated with
derivatives described above, indexed and inverse securities are subject to risk
with respect to the value of the particular index. These securities are subject
to leverage risk and correlation risk. Certain indexed and inverse securities
have greater sensitivity to changes in interest rates or index levels than other
securities, and a fund's investment in such instruments may decline
significantly in value if interest rates or index levels move in a way a fund's
management does not anticipate.

FUTURES. Certain funds held by the trust may engage in futures transactions.
In addition to general risks associated with derivatives described above, the
primary risks associated with the use of futures contracts and options are (a)
the imperfect correlation between the change in market value of the instruments
held by a fund and the price of the futures contract or option; (b) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures contract when desired; (c) losses caused by
unanticipated market movements, which are potentially unlimited; (d) the
investment adviser's inability to predict correctly the

Understanding Your Investment 31

direction of securities prices, interest rates, currency exchange rates and
other economic factors; and (e) the possibility that the counterparty will
default in the performance of its obligations. While futures contracts are
generally liquid instruments, under certain market conditions they may become
illiquid. Futures exchanges may impose daily or intra-day price change limits
and/or limit the volume of trading. Additionally, government regulation may
further reduce liquidity through similar trading restrictions.

OPTIONS. Certain funds held by the trust may engage in options transactions.
In addition to general risks associated with derivatives described above,
options are considered speculative. When a fund purchases an option, it may
lose the premium paid for it if the price of the underlying security or other
assets decreased or remained the same (in the case of a call option) or
increased or remained the same (in the case of a put option). If a put or call
option purchased by a fund were permitted to expire without being sold or
exercised, its premium would represent a loss to a fund. To the extent that a
fund writes or sells an option, if the decline or increase in the underlying
asset is significantly below or above the exercise price of the written option,
a fund could experience substantial and potentially unlimited losses.

REPURCHASE AGREEMENT RISK. If the other party to a repurchase agreement
defaults on its obligation under such agreement, a fund may suffer delays and
incur costs or lose money in exercising its rights under the agreement. If the
seller fails to repurchase the security under a repurchase agreement and the
market value of such security declines, such fund may lose money.

SHORT SALES RISK. Certain funds held by the trust may engage in short sales.
Because making short sales in securities that it does not own exposes a fund to
the risks associated with those securities, such short sales involve speculative
exposure risk. A fund will incur a loss as a result of a short sale if the
price of the security increases between the date of the short sale and the date
on which such fund replaces the security sold short. A fund will realize a gain
if the security declines in price between those dates. As a result, if a fund
makes short sales in securities that increase in value, it will likely
underperform similar funds that do not make short sales in securities they do
not own. There can be no assurance that a fund will be able to close out a
short sale position at any particular time or at an acceptable price. Although
a fund's gain is limited to the amount at which it sold a security short, its
potential loss is limited only by the maximum attainable price of the security,
less the price at which the security was sold. Short sale transactions involve
leverage because they can provide investment exposure in an amount exceeding the
initial investment. A fund may also pay transaction costs and borrowing fees in
connection with short sales.

COMMODITIES. Certain funds held by the trust may have exposure to the
commodities market. This exposure could expose such funds and the trust to
greater volatility than investment in other securities. The value of
investments providing commodity exposure may be affected by changes in overall
market movements, commodity index volatility, changes in interest rates, or
factors affecting a particular industry or commodity, such as drought, floods,
weather, embargoes, tariffs and international economic, political and regulatory
developments.

MONEY MARKET SECURITIES. Certain funds held by the trust may invest in money
market securities. If market conditions improve while a fund has temporarily
invested some or all of its assets in high quality money market securities, this
strategy

32 Understanding Your Investment

could result in reducing the potential gain from the market upswing, thus
reducing a fund's opportunity to achieve its investment objective.

LEGISLATION/LITIGATION. From time to time, various legislative initiatives
are proposed in the United States and abroad which may have a negative impact on
certain of the securities held by the trust or underlying funds. In addition,
litigation regarding any of the issuers of the securities or of the industries
represented by these issuers may negatively impact the share prices of these
securities. No one can predict what impact any pending or threatened litigation
will have on the share prices of the securities.

NO FDIC GUARANTEE. An investment in the trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

HOW THE TRUST WORKS

YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940. We created the trust under a trust agreement
between Advisors Asset Management, Inc. (as depositor/sponsor, evaluator and
supervisor) and The Bank of New York Mellon (as trustee). To create your trust,
we deposited securities with the trustee (or contracts to purchase securities
along with an irrevocable letter of credit or other consideration to pay for the
securities). In exchange, the trustee delivered units of your trust to us.
Each unit represents an undivided interest in the assets of your trust. These
units remain outstanding until redeemed or until your trust terminates. At the
close of the New York Stock Exchange on the trust's inception date, the number
of units may be adjusted so that the public offering price per unit equals $10.
The number of units and fractional interest of each unit in the trust will
increase or decrease to the extent of any adjustment.

CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed. Your trust will
generally buy and sell securities:

* to pay expenses,

* to issue additional units or redeem units,

* in limited circumstances to protect the trust,

* to make required distributions or avoid imposition of taxes on the trust,
or

* as permitted by the trust agreement.

When your trust sells securities, the composition and diversification of the
securities in the portfolio may be altered. However, if the trustee sells fund
shares to redeem units or to pay trust expenses or sales charges, the trustee
will do so, as nearly as practicable, on a pro rata basis. If a public tender
offer has been made for a security or a merger, acquisition or similar
transaction has been announced affecting a security, the trustee may either sell
the security or accept a tender offer if the supervisor determines that the
action is in the best interest of unitholders. The trustee will distribute any
cash proceeds to unitholders. If an offer by the issuer of any of the portfolio
securities or any other party is made to issue new securities, or to exchange
securities, for trust portfolio securities, the trustee will at the direction of
the sponsor, vote for or against, or accept or reject, any offer for new or
exchanged securities or property in exchange for a trust portfolio security. If
any such issuance, exchange or substitution occurs (regardless of any action or
rejection by a trust), any securities and/or property received will

Understanding Your Investment 33

be deposited into the trust and will be promptly sold by the trustee pursuant to
the sponsor's direction, unless the sponsor advises the trustee to keep such
securities or property. If any contract for the purchase of securities fails,
the sponsor will refund the cash and sales fee attributable to the failed
contract to unitholders on or before the next distribution date unless
substantially all of the moneys held to cover the purchase are reinvested in
substitute securities in accordance with the trust agreement. The sponsor may
direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of the sponsor,
would make retention of the securities detrimental to the trust. In such a
case, the sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities that meet the criteria for inclusion in the
trust on the trust's inception date. The sponsor may also instruct the trustee
to take action necessary to ensure that the portfolio continues to satisfy the
qualifications of a regulated investment company.

We will increase the size of your trust as we sell units. When we create
additional units, we will seek to replicate the existing portfolio. When your
trust buys securities, it may pay brokerage or other acquisition fees. You
could experience a dilution of your investment because of these fees and
fluctuations in security prices between the time we create units and the time
your trust buys the securities. When your trust buys or sells securities, we
may direct that it place orders with and pay brokerage commissions to brokers
that sell units or are affiliated with us, your trust or the trustee.

Pursuant to an exemptive order, your trust may be able to purchase securities
from other trusts that we sponsor when we create additional units. Your trust
may also be able to sell securities to other trusts that we sponsor to satisfy
unit redemption, pay deferred sales charges or expenses, in connection with
periodic tax compliance or in connection with the termination of your trust.
The exemption may enable each trust to eliminate commission costs on these
transactions. The price for those securities will be the closing price on the
sale date on the exchange where the securities are principally traded as
certified by us to the trustee.

AMENDING THE TRUST AGREEMENT. The sponsor and the trustee can change the
trust agreement without your consent to correct any provision that may be
defective or to make other provisions that will not materially adversely affect
your interest (as determined by the sponsor and the trustee). We cannot change
this agreement to reduce your interest in your trust without your consent.
Investors owning two-thirds of the units in your trust may vote to change this
agreement.

TERMINATION OF YOUR TRUST. Your trust will terminate on the termination date
set forth under "Essential Information" in the "Investment Summary" section of
this prospectus. The trustee may terminate your trust early if the value of the
trust is less than 40% of the original value of the securities in the trust at
the time of deposit. At this size, the expenses of your trust may create an
undue burden on your investment. Investors owning two-thirds of the units in
your trust may also vote to terminate the trust early. The trustee will
liquidate the trust in the event that a sufficient number of units not yet sold
to the public are tendered for redemption so that the net worth of the trust
would be reduced to less than 40% of the value of the securities at the time
they were deposited in the trust. If this happens, we will refund any sales
charge that you paid.

You will receive your final distribution within a reasonable time following
liquidation of all the securities after deducting final expenses.

34 Understanding Your Investment

Your termination distribution may be less than the price you originally paid for
your units.

THE SPONSOR. The sponsor of the trust is Advisors Asset Management, Inc. We
are a broker-dealer specializing in providing trading and support services to
broker-dealers, registered representatives, investment advisers and other
financial professionals. Our headquarters are located at 18925 Base Camp Road,
Monument, Colorado 80132. You can contact our unit investment trust division at
8100 East 22nd Street North, Building 800, Suite 102, Wichita, Kansas 67226 or
by using the contacts listed on the back cover of this prospectus. AAM is a
registered broker-dealer and investment adviser, a member of the Financial
Industry Regulatory Authority, Inc. (FINRA) and Securities Investor Protection
Corporation (SIPC) and a registrant of the Municipal Securities Rulemaking Board
(MSRB). If we fail to or cannot perform our duties as sponsor or become
bankrupt, the trustee may replace us, continue to operate your trust without a
sponsor, or terminate your trust.

We and your trust have adopted a code of ethics requiring our employees who
have access to information on trust transactions to report personal securities
transactions. The purpose of the code is to avoid potential conflicts of
interest and to prevent fraud, deception or misconduct with respect to your
trust.

The sponsor or an affiliate may use the list of securities in the trust in
its independent capacity (which may include acting as an investment adviser or
broker-dealer) and distribute this information to various individuals and
entities. The sponsor or an affiliate may recommend or effect transactions in
the securities. This may also have an impact on the price your trust pays for
the securities and the price received upon unit redemption or trust termination.
The sponsor may act as agent or principal in connection with the purchase and
sale of securities, including those held by the trust, and may act as a
specialist market maker in the securities. The sponsor may also issue reports
and make recommendations on the securities in the trust. The sponsor or an
affiliate may have participated in a public offering of one or more of the
securities in the trust. The sponsor, an affiliate or their employees may have
a long or short position in these securities or related securities. An officer,
director or employee of the sponsor or an affiliate may be an officer or
director for the issuers of the securities.

THE TRUSTEE. The Bank of New York Mellon is the trustee of your trust with
its principal unit investment trust division offices located at 2 Hanson Place,
12th Floor, Brooklyn, New York 11217. You can contact the trustee by calling
the telephone number on the back cover of this prospectus or by writing to its
unit investment trust office. We may remove and replace the trustee in some
cases without your consent. The trustee may also resign by notifying us and
investors.

HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. These distribution firms each receive part of the sales fee
when they sell units. During the initial offering period, the broker-dealer
concession or agency commission for broker-dealers and other firms is 1.25% of
the public offering price per unit at the time of the transaction. The broker-
dealer concession or agency commission is 65% of the sales fee for secondary
market sales. 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 subject to a Wrap Fee.

Understanding Your Investment 35

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 A trust. Broker-dealers and other firms that sell units
of any Volume Concession A 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 for sales in a calendar month is based on total
initial offering period sales of all Volume Concession A trusts during the 12-
month period through the end of the preceding calendar month as set forth in the
following table:

INITIAL OFFERING PERIOD SALES VOLUME
IN PRECEDING 12 MONTHS CONCESSION
---------------------------------------------------------

$25,000,000 but less than $100,000,000 0.035%
$100,000,000 but less than $150,000,000 0.050
$150,000,000 but less than $250,000,000 0.075
$250,000,000 but less than $1,000,000,000 0.100
$1,000,000,000 but less than $5,000,000,000 0.125
$5,000,000,000 but less than $7,500,000,000 0.150
$7,500,000,000 or more 0.175

We will pay these amounts out of our own assets within a reasonable time
following each calendar month.

The volume concessions will be paid on units of all Volume Concession A
trusts sold in the initial offering period, except as described below. For a
trust to be eligible for this additional Volume Concession A compensation, the
trust's prospectus must include disclosure related to the additional Volume
Concession A compensation; a trust is not eligible for additional Volume
Concession A compensation if the prospectus for such trust does not include
disclosure related to the additional Volume Concession A compensation. In
addition, dealer firms will not receive volume concessions on the sale of units
which are not subject to a transactional sales charge. However, such sales will
be included in determining whether a firm has met the sales level breakpoints
for volume concessions subject to the policies of the related selling firm.
Secondary market sales of all unit trusts are excluded for purposes of these
volume concessions.

Any sales fee discount is borne by the broker-dealer or selling firm out of
the broker-dealer concession or agency commission. We reserve the right to
change the amount of compensation paid to selling firms from time to time. Some
broker-dealers and other selling firms may limit the compensation they or their
representatives receive in connection with unit sales. As a result, certain
broker-dealers and other selling firms may waive or refuse payment of all or a
portion of the regular concession or agency commission and/or volume concession
described above and instruct the sponsor to retain such amounts rather than pay
or allow the amounts to such firm.

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

36 Understanding Your Investment

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 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. The amount of our profit or loss on the initial deposit of
securities into the trust is shown in the "Notes to Portfolio."

TAXES

This section summarizes some of the main U.S. federal income tax consequences
of owning units of the trust. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example,
these summaries generally do not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or 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. If your trust invests

Understanding Your Investment 37

in a partnership, an adverse federal income tax audit of that partnership could
result in the trust being required to pay federal income tax or pay a deficiency
dividend (without having received additional cash).

DISTRIBUTIONS. Trust distributions are generally taxable. After the end of
each year, you will receive a tax statement that separates your trust's
distributions into three categories: ordinary income distributions, capital
gain dividends and return of capital. Ordinary income distributions are
generally taxed at your ordinary tax rate, however, as further discussed below,
certain ordinary income distributions received from your trust may be taxed at
the capital gains tax rates. 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.
However, certain ordinary income dividends on units that are attributable to
qualifying dividends received by your trust from certain corporations may be
reported by the trust as being eligible for the dividends received deduction.

SALE OR REDEMPTION OF UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this
gain or loss, you must subtract your tax basis in your units from the amount you
receive in the transaction. Your tax basis in your units is generally equal to
the cost of your units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your units.

CAPITAL GAINS AND LOSSES AND CERTAIN ORDINARY INCOME DIVIDENDS. If you are
an individual, the maximum marginal stated federal tax rate for net capital gain
is generally 20% (15% or 0% for taxpayers with taxable incomes below certain
thresholds). Some portion of your capital gain dividends may be subject to
higher maximum marginal stated federal income tax rates. Some portion of your
capital gain dividends may be attributable to the trust's interest in a master
limited

38 Understanding Your Investment

partnership which may be subject to a maximum marginal stated federal income tax
rate of 28%, rather than the rates set forth above. In addition, capital gain
received from assets held for more than one year that is considered
"unrecaptured section 1250 gain" (which may be the case, for example, with some
capital gains attributable to equity interests in real estate investment trusts
that constitute interests in entities treated as real estate investment trusts
for federal income tax purposes) is taxed at a maximum stated tax rate of 25%.
In the case of capital gain dividends, the determination of which portion of the
capital gain dividend, if any, is subject to the 28% tax rate or the 25% tax
rate, will be made based on rules prescribed by the United States Treasury.
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.

Ordinary income dividends received by an individual unitholder from a
regulated investment company such as your trust are generally taxed at the same
rates that apply to net capital gain (as discussed above), provided certain
holding period requirements are satisfied and provided the dividends are
attributable to qualifying dividends received by your trust itself.
Distributions with respect to shares in real estate investment trusts are
qualifying dividends only in limited circumstances. Your trust will provide
notice to its unitholders of the amount of any distribution which may be taken
into account as a dividend which is eligible for the capital gains tax rates.

IN-KIND DISTRIBUTIONS. Under certain circumstances, as described in this
prospectus, you may receive an in-kind distribution of trust securities when you
redeem units or when your trust terminates. This distribution will be treated
as a sale for federal income tax purposes and you will generally recognize gain
or loss, generally based on the value at that time of the securities and the
amount of cash received. The Internal Revenue Service could however assert that
a loss could not be currently deducted.

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.

TREATMENT 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.
You may not be able to deduct some or all of these expenses.

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

Understanding Your Investment 39

may be able to deduct or receive a tax credit for your share of these taxes.

INVESTMENTS IN CERTAIN FOREIGN CORPORATIONS. If your trust holds an equity
interest in any "passive foreign investment companies" ("PFICs"), which are
generally certain foreign corporations that receive at least 75% of their annual
gross income from passive sources (such as interest, dividends, certain rents
and royalties or capital gains) or that hold at least 50% of their assets in
investments producing such passive income, the trust could be subject to U.S.
federal income tax and additional interest charges on gains and certain
distributions with respect to those equity interests, even if all the income or
gain is timely distributed to its unitholders. Your trust will not be able to
pass through to its unitholders any credit or deduction for such taxes. Your
trust may be able to make an election that could ameliorate these adverse tax
consequences. In this case, your trust would recognize as ordinary income any
increase in the value of such PFIC shares, and as ordinary loss any decrease in
such value to the extent it did not exceed prior increases included in income.
Under this election, your trust might be required to recognize in a year income
in excess of its distributions from PFICs and its proceeds from dispositions of
PFIC stock during that year, and such income would nevertheless be subject to
the distribution requirement and would be taken into account for purposes of the
4% excise tax. Dividends paid by PFICs are not treated as qualified dividend
income.

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.

40 Understanding Your Investment

The sponsor will receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. This "creation and
development fee" is a charge of $0.05 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. The
trustee will generally pay trust expenses from distributions received on the
securities but in some cases may sell securities to pay trust expenses.

The trust will also indirectly bear the expenses of the underlying funds.
While the trust will not pay these expenses directly out of its assets, these
expenses are shown in the trust's annual operating expenses under "Fees and
Expenses" to illustrate the impact of these expenses.

EXPERTS

LEGAL MATTERS. Chapman and Cutler LLP acts as counsel for the trust and has
given an opinion that the units are validly issued. Dorsey & Whitney LLP acts
as counsel for the trustee.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Grant Thornton LLP,
independent registered public accounting firm, audited the statement of
financial condition and the portfolio included in this prospectus.

ADDITIONAL INFORMATION

This prospectus does not contain all the information in the registration
statement that your trust filed with the Securities and Exchange Commission.
The Information Supplement, which was filed with the Securities and Exchange
Commission, includes more detailed information about the securities in your
portfolio, investment risks and general information about your trust. You can
obtain the Information Supplement by contacting us or the Securities and
Exchange Commission as indicated on the back cover of this prospectus. This
prospectus incorporates the Information Supplement by reference (it is legally
considered part of this prospectus).

Understanding Your Investment 41

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

SPONSOR AND UNITHOLDERS
ADVISORS DISCIPLINED TRUST 1921

Opinion on the financial statements

We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 5 through 9 of Advisors Disciplined Trust 1921 (the
"Trust") as of ____________, ____, the initial date of deposit, and the related
notes (collectively referred to as the "financial statements"). In our opinion,
the financial statements present fairly, in all material respects, the financial
position of the Trust as of ____________, ____, in conformity with accounting
principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of Advisors Asset Management,
Inc., the Sponsor. Our responsibility is to express an opinion on the Trust's
financial statements based on our audit. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Trust in
accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Trust is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audit we are required to obtain an understanding of
internal control over financial reporting 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.

Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. Our procedures
included confirmation of cash or irrevocable letter of credit deposited for the
purchase of securities as shown in the statement of financial condition as of
____________, ____ by correspondence with The Bank of New York Mellon, Trustee.
We believe that our audit provides a reasonable basis for our opinion.

/S/ GRANT THORNTON LLP

We have served as the auditor of one or more of the unit investment trusts,
sponsored by Advisors Asset Management, Inc. and its predecessor since 2003.

Chicago, Illinois
____________, ____

42 Understanding Your Investment

ADVISORS DISCIPLINED TRUST 1921

STATEMENT OF FINANCIAL CONDITION AS OF ____________, ____
-----------------------------------------------------------------------------------------------------------

INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . . . . . . . . . . $
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========

LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred sales fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creation and development fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------

----------

Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: initial sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: deferred sales fee, creation and development fee and organization costs (3)(4)(5) . .
----------
Net interest of investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========

Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
==========

Net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========

<FN>
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the evaluator.
(2) Cash or an irrevocable letter of credit has been deposited with the trustee
covering the funds necessary for the purchase of securities in the trust
represented by purchase contracts.
(3) A portion of the public offering price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing and offering
the trust. These costs have been estimated at $______ per unit for the
trust. A distribution will be made as of the earlier of the close of the
initial offering period or six months following the trust's inception date
to an account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent the actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be reimbursed to the sponsor
and deducted from the assets of the trust.
(4) The total sales fee consists of an initial sales fee, a deferred sales fee
and a creation and development fee. The initial sales fee is equal to the
difference between the maximum sales fee and the sum of the remaining
deferred sales fee and the total creation and development fee. On the
inception date, the total sales fee is 1.85% of the public offering price
per unit. The deferred sales fee is equal to $0.135 per unit and the
creation and development fee is equal to $0.05 per unit.
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees.
</FN>

Understanding Your Investment 43

CONTENTS

INVESTMENT SUMMARY
----------------------------------------------------------------------

A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
4 Who Should Invest
4 Essential Information
4 Fees and Expenses
5 Portfolio

UNDERSTANDING YOUR INVESTMENT
----------------------------------------------------------------------

Detailed information to 10 How to Buy Units
help you understand 13 How to Sell Your Units
your investment 14 Distributions
15 Investment Risks
33 How the Trust Works
37 Taxes
40 Expenses
41 Experts
41 Additional Information
42 Report of Independent Registered
Public Accounting Firm
43 Statement of Financial Condition

WHERE TO LEARN MORE
----------------------------------------------------------------------

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Supplement (877) 858-1773
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ADDITIONAL INFORMATION
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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 1921
Securities Act file number: 333-__________
Investment Company Act file number: 811-21056

60/40 ASSET
ALLOCATION PORTFOLIO,
SERIES 2019-1Q

PROSPECTUS

____________, ____

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AAM

ADVISORS
ASSET MANAGEMENT

ADVISORS DISCIPLINED TRUST
INFORMATION SUPPLEMENT FOR TRUSTS
INVESTING IN EQUITY AND/OR PREFERRED SECURITIES
FEBRUARY 21, 2018

This Information Supplement provides additional information concerning
Advisors Disciplined Trust unit investment trusts that have prospectuses dated
on and after the date set forth above investing in equity and/or preferred
securities. This Information Supplement should be read in conjunction with the
prospectus for a trust. 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 for each applicable trust. 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 or 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 set forth above.

CONTENTS

General Information 2
Investment Policies 2
Risk Factors 5
Administration of the Trust 54

GENERAL INFORMATION

Each trust is one of a series of separate unit investment trusts ("UITs")
created under the name Advisors Disciplined Trust and registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). Each
trust was created as a common law trust on the initial date of deposit set forth
in the prospectus for such trust under the laws of the state of New York. Each
trust was created under a trust agreement among Advisors Asset Management, Inc.
(as sponsor/depositor, evaluator and supervisor) and The Bank of New York Mellon
(as trustee).

When a trust was created, the sponsor delivered to the trustee securities
or contracts for the purchase thereof for deposit in the trust and the trustee
delivered to the sponsor documentation evidencing the ownership of units of the
trust. At the close of the New York Stock Exchange on a trust's initial date of
deposit or the first day units are offered to the public, the number of units
may be adjusted so that the public offering price per unit equals $10. The
number of units, fractional interest of each unit in a trust and any estimated
income distributions per unit will increase or decrease to the extent of any
adjustment. Additional units of a 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, the aggregate value of
the securities in the trust will be increased and the fractional undivided
interest in the trust represented by each unit will be decreased. The sponsor
may continue to make additional deposits of securities into a trust, provided
that such additional deposits will be in amounts which will generally maintain
the existing relationship among the shares of the securities in such trust.
Thus, although additional units will be issued, each unit will generally
continue to represent the approximately same number of shares of each security.
If the sponsor deposits cash to purchase additional securities, existing and new
investors may experience a dilution of their investments and a reduction in
their anticipated income because of fluctuations in the prices of the securities
between the time of the deposit and the purchase of the securities and because a
trust will pay any associated brokerage fees.

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,
refund the cash and sales charge attributable to such failed contract to all
unitholders on the next distribution date.

INVESTMENT POLICIES

Each trust is a UIT 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.

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The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in special circumstances as provided in the
applicable trust agreement. Thus, the assets of a trust will generally remain
unchanged under normal circumstances. Each trust agreement provides that the
sponsor may direct the trustee to sell, liquidate or otherwise dispose of
securities in the trust at such price and time and in such manner as shall be
determined by the sponsor, provided that the supervisor has determined, if
appropriate, that any one or more of the following conditions exist with respect
to such securities: (i) that there has been a default in the payment of
dividends, interest, principal or other payments, after declared and when due
and payable; (ii) that any action or proceeding has been instituted at law or
equity seeking to restrain or enjoin the payment of dividends, interest,
principal or other payments on securities after declared and when due and
payable, or that there exists any legal question or impediment affecting such
securities or the payment of dividends, interest, principal or other payments
from the same; (iii) that there has occurred any breach of covenant or warranty
in any document relating to the issuer of the securities which would adversely
affect either immediately or contingently the payment of dividends, interest,
principal or other payments on the securities, or the general credit standing of
the issuer or otherwise impair the sound investment character of such
securities; (iv) that there has been a default in the payment of dividends,
interest, principal, income, premium or other similar payments, if any, on any
other outstanding obligations of the issuer of such securities; (v) that the
price of the security has declined to such an extent or other such credit
factors exist so that in the opinion of the supervisor, as evidenced in writing
to the trustee, the retention of such securities would be detrimental to the
trust and to the interest of the unitholders; (vi) that all of the securities in
the trust will be sold pursuant to termination of the trust; (vii) that such
sale is required due to units tendered for redemption; (viii) that there has
been a public tender offer made for a security or a merger or acquisition is
announced affecting a security, and that in the opinion of the supervisor the
sale or tender of the security is in the best interest of the unitholders; (ix)
if the trust is designed to be a grantor trust for tax purposes, that the sale
of such securities is required in order to prevent the trust from being deemed
an association taxable as a corporation for federal income tax purposes; (x) if
the trust has elected to be a regulated investment company (a "RIC") for tax
purposes, that such sale is necessary or advisable (a) to maintain the
qualification of the trust as a RIC or (b) to provide funds to make any
distribution for a taxable year in order to avoid imposition of any income or
excise taxes on the trust or on undistributed income in the trust; (xi) that as
result of the ownership of the security, the trust or its unitholders would be a
direct or indirect shareholder of a passive foreign investment company as
defined in section 1297(a) of the Internal Revenue Code; or (xii) that such sale
is necessary for the trust to comply with such federal and/or state securities
laws, regulations and/or regulatory actions and interpretations which may be in
effect from time to time. The trustee may also sell securities, designated by
the supervisor, from a trust for the purpose of the payment of expenses. In the
event a security is sold as a direct result of serious adverse credit factors
affecting the issuer of such security and a trust is a RIC for tax purposes,
then the sponsor may, if permitted by applicable law, but is not obligated, to
direct the reinvestment of the proceeds of the sale of such security in any
other securities which meet the criteria necessary for inclusion in such trust
on the initial date of deposit.

If the trustee is notified at any time of any action to be taken or
proposed to be taken by holders of the portfolio securities, the trustee will
notify the sponsor and will take such action or refrain from taking any action
as the sponsor directs and, if the sponsor does not within five

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business days of the giving of such notice direct the trustee to take or refrain
from taking any action, the trustee will take such reasonable action or refrain
from taking any action so that the securities are voted as closely as possible
in the same manner and the same general proportion, with respect to all issues,
as are shares of such securities that are held by owners other than the trust.
Notwithstanding the foregoing, in the event that the trustee shall have been
notified at any time of any action to be taken or proposed to be taken by
holders of shares of any registered investment company, the trustee will
thereupon take such reasonable action or refrain from taking any action with
respect to the fund shares so that the fund shares are voted as closely as
possible in the same manner and the same general proportion, with respect to all
issues, as are shares of such fund shares that are held by owners other than the
related trust.

In the event that an offer by the issuer of any of the securities or any
other party is made to issue new securities, or to exchange securities, for
trust portfolio securities, the trustee will reject such offer, provided that in
the case of a trust that is a RIC for tax purposes, if an offer by the issuer of
any of the securities or any other party is made to issue new securities, or to
exchange securities, for trust portfolio securities, the trustee will at the
direction of the sponsor, vote for or against, or accept or reject, any offer
for new or exchanged securities or property in exchange for a trust portfolio
security. If any such issuance, exchange or substitution occurs (regardless of
any action or rejection by a trust), any securities, cash and/or property
received will be deposited into the trust and will be promptly sold, if
securities or property, by the trustee pursuant to the sponsor's direction,
unless the sponsor advises the trustee to keep such securities, cash or
property. The sponsor may rely on the supervisor in so advising the trustee.

Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Capital
Account of the trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided herein, in a prospectus or in a
trust agreement, the acquisition by a trust of any securities other than the
portfolio securities is prohibited.

Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or otherwise liquidated and because the
proceeds from such events will be distributed to unitholders and will not be
reinvested, no assurance can be given that a trust will retain for any length of
time its present size and composition. Neither the sponsor nor the trustee
shall be liable in any way for any default, failure or defect in any security.
In the event of a failure to deliver any security that has been purchased for a
trust under a contract ("Failed Securities"), the sponsor is authorized under
the trust agreement to direct the trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such trust.

The Replacement Securities must be securities as originally selected for
deposit in a trust or, in the case of a trust that is a RIC for tax purposes,
securities which the sponsor determines to be similar in character as the
securities originally selected for deposit in the trust and the purchase of the
Replacement Securities may not adversely affect the federal income tax status of
the trust. The Replacement Securities must be purchased within thirty days
after the deposit of the Failed Security. Whenever a Replacement Security is
acquired for a trust, the trustee shall notify all unitholders of the trust of
the acquisition of the Replacement Security and shall, on the next monthly
distribution date which is more than thirty days thereafter, make a pro rata

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distribution of the amount, if any, by which the cost to the trust of the Failed
Security exceeded the cost of the Replacement Security. The trustee will not be
liable or responsible in any way for depreciation or loss incurred by reason of
any purchase made pursuant to, or any failure to make any purchase of
Replacement Securities. The sponsor will not be liable for any failure to
instruct the trustee to purchase any Replacement Securities, nor shall the
trustee or sponsor be liable for errors of judgment in connection with Failed
Securities or Replacement Securities.

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 charge attributable to such Failed
Securities to all unitholders of the related trust and the trustee will
distribute the cash attributable to such Failed Securities not more than thirty
days after the date on which the trustee would have been required to purchase a
Replacement Security. In addition, unitholders should be aware that, at the
time of receipt of such cash, they may not be able to reinvest such proceeds in
other securities at a return equal to or in excess of the return which such
proceeds would have earned for unitholders of a trust. In the event that a
Replacement Security is not acquired by a trust, the income for such trust may
be reduced.

RISK FACTORS

An investment in units of a trust, and/or shares of other registered
investment companies ("funds") held by a trust, if any, may be subject to some
or all of the risks described below. In addition, you should carefully review
the objective, strategy and risk of the trust as described in the prospectus and
consider your ability to assume the risks involved before making an investment
in a trust.

MARKET RISK. You should understand the risks of investing in securities
before purchasing units. These risks include the risk that the financial
condition of the company or the general condition of the stock market may worsen
and the value of the securities (and therefore units) will fall. Securities are
especially susceptible to general stock market movements. The value of
securities often rises or falls rapidly and unpredictably as market confidence
and perceptions of companies change. These perceptions are based on factors
including expectations regarding government economic policies, inflation,
interest rates, economic expansion or contraction, political climates and
economic or banking crises. The value of units of a trust will fluctuate with
the value of the securities in the trust and may be more or less than the price
you originally paid for your units. As with any investment, no one can guarantee
that the performance of a trust will be positive over any period of time.
Because each trust is unmanaged, the trustee will not sell securities in
response to market fluctuations as is common in managed investments. In
addition, because some trusts hold a relatively small number of securities, you
may encounter greater market risk than in a more diversified investment.

EQUITY SECURITIES. Investments in securities representing equity ownership
of a company are exposed to risks associated with the companies issuing the
securities, the sectors and geographic locations they are involved in and the
markets that such securities are traded on among other risks as described in
greater detail below.

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FIXED INCOME SECURITIES. Investments in fixed income and similar
securities involve certain unique risks such as credit risk and interest rate
risk among other things as described in greater detail below.

DIVIDENDS. Stocks represent ownership interests in a company and are not
obligations of the company. Common stockholders have a right to receive
payments from the company that is subordinate to the rights of creditors,
bondholders or preferred stockholders of the company. This means that common
stockholders have a right to receive dividends only if a company's board of
directors declares a dividend and the company has provided for payment of all of
its creditors, bondholders and preferred stockholders. If a company issues
additional debt securities or preferred stock, the owners of these securities
will have a claim against the company's assets before common stockholders if the
company declares bankruptcy or liquidates its assets even though the common
stock was issued first. As a result, the company may be less willing or able to
declare or pay dividends on its common stock.

CREDIT RISK. Credit risk is the risk that a borrower is unable to meet its
obligation to pay principal or interest on a security. This could cause the
value of an investment to fall and may reduce the level of dividends an
investment pays which would reduce income.

INTEREST RATE RISK. Interest rate risk is the risk that the value of fixed
income securities and similar securities will fall if interest rates increase.
Bonds and other fixed income securities typically fall in value when interest
rates rise and rise in value when interest rates fall. Securities with longer
periods before maturity are often more sensitive to interest rate changes.

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.

INVESTMENT IN OTHER INVESTMENT COMPANIES. As with other investments,
investments in other investment companies are subject to market and selection
risk. In addition, when a trust acquires shares of investment companies,
unitholders bear both their proportionate share of fees and expenses in the
trust and, indirectly, the expenses of the underlying investment companies.
Investment companies' expenses are subject to the risk of fluctuation including
in response to fluctuation in a fund's assets. Accordingly, a fund's actual
expenses may vary from what is indicated at the time of investment by a trust.
There are certain regulatory limitations on the ability of a trust to hold other
investment companies which may impact the trust's ability to invest in certain
funds, the weighting of the fund in a trust's portfolio and the trust's ability
to issue additional units in the future.

CLOSED-END FUNDS. Closed-end investment companies ("closed-end funds") are
actively managed investment companies registered under the Investment Company
Act that invest in various types of securities. Closed-end funds issue shares
of common stock that are generally traded on a securities exchange (although
some closed-end fund shares are not listed on a securities exchange). Closed-
end funds are subject to various risks, including management's ability to meet
the closed-end fund's investment objective, and to manage the closed-end fund
portfolio when the underlying securities are redeemed or sold during periods of
market turmoil

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and as investors' perceptions regarding closed-end funds or their underlying
investments change. If a trust invests in closed-end funds, you will bear not
only your share of the trust's expenses, but also the expenses of the underlying
funds. By investing in the other funds, a trust may incur greater expenses than
you would incur if you invested directly in the closed-end funds.

The net asset value of closed-end fund shares will fluctuate with changes
in the value of the underlying securities that the closed-end fund owns. In
addition, for various reasons closed-end fund shares frequently trade at a
discount from their net asset value in the secondary market. This risk is
separate and distinct from the risk that the net asset value of closed-end fund
shares may decrease. The amount of such discount from net asset value is
subject to change from time to time in response to various factors.

Certain closed-end funds employ the use of leverage in their portfolios
through the issuance of preferred stock, debt or other borrowings. While
leverage often serves to increase the yield of a closed-end fund, this leverage
also subjects the closed-end fund to increased risks. These risks may include
the likelihood of increased volatility and the possibility that the closed-end
fund's common share income will fall if the dividend rate on the preferred
shares or the interest rate on any borrowings rises.

Closed-end funds' governing documents may contain certain anti-takeover
provisions that may have the effect of inhibiting a fund's possible conversion
to open-end status and limiting the ability of other persons to acquire control
of a fund. In certain circumstances, these provisions might also inhibit the
ability of stockholders (including a trust) to sell their shares at a premium
over prevailing market prices. This characteristic is a risk separate and
distinct from the risk that a fund's net asset value will decrease. In
particular, this characteristic would increase the loss or reduce the return on
the sale of those closed-end fund shares that were purchased by a trust at a
premium. In the unlikely event that a closed-end fund converts to open-end
status at a time when its shares are trading at a premium there would be an
immediate loss in value to a trust since shares of open-end funds trade at net
asset value. Certain closed-end funds may have in place or may put in place in
the future plans pursuant to which the fund may repurchase its own shares in the
marketplace. Typically, these plans are put in place in an attempt by a fund's
board of directors to reduce a discount on its share price. To the extent that
such a plan is implemented and shares owned by a trust are repurchased by a
fund, the trust's position in that fund will be reduced and the cash will be
distributed.

A trust may be prohibited from subscribing to a rights offering for shares
of any of the closed-end funds in which it invests. In the event of a rights
offering for additional shares of a fund, unitholders should expect that a trust
holding shares of the fund will, at the completion of the offer, own a smaller
proportional interest in such fund that would otherwise be the case. It is not
possible to determine the extent of this dilution in share ownership without
knowing what proportion of the shares in a rights offering will be subscribed.
This may be particularly serious when the subscription price per share for the
offer is less than the fund's net asset value per share. Assuming that all
rights are exercised and there is no change in the net asset value per share,
the aggregate net asset value of each shareholder's shares of common stock
should decrease as a result of the offer. If a fund's subscription price per
share is below that fund's net asset value per share at the expiration of the
offer, shareholders would experience an immediate

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dilution of the aggregate net asset value of their shares of common stock as a
result of the offer, which could be substantial.

BUSINESS DEVELOPMENT COMPANIES. Business development companies ("BDCs")
are closed-end investment companies that have elected to be treated as business
development companies under the Investment Company Act. BDCs are required to
hold at least 70% of their investments in eligible assets which include, among
other things, (i) securities of eligible portfolio companies (generally,
domestic companies that are not investment companies and that cannot have a
class of securities listed on a national securities exchange or have securities
that are marginable that are purchased from that company in a private
transaction), (ii) securities received by the BDC in connection with its
ownership of securities of eligible portfolio companies, or (iii) cash, cash
items, government securities, or high quality debt securities maturing one year
or less from the time of investment.

BDCs' ability to grow and their overall financial condition is impacted
significantly by their ability to raise capital. In addition to raising capital
through the issuance of common stock, BDCs may engage in borrowing. This may
involve using revolving credit facilities, the securitization of loans through
separate wholly-owned subsidiaries and issuing of debt and preferred securities.
BDCs are less restricted than other closed-end funds as to the amount of debt
they can have outstanding. Generally, a BDC may not issue any class of senior
security representing an indebtedness unless, immediately after such issuance or
sale, it will have asset coverage of at least 200%. (Thus, for example, if a
BDC has $5 million in assets, it can borrow up to $5 million, which would result
in assets of $10 million and debt of $5 million.) These borrowings, also known
as leverage, magnify the potential for gain or loss on amounts invested and,
accordingly, the risks associated with investing in BDC securities. While the
value of a BDC's assets increases, leveraging would cause the net value per
share of BDC common stock to increase more sharply than it would have had such
BDC not leveraged. However, if the value of a BDC's assets decreases, leveraging
would cause net asset value to decline more sharply than it otherwise would have
had such BDC not leveraged. In addition to decreasing the value of a BDC's
common stock, it could also adversely impact a BDC's ability to make dividend
payments. A BDC's credit rating may change over time which could adversely
affect its ability to obtain additional credit and/or increase the cost of such
borrowing. Agreements governing BDC's credit facilities and related funding and
service agreements may contain various covenants that limit the BDC's discretion
in operating its business along with other limitations. Any defaults may
restrict the BDC's ability to manage assets securing related assets which may
adversely impact the BDC's liquidity and operations.

BDCs compete with other BDCs along with a large number of investment funds,
investment banks and other sources of financing to make their investments.
Competitors may have lower costs or access to funding sources that cause BDCs to
lose prospective investments if they do not match competitors' pricing, terms
and structure. As a result of this competition, there is no assurance that a
BDC will be able to identify and take advantage of attractive investment
opportunities or that they will fully be able to invest available capital.

BDC investments are frequently not publicly traded and, as a result, there
is uncertainty as to the value and liquidity of those investments. BDCs may use
independent valuation firms to

-8-

value their investments and such valuations may be uncertain, be based on
estimates and/or differ materially from that which would have been used if a
ready market for those investments existed. The value of a BDC could be
adversely affected if its determinations regarding the fair value of investments
was materially higher than the value realized upon sale of such investments. Due
to the relative illiquidity of certain BDC investments, if a BDC is required to
liquidate all or a portion of its portfolio quickly, it may realize
significantly less than the value at which such investments are recorded.
Further restrictions may exist on the ability to liquidate certain assets to the
extent that subsidiaries or related parties have material non-public information
regarding such assets.

BDCs may enter into hedging transactions and utilize derivative instruments
such as forward contracts, options and swaps. Unanticipated movements and
improper correlation of hedging instruments may prevent a BDC from hedging
against exposure to risk of loss. BDCs are required to make available
significant managerial assistance to their portfolio companies. Significant
managerial assistance refers to any arrangement whereby a BDC provides
significant guidance and counsel concerning the management, operations, or
business objectives and policies of a portfolio company. Examples of such
activities include arranging financing, managing relationships with financing
sources, recruiting management personnel and evaluating acquisition and
divestiture opportunities. BDCs are frequently externally managed by an
investment adviser which may also provide this external managerial assistance to
portfolio companies. Such investment adviser's liability may be limited under
their investment advisory agreement which may lead such investment adviser to
act in a riskier manner than it would were it investing for its own account.
Such investment advisers may be entitled to incentive compensation which may
cause such adviser to make more speculative and riskier investments than it
would if investing for its own account. Such compensation may be due even in the
case of declines to the value of a BDC's investments.

BDCs may issue options, warrants and rights to convert to voting securities
to its officers, employees and board members. Any issuance of derivative
securities requires the approval of the company's board of directors and
authorization by the company's shareholders. A BDC may operate a profit-sharing
plan for its employees, subject to certain restrictions. BDCs frequently have
high expenses which may include, but are not limited to, the payment of
management fees, administration expenses, taxes, interest payable on debt,
governmental charges, independent director fees and expenses, valuation expenses
and fees payable to third parties relating to or associated with making
investments. These expenses may fluctuate significantly over time.

If a BDC fails to maintain its status as a BDC it may be regulated as a
closed-end fund which would subject such BDC to additional regulatory
restrictions and significantly decrease its operating flexibility. In addition,
such failure could trigger an event of default under certain outstanding
indebtedness which could have a material adverse impact on its business.

EXCHANGE-TRADED FUNDS. Exchange-traded funds ("ETFs") are typically
investment companies registered under the Investment Company Act that have
obtained exemptive relief from the Securities and Exchange Commission (the
"SEC") allowing fund shares to trade on a securities exchange. Shares of ETFs
may trade at a discount from their net asset value in the secondary market.
This risk is separate and distinct from the risk that the net asset value of
ETFs

-9-

may decrease. The amount of such discount from net asset value is subject to
change from time to time in response to various factors. ETFs are subject to
various risks, including management's ability to meet the ETF's investment
objective, and to manage the ETF portfolio when the underlying securities are
redeemed or sold during periods of market turmoil and as investors' perceptions
regarding ETFs or their underlying investments change. A trust and any
underlying ETFs have operating expenses. If a trust invests in ETFs, you will
bear not only your share of the trust's expenses, but also the expenses of the
underlying funds. By investing in the other funds, a trust may incur greater
expenses than you would incur if you invested directly in the funds.

Most ETFs replicate the composition or returns of a securities index.
These ETFs face index correlation risk which is the risk that the performance of
an ETF will vary from the actual performance of the fund's target index, known
as "tracking error." This can happen due to transaction costs, market impact,
corporate actions (such as mergers and spin-offs) and timing variances. Some
funds use a technique called "representative sampling," which means that the
fund invests in a representative sample of securities in its target index rather
than all of the index securities. This could increase the risk of tracking
error.

Some ETFs are open-end funds. Open-end funds of this type can be actively-
managed or passively-managed investment companies that are registered under the
Investment Company Act. These open-end funds have received orders from the SEC
exempting them from various provisions of the Investment Company Act. Regular
open-end funds generally issue redeemable securities that are issued and
redeemed at a price based on the fund's current net asset value and are not
traded on a securities exchange. Exchange-traded open-end funds, however, issue
shares of common stock that are traded on a securities exchange based on
negotiated prices rather than the fund's current net asset value. These funds
only issue new shares and redeem outstanding shares in very large blocks, often
called "creation units," in exchange for an in-kind distribution of the fund's
portfolio securities. Due to a variety of cost and administrative factors, a
trust that invests in ETFs will generally buy and sell shares of its underlying
open-end fund ETFs on securities exchanges rather than engaging in transactions
in creation units. Shares of exchange-traded open-end funds frequently trade at
a discount from their net asset value in the secondary market. This risk is
separate and distinct from the risk that the net asset value of open-end fund
shares may decrease. The amount of such discount from net asset value is
subject to change from time to time in response to various factors.

Some ETFs are UITs. UITs of this type are passively-managed investment
companies that are registered under the Investment Company Act. ETFs that are
UITs differ significantly from your trust in certain respects, even though the
UITs that may be held in the trust's portfolio and the trust itself are
registered UITs. UITs that are ETFs have received orders from the SEC exempting
them from various provisions of the Investment Company Act. Regular UITs, such
as your trust, generally issue redeemable securities that are issued and
redeemed at a price based on the UIT's current net asset value and are not
traded on a securities exchange. ETFs that are UITs, however, issue units that
are traded on a securities exchange based on negotiated prices rather than the
UIT's current net asset value. These UITs only issue new shares and redeem
outstanding shares in very large blocks, often called "creation units," in
exchange for an in-kind distribution of the UIT's portfolio securities. Due to
a variety of cost and administrative factors, a trust that invests in ETFs will
generally buy and sell shares of its underlying ETFs on securities

-10-

exchanges rather than engaging in transactions in creation units. Units of
exchange-traded UITs frequently trade at a discount from their net asset value
in the secondary market. This risk is separate and distinct from the risk that
the net asset value of UIT units may decrease. The amount of such discount from
net asset value is subject to change from time to time in response to various
factors.

INVERSE ETFS. Certain ETFs may be "inverse" ETFs. An inverse ETF,
sometimes referred to as a "bear ETF" or "short ETF," is a special type of index
ETF that is designed to provide investment results that move in the opposite
direction of the daily price movement of the index to which it is benchmarked.
Put another way, an inverse ETF is designed to go up in value when its benchmark
index goes down in value, and go down in value when its benchmark index goes up
in value. Inverse ETFs can be used to establish a hedge position within an
investment portfolio to attempt to protect its value during market declines.
Though inverse ETFs may reduce downside risk and volatility in a down market,
they are not suitable for all investors. The value of an inverse investment may
tend to increase on a daily basis by the amount of any decrease in the index,
but the converse is also true that the value of the investment will also tend to
decrease on a daily basis by the amount of any increase in the index.

Investing in inverse ETFs involves certain risks, which may include
increased volatility due to the ETFs' possible use of short sales of securities
and derivatives such as options and futures. Inverse ETFs are subject to active
trading risks that may increase volatility and impact the ETFs' ability to
achieve their investment objectives. The use of leverage by an ETF increases the
risk to the ETF. The more an ETF invests in leveraged instruments, the more the
leverage will magnify any gains or losses on those investments. Most inverse
ETFs "reset" daily, meaning that they are designed to achieve their stated
objectives on a daily basis only and not over any longer time period. Due to
the effect of compounding, the performance of these ETFs over longer periods of
time can differ significantly from the inverse of the performance of the ETF's
underlying index or benchmark during the same period of time. This effect can
be magnified in volatile markets. Inverse ETFs typically are not suitable for
retail investors who plan to hold them for more than one trading session,
particularly in volatile markets.

LEVERAGED ETFS. Certain ETFs may be "leveraged" ETFs. These ETFs seek to
match a multiple or multiples of the performance, or the inverse of the
performance, of a benchmark index on a given day and not for greater periods of
time. This means that the return of a leveraged ETF for a period longer than a
single day will be the result of each day's returns compounded over the period
and not the point-to-point return of the index over the entire time period. As a
result, the use of leverage will very likely cause the performance of such an
ETF to be either greater than, or less than, the index performance times the
stated multiple in an ETF's investment objective. Investors should recognize
that the degree of volatility of the underlying index can have a dramatic effect
on an ETF's longer-term performance. The greater the volatility, given a
particular index return, the greater the downside deviation will be of the ETF's
longer-term performance from a simple multiple of its index's longer-term
return. Leveraged ETFs use investment techniques that may be considered
aggressive, including the use of futures contracts, options on futures
contracts, securities and indexes, forward contracts, swap agreements and
similar instruments. Leveraged ETFs are typically unsuitable for investors who
plan to hold them for longer than one trading session, particularly in volatile
markets.

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NON-DIVERSIFICATION RISK. Certain funds held by a trust may be classified
as "non-diversified." Such funds may be more exposed to the risks associated
with and developments affecting an individual issuer, industry and/or asset
class than a fund that invests more widely.

FOREIGN ISSUERS. An investment in securities of non-U.S. issuers involves
certain investment risks that are different in some respects from an investment
in the securities of domestic issuers. These investment risks include future
political or governmental restrictions which might adversely affect the payment
or receipt of payment of dividends on the relevant securities, the possibility
that the financial condition of the issuers of the securities may become
impaired or that the general condition of the relevant stock market may worsen
(both of which would contribute directly to a decrease in the value of foreign
securities), the limited liquidity and relatively small market capitalization of
the relevant securities market, expropriation or confiscatory taxation, economic
uncertainties and foreign currency devaluations and fluctuations. In addition,
for foreign issuers that are not subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"),
there may be less publicly available information than is available from a
domestic issuer. In addition, foreign issuers are not necessarily subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic issuers. The securities
of many foreign issuers are less liquid and their prices more volatile than
securities of comparable domestic issuers. In addition, fixed brokerage
commissions and other transaction costs in foreign securities markets are
generally higher than in the United States and there is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States.

Securities issued by non-U.S. issuers generally pay income in foreign
currencies and principally trade in foreign currencies. Therefore, there is a
risk that the U.S. dollar value of these securities will vary with fluctuations
in the U.S. dollar foreign exchange rates for the various securities.

There can be no assurance that exchange control regulations might not be
adopted in the future which might adversely affect payment to a trust or a fund
held by a trust. The adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of foreign
securities and on the ability to liquidate securities. In addition,
restrictions on the settlement of transactions on either the purchase or sale
side, or both, could cause delays or increase the costs associated with the
purchase and sale of the foreign securities and correspondingly could affect the
price of trust units.

Investors should be aware that it may not be possible to buy all securities
at the same time because of the unavailability of any security, and restrictions
applicable to a trust relating to the purchase of a security by reason of the
federal securities laws or otherwise.

Foreign securities generally have not been registered under the Securities
Act of 1933, as amended (the "Securities Act") and may not be exempt from the
registration requirements of such Act. Sales of non-exempt securities in the
United States securities markets are subject to severe restrictions and may not
be practicable. Accordingly, sales of these securities will

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generally be effected only in foreign securities markets. Investors should
realize that the securities might be traded in foreign countries where the
securities markets are not as developed or efficient and may not be as liquid as
those in the United States. The value of securities will be adversely affected
if trading markets for the securities are limited or absent.

EMERGING MARKETS. Compared to more mature markets, some emerging markets
may have a low level of regulation, enforcement of regulations and monitoring of
investors' activities. Those activities may include practices such as trading
on material non-public information. The securities markets of developing
countries are not as large as the more established securities markets and have
substantially less trading volume, resulting in a lack of liquidity and high
price volatility. There may be a high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number of
industries as well as a high concentration of investors and financial
intermediaries. These factors may adversely affect the timing and pricing of
the acquisition or disposal of securities. In certain emerging markets,
registrars are not subject to effective government supervision nor are they
always independent from issuers. The possibility of fraud, negligence, undue
influence being exerted by the issuer or refusal to recognize ownership exists,
which, along with other factors, could result in the registration of a
shareholding being completely lost. Investors could suffer loss arising from
these registration problems. In addition, the legal remedies in emerging
markets are often more limited than the remedies available in the United States.

Practices pertaining to the settlement of securities transactions in
emerging markets involve higher risks than those in developed markets, in large
part because of the need to use brokers and counterparties who are less well
capitalized, and custody and registration of assets in some countries may be
unreliable. As a result, brokerage commissions and other fees are generally
higher in emerging markets and the procedures and rules governing foreign
transactions and custody may involve delays in payment, delivery or recovery of
money or investments. Delays in settlement could result in investment
opportunities being missed if a trust or a fund held by a trust is unable to
acquire or dispose of a security. Certain foreign investments may also be less
liquid and more volatile than U.S. investments, which may mean at times that
such investments are unable to be sold at desirable prices.

Political and economic structures in emerging markets often change rapidly,
which may cause instability. In adverse social and political circumstances,
governments have been involved in policies of expropriation, confiscatory
taxation, nationalization, intervention in the securities market and trade
settlement, and imposition of foreign investment restrictions and exchange
controls, and these could be repeated in the future. In addition to withholding
taxes on investment income, some governments in emerging markets may impose
different capital gains taxes on foreign investors. Foreign investments may
also be subject to the risks of seizure by a foreign government and the
imposition of restrictions on the exchange or export of foreign currency.
Additionally, some governments exercise substantial influence over the private
economic sector and the political and social uncertainties that exist for many
developing countries are considerable.

Another risk common to most developing countries is that the economy is
heavily export oriented and, accordingly, is dependent upon international trade.
The existence of overburdened

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infrastructures and obsolete financial systems also presents risks in certain
countries, as do environmental problems. Certain economies also depend to a
large degree upon exports of primary commodities and, therefore, are vulnerable
to changes in commodity prices which, in turn, may be affected by a variety of
factors.

DEPOSITARY RECEIPTS. Certain of the securities in a trust may be in
depositary receipt form, including American Depositary Receipts ("ADRs") or
Global Depositary Receipts ("GDRs"). Depositary receipts represent stock
deposited with a custodian in a depositary. Depositary receipts are issued by a
bank or trust company to evidence ownership of underlying securities issued by a
foreign corporation. These instruments may not necessarily be denominated in the
same currency as the securities into which they may be converted.

Depositary receipts may be sponsored or unsponsored. In an unsponsored
facility, the depositary initiates and arranges the facility at the request of
market makers and acts as agent for the depositary receipts holder, while the
company itself is not involved in the transaction. In a sponsored facility, the
issuing company initiates the facility and agrees to pay certain administrative
and shareholder-related expenses. Sponsored facilities use a single depositary
and entail a contractual relationship between the issuer, the shareholder and
the depositary; unsponsored facilities involve several depositaries with no
contractual relationship to the company. The depositary bank that issues
depositary receipts generally charges a fee, based on the price of the
depositary receipts, upon issuance and cancellation of the depositary receipts.
This fee would be in addition to the brokerage commissions paid upon the
acquisition or surrender of the security. In addition, the depositary bank
incurs expenses in connection with the conversion of dividends or other cash
distributions paid in local currency into U.S. dollars and such expenses are
deducted from the amount of the dividend or distribution paid to holders,
resulting in a lower payout per underlying shares represented by the depositary
receipts than would be the case if the underlying share were held directly.
Certain tax considerations, including tax rate differentials and withholding
requirements, arising from the application of the tax laws of one nation to
nationals of another and from certain practices in the depositary receipts
market may also exist with respect to certain depositary receipts. In varying
degrees, any or all of these factors may affect the value of the depositary
receipts compared with the value of the underlying shares in the local market.
In addition, the rights of holders of depositary receipts may be different than
those of holders of the underlying shares, and the market for depositary
receipts may be less liquid than that for the underlying shares. Depositary
receipts are registered securities pursuant to the Securities Act and may be
subject to the reporting requirements of the Securities Exchange Act.

For the securities that are depositary receipts, currency fluctuations will
affect the United States dollar equivalent of the local currency price of the
underlying domestic share and, as a result, are likely to affect the value of
the depositary receipts and consequently the value of the securities. The
foreign issuers of securities that are depositary receipts may pay dividends in
foreign currencies which must be converted into dollars. Most foreign currencies
have fluctuated widely in value against the United States dollar for many
reasons, including supply and demand of the respective currency, the soundness
of the world economy and the strength of the respective economy as compared to
the economies of the United States and other countries. Therefore, for any
securities of issuers (whether or not they are in depositary receipt form) whose
earnings are

-14-

stated in foreign currencies, or which pay dividends in foreign currencies or
which are traded in foreign currencies, there is a risk that their United States
dollar value will vary with fluctuations in the United States dollar foreign
exchange rates for the relevant currencies.

CURRENCY RISK. A trust that invests in securities of non-U.S. issuers will
be subject to currency risk, which is the risk that an increase in the U.S.
dollar relative to the non-U.S. currency will reduce returns or portfolio value.
Generally, when the U.S. dollar rises in value relative to a non-U.S. currency,
a trust's investment in securities denominated in that currency will lose value
because its currency is worth fewer U.S. dollars. On the other hand, when the
value of the U.S. dollar falls relative to a non-U.S. currency, a trust's
investments denominated in that currency will tend to increase in value because
that currency is worth more U.S. dollars. The exchange rates between the U.S.
dollar and non-U.S. currencies depend upon such factors as supply and demand in
the currency exchange markets, international balance of payments, governmental
intervention, speculation and other economic and political conditions. A trust
may incur conversion costs when it converts its holdings to another currency.
Non-U.S. exchange dealers may realize a profit on the difference between the
price at which a trust buys and sells currencies. A trust may engage in non-U.S.
currency exchange transactions in connection with its portfolio investments. A
trust may also be subject to currency risk through investments in ADRs, GDRs and
other non-U.S. securities denominated in U.S. dollars.

FOREIGN GOVERNMENT SECURITIES RISK. The ability of a government issuer,
especially in an emerging market country, to make timely and complete payments
on its debt obligations will be strongly influenced by the government issuer's
balance of payments, including export performance, its access to international
credits and investments, fluctuations of interest rates and the extent of its
foreign reserves. A country whose exports are concentrated in a few commodities
or whose economy depends on certain strategic imports could be vulnerable to
fluctuations in international prices of these commodities or imports. If a
government issuer cannot generate sufficient earnings from foreign trade to
service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multinational organizations.
There are no bankruptcy proceedings similar to those in the United States by
which defaulted government debt may be collected. Additional factors that may
influence a government issuer's ability or willingness to service debt include,
but are not limited to, a country's cash flow situation, the ability of
sufficient foreign exchange on the date a payment is due (where applicable), the
relative size of its debt burden to the economy as a whole, and the issuer's
policy towards the International Monetary Fund, the International Bank for
Reconstruction and Development and other international agencies to which a
government debtor may be subject.

SUPRANATIONAL ENTITIES' SECURITIES. Certain securities are obligations
issued by supranational entities such as the International Bank for
Reconstruction and Development (the "World Bank"). The government members, or
"stockholders," usually make initial capital contributions to supranational
entities and in many cases are committed to make additional capital
contributions if a supranational entity is unable to repay its borrowings.
There is no guarantee that one or more stockholders of a supranational entity
will continue to make any necessary additional capital contributions. If such
contributions are not made, the entity may be

-15-

unable to pay interest or repay principal on its debt securities, and an
investor in such securities may lose money on such investments.

SMALL-CAP AND MID-CAP COMPANIES. Smaller company stocks customarily
involve more investment risk than larger company stocks. Small-capitalization
and mid-capitalization companies may have limited product lines, markets or
financial resources; may lack management depth or experience; and may be more
vulnerable to adverse general market or economic developments than large
companies. Some of these companies may distribute, sell or produce products
which have recently been brought to market and may be dependent on key
personnel.

The prices of small or mid-size company securities are often more volatile
than prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less publicly
available information. Also, because small-cap and mid-cap companies normally
have fewer shares outstanding and these shares trade less frequently than large
companies, it may be more difficult for a trust which contains these securities
to buy and sell significant amounts of such shares without an unfavorable impact
on prevailing market prices.

REAL ESTATE INVESTMENT TRUSTS. Real estate investment trusts ("REITs") may
be exposed to the risks associated with the ownership of real estate which
include, among other factors, changes in general U.S., global and local economic
conditions, declines in real estate values, changes in the financial health of
tenants, overbuilding and increased competition for tenants, oversupply of
properties for sale, changing demographics, changes in interest rates, tax rates
and other operating expenses, changes in government regulations, faulty
construction and the ongoing need for capital improvements, regulatory and
judicial requirements including relating to liability for environmental hazards,
changes in neighborhood values and buyer demand and the unavailability of
construction financing or mortgage loans at rates acceptable to developers.

Many factors can have an adverse impact on the performance of a REIT,
including its cash available for distribution, the credit quality of the REIT or
the real estate industry generally. The success of a REIT depends on various
factors, including the occupancy and rent levels, appreciation of the underlying
property and the ability to raise rents on those properties. Economic recession,
overbuilding, tax law changes, higher interest rates or excessive speculation
can all negatively impact REITs, their future earnings and share prices.
Variations in rental income and space availability and vacancy rates in terms of
supply and demand are additional factors affecting real estate generally and
REITs in particular. Properties owned by a REIT may not be adequately insured
against certain losses and may be subject to significant environmental
liabilities, including remediation costs. You should also be aware that REITs
may not be diversified and are subject to the risks of financing projects. The
real estate industry may be cyclical, and, if REIT securities are acquired at or
near the top of the cycle, there is increased risk of a decline in value of the
REIT securities. At various points in time, demand for certain types of real
estate may inflate the value of real estate. This may increase the risk of a
substantial decline in the value of such real estate and increase the risk of a
decline in the value of the securities. REITs are also subject to defaults by
borrowers and the market's perception of the REIT industry generally. Because of
their structure, and a current legal requirement that they distribute at least
90% of their taxable income to shareholders annually, REITs require frequent
amounts of new

-16-

funding, through both borrowing money and issuing stock. Thus, REITs
historically have frequently issued substantial amounts of new equity shares (or
equivalents) to purchase or build new properties. This may adversely affect REIT
equity share market prices. Both existing and new share issuances may have an
adverse effect on these prices in the future, especially if REITs issue stock
when real estate prices are relatively high and stock prices are relatively low.

MASTER LIMITED PARTNERSHIPS. Master limited partnerships ("MLPs") are
limited partnerships or limited liability companies that are generally taxed as
partnerships whose interests are traded on securities exchanges. MLP ownership
generally consists of a general partner and limited partners. The general
partner manages the partnership, has an ownership stake in the partnership and
is eligible to receive an incentive distribution. The limited partners provide
capital to the partnership, have a limited (if any) role in the operation and
management of the partnership and receive cash distributions. Most MLPs
generally operate in the energy, natural resources or real estate sectors and
are subject to the risks generally applicable to companies in those sectors.
MLPs are also subject to the risk that authorities could challenge the tax
treatment of MLPs for federal income tax purposes which could have a negative
impact on the after-tax income available for distribution by the MLPs.

BOND QUALITY RISK. Bond quality risk is the risk that a bond will fall in
value if a rating agency decreases or withdraws the bond's rating.

PREPAYMENT RISK. When interest rates fall, among other factors, the issuer
of a fixed income security may prepay its obligations earlier than expected.
Such amounts will result in early distributions to an investor who may be unable
to reinvest such amounts at the yields originally invested which could adversely
impact the value of your investment. Certain bonds include call provisions
which expose such an investor to 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, the holder of such bond will receive principal but will
not receive any future interest distributions on the bond. Such investor might
not be able to reinvest this principal at as high a yield. A bond's call price
could be less than the price paid for the bond and could be below the bond's par
value. Certain 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.

EXTENSION RISK. When interest rates rise, among other factors, issuers of
a security may pay off obligations more slowly than expected causing the value
of such obligations to fall.

-17-

"WHEN ISSUED" AND "DELAYED DELIVERY" BONDS. Certain debt obligations may
have been purchased on a "when, as and if issued" or "delayed delivery" basis.
The delivery of any such bonds may be delayed or may not occur. Interest on
these bonds begins accruing to the benefit of investors on their respective
dates of delivery. Investors will be "at risk" with respect to all "when, as
and if issued" and "delayed delivery" bonds (i.e., may derive either gain or
loss from fluctuations in the values of such bonds) from the date they purchase
their investment.

PREMIUM SECURITIES. Certain securities may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the premium
securities at the time they were purchased by the fund were higher than the
current market interest rates for newly issued securities of comparable rating
and type. If such interest rates for newly issued and otherwise comparable
securities decrease, the market premium of previously issued securities will be
increased, and if such interest rates for newly issued comparable securities
increase, the market premium of previously issued securities will be reduced,
other things being equal. The current returns of securities trading at a market
premium are initially higher than the current returns of comparable securities
of a similar type issued at currently prevailing interest rates because premium
securities tend to decrease in market value as they approach maturity when the
face amount becomes payable. Because part of the purchase price is thus
returned not at maturity but through current income payments, early redemption
of a premium security at par or early prepayments of principal will result in a
reduction in yield. Redemption pursuant to call provisions generally will, and
redemption pursuant to sinking fund provisions may, occur at times when the
redeemed securities have an offering side valuation which represents a premium
over par or for original issue discount securities a premium over the accreted
value.

MARKET DISCOUNT. Certain fixed income securities may have been acquired at
a market discount from par value at maturity. The coupon interest rates on
discount securities at the time of purchase are lower than the current market
interest rates for newly issued securities of comparable rating and type. If
such interest rates for newly issued comparable securities increase, the market
discount of previously issued securities will become greater, and if such
interest rates for newly issued comparable securities decline, the market
discount of previously issued securities will be reduced, other things being
equal. Investors should also note that the value of securities purchased at a
market discount will increase in value faster than securities purchased at a
market premium if interest rates decrease. Conversely, if interest rates
increase, the value of securities purchased at a market discount will decrease
faster than securities purchased at a market premium. In addition, if interest
rates rise, the prepayment risk of higher yielding, premium securities and the
prepayment benefit for lower yielding, discount securities will be reduced.

ORIGINAL ISSUE DISCOUNT BONDS. Original issue discount bonds were
initially issued at a price below their face (or par) value. These bonds
typically pay a lower interest rate than comparable bonds that were issued at or
above their par value. In a stable interest rate environment, the market value
of these bonds tends to increase more slowly in early years and in greater
increments as the bonds approach maturity. The issuers of these bonds may be
able to call or redeem a bond before its stated maturity date and at a price
less than the bond's par value. Under current law, the original issue discount,
which is the difference between the stated redemption price at maturity and the
issue price of the bonds, is deemed to accrue on a daily

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basis and the accrued portion is treated as taxable interest income for U.S.
federal income tax purposes.

ZERO COUPON BONDS. Certain 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.

RESTRICTED SECURITIES. Certain securities may only be resold pursuant to
Rule 144A under the Securities Act. Such securities may not be readily
marketable. Restricted securities may be sold only to purchasers meeting certain
eligibility requirements in privately negotiated transactions or in a public
offering with respect to which a registration statement is in effect under the
Securities Act. Where registration of such securities under the Securities Act
is required, an owner may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time an owner may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, an owner might obtain a less favorable price than
that which prevailed when it decided to sell.

PREFERRED SECURITY RISKS. Preferred securities include preferred stocks,
trust preferred securities, subordinated or junior notes and debentures and
other similarly structured securities. Preferred securities combine some of the
characteristics of common stocks and bonds. Preferred securities generally pay
fixed or adjustable rate income in the form of dividends or interest to
investors. Preferred securities generally have preference over common stock in
the payment of income and the liquidation of a company's assets. However,
preferred securities are typically subordinated to bonds and other debt
instruments in a company's capital structure and therefore will be subject to
greater credit risk than those debt instruments. Because of their subordinated
position in the capital structure of an issuer, the ability to defer dividend or
interest payments for extended periods of time without triggering an event of
default for the issuer, and certain other features, preferred securities are
often treated as equity-like instruments by both issuers and investors, as their
quality and value are heavily dependent on the profitability and cash flows of
the issuer rather than on any legal claims to specific assets. Preferred
securities are often callable at their par value at some point in time after
their original issuance date. Income payments on preferred securities are
generally stated as a percentage of these par values although certain preferred
securities provide for variable or additional participation payments.

-19-

default for the issuer. Preferred securities generally may be subject to
provisions that allow an issuer, under certain conditions, to skip ("non-
cumulative" preferred securities) or defer ("cumulative" preferred securities)
distributions. The issuer of a non-cumulative preferred security does not have
an obligation to make up any arrearages to holders of such securities and non-
cumulative preferred securities can defer distributions indefinitely. Cumulative
preferred securities typically contain provisions that allow an issuer, at its
discretion, to defer distributions payments for up to 10 years. If a preferred
security is deferring its distribution, investors may be required to recognize
income for tax purposes while they are not receiving any income. In certain
circumstances, an issuer of preferred securities may redeem the securities
during their life. For certain types of preferred securities, a redemption may
be triggered by a change in federal income tax or securities laws. As with call
provisions, a redemption by the issuer may negatively impact the return of the
security. Preferred security holders generally have no voting rights with
respect to the issuing company except in very limited situations, such as if the
issuer fails to make income payments for a specified period of time or if a
declaration of default occurs and is continuing. Preferred securities may be
substantially less liquid than many other securities, such as U.S. government
securities or common stock. The federal income tax treatment of preferred
securities may not be clear or may be subject to recharacterization by the
Internal Revenue Service. Issuers of preferred securities may be in industries
that are heavily regulated and that may receive government funding. The value of
preferred securities issued by these companies may be affected by changes in
government policy, such as increased regulation, ownership restrictions,
deregulation or reduced government funding.

Certain preferred securities may be issued by trusts or other special
purpose entities established by operating companies, and are therefore not
direct obligations of operating companies. At the time a trust or special
purpose entity sells its preferred securities to investors, the trust or special
purpose entity generally purchases debt of the operating company with terms
comparable to those of the trust or special purpose entity securities. The trust
or special purpose entity, as the holder of the operating company's debt, has
priority with respect to the operating company's earnings and profits over the
operating company's common shareholders, but is typically subordinated to other
classes of the operating company's debt. Distribution payments of trust
preferred securities generally coincide with interest payments on the underlying
obligations. Distributions from trust preferred securities are typically treated
as interest rather than dividends for federal income tax purposes and therefore,
are not eligible for the dividends-received deduction or the lower federal tax
rates applicable to qualified dividends. Trust preferred securities generally
involve the same risks as traditional preferred stocks but are also subject to
unique risks, including risks associated with income payments only being made if
payments on the underlying obligations are made. Typically, a trust preferred
security will have a rating that is below that of its corresponding operating
company's senior debt securities due to its subordinated nature.

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Subordinated or junior notes or debentures are securities that generally
have priority to common stock and other preferred securities in a company's
capital structure but are subordinated to other bonds and debt instruments in a
company's capital structure. As a result, these securities will be subject to
greater credit risk than those senior debt instruments and will not receive
income payments or return of principal in the event of insolvency until all
obligations on senior debt instruments have been made. Distributions from these
securities are typically treated as interest rather than dividends for federal
income tax purposes and therefore, are not eligible for the dividends-received
deduction or the lower federal tax rates applicable to qualified dividends.
Investments in subordinated or junior notes or debentures also generally involve
risks similar to risks of other preferred securities described above.

HIGH-YIELD SECURITIES. "High-yield" or "junk" securities, the generic
names for securities rated below BBB by Standard & Poor's or below Baa by
Moody's (or similar ratings of other rating agencies), are frequently issued by
corporations in the growth stage of their development, by established companies
whose operations or industries are depressed or by highly leveraged companies
purchased in leveraged buyout transactions. These obligations that are
considered below "investment grade" and should be considered speculative as such
ratings indicate a quality of less than investment grade. High-yield securities
are generally not listed on a national securities exchange. Trading of high-
yield securities, therefore, takes place primarily in over-the-counter markets
that consist of groups of dealer firms that are typically major securities
firms. Because the high-yield security market is a dealer market, rather than
an auction market, no single obtainable price for a given security prevails at
any given time. Prices are determined by negotiation between traders. The
existence of a liquid trading market for the securities may depend on whether
dealers will make a market in the securities. There can be no assurance that a
market will be made for any of the securities, that any market for the
securities will be maintained or of the liquidity of the securities in any
markets made. Not all dealers maintain markets in all high-yield securities.
Therefore, since there are fewer traders in these securities than there are in
"investment grade" securities, the bid-offer spread is usually greater for
high-yield securities than it is for investment grade securities. The price at
which the securities may be sold to meet redemptions and the value of a trust
may be adversely affected if trading markets for the securities are limited or
absent.

An investment in "high-yield, high-risk" debt obligations or "junk"
obligations may include increased credit risks and the risk that the value of
the units will decline, and may decline precipitously, with increases in
interest rates. During certain periods there have been wide fluctuations in
interest rates and thus in the value of debt obligations generally. Certain
high-yield securities may be subject to greater market fluctuations and risk of
loss of income and principal than are investments in lower-yielding, higher-
rated securities, and their value may decline precipitously because of increases
in interest rates, not only because the increases in rates generally decrease
values, but also because increased rates may indicate a slowdown in the economy
and a decrease in the value of assets generally that may adversely affect the
credit of issuers of high-yield, high-risk securities resulting in a higher
incidence of defaults among high-yield, high-risk securities. A slowdown in the
economy, or a development adversely affecting an issuer's creditworthiness, may
result in the issuer being unable to maintain earnings or sell assets at the
rate and at the prices, respectively, that are required to produce sufficient
cash flow to meet its interest and principal requirements. For an issuer that
has outstanding both senior commercial

-21-

bank debt and subordinated high-yield, high-risk securities, an increase in
interest rates will increase that issuer's interest expense insofar as the
interest rate on the bank debt is fluctuating. However, many leveraged issuers
enter into interest rate protection agreements to fix or cap the interest rate
on a large portion of their bank debt. This reduces exposure to increasing
rates, but reduces the benefit to the issuer of declining rates. The sponsor
cannot predict future economic policies or their consequences or, therefore, the
course or extent of any similar market fluctuations in the future.

Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the issuers
of lower-rated securities may not be as strong as that of other issuers.
Moreover, if a security is recharacterized as equity by the Internal Revenue
Service for federal income tax purposes, the issuer's interest deduction with
respect to the security will be disallowed and this disallowance may adversely
affect the issuer's credit rating. Because investors generally perceive that
there are greater risks associated with the lower-rated securities, the yields
and prices of these securities tend to fluctuate more than higher- rated
securities with changes in the perceived quality of the credit of their issuers.
In addition, the market value of high-yield, high-risk securities may fluctuate
more than the market value of higher-rated securities since these securities
tend to reflect short-term credit development to a greater extent than higher-
rated securities. Lower-rated securities generally involve greater risks of
loss of income and principal than higher-rated securities. Issuers of lower-
rated securities may possess fewer creditworthiness characteristics than issuers
of higher-rated securities and, especially in the case of issuers whose
obligations or credit standing have recently been downgraded, may be subject to
claims by debt-holders, owners of property leased to the issuer or others which,
if sustained, would make it more difficult for the issuers to meet their payment
obligations. High-yield, high-risk securities are also affected by variables
such as interest rates, inflation rates and real growth in the economy.

Should the issuer of any security default in the payment of principal or
interest, the holders of such security may incur additional expenses seeking
payment on the defaulted security. Because the amounts (if any) recovered in
payment under the defaulted security may not be reflected in the value of a fund
held by a trust or units of a trust until actually received, and depending upon
when a unitholder purchases or sells his or her units, it is possible that a
unitholder would bear a portion of the cost of recovery without receiving any
portion of the payment recovered.

High-yield, high-risk securities are generally subordinated obligations.
The payment of principal (and premium, if any), interest and sinking fund
requirements with respect to subordinated obligations of an issuer is
subordinated in right of payment to the payment of senior obligations of the
issuer. Senior obligations generally include most, if not all, significant debt
obligations of an issuer, whether existing at the time of issuance of
subordinated debt or created thereafter. Upon any distribution of the assets of
an issuer with subordinated obligations upon dissolution, total or partial
liquidation or reorganization of or similar proceeding relating to the issuer,
the holders of senior indebtedness will be entitled to receive payment in full
before holders of subordinated indebtedness will be entitled to receive any
payment. Moreover, generally no payment with respect to subordinated
indebtedness may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of

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senior indebtedness of an issuer generally will recover more, ratably, than
holders of subordinated indebtedness of that issuer.

MUNICIPAL BONDS. Certain municipal bonds are "general obligation bonds"
and are general obligations of a governmental entity that are backed by the
taxing power of such entity. Other municipal bonds are "revenue bonds" payable
from the income of a specific project or authority and are not supported by the
issuer's power to levy taxes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds, on the other hand, are payable only from
the revenues derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise tax or other specific revenue
source. There are, of course, variations in the security of the different bonds,
both within a particular classification and between classifications, depending
on numerous factors.

Certain municipal bonds may be obligations which derive their payments from
mortgage loans. Certain of such housing bonds may be insured by the Federal
Housing Administration or may be single family mortgage revenue bonds issued for
the purpose of acquiring from originating financial institutions notes secured
by mortgages on residences located within the issuer's boundaries and owned by
persons of low or moderate income. Mortgage loans are generally partially or
completely prepaid prior to their final maturities as a result of events such as
sale of the mortgaged premises, default, condemnation or casualty loss. Because
these bonds are subject to extraordinary mandatory redemption in whole or in
part from such prepayments of mortgage loans, a substantial portion of such
bonds will probably be redeemed prior to their scheduled maturities or even
prior to their ordinary call dates. Extraordinary mandatory redemption without
premium could also result from the failure of the originating financial
institutions to make mortgage loans in sufficient amounts within a specified
time period. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of principal of or
interest on such mortgage revenue bonds. These bonds were issued under
provisions of the Internal Revenue Code, which include certain requirements
relating to the use of the proceeds of such bonds in order for the interest on
such bonds to retain its tax-exempt status. In each case the issuer of the bonds
has covenanted to comply with applicable requirements and bond counsel to such
issuer has issued an opinion that the interest on the bonds is exempt from
federal income tax under existing laws and regulations.

Certain municipal bonds may be health care revenue bonds. Ratings of bonds
issued for health care facilities are often based on feasibility studies that
contain projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service may be affected by
future events and conditions including, among other things, demand for services
and the ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with other
health care facilities, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses, the cost
and possible unavailability of malpractice insurance, the funding of Medicare,
Medicaid and other similar third-party pay or programs, government regulation
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar third-party
pay or programs.

-23-

Certain municipal bonds may be obligations of public utility issuers,
including those selling wholesale and retail electric power and gas. General
problems of such issuers would include the difficulty in financing large
construction programs, the limitations on operations and increased costs and
delays attributable to environmental considerations, the difficulty of the
capital market in absorbing utility debt, the difficulty in obtaining fuel at
reasonable prices and the effect of energy conservation. In addition, federal,
state and municipal governmental authorities may from time to time review
existing, and impose additional, regulations governing the licensing,
construction and operation of nuclear power plants, which may adversely affect
the ability of the issuers of certain bonds to make payments of principal and/or
interest on such bonds.

Certain municipal bonds may be obligations of issuers whose revenues are
derived from the sale of water and/or sewerage services. Such bonds are
generally payable from user fees. The problems of such issuers include the
ability to obtain timely and adequate rate increases, population decline
resulting in decreased user fees, the difficulty of financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing difficulty of
obtaining or discovering new supplies of fresh water, the effect of conservation
programs and the impact of "no-growth" zoning ordinances.

Certain municipal bonds may be industrial revenue bonds ("IRBs"). IRBs have
generally been issued under bond resolutions pursuant to which the revenues and
receipts payable under the arrangements with the operator of a particular
project have been assigned and pledged to purchasers. In some cases, a mortgage
on the underlying project may have been granted as security for the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon the
creditworthiness of the corporate operator of the project or corporate
guarantor. Corporate operators or guarantors may be affected by many factors
which may have an adverse impact on the credit quality of the particular company
or industry. These include cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting from accidents or
environmentally-caused illnesses, extensive competition and financial
deterioration resulting from a corporate restructuring pursuant to a leveraged
buy-out, takeover or otherwise. Such a restructuring may result in the operator
of a project becoming highly leveraged which may impact on such operator's
creditworthiness which in turn would have an adverse impact on the rating and/or
market value of such bonds. Further, the possibility of such a restructuring may
have an adverse impact on the market for and consequently the value of such
bonds, even though no actual takeover or other action is ever contemplated or
effected.

Certain municipal bonds may be obligations that are secured by lease
payments of a governmental entity ("lease obligations"). Lease obligations are
often in the form of certificates of participation. Although the lease
obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to appropriate for and make the payments
due under the lease obligation. However, certain lease obligations contain "non-
appropriation" clauses which provide that the municipality has no obligation to
make lease payments in future years unless money is appropriated for such
purpose on a yearly basis. A governmental entity that enters into such a lease
agreement cannot obligate future governments to appropriate for and make lease

-24-

payments but covenants to take such action as is necessary to include any lease
payments due in its budgets and to make the appropriations therefor. A
governmental entity's failure to appropriate for and to make payments under its
lease obligation could result in insufficient funds available for payment of the
obligations secured thereby. Although "non-appropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult.

Certain municipal bonds may be obligations of issuers which are, or which
govern the operation of, schools, colleges and universities and whose revenues
are derived mainly from ad valorem taxes or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby creating a
disparity in educational funds available to schools in wealthy areas and schools
in poor areas. Litigation or legislation on this issue may affect the sources of
funds available for the payment of school bonds. General problems relating to
college and university obligations include the prospect of declining student
enrollment, possible inability to raise tuitions and fees sufficiently to cover
operating costs, the uncertainty of continued receipt of federal grants and
state funding and government legislation or regulations which may adversely
affect the revenues or costs of such issuers.

Certain municipal bonds may be obligations which are payable from and
secured by revenues derived from the ownership and operation of facilities such
as airports, bridges, turnpikes, port authorities, convention centers and
arenas. The major portion of an airport's gross operating income is generally
derived from fees received from signatory airlines pursuant to use agreements
which consist of annual payments for leases, occupancy of certain terminal space
and service fees. Airport operating income may therefore be affected by the
ability of the airlines to meet their obligations under the use agreements. From
time to time the air transport industry has experienced significant variations
in earnings and traffic, due to increased competition, excess capacity,
increased costs, deregulation, traffic constraints and other factors, and
several airlines have experienced severe financial difficulties. Similarly,
payment on bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges and rents
from buildings. Therefore, payment may be adversely affected by reduction in
revenues due to such factors as increased cost of maintenance, decreased use of
a facility, lower cost of alternative modes of transportation, scarcity of fuel
and reduction or loss of rents.

Certain municipal bonds may be obligations which are payable from and
secured by revenues derived from the operation of resource recovery facilities.
Resource recovery facilities are designed to process solid waste, generate steam
and convert steam to electricity. Resource recovery bonds may be subject to
extraordinary optional redemption at par upon the occurrence of certain
circumstances, including but not limited to: destruction or condemnation of a
project; contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of a project;
technological or other unavoidable changes adversely affecting the operation of
a project; and administrative or judicial actions which render contracts
relating to the projects void, unenforceable or impossible to perform or impose
unreasonable burdens or

-25-

excessive liabilities. No one can predict the causes or likelihood of the
redemption of resource recovery bonds prior to the stated maturity of the bonds.

Certain municipal bonds may have been acquired at a market discount from
par value at maturity. A "tax-exempt" municipal bond purchased at a market
discount and held to maturity will have a larger portion of its total return in
the form of taxable income and capital gain and less in the form of tax-exempt
interest income than a comparable bond newly issued at current market rates.

Certain municipal bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for retirement
of debt. A callable debt obligation is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A refunding is a method
by which a debt obligation is redeemed, at or before maturity, by the proceeds
of a new debt obligation. In general, call provisions are more likely to be
exercised when the offering side valuation is at a premium over par than when it
is at a discount from par. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called bonds are used to pay for unit
redemptions) result in the distribution of principal and may result in a
reduction in the amount of subsequent interest distributions. Extraordinary
optional redemptions and mandatory redemptions result from the happening of
certain events. Generally, events that may permit the extraordinary optional
redemption of bonds or may require the mandatory redemption of bonds include,
among others: a final determination that the interest on the bonds is taxable;
the substantial damage or destruction by fire or other casualty of the project
for which the proceeds of the bonds were used; an exercise by a local, state or
federal governmental unit of its power of eminent domain to take all or
substantially all of the project for which the proceeds of the bonds were used;
changes in the economic availability of raw materials, operating supplies or
facilities; technological or other changes which render the operation of the
project for which the proceeds of the bonds were used uneconomic; changes in law
or an administrative or judicial decree which renders the performance of the
agreement under which the proceeds of the bonds were made available to finance
the project impossible or which creates unreasonable burdens or which imposes
excessive liabilities, such as taxes, not imposed on the date the bonds are
issued on the issuer of the bonds or the user of the proceeds of the bonds; an
administrative or judicial decree which requires the cessation of a substantial
part of the operations of the project financed with the proceeds of the bonds;
an overestimate of the costs of the project to be financed with the proceeds of
the bonds resulting in excess proceeds of the bonds which may be applied to
redeem bonds; or an underestimate of a source of funds securing the bonds
resulting in excess funds which may be applied to redeem bonds. The issuer of
certain bonds may have sold or reserved the right to sell, upon the satisfaction
of certain conditions, to third parties all or any portion of its rights to call
bonds in accordance with the stated redemption provisions of such bonds. In such
a case the issuer no longer has the right to call the bonds for redemption
unless it reacquires the rights from such third party. A third party pursuant to
these rights may exercise the redemption provisions with respect to a bond at a
time when the issuer of the bond might not have called a bond for redemption had
it not sold such rights. No one can predict all of the circumstances which may
result in such redemption of an issue of bonds. See also the discussion of
single

-26-

family mortgage and multi-family revenue bonds above for more information on the
call provisions of such bonds.

CONVERTIBLE SECURITIES. Convertible securities are generally debt
obligations or preferred stock of a company that are convertible into another
security of the company, typically common stock. Convertible securities
generally offer lower interest or dividend yields than non-convertible fixed-
income securities of similar credit quality because of the potential for capital
appreciation. The market values of convertible securities tend to decline as
interest rates increase and, conversely, to increase as interest rates decline.
However, a convertible security's market value also tends to reflect the market
price of the common stock of the issuing company, particularly when the stock
price is greater than the convertible security's conversion price. The
conversion price is defined as the predetermined price or exchange ratio at
which the convertible security can be converted or exchanged for the underlying
common stock. As the market price of the underlying common stock declines below
the conversion price, the price of the convertible security tends to be
increasingly influenced more by the yield of the convertible security than by
the market price of the underlying common stock. Thus, it may not decline in
price to the same extent as the underlying common stock, and convertible
securities generally have less potential for gain or loss than common stocks.
However, mandatory convertible securities (as discussed below) generally do not
limit the potential for loss to the same extent as securities convertible at the
option of the holder. In the event of a liquidation of the issuing company,
holders of convertible securities would be paid before that company's common
stockholders. Consequently, an issuer's convertible securities generally entail
less risk than its common stock. However, convertible securities generally fall
below other debt obligations of the same issuer in order of preference or
priority in the event of a liquidation and are typically unrated or rated lower
than such debt obligations. In addition, contingent payment, convertible
securities allow the issuer to claim deductions based on its nonconvertible cost
of debt, which generally will result in deduction in excess of the actual cash
payments made on the securities (and accordingly, holders will recognize income
in amounts in excess of the cash payments received).

Mandatory convertible securities are distinguished as a subset of
convertible securities because the conversion is not optional and the conversion
price at maturity is based solely upon the market price of the underlying common
stock, which may be significantly less than par or the price (above or below
par) paid. For these reasons, the risks associated with investing in mandatory
convertible securities most closely resemble the risks inherent in common
stocks. Mandatory convertible securities customarily pay a higher coupon yield
to compensate for the potential risk of additional price volatility and loss
upon conversion. Because the market price of a mandatory convertible security
increasingly corresponds to the market price of its underlying common stock as
the convertible security approaches its conversion date, there can be no
assurance that the higher coupon will compensate for the potential loss.

SENIOR LOANS. Senior loans may be issued by banks, other financial
institutions, and other investors to corporations, partnerships, limited
liability companies and other entities to finance leveraged buyouts,
recapitalizations, mergers, acquisitions, stock repurchases, debt refinancings
and, to a lesser extent, for general operating and other purposes. Senior loans
generally are of below investment grade credit quality and may be unrated at the
time of

-27-

investment. They generally are not registered with the SEC or any state
securities commission and generally are not listed on any securities exchange.

An investment in senior loans involves risk that the borrowers under senior
loans may default on their obligations to pay principal or interest when due.
Although senior loans may be secured by specific collateral, there can be no
assurance that liquidation of collateral would satisfy the borrower's obligation
in the event of non-payment or that such collateral could be readily liquidated.
Senior loans are typically structured as floating rate instruments in which the
interest rate payable on the obligation fluctuates with interest rate changes.
As a result, the yield on an investment in senior loans will generally decline
in a falling interest rate environment and increase in a rising interest rate
environment.

The amount of public information available on senior loans generally will
be less extensive than that available for other types of assets. No reliable,
active trading market currently exists for many senior loans, although a
secondary market for certain senior loans does exist. Senior loans are thus
relatively illiquid. If a fund held by a trust invests in senior loans,
liquidity of a senior loan refers to the ability of the fund to sell the
investment in a timely manner at a price approximately equal to its value on the
fund's books. The illiquidity of senior loans may impair a fund's ability to
realize the full value of its assets in the event of a voluntary or involuntary
liquidation of such assets. Because of the lack of an active trading market,
illiquid securities are also difficult to value and prices provided by external
pricing services may not reflect the true value of the securities. However, many
senior loans are of a large principal amount and are held by financial
institutions. To the extent that a secondary market does exist for certain
senior loans, the market may be subject to irregular trading activity, wide
bid/ask spreads and extended trade settlement periods. The market for senior
loans could be disrupted in the event of an economic downturn or a substantial
increase or decrease in interest rates. This could result in increased
volatility in the market and in a trust's net asset value.

If legislation or state or federal regulators impose additional
requirements or restrictions on the ability of financial institutions to make
loans that are considered highly leveraged transactions, the availability of
senior loans for investment may be adversely affected. In addition, such
requirements or restrictions could reduce or eliminate sources of financing for
certain borrowers. This would increase the risk of default. If legislation or
federal or state regulators require financial institutions to dispose of senior
loans that are considered highly leveraged transactions or subject such senior
loans to increased regulatory scrutiny, financial institutions may determine to
sell such senior loans. Such sales could result in depressed prices. The price
for the senior loan may be adversely affected if sold at a time when a financial
institution is engaging in such a sale.

Some senior loans are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate the senior loans
to presently existing or future indebtedness of the borrower or take other
action detrimental to lenders. Such court action could under certain
circumstances include invalidation of senior loans. Any lender, which could
include a fund held by a trust, is subject to the risk that a court could find
the lender liable for damages in a claim by a borrower arising under the common
laws of tort or contracts or anti-fraud provisions of certain securities laws
for actions taken or omitted to be taken by the lenders

-28-

under the relevant terms of a loan agreement or in connection with actions with
respect to the collateral underlying the senior loan.

FLOATING RATE INSTRUMENTS. A floating rate security is an instrument in
which the interest rate payable on the obligation fluctuates on a periodic basis
based upon changes in a benchmark, often related to interest rates. As a
result, the yield on such a security will generally decline with negative
changes to the benchmark, causing an investor to experience a reduction in the
income it receives from such securities. A sudden and significant increase in
the applicable benchmark may increase the risk of payment defaults and cause a
decline in the value of the security.

ASSET-BACKED SECURITIES. Asset-backed securities ("ABS") are securities
backed by pools of loans or other receivables. ABS are created from many types
of assets, including auto loans, credit card receivables, home equity loans and
student loans. ABS are issued through special purpose vehicles that are
bankruptcy remote from the issuer of the collateral. The credit quality of an
ABS transaction depends on the performance of the underlying assets. To protect
ABS investors from the possibility that some borrowers could miss payments or
even default on their loans, ABS include various forms of credit enhancement.
Some ABS, particularly home equity loan transactions, are subject to interest
rate risk and prepayment risk. A change in interest rates can affect the pace
of payments on the underlying loans, which in turn, affects total return on the
securities. ABS also carry credit or default risk. If many borrowers on the
underlying loans default, losses could exceed the credit enhancement level and
result in losses to investors in an ABS transaction. Finally, ABS have
structure risk due to a unique characteristic known as early amortization, or
early payout, risk. Built into the structure of most ABS are triggers for early
payout, designed to protect investors from losses. These triggers are unique to
each transaction and can include: a big rise in defaults on the underlying
loans, a sharp drop in the credit enhancement level, or even the bankruptcy of
the originator. Once early amortization begins, all incoming loan payments
(after expenses are paid) are used to pay investors as quickly as possible based
upon a predetermined priority of payment.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities are a type of ABS
representing direct or indirect participations in, or are secured by and payable
from, mortgage loans secured by real property and can include single- and
multi-class pass-through securities and collateralized mortgage obligations.
Mortgage-backed securities are based on different types of mortgages, including
those on commercial real estate or residential properties. These securities
often have stated maturities of up to thirty years when they are issued,
depending upon the length of the mortgages underlying the securities. In
practice, however, unscheduled or early payments of principal and interest on
the underlying mortgages may make the securities' effective maturity shorter
than this. Rising interest rates tend to extend the duration of mortgage-backed
securities, making them more sensitive to changes in interest rates, and may
reduce the market value of the securities. In addition, mortgage-backed
securities are subject to prepayment risk, the risk that borrowers may pay off
their mortgages sooner than expected, particularly when interest rates decline.

SOVEREIGN DEBT. Sovereign debt instruments are subject to the risk that a
governmental entity may delay or refuse to pay interest or repay principal on
its sovereign debt, due, for example, to cash flow problems, insufficient
foreign currency reserves, political considerations,

-29-

the relative size of the governmental entity's debt position in relation to the
economy or the failure to put in place required economic reforms. If a
governmental entity defaults, it may ask for more time in which to pay or for
further loans. There is no legal process for collecting sovereign debt that a
government does not pay nor are there bankruptcy proceedings through which all
or part of the sovereign debt that a governmental entity has not repaid may be
collected.

U.S. GOVERNMENT OBLIGATIONS RISK. Obligations of U.S. government agencies,
authorities, instrumentalities and sponsored enterprises have historically
involved little risk of loss of principal if held to maturity. However, not all
U.S. government securities are backed by the full faith and credit of the United
States. Obligations of certain agencies, authorities, instrumentalities and
sponsored enterprises of the U.S. government are backed by the full faith and
credit of the United States (e.g., the Government National Mortgage
Association); other obligations are backed by the right of the issuer to borrow
from the U.S. Treasury (e.g., the Federal Home Loan Banks) and others are
supported by the discretionary authority of the U.S. government to purchase an
agency's obligations. Still others are backed only by the credit of the agency,
authority, instrumentality or sponsored enterprise issuing the obligation. No
assurance can be given that the U.S. government would provide financial support
to any of these entities if it is not obligated to do so by law.

MONEY MARKET SECURITIES. Certain funds held by a trust may invest in money
market securities. If market conditions improve while a fund has temporarily
invested some or all of its assets in high quality money market securities, this
strategy could result in reducing the potential gain from the market upswing,
thus reducing a fund's opportunity to achieve its investment objective.

DERIVATIVES RISK. Certain funds held by a trust may engage in transactions
in derivatives. Derivatives are subject to counterparty risk which is the risk
that the other party in a transaction may be unable or unwilling to meet
obligations when due. Use of derivatives may increase volatility of a fund and
reduce returns. Fluctuations in the value of derivatives may not correspond
with fluctuations of underlying exposures. Unanticipated market movements could
result in significant losses on derivative positions including greater losses
than amounts originally invested and potentially unlimited losses in the case of
certain derivatives. There are no assurances that there will be a secondary
market available in any derivative position which could result in illiquidity
and the inability of a fund to liquidate or terminate positions as valued.
Valuation of derivative positions may be difficult and increase during times of
market turmoil. Certain derivatives may be used as a hedge against other
securities positions, however, hedging can be subject to the risk of imperfect
alignment and there are no assurances that a hedge will be achieved as intended
which can pose significant loss to a fund. The derivatives market is subject to
the risk of changing or increased regulation which may make derivatives more
costly, limit the availability of derivatives or otherwise adversely affect the
value or performance of derivatives. Examples of increased regulation include,
but are not limited to, the imposition of clearing and reporting requirements on
transactions that fall within the definition of "swap" and "security-based
swap," increased recordkeeping and reporting requirements, changing definitional
and registration requirements, and changes to the way that funds' use of
derivatives is regulated. No one can predict the effects of any new
governmental regulation that may be implemented on the ability of a fund to use
any financial derivative product, and there can be no

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assurance that any new governmental regulation will not adversely affect a
fund's ability to achieve its investment objective. The federal income tax
treatment of a derivative may not be as favorable as a direct investment in the
asset that a derivative provides exposure to, which may adversely impact the
timing, character and amount of income a fund realizes from its investment. The
tax treatment of certain derivatives is unsettled and may be subject to future
legislation, regulation or administrative pronouncements.

OPTIONS. A trust may hold a fund or funds that write (sell) or purchase
options as part of its investment strategy. In addition to general risks
associated with derivatives described above, options are considered speculative.
When a fund purchases an option, it may lose the premium paid for it if the
price of the underlying security or other assets decreases or remains the same
(in the case of a call option) or increases or remains the same (in the case of
a put option). If a put or call option purchased by a fund were permitted to
expire without being sold or exercised, its premium would represent a loss to a
fund. To the extent that a fund writes or sells an option, if the decline or
increase in the underlying asset is significantly below or above the exercise
price of the written option, a fund could experience substantial and potentially
unlimited losses.

There can be no assurance that a liquid market for the options will exist
when a fund seeks to close out an option position. Reasons for the absence of a
liquid secondary market on an exchange may include the following: (i) there may
be insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options; (iv) unusual or unforeseen
of an exchange or The Options Clearing Corporation ("OCC") may not at all times
be adequate to handle current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options). If trading were discontinued, the secondary market on that exchange
(or in that class or series of options) would cease to exist. However,
outstanding options on that exchange that had been issued by the OCC as a result
of trades on that exchange would continue to be exercisable in accordance with
their terms. A fund's ability to terminate over-the-counter options is more
limited than with exchange-traded options and may involve the risk that broker-
dealers participating in such transactions will not fulfill their obligations.
If a fund were unable to close out a covered call option that it had written
(sold) on a security, it would not be able to sell the underlying security
unless the option expired without exercise.

The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets. Additionally, the exercise price of an option may be
adjusted downward before the option's expiration as a result of the occurrence
of certain corporate events affecting the underlying equity security, such as
extraordinary dividends, stock splits, merger or other extraordinary
distributions or events. In certain circumstances, a reduction in the exercise
price of an option could reduce a fund's capital appreciation potential on the
underlying security.

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To the extent that a fund purchases options pursuant to a hedging strategy,
the fund will be subject to the following additional risks. If a put or call
option purchased by a fund is not sold when it has remaining value, and if the
market price of the underlying security remains equal to or greater than the
exercise price (in the case of a put), or remains less than or equal to the
exercise price (in the case of a call), the fund will lose its entire investment
in the option. Also, where a put or call option on a particular security is
purchased to hedge against price movements in a related security, the price of
the put or call option may move more or less than the price of the related
security. If restrictions on exercise were imposed, a fund might be unable to
exercise an option it had purchased. If a fund were unable to close out an
option that it had purchased on a security, it would have to exercise the option
in order to realize any profit or the option may expire worthless.

The writing (selling) and purchase of options is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. The successful use
of options depends in part on the ability of a fund's adviser to predict future
price fluctuations and, for hedging transactions, the degree of correlation
between the options and securities or currency markets.

If a fund employs a covered call strategy, a fund will generally write
(sell) call options on a significant portion of the fund's managed assets. These
call options will give the option holder the right, but not the obligation, to
purchase a security from the fund at the strike price on or prior to the
option's expiration date. The ability to successfully implement the fund's
investment strategy depends on the fund adviser's ability to predict pertinent
market movements, which cannot be assured. Thus, the use of options may require
a fund to sell portfolio securities at inopportune times or for prices other
than current market values, may limit the amount of appreciation the fund can
realize on an investment or may cause the fund to hold a security that it might
otherwise sell. The writer (seller) of an option has no control over the time
when it may be required to fulfill its obligation as a writer (seller) of the
option. Once an option writer (seller) has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying security at the
exercise price. As the writer (seller) of a covered call option, a fund forgoes,
during the option's life, the opportunity to profit from increases in the market
value of the security underlying the call option above the sum of the premium
and the strike price of the call option, but has retained the risk of loss
should the price of the underlying security decline. The value of the options
written (sold) by a fund will be affected by changes in the value and dividend
rates of the underlying equity securities, an increase in interest rates,
changes in the actual or perceived volatility of securities markets and the
underlying securities and the remaining time to the options' expirations. The
value of the options may also be adversely affected if the market for the
options becomes less liquid or smaller.

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a fund generally seeks to generate income, in the form of the premiums received
for writing (selling) the call options. Investment income paid by a fund to its
shareholders (such as a trust) may be derived primarily from the premiums it
receives from writing (selling) call options and, to a lesser extent, from the
dividends and interest it receives from the equity securities or other
investments held in the fund's portfolio and short-term gains thereon. Premiums
from writing (selling) call options and dividends and interest payments made by
the securities in a fund's portfolio can vary widely over time.

SWAPS. Certain funds held by a trust may invest in swaps. In addition to
general risks associated with derivatives described above, swap agreements
involve the risk that the party with whom a fund has entered into the swap will
default on its obligation to pay a fund and the risk that a fund will not be
able to meet its obligations to pay the other party to the agreement. Swaps
entered into by a fund may include, but are not limited to, interest rate swaps,
total return swaps and/or credit default swaps. In an interest rate swap
transaction, two parties exchange rights to receive interest payments, such as
exchanging the right to receive floating rate payments based on a reference
interest rate for the right to receive fixed rate payments. In addition to the
general risks associated with derivatives and swaps described above, interest
rate swaps are subject to interest rate risk and credit risk. In a total return
swap transaction, one party agrees to pay another party an amount equal to the
total return on a reference asset during a specified period of time in return
for periodic payments based on a fixed or variable interest rate or on the total
return from a different reference asset. In addition to the general risks
associated with derivatives and swaps described above, total return swaps could
result in losses if the reference asset does not perform as anticipated and
these swaps can have the potential for unlimited losses. In a credit default
swap transaction, one party makes one or more payments over the term of the
contract to the counterparty, provided that no event of default with respect to
a specific obligation or issuer has occurred. In return, upon any event of
default, such party would receive from the counterparty a payment equal to the
par (or other agreed-upon) value of such specified obligation. In addition to
general risks associated with derivatives and swaps described above, credit
default swaps involve special risks because they are difficult to value, are
highly susceptible to liquidity and credit risk and generally pay a return to
the party that has paid the premium only in the event of an actual default by
the issuer of the underlying obligation (as opposed to a credit downgrade or
other indication of financial difficulty).

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Certain funds held by a trust
may engage in forward foreign currency exchange transactions. Forward foreign
exchange transactions are contracts to purchase or sell a specified amount of a
specified currency or multinational currency unit at a price and future date set
at the time of the contract. Forward foreign currency exchange contracts do not
eliminate fluctuations in the value of non-U.S. securities but rather allow a
fund to establish a fixed rate of exchange for a future point in time. This
strategy can have the effect of reducing returns and minimizing opportunities
for gain.

INDEXED AND INVERSE SECURITIES. Certain funds held by a trust may invest
in indexed and inverse securities. In addition to general risks associated with
derivatives described above, indexed and inverse securities are subject to risk
with respect to the value of the particular index. These securities are subject
to leverage risk and correlation risk. Certain indexed and inverse securities
have greater sensitivity to changes in interest rates or index levels than other
securities,

-33-

and a fund's investment in such instruments may decline significantly in value
if interest rates or index levels move in a way a fund's management does not
anticipate.

FUTURES. Certain funds held by a trust may engage in futures transactions.
In addition to general risks associated with derivatives described above, the
primary risks associated with the use of futures contracts and options are
(a) the imperfect correlation between the change in market value of the
instruments held by a fund and the price of the futures contract or option;
(b) possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures contract when desired; (c) losses caused
by unanticipated market movements, which are potentially unlimited; (d) the
investment adviser's inability to predict correctly the direction of securities
prices, interest rates, currency exchange rates and other economic factors; and
(e) the possibility that the counterparty will default in the performance of its
obligations. While futures contracts are generally liquid instruments, under
certain market conditions they may become illiquid. Futures exchanges may
impose daily or intra-day price change limits and/or limit the volume of
trading. Additionally, government regulation may further reduce liquidity
through similar trading restrictions.

REPURCHASE AGREEMENT RISK. A repurchase agreement is a form of short-term
borrowing where a dealer sells securities to investors (usually on an overnight
basis) and buys them back the following day. If the other party to a repurchase
agreement defaults on its obligation under such agreement, a fund held by a
trust may suffer delays and incur costs or lose money in exercising its rights
under the agreement. If the seller fails to repurchase the security under a
repurchase agreement and the market value of such security declines, such fund
may lose money.

SHORT SALES RISK. Certain funds held by a trust may engage in short sales.
Because making short sales in securities that it does not own exposes a fund to
the risks associated with those securities, such short sales involve speculative
exposure risk. A fund will incur a loss as a result of a short sale if the
price of the security increases between the date of the short sale and the date
on which such fund replaces the security sold short. A fund will realize a gain
if the security declines in price between those dates. As a result, if a fund
makes short sales in securities that increase in value, it will likely
underperform similar funds that do not make short sales in securities they do
not own. There can be no assurance that a fund will be able to close out a
short sale position at any particular time or at an acceptable price. Although
a fund's gain is limited to the amount at which it sold a security short, its
potential loss is limited only by the maximum attainable price of the security,
less the price at which the security was sold. Short sale transactions involve
leverage because they can provide investment exposure in an amount exceeding the
initial investment. A fund may also pay transaction costs and borrowing fees in
connection with short sales.

COMMODITIES. Certain funds held by a trust may have exposure to the
commodities market. This exposure could expose such funds and to greater
volatility than investment in other securities. The value of investments
providing commodity exposure may be affected by changes in overall market
movements, commodity index volatility, changes in interest rates, or factors
affecting a particular industry or commodity, such as drought, floods, weather,
embargoes, tariffs and international economic, political and regulatory
developments.

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CONCENTRATION RISK. Concentration risk is the risk that the value of a
trust may be more susceptible to fluctuations based on factors that impact a
particular sector because the trust provides exposure to investments
concentrated within a particular sector or sectors.

CONSUMER DISCRETIONARY AND CONSUMER STAPLES SECTORS. The profitability of
companies that manufacture or sell consumer products or provide consumer
services 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
technological investments. 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. Many retailers are involved in 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.

ENERGY SECTOR. Energy companies may include but are not limited to
companies involved in: production, generation, transmission, marketing, control,
or measurement of energy; the provision of component parts or services to
companies engaged in the above activities; energy research or experimentation;
and environmental activities related to the solution of energy problems, such as
energy conservation and pollution control.

The securities of companies in the energy field are subject to changes in
value and dividend yield which depend, to a large extent, on the price and
supply of energy fuels. Swift price and supply fluctuations may be caused by
events relating to international politics, energy conservation, the success of
exploration projects, and tax and other regulatory policies of various
governments. As a result of the foregoing, the securities issued by energy
companies may be subject to rapid price volatility.

Any future scientific advances concerning new sources of energy and fuels
or legislative changes relating to the energy sector or the environment could
have a negative impact on the energy sector. Each of the problems referred to
could adversely affect the financial stability of the issuers of any energy
sector securities.

FINANCIALS SECTOR. Companies in the financials sector may include banks
and their holding companies, finance companies, investment managers, broker-
dealers, insurance and reinsurance companies and mortgage REITs. 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

-35-

competition from new entrants in their fields of business. In addition, banks
and their holding companies are extensively regulated at both the federal and
state level and may be adversely affected by increased regulations. Banks face
increased competition from nontraditional lending sources as regulatory changes
permit new entrants to offer various financial products. Technological advances
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 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 but not limited to interest rate movements, the
imposition of premium rate caps, a misapprehension of the risks involved in
given underwritings, competition and pressure to compete globally, weather
catastrophes or other natural or man-made disasters and the effects of client
mergers. Individual companies may be exposed to material risks including reserve
inadequacy and the inability to collect from reinsurance carriers. Insurance
companies are subject to extensive governmental regulation, including the
imposition of maximum rate levels, which may not be adequate for some lines of
business. Proposed or potential tax law changes may also adversely affect
insurance companies' policy sales, tax obligations and profitability. In
addition to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressure to compete globally.

In addition to the normal risks of business, companies involved in the
insurance and risk management industry are subject to significant risk factors,
including those applicable to regulated insurance companies, such as: the
inherent uncertainty in the process of establishing property-liability loss
reserves, and the fact that ultimate losses could materially exceed established
loss reserves, which could have a material adverse effect on results of
operations and financial condition; the fact that insurance companies have
experienced, and can be expected in the future to experience, catastrophic
losses, which could have a material adverse impact on their financial
conditions, results of operations and cash flow; the inherent uncertainty in the
process

-36-

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
collectability of reinsurance recoverables.

The state insurance regulatory framework is also subject to the risk of
federal and state legislatures potentially enacting laws that alter or increase
regulation of insurance companies and insurance holding company systems.
Previously, 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.

HEALTH CARE SECTOR. Healthcare companies involved in advanced medical
devices and instruments, drugs and biotech, managed care, hospital
management/health services and medical supplies have potential risks unique to
their sector of the healthcare field. These companies are subject to
governmental regulation of their products and services, a factor which could
have a significant and possibly unfavorable effect on the price and availability
of such products or services. Furthermore, such companies face the risk of
increasing competition from new products or services, generic drug sales,
termination of patent protection for drug or medical supply products and the
risk that technological advances will render their products obsolete. The
research and development costs of bringing a drug to market are substantial, and
include lengthy governmental review processes with no guarantee that the product
will ever come to market. Many of these companies may have losses and not offer
certain products for several years. Such companies may also have persistent
losses during a new product's transition from development to production, and
revenue patterns may be erratic. In addition, healthcare facility operators may
be affected by events and conditions including, among other things, demand for
services, the ability of the facility to provide the services required,
physicians' confidence in the facility,

-37-

management capabilities, competition with other hospitals, efforts by insurers
and governmental agencies to limit rates, legislation establishing state rate-
setting agencies, expenses, government regulation, the cost and possible
unavailability of malpractice insurance and the termination or restriction of
governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third-party payor programs.

Legislative proposals concerning healthcare are proposed in Congress from
time to time. These proposals span a wide range of topics, including cost and
price controls (which might include a freeze on the prices of prescription
drugs), national health insurance incentives for competition in the provision of
healthcare services, tax incentives and penalties related to healthcare
insurance premiums and promotion of prepaid healthcare plans.

INDUSTRIALS SECTOR. General risks of industrials companies include the
general state of the economy, intense competition, consolidation, domestic and
international politics, excess capacity and consumer spending trends. In
addition, capital goods companies may also be significantly affected by overall
capital spending levels, economic cycles, technical obsolescence, delays in
modernization, limitations on supply of key materials, labor relations,
government regulations, government contracts and ecommerce initiatives.
Furthermore, certain companies involved in the industry have also faced scrutiny
for alleged accounting irregularities that may have led to the overstatement of
their financial results, and other companies in the industry may face similar
scrutiny.

Industrials companies may also be affected by factors more specific to
their individual industries. Industrial machinery manufacturers may be subject
to declines in commercial and consumer demand and the need for modernization.
Aerospace and defense companies may be influenced by decreased demand for new
equipment, aircraft order cancellations, disputes over or ability to obtain or
retain government contracts, or changes in government budget priorities, changes
in aircraft-leasing contracts and cutbacks in profitable business travel.

INFORMATION TECHNOLOGY SECTOR. Information technology companies generally
include companies involved in the development, design, manufacture and sale of
computers and peripherals, software and services, data networking and
communications equipment, internet access and information providers,
semiconductors and semiconductor equipment and other related products, systems
and services. The market for these products, especially those specifically
related to the internet, may be characterized by rapidly changing technology,
product obsolescence, cyclical markets, evolving industry standards and frequent
new product introductions. The success of companies in this sector depends, in
substantial part, on the timely and successful introduction of new products. An
unexpected change in one or more of the technologies affecting a company's
products or in the market for products based on a particular technology could
have a material adverse effect on an issuer's operating results. Furthermore,
there can be no assurance that any particular company will be able to respond in
a timely manner to compete in the rapidly developing marketplace.

Factors such as announcements of new products or development of new
technologies and general conditions of the industry have caused and are likely
to cause the market price of high-technology common stocks to fluctuate
substantially. In addition, technology company stocks

-38-

have experienced extreme price and volume fluctuations that often have been
unrelated to the operating performance of such companies. Such market volatility
may adversely affect the market price of shares of these companies.

Some key components of certain products of technology issuers are currently
available only from single sources. There can be no assurance that in the future
suppliers will be able to meet the demand for components in a timely and cost-
effective manner. Accordingly, an issuer's operating results and customer
relationships could be adversely affected by either an increase in price for, or
an interruption or reduction in supply of, any key components. Additionally,
many technology issuers are characterized by a highly concentrated customer base
consisting of a limited number of large customers who may require product
vendors to comply with rigorous industry standards. Any failure to comply with
such standards may result in a significant loss or reduction of sales. Because
many products and technologies of technology companies are incorporated into
other related products, such companies are often highly dependent on the
performance of the personal computer, electronics and telecommunications
industries. There can be no assurance that these customers will place additional
orders, or that an issuer will obtain orders of similar magnitude as past orders
from other customers. Similarly, the success of certain technology companies is
tied to a relatively small concentration of products or technologies.
Accordingly, a decline in demand of such products, technologies or from such
customers could have a material adverse impact on companies in this sector.

Many technology companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken to protect proprietary rights will be adequate to prevent
misappropriation of technology or that competitors will not independently
develop technologies that are substantially equivalent or superior to an
issuer's technology. In addition, due to the increasing public use of the
internet, it is possible that other laws and regulations may be adopted to
address issues such as privacy, pricing, characteristics, and quality of
internet products and services. The adoption of any such laws could have a
material adverse impact on the issuers of securities in the information
technology sector.

MATERIALS SECTOR. Companies in the basic materials sector are engaged in
the manufacture, mining, processing, or distribution of raw materials and
intermediate goods used in the industrial sector. These may include materials
and products such as chemicals, commodities, forestry products, paper products,
copper, iron ore, nickel, steel, aluminum, precious metals, textiles, cement,
and gypsum. Basic materials companies may be affected by the volatility of
commodity prices, exchange rates, import controls, worldwide competition,
depletion of resources and mandated expenditures for safety and pollution
control devices. In addition, they may be adversely affected by technical
progress, labor relations and governmental regulation. These companies are also
at risk for environmental damage and product liability claims. Production of
industrial materials often exceeds demand as a result of over-building or
economic downturns, which may lead to poor investment returns.

REAL ESTATE SECTOR. Real estate companies include REITs and real estate
management and development companies. Companies in the real estate sector may
be exposed to the risks associated with the ownership of real estate which
include, among other factors, changes in

-39-

general U.S., global and local economic conditions, declines in real estate
values, changes in the financial health of tenants, overbuilding and increased
competition for tenants, oversupply of properties for sale, changing
demographics, changes in interest rates, tax rates and other operating expenses,
changes in government regulations, faulty construction and the ongoing need for
capital improvements, regulatory and judicial requirements including relating to
liability for environmental hazards, changes in neighborhood values and buyer
demand and the unavailability of construction financing or mortgage loans at
rates acceptable to developers. The performance of a REIT may also be adversely
impacted by other factors (discussed above).

Real estate management and development companies often are dependent upon
specialized management skills, have limited diversification and are subject to
risks inherent in operating and financing a limited number of projects. To the
extent such companies focus their business on a particular geographic region of
a country, they may be subject to greater risks of adverse developments in that
area. These companies may also be subject to heavy cash flow dependency and
defaults by borrowers. Certain real estate management and development companies
have a relatively small market capitalization, which may tend to increase the
volatility of the market price of these securities.

TELECOMMUNICATION SERVICES SECTOR. General risks of telecommunication
services companies include rapidly changing technology, rapid product
obsolescence, loss of patent protection, cyclical market patterns, evolving
industry standards and frequent new product introductions. Certain
communications/bandwidth companies are subject to substantial governmental
regulation, which among other things, regulates permitted rates of return and
the kinds of services that a company may offer. Such companies can also be
negatively impacted by any failure to obtain, or delays in obtaining, financial
or regulatory approval for new products or services. Companies in this sector
are subject to fierce competition for market share from existing competitors and
new market entrants. Such competitive pressures are intense and communications
stocks can experience extreme volatility.

Companies in the telecommunications sector may encounter distressed cash
flows and heavy debt burdens due to the need to commit substantial capital to
meet increasing competition, particularly in formulating new products and
services using new technology. Technological innovations may also make the
existing products and services of telecommunications companies obsolete. In
addition, companies in this sector can be impacted by a lack of investor or
consumer acceptance of new products, changing consumer preferences and lack of
standardization or compatibility with existing technologies making
implementation of new products more difficult.

UTILITIES SECTOR. General problems of utility companies include risks of
increases in fuel and other operating costs; restrictions on operations and
increased costs and delays as a result of environmental, nuclear safety and
other regulations; regulatory restrictions on the ability to pass increasing
wholesale costs along to the retail and business customer; energy conservation;
technological innovations which may render existing plants, equipment or
products obsolete; the effects of local weather, maturing markets and difficulty
in expanding to new markets due to regulatory and other factors; natural or
manmade disasters; difficulty obtaining adequate returns on invested capital;
the high cost of obtaining financing during periods of inflation; difficulties
of the capital markets in absorbing utility debt and equity securities; and
increased competition. In

-40-

addition, taxes, government regulation, international politics, price and supply
fluctuations, volatile interest rates and energy conservation may cause
difficulties for utilities. All of such issuers experience certain of these
problems to varying degrees.

CALIFORNIA. The information provided below is only a brief summary of the
complex factors affecting the financial situation in California and is derived
from sources that are generally available to investors and are believed to be
accurate. Except where otherwise indicated, the information is based on
California's 2015-16 fiscal year running from July 1, 2015 to June 30, 2016. No
independent verification has been made of the accuracy or completeness of any of
the following information. It is based in part on information obtained from
various state and local agencies in California or contained in official
statements for various California municipal obligations.

Economic Outlook. California, along with the United States as a whole,
completed its seventh year of economic recovery as California ended its fiscal
year on June 30, 2016. California's economy demonstrated continued economic
growth throughout the 2015-16 fiscal year. California's personal income growth
outperformed that of the nation as a whole during the 2015-16 fiscal year,
increasing by 5.2% compared with a 3.8% increase nationally. Consequently,
consumer spending increased, as demonstrated by a 2.8% increase in California's
new vehicle registrations in the 2015-16 fiscal year and a $1.2 billion (5.1%)
increase in sales and use tax revenue.

California's labor market continued to add jobs during the 2015-16 fiscal
year. Total employment for June 2016 stood at 18.1 million jobs, a gain of more
than 300,000 jobs from the same period a year earlier. Mirroring the increase
in jobs, California's unemployment rate fell from 6.2% in June 2015 to 5.4% in
June 2016.

Net Assets. The California primary government's net position as of the end
of the 2015-16 fiscal year was a net deficit position of $30.3 billion, an
improvement of $10.6 billion (26.0%). The total net deficit position was
reduced by $107.1 billion for net investment in capital assets and by $34.8
billion for restricted net position, yielding a negative unrestricted net
position of $172.2 billion. Restricted net position is dedicated for specified
uses and is not available to fund current activities. More than 59.0% ($101.6
billion) of the negative $172.2 billion consisted of unfunded, employee-related,
long-term liabilities that are recognized as soon as an obligation has been
incurred, even though payment will occur over many future periods. Another 38.6%
($66.5 billion) consisted of outstanding bonded debt issued to build capital
assets of school districts and other local governmental entities. Bonded debt
reduces the state's unrestricted net position; however, local governments, not
the state, own the capital assets that would normally offset this reduction.

The primary government's combined net position (governmental and business-
type activities) increased by $10.6 billion (26.0%) from a negative $40.9
billion to negative $30.3 billion at June 30, 2016.

California General Fund. California's main operating fund (the "California
General Fund") ended the 2015-16 fiscal year with assets of $20.9 billion;
liabilities and deferred inflows

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of resources of $20.6 billion; and nonspendable, restricted, and committed fund
balances of $76 million, $4.0 billion, and $68 million, respectively, leaving
the California General Fund with a negative unassigned fund balance of $3.8
billion. Total assets of the California General Fund decreased by $1.3 billion
(5.6%) from the prior fiscal year, while the total liabilities and deferred
inflows of resources decreased by $3.8 billion (15.7%). The California General
Fund's unassigned fund balance deficit decreased by $830 million (17.8%).

As of the end of the 2015-16 fiscal year, the California General Fund had
an excess of revenues over expenditures of $5.8 billion ($117.6 billion in
revenues and $111.8 billion in expenditures). Approximately $112.5 billion
(95.7%) of California General Fund revenue was derived from California's largest
three taxes--personal income taxes ($78.5 billion), sales and use taxes ($24.8
billion) and corporation taxes ($9.2 billion). As a result of fund
classifications made to comply with generally accepted governmental accounting
principles, a total of $246 million in revenue, essentially all from
unemployment programs, was included in the California General Fund. These
revenues were not considered California General Fund revenues for any budgetary
purposes or for California's "Budgetary/Legal Basis Annual Report." During the
2015-16 fiscal year, total California General Fund revenue increased by $796
million (0.7%). The increase was a result of increases in personal income taxes
of $1.6 billion (2.1%) and sales and use taxes of $1.2 billion (5.1%), offset by
a decrease in corporation taxes of $1.6 billion (14.5%).

California General Fund expenditures increased by $4.6 billion (4.3%)
during the 2015-16 fiscal year. The largest increases were in education and
health and human services expenditures, which were up $2.3 billion and $2.1
billion, respectively. The California General Fund's net fund balance of $362
million for the year ended June 30, 2016, was an improvement of $2.6 billion
over the prior year's ending fund deficit of $2.2 billion.

Budget Outlook. California's 2016-17 Budget Act (the "California Budget
Act") was enacted on June 27, 2016. The California Budget Act appropriated
$170.9 billion: $122.5 billion from the California General Fund, $44.6 billion
from special funds and $3.8 billion from bond funds. The California General
Fund's budgeted expenditures increased $6.9 billion (6.0%) over the previous
year's California General Fund budget. When the budget was enacted, the
California General Fund's revenues were projected to be $120.3 billion after a
$3.3 billion transfer to the Budget Stabilization Account ("BSA"). California
General Fund revenue comes predominantly from taxes, with personal income taxes
expected to provide 67.5% of total revenue. California's major taxes (personal
income, sales and use and corporation taxes) were projected to supply
approximately 98.1% of the California General Fund's resources in the 2016-17
fiscal year. When the budget was enacted, the California General Fund was
projected to end the 2016-17 fiscal year with $8.5 billion in total reserves:
$6.7 billion in the BSA and $1.8 billion in the Special Fund for Economic
Uncertainties ("SFEU"), resulting in the fifth consecutive year of projected
budget surplus in the California General Fund.

In January 2017, the proposed 2017-18 governor's budget provided revised
California General Fund revenue, expenditure and reserve estimates for the 2016-
17 fiscal year. The revised estimate projected California General Fund revenue
of $118.8 billion, expenditures of $122.8 billion and total year-end reserves of
$6.8 billion: $6.7 billion in the BSA and only $47

-42-

million in the SFEU, which is $1.7 billion less than projected in June 2016 for
the enacted budget. Actual California General Fund cash receipts for the first
half of the 2016-17 fiscal year fell short of the estimates used in preparing
the enacted budget, which supported the need for revised estimates. As of
January 1, 2017, revenues were $1.7 billion less than forecasted for the first
six months of the fiscal year, while disbursements were $2.2 billion more than
estimated. As a result, the California General Fund's temporary borrowing was
$4.0 billion more than projected, leaving a balance as of December 31, 2016, of
$17.8 billion in outstanding loans--comprised entirely of internal borrowing
from special funds.

The majority of the spending plan for the 2016-17 fiscal year included
funding that maintains existing state policies or is based on spending
allocations driven by constitutional funding requirements, such as the
Proposition 98 guaranteed minimum funding levels for K-12 schools and community
colleges and the Proposition 2 required minimum transfers to the BSA and minimum
annual debt reduction payments. The discretionary portion of the 2016-17
spending plan allocated $2.6 billion toward additional California General Fund
reserves: an additional $2.0 billion transfers to the BSA and $600 million to
the SFEU; funding for one-time activities, such as $1.5 billion for repairing
and replacing aged infrastructure, $500 million for building affordable housing
and $200 million for drought-related activities; and ongoing funding
augmentations for specific programs, including $300 million to the University of
California and California State Universities. To offset the impact of reduced
California General Fund revenues in the 2016-17 fiscal year, the administration
proposed to reduce or eliminate some of these discretionary items in the 2016-17
spending plan.

California's governor released his proposed 2017-18 budget on January 10,
2017. The large revenue growth that California experienced in the past few
years is beginning to slow and, if no action is taken, the governor's budget
projected a budget shortfall of $1.6 billion for the 2017-18 fiscal year. The
proposed budget included a variety of solutions to bring California's budget
back into balance for the 2017-18 fiscal year and future years, including a $1.7
billion reduction in the Proposition 98 minimum funding guarantee for K-12
schools and community colleges based on the lower revenue estimates, a $900
million elimination of uncommitted one-time spending including in the 2016-17
budget and a $600 million delay or elimination of proposed spending increases.
After addressing the budget shortfall, the 2017-18 governor's budget prioritized
the achievements made in recent years: more money for education, an earned
income tax credit for working families, raising the minimum wage, extending
health care to millions of Californians, paying down long-term liabilities and
continuing to plan and save for the next recession.

The 2017-18 governor's budget projected (with all budget solutions enacted)
that California General Fund revenues and transfers will be $124.0 billion and
expenditures will be $122.5 billion, leaving an estimated year-end reserve of
$1.5 billion in the California General Fund's SFEU. Estimated 2017-18
California General Fund revenues and transfers were 4.4% higher than the revised
2016-17 fiscal year projection of $118.8 billion, but were 2.2% less than
estimated for the 2017-18 fiscal year in June 2016. The proposed 2017-18
California General Fund expenditures were slightly less than the revised 2016-17
fiscal year projected expenditures of $122.8 billion, but were 3.0% less than
projected for the 2017-18 fiscal year in June 2016.

-43-

Capital Assets. As of June 30, 2016, California's investment in capital
assets for its governmental and business-type activities amounted to $136.7
billion (net of accumulated depreciation/amortization). The state's capital
assets include land, state highway infrastructure, collections, buildings and
other depreciable property, intangible assets and construction/development in
progress. The buildings and other depreciable property account includes
buildings, improvements other than buildings, equipment, certain infrastructure
assets, certain books and other capitalized and depreciable property.
Intangible assets include computer software, land use rights, patents,
copyrights and trademarks. Infrastructure assets are items that normally are
immovable, such as roads and bridges, and can be preserved for a greater number
of years than can most capital assets.

As of June 30, 2016, California's capital assets increased $4.3 billion
(3.2%) over the prior fiscal year. The majority of the increase occurred in
state highway infrastructure and buildings and other depreciable property.

Debt Administration. At June 30, 2016, California had total bonded debt
outstanding of $110.9 billion. Of this amount, $79.8 billion (71.9%)
represented general obligation bonds, which are backed by the full faith and
credit of the state. The current portion of general obligation bonds
outstanding was $3.2 billion and the long-term portion was $76.6 billion. The
remaining $31.1 billion (28.1%) of bonded debt outstanding represents revenue
bonds, which are secured solely by specified revenue sources. The current
portion of revenue bonds outstanding was $1.7 billion and the long-term portion
was $29.4 billion. During the 2015-16 fiscal year, California issued $7.3
billion in new general obligation bonds for governmental activities, including:
parks, clean water and clean air; reading and literacy improvement and public
libraries; safe drinking water; children's hospitals; earthquake safety and
public building rehabilitation; public primary, secondary, community college
and university education facilities; highway safety, traffic reduction, air
quality and port security; transportation; clean water, watershed protection and
flood protection; water security, water quality, water supply and river, coastal
and beach protection; water conservation; seismic retrofit; wildlife, coastal
and parkland conservation; medical research; housing and emergency shelters;
veteran's homes; high speed passenger train projects; and to refund previously
outstanding general obligation bonds and commercial paper. California also
issued $545 million in new general obligation bonds for veterans farm and home
buildings, a business-type activity.

Budgetary Control. The California state legislature approves an annual
budget that contains estimates of revenues and expenditures for the ensuing
fiscal year. This budget is the result of negotiations between the governor and
the California legislature. Throughout the fiscal year, adjustments in the form
of budget revisions, executive orders and financial legislation agreed to by the
governor and the California legislature are made to the budget. The California
State Controller's Office is statutorily responsible for controlling revenues
due the primary government and for expenditures of each appropriation contained
in the budget. Budgeted appropriations are the expenditure authorizations that
allow state agencies to purchase or create liabilities for goods and services.

California's accounting system provides the California State Controller's
Office with a centrally-controlled record system to fully account for each
budgeted appropriation, including its

-44-

unexpended balance, and for all cash receipts and disbursements. The accounting
system is decentralized, meaning the detail of each control account is
maintained by each state agency. During the fiscal year, the control accounts
and the agency accounts are maintained and reconciled on a cash basis. At the
end of the fiscal year, each agency prepares annual accrual reports for
receivables and payables. The California State Controller's Office combines its
control account balances with the agency accrual reports to prepare California's
Budgetary/Legal Basis Annual Report. State laws and regulations that, in some
cases, do not fully agree with generally accepted accounting principles, govern
the methods of accounting for expenditures and revenues in these reports.

Risk Management. California's primary government has elected, with a few
exceptions, to be self-insured against loss or liability. The primary
government generally does not maintain reserves. Losses are covered by
appropriations from each fund responsible for payment in the year in which the
payment occurs. The state is permissively self-insured and, barring any
extraordinary catastrophic event, the potential amount of loss faced by the
state is not considered material in relation to the primary government's
financial position. Generally, the exceptions are when a bond resolution or a
contract requires the primary government to purchase commercial insurance for
coverage against property loss or liability. There have been no significant
reductions in insurance coverage in 2016 from the prior year. In addition, no
insurance settlement from 2013 to 2016 has exceeded insurance coverage. All
claim payments are on a "pay-as-you-go" basis, with workers' compensation
benefits for self-insured agencies initially being paid by California's "State
Compensation Insurance Fund."

The discounted liability for unpaid self-insurance claims of the primary
government was estimated to be $3.9 billion as of June 30, 2016. This estimate
was based primarily on actuarial reviews of the state's workers' compensation
program and included indemnity payments to claimants, as well as all other costs
of providing workers' compensation benefits, such as medical care and
rehabilitation. The estimate also included the liability for unpaid services
fees, industrial disability leave benefits, and incurred-but-not-reported
amounts. The estimated total liability of approximately $5.6 billion was
discounted to $3.9 billion using a 3.5% interest rate. Of the total discounted
liability, $409 million was a current liability, of which $276 million was
included in the California General Fund, $130 million in the special revenue
funds and $3 million in the internal service funds. The remaining $3.5 billion
was reported as other noncurrent liabilities in the government-wide statement of
net position.

The University of California, a discretely presented component unit, is
self-insured or insured through a wholly-owned captive insurance company.
Additional disclosures for the University's risk management and self-insurance
claims liability is included in its separately issued financial statements.

Ratings. As of February 21, 2018 all outstanding general obligation bonds
of the state of California were rated "AA-" by S&P Global Ratings, a division of
S&P Global, Inc., and "Aa3" by Moody's Investors Service, Inc. Any explanation
concerning the significance of such ratings must be obtained from the rating
agencies. There is no assurance that any ratings will continue for any period
of time or that they will not be revised or withdrawn.

-45-

Local Issuances. It should be noted that the creditworthiness of
obligations issued by local California issuers may be unrelated to the
creditworthiness of obligations issued by the state of California, and there is
no obligation on the part of the state to make payment on such local obligations
in the event of default.

The foregoing information constitutes only a brief summary of some of the
general factors which may impact certain issuers of California bonds and does
not purport to be a complete or exhaustive description of all adverse conditions
to which the issuers of such obligations are subject. Additionally, many
factors including national economic, social and environmental policies and
conditions, which are not within the control of the issuers of such bonds, could
affect or could have an adverse impact on the financial condition of the state
and various agencies and political subdivisions thereof. The sponsor is unable
to predict whether or to what extent such factors or other factors may affect
the issuers of the bonds, the market value or marketability of such bonds or the
ability of the respective issuers of such bonds to pay interest on or principal
of such bonds.

NEW JERSEY. The information provided below is only a brief summary of the
complex factors affecting the financial situation in New Jersey and is derived
from sources that are generally available to investors and are believed to be
accurate. Except where otherwise indicated, the information is based on New
Jersey's 2015-16 fiscal year running from July 1, 2015 to June 30, 2016. No
independent verification has been made of the accuracy or completeness of any of
the following information. It is based in part on information obtained from
various state and local agencies in New Jersey or contained in official
statements for various New Jersey municipal obligations.

Economic Outlook. New Jersey's economic recovery continued in 2016. New
Jersey added 14,800 new private sector jobs over the course of the year. New
Jersey has gained 281,700 new private sector jobs since February 2010 and
private sector payrolls are now higher than the pre-recession peak by 33,200
jobs. Payroll growth in 2016 was led by the education and health services
sector; trade, transportation and utilities sector; and manufacturing sector.
New Jersey's unemployment rate stood at 4.7% at the end of December 2016 which
matched the national unemployment rate.

New Jersey's housing market continued to recover with a solid year in 2016.
Single-family home sales in 2016 were 15.1% higher than in 2015 while townhouse-
condo sales were 8.8% higher in 2016 than in 2015. The number of residential
building permits issued in 2016 remained above the 25,000 mark for the third
year in a row. New car sales continued to rise in 2016 with the total for the
year exceeding 600,000 for the first time since prior to the great recession.
Aggregate personal income, which includes wage income as well as income from
other sources such as assets or transfers, grew for a fourteenth consecutive
quarter and reached a new all-time high at the end of the third quarter of 2016.

Revenues and Expenditures. During the 2015-16 fiscal year, New Jersey's
revenues, including transfers, totaled $58.9 billion or a decrease of $0.9
billion when compared to the prior fiscal year. This decrease in total revenues
is primarily attributable to decreases in interest earnings and general taxes,
primarily New Jersey's corporation business tax. General taxes

-46-

totaled $30.5 billion and accounted for 51.7% of total state revenues for the
2015-16 fiscal year. New Jersey's gross income tax totaled $13.4 billion, the
sales and use tax totaled $9.2 billion and the corporation business tax totaled
$2.3 billion. New Jersey's three major taxes comprised 81.7% of the total
general taxes that were collected during the 2015-16 fiscal year. General taxes
decreased by $307.8 million when compared to the 2014-15 fiscal year.

The 2015-16 fiscal year expenses totaled $66.0 billion, an increase of $0.9
billion in comparison to the prior fiscal year. New Jersey state spending
increased by $769.4 million in government direction, management and control
mainly due to the increase in the pension expense based on the requirements of
Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and
Financial Reporting for Pensions and $725.7 million in educational, cultural and
intellectual development. Offsetting the aforementioned increases were
decreases in transportation programs, $308.5 million, and economic planning,
development and security, $242.8 million.

New Jersey General Fund. New Jersey's chief operating fund (the "New
Jersey General Fund") is the fund into which all State revenues, not otherwise
restricted by statute, are deposited. The New Jersey General Fund's ending fund
balance totaled $3.9 billion of which $462.8 million represented unassigned fund
balance.

On a budgetary basis, general revenues of $34.5 billion were $5.5 billion
lower than the final budget. The negative variance was the result of unearned
federal and other grant revenues of $2.5 billion and declines of $2.3 billion in
other revenues. Federal and other grant revenues are not earned unless there
has been a grant award and eligible grant expenses incurred. To the extent that
federal and grant appropriations are made in anticipation of grant awards and
the incurrence of grant expenditures, grant revenues are budgeted.

Total expenditures were $5.4 billion lower than original appropriations as
set forth in the annual Appropriations Act plus supplemental appropriations
enacted during the 2015-16 fiscal year. A major cause for under-spending
resulted from the overestimate of federal funds. This practice allows New
Jersey to receive the maximum federal dollars that become available. During the
2015-16 fiscal year, New Jersey's appropriation of federal funds and other
grants exceeded expenditures by $2.5 billion. These excess appropriations are
available for use in future years. From a 2015-16 fiscal year program
perspective, under-spending transpired in physical and mental health ($2.4
billion); economic planning, development and security ($743.4 million);
community development and environmental management ($721.1 million); public
safety and criminal justice ($636.0 million); government direction, management
and control ($438.6 million); educational, cultural and intellectual development
($311.5 million); transportation programs ($108.5 million); and special
government services ($66.2 million).

Net Assets. The primary government's assets and deferred outflows of
resources totaled $56.2 billion, an increase of $9.4 billion from the prior
fiscal year after two restatements that resulted in a $703 million increase in
net position. Restatements were made to include an increase in capital assets
and to reduce the overstated contributory life insurance payable. As of June
30, 2016, liabilities and deferred inflows of resources exceeded assets and
deferred outflows of resources by $120.3 billion. New Jersey's unrestricted net
position, which represents net

-47-

assets that have no statutory commitments and are available for discretionary
use, totaled a negative $137.0 billion. The negative balance is primarily a
result of New Jersey implementing, in the 2014-15 fiscal year, GASB Statement
No. 68 and New Jersey's recognition of other postemployment benefits under GASB
Statement No. 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other than Pensions. Financing activities that have
contributed to New Jersey's negative unrestricted net position amount include
liabilities from pension obligation bonds, the funding of a portion of local
elementary and high school construction and the securitization of a major
portion of annual tobacco master settlement agreement receipts with no
corresponding assets.

Changes in Net Assets. New Jersey's 2015-16 fiscal year net position
decreased by $7.1 billion. Approximately 51.7% of New Jersey's total revenues
came from general taxes, while 28.0% was derived from operating grants. Charges
for services amounted to 18.7% of total revenues, while other items such as
capital grants and miscellaneous revenues accounted for the remainder. New
Jersey's expenses cover a range of services. The largest expense, 25.9%, was
for educational, cultural and intellectual development, which includes
approximately $459.2 million disbursed by the New Jersey Schools Development
Authority (a blended component unit) to help finance school facilities
construction. Government direction, management and control amounted to 23.1% of
total expenses, while physical and mental health amounted to 21.6%. Other major
expenditures focused on economic planning, development, and security and public
safety and criminal justice. During the 2015-16 fiscal year, governmental
activity expenses exceeded program revenues. This imbalance was mainly funded
through $32.1 billion of general revenues (mostly taxes). The remaining $7.9
billion resulted in a decrease in net position. Offsetting the governmental net
position decrease, business-type activities reflected a net position increase of
$762.2 million as the unemployment compensation fund's available resources
exceeded the need to pay claims.

Debt Administration. As of June 30, 2016, New Jersey's outstanding long-
term obligations for governmental activities totaled $171.6 billion, a $18.1
billion increase over the prior fiscal year. Of the $18.1 billion increase,
$18.6 billion is attributable to increases in the net pension liability and net
other postemployment benefits ("OPEB") obligation offset by a $0.5 billion
reduction in bonded debt. Long-term bonded obligations totaled $42.7 billion,
while other long-term obligations totaled $128.9 billion. In addition, New
Jersey has $4.0 billion of legislatively authorized bonding capacity that has
not yet been issued. As of June 30, 2016, the legislatively authorized but
unissued debt decreased by $1.1 billion. In the 2014-15 fiscal year, New Jersey
implemented GASB Statement No. 68 which required the State to record its
proportionate share of the net pension liability for all state retirement
systems. Only the the 2013-14 fiscal year was restated. Therefore, comparisons
to fiscal years 2012 and 2013 are incompatible.

Ratings. As of February 21, 2018, all outstanding general obligation bonds
of the State of New Jersey were rated "A-" by S&P Global Ratings a division of
S&P Global, Inc. and "A3" by Moody's Investors Service, Inc. Any explanation
concerning the significance of such ratings must be obtained from the rating
agencies. There is no assurance that any ratings will continue for any period
of time or that they will not be revised or withdrawn.

-48-

Local Issuances. It should be noted that the creditworthiness of
obligations issued by local New Jersey issuers may be unrelated to the
creditworthiness of obligations issued by the State of New Jersey, and there is
no obligation on the part of the state to make payment on such local obligations
in the event of default.

The foregoing information constitutes only a brief summary of some of the
general factors which may impact certain issuers of bonds and does not purport
to be a complete or exhaustive description of all adverse conditions to which
the issuers of such obligations are subject. Additionally, many factors
including national economic, social and environmental policies and conditions,
which are not within the control of the issuers of such bonds, could affect or
could have an adverse impact on the financial condition of the state and various
agencies and political subdivisions thereof. The sponsor is unable to predict
whether or to what extent such factors or other factors may affect the issuers
of the bonds, the market value or marketability of such bonds or the ability of
the respective issuers of such bonds to pay interest on or principal of such
bonds.

NEW YORK. The information provided below is only a brief summary of the
complex factors affecting the financial situation in New York and is derived
from sources that are generally available to investors and are believed to be
accurate. Except where otherwise indicated, the information is based on New
York's 2016-2017 fiscal year running from April 1, 2016 to March 31, 2017. No
independent verification has been made of the accuracy or completeness of any of
the following information. It is based in part on information obtained from
various state and local agencies in New York or contained in official statements
for various New York municipal obligations.

Economic Condition and Outlook. Overall economic activity, employment and
wages all rose in New York in 2016, but at rates below the nation's. The
nation's real gross domestic product slowed in 2016, increasing by 1.6 percent.
In comparison, New York's real gross state product grew at half this rate, an
increase of 0.8 percent. Similar to the nation, this economic growth was weaker
than New York's 1.2 percent gain in 2015. Job growth at both the national and
state levels decelerated in 2016. Employment increased at a stronger rate
nationally, growth of 1.7 percent, compared to 1.5 percent in New York. Total
employment in New York increased to nearly 9.4 million. Similar to employment,
wages at both the national and state levels increased at a slower rate in 2016.
Gains in wages at the national level (3.9 percent) were stronger than those in
New York (3.2 percent) in 2016.

General Government Results. An operating deficit of $2.8 billion is
reported in the state's general fund ("New York General Fund") for the 2016-2017
fiscal year. As a result, the New York General Fund now has an accumulated fund
balance of $2.3 billion. New York completed its 2016-2017 fiscal year with a
combined governmental funds operating deficit of $3.4 billion as compared to a
combined governmental funds operating surplus in the 2015-2016 fiscal year of
$408 million. The combined operating deficit of $3.4 billion for the 2016-2017
fiscal year included an operating deficit in the New York General Fund of $2.8
billion, an operating surplus in the "Federal Special Revenue Fund" of $6
million, an operating deficit in the "General Debt Service Fund" of $774 million
and an operating surplus in "Other Governmental Funds" of $204 million.

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New York's financial position as shown in its governmental funds balance
sheet as of March 31, 2017 includes a fund balance of $11.2 billion comprised of
$43.6 billion of assets less liabilities of $30.6 billion and deferred inflows
of resources of $1.8 billion. The governmental funds fund balance includes a
$2.3 billion accumulated New York General Fund balance.

Overall Financial Position. In the 2016-2017 fiscal year, New York
reported net position of $28.9 billion, comprised of $160.2 billion in total
assets and $9.5 billion in deferred outflows of resources, less $139.5 billion
in total liabilities and $1.3 billion in deferred inflows of resources.

Net position reported for governmental activities decreased in the
2016-2017 fiscal year by $4 billion, decreasing to $28.6 billion from $32.5
billion in the 2015-2016 fiscal year. Unrestricted net position for governmental
activities--the part of net position that can be used to finance day-to-day
operations without constraints established by debt covenants, enabling
legislation, or other legal requirements--had a deficit of $45.6 billion at the
end of the 2016-2017 fiscal year.

The net position deficit in unrestricted governmental activities, which
increased by $4.7 billion in 2017, exists primarily because New York has issued
debt for purposes not resulting in a capital asset related to New York
governmental activities and the obligation related to other postemployment
benefits ($17.3 billion). Such outstanding debt included: securitizing New
York's future tobacco settlement receipts ($660 million); eliminating the need
for seasonal borrowing by the New York Local Government Assistance Corporation
($1.8 billion); and borrowing for local highway and bridge projects ($4.1
billion), local mass transit projects ($1.5 billion), and a wide variety of
grants and other expenditures not resulting in New York capital assets ($12.7
billion). This deficit in unrestricted net position of governmental activities
can be expected to continue for as long as New York continues to have
obligations outstanding for purposes other than the acquisition of New York
governmental capital assets.

The net position for business-type activities increased by $107 million
(47.6 percent) to $332 million in 2017 as compared to $225 million in 2016. The
increase in net position for business-type activities was due to employer
contributions and other revenue exceeding unemployment benefit payments for the
Unemployment Insurance Fund ($768 million). This was partially offset by the
State University of New York expenses exceeding revenues and State support ($537
million), the City University of New York Senior Colleges expenses exceeding
revenues and state support ($88 million), and Lottery education aid transfers
exceeding net income ($36 million).

New York General Fund Budgetary Highlights. New York General Fund
disbursements exceeded receipts by $1.2 billion in 2016-2017. The New York
General Fund ended the 2016-2017 fiscal year with a closing cash fund balance of
$7.7 billion, which consisted of approximately $1.8 billion in the state's rainy
day reserve funds ($1.3 billion in the "Tax Stabilization Reserve Account" and
$540 million in the "Rainy Day Reserve Fund"), $56 million in the "Community
Projects Fund," $21 million in the "Contingency Reserve Fund," and $5.9 billion
in the "Refund Reserve Account." Total New York General Fund receipts for the
2016-2017 fiscal year (including transfers from other funds) were approximately
$66.9 billion. Total

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New York General Fund disbursements for the 2016-2017 fiscal year (including
transfers to other funds) were approximately $68.1 billion.

Net operating results for the 2016-2017 fiscal year were $1.7 billion more
favorable than anticipated in the original financial plan, with the original
plan projecting a net operating deficit of $2.9 billion. Total receipts and
transfers from other funds were less than original financial plan estimates by
$2.1 billion and total disbursements and transfers to other funds were less than
original financial plan estimates by $3.8 billion.

Personal income tax receipts were $1.3 billion below initial projections,
due to underlying weakness in estimated payments and withholding growth.
Business tax receipts were $989 million below initial projections, due to
shortfalls in both audit collections and cash payments associates with tax year
2015 final returns. The lower receipts were partially offset by higher than
estimated estate tax collections related to stronger than anticipated growth in
household net worth. Miscellaneous receipts were $1 billion higher than the
original projections, due almost entirely to additional monetary settlement
collections not anticipated in the initial budget for the 2016-2017 fiscal year.

Net operating results for the 2016-2017 fiscal year were $0.5 million more
favorable than anticipated in the final financial plan, with the final financial
plan projecting a net operating deficit of $1.7 billion. Total receipts and
disbursements were lower than the final financial plan estimates (by $1.1
billion and $1.6 billion, respectively). Lower receipts were primarily due to
lower than expected business tax receipts related to lower corporate franchise
taxes and lower transfers to other funds due to timing associated with the
availability of fund balances. Lower than projected total disbursements occurred
primarily as a result of lower than planned transfers to the Capital Projects
Fund, as well as lower spending for local assistance and agency operations.

Capital Assets. As of the end of the 2016-2017 fiscal year, New York has
$104.8 billion invested in a broad range of capital assets, including equipment,
buildings, construction in progress, land preparation, and infrastructure, which
primarily includes roads and bridges. This amount represents a net increase
(including additions and deductions) of $2.4 billion over the 2015-2016 fiscal
year.

Debt Administration. There are a number of methods by which New York may
incur debt. New York has obtained long-term financing in the form of
voter-approved General Obligation debt (voter-approved debt) and other
obligations that are authorized by legislation but not approved by the voters
(non-voter-approved debt), including lease purchase and contractual obligations
where New York's legal obligation to make payments is subject to and paid from
annual appropriations made by the New York State legislature or from assignment
of revenue in the case of tobacco settlement revenue bonds. Equipment capital
leases and mortgage loan commitments, which represent $542 million as of the end
of the 2016-2017 fiscal year, do not require legislative or voter approval.
Other obligations include certain bonds issued through New York public
authorities and certificates of participation. New York administers its
long-term financing needs as a single portfolio of New York-supported debt that
includes general obligation bonds and other obligations of both its governmental
activities and business-type

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activities. Most of the debt reported under business-type activities, all of
which was issued for capital assets used in those activities, is supported by
payments from resources generated by New York's governmental activities--thus it
is not expected to be repaid from resource generated by business-type
activities.

At the end of the 2016-2017 fiscal year, New York had $173 million in New
York-supported (net) variable rate bonds outstanding and $1.7 billion in
interest rate exchange agreements, in which New York issues variable rate bonds
and enters into a swap agreement that effectively converts the rate to a fixed
rate. At the end of the 2016-2017 fiscal year, variable rate bonds, net of
those subject to the fixed rate swaps, were equal to 0.3 percent of the New
York-supported debt portfolio. Variable rate bonds that were converted to a
synthetic fixed rate through swap agreements of $1.7 billion were equal to 3.4
percent of the total New York-supported debt portfolio.

At the end of the 2016-2017 fiscal year, New York had $56.2 billion in
bonds, notes, and other financing agreements outstanding compared with $56.7
billion in the 2015-2016 fiscal year, a decrease of $518 million.

In addition, New York reported $1.4 billion for collateralized borrowings
($378 million in governmental activities and $985 million in business-type
activities) for which specific revenues have been pledged. In the 2015-2016
fiscal year, New York reported $838 million for collateralized borrowings ($401
million in governmental activities and $437 million in business-type
activities). During the 2016-2017 fiscal year, New York issued $6.1 billion in
bonds, of which $2.3 billion was for refunding and $3.8 billion was for new
borrowing.

The New York State Constitution, with exceptions for emergencies, limits
the amount of general obligation bonds that can be issued to that amount
approved by the voters for a single work or purpose in a general election. As
of the end of the 2016-2017 fiscal year, New York has $2.7 billion in authorized
but unissued bond capacity that can be used to issue bonds for specifically
approved purposes. New York may issue short-term debt without voter approval in
anticipation of the receipt of taxes and revenues or proceeds from duly
authorized but not issued general obligation bonds.

The state finance law, through the New York State Debt Reform Act of 2000
(the "New York Debt Reform Act"), also imposes phased-in caps on the issuance of
the new New York-supported debt and related debt service costs. The New York
Debt Reform Act also limits the use of debt to capital works and purposes, and
establishes a maximum term length for repayment of 30 years. The New York Debt
Reform Act applies to all New York-supported debt. The New York Debt Reform Act
does not apply to debt issued prior to April 1, 2000 or to other obligations
issued by public authorities where New York is not the direct obligor.

Litigation. The State of New York is a defendant in numerous legal
proceedings pertaining to matters incidental to the performance of routine
governmental operations. Such litigation includes, but is not limited to,
claims asserted against the State of New York arising from alleged torts,
alleged breaches of contracts, condemnation proceedings and other alleged
violations of state and federal laws.

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Included in New York's outstanding litigation are a number of cases
challenging the legality or the adequacy of a variety of significant social
welfare programs, primarily involving New York's Medicaid and mental health
programs. Adverse judgments in these matters generally could result in
injunctive relief coupled with prospective changes in patient care that could
require substantial increased financing of the litigated programs in the future.
With respect to pending and threatened litigation, New York has reported, in the
governmental activities, liabilities of $924 million, of which $712 million
pertains to the State University of New York, for awarded claims, anticipated
unfavorable judgments, and incurred but not reported loss estimates related to
medical malpractice claims. In addition, the State of New York is party to
other claims and litigation that its legal counsel has advised may result in
possible adverse court decisions with estimated potential losses of
approximately $116 million.

Ratings. As of February 21, 2018, all outstanding general obligation bonds
of the State of New York were rated "AA+" by S&P Global Ratings a division of
S&P Global, Inc., and "Aa1" by Moody's Investors Service, Inc. Any explanation
concerning the significance of such ratings must be obtained from the rating
agencies. There is no assurance that any ratings will continue for any period
of time or that they will not be revised or withdrawn.

Local Issuances. It should be noted that the creditworthiness of
obligations issued by local New York issuers may be unrelated to the
creditworthiness of obligations issued by the State of New York, and there is no
obligation on the part of the state to make payment on such local obligations in
the event of default.

ADDITIONAL DEPOSITS. Each trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities between the time of the deposit and the purchase
of the securities and because the trust will pay the associated brokerage fees
and other acquisition costs.

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ADMINISTRATION OF THE TRUST

DISTRIBUTIONS TO UNITHOLDERS BY REGULATED INVESTMENT COMPANIES MAKING
SEMIANNUAL/QUARTERLY DISTRIBUTIONS OR GRANTOR TRUSTS. The discussion in this
section applies to all trusts other than trusts that are "regulated investment
companies" for tax purposes that have monthly distribution dates. Income
received by a trust is credited by the trustee to the Income Account for the
trust. All other receipts are credited by the trustee to a separate Capital
Account for the trust. The trustee will normally distribute any income received
by a trust on each distribution date or shortly thereafter to unitholders of
record on the preceding record date. A trust will also generally make required
distributions or distributions to avoid imposition of tax at the end of each
year if it has elected to be taxed as a RIC for federal tax purposes.
Unitholders will receive an amount substantially equal to their pro rata share
of the available balance of the Income Account of the related trust. All
distributions will be net of applicable expenses. There is no assurance that
any actual distributions will be made since all dividends received may be used
to pay expenses. In addition, excess amounts from the Capital Account of a
trust, if any, will be distributed on each distribution date or shortly
thereafter to unitholders of record on the preceding record date, provided that
the trustee is not required to make a distribution from the Capital Account
unless the amount available for distribution is at least $1.00 per 100 units.
Proceeds received from the disposition of any of the securities after a record
date and prior to the following distribution date will be held in the Capital
Account and not distributed until the next distribution date applicable to the
Capital Account. Notwithstanding the foregoing, if a trust is designed to be a
grantor trust for tax purposes, the trustee is not required to make a
distribution from the Income Account or the Capital Account unless the total
cash held for distribution equals at least 0.1% of the trust's net asset value
as determined under the trust agreement, provided that the trustee is required
to distribute the balance of the Income Account and Capital Account on the
distribution date occurring in December of each year. The trustee is not
required to pay interest on funds held in the Capital or Income Accounts (but
may itself earn interest thereon and therefore benefits from the use of such
funds).

The distribution to the unitholders of a trust as of each record date will
be made on the following distribution date or shortly thereafter and shall
consist of an amount substantially equal to the unitholders' pro rata share of
the available balance of the Income Account of the trust after deducting
estimated expenses. Because dividends are not received by a trust at a constant
rate throughout the year, such distributions to unitholders are expected to
fluctuate.

DISTRIBUTIONS TO UNITHOLDERS BY REGULATED INVESTMENT COMPANIES MAKING
MONTHLY DISTRIBUTIONS. The discussion in this section applies if your trust is
a RIC that has monthly distribution dates. Income received by a trust is
credited by the trustee to the Income Account for the trust. All other receipts
are credited by the trustee to a separate Capital Account for the trust. The
trustee will normally distribute income received by a trust on each distribution
date or shortly thereafter to unitholders of record on the preceding record
date. The trust generally pays distributions from its Income Account (pro-rated
on an annual basis) along with any excess balance from the Capital Account on
each monthly distribution date to unitholders of record on the preceding record
date as described in greater detail below. All distributions will be net of
applicable expenses. The amount of your distributions will vary from time to
time as companies change their dividends or trust expenses change. The trust
will also generally make required

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distributions or distributions to avoid imposition of tax at the end of each
year if it has elected to be taxed as a RIC for federal tax purposes. Excess
amounts from the Capital Account of a trust, if any, will be distributed at
least annually to the unitholders then of record. Proceeds received from the
disposition of any of the securities after a record date and prior to the
following distribution date will be held in the Capital Account and not
distributed until the next distribution date applicable to the Capital Account.
The trustee shall not be required to make a distribution from the Capital
Account unless the cash balance on deposit therein available for distribution
shall be sufficient to distribute at least $1.00 per 100 units. The trustee is
not required to pay interest on funds held in the Capital or Income Accounts
(but may itself earn interest thereon and therefore benefits from the use of
such funds).

The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter. When the trust receives
dividends from a portfolio security, the trustee credits the dividends to the
trust's accounts. In an effort to make relatively regular income distributions,
the trust's distribution from the Income Account on each distribution date to
each unitholder is equal to such unitholder's pro rata share of the cash balance
in the Income Account calculated on the basis of a fraction (the numerator of
which is one and the denominator of which is the total number of distribution
dates per year) of the estimated annual income to the trust for the ensuing
twelve months computed as of the close of business on the record date
immediately preceding such distribution after deduction of (1) the fees and
expenses then deductible pursuant to the trust agreement and (2) the trustee's
estimate of other expenses properly chargeable to the Income Account pursuant to
the trust agreement which have accrued as of such record date or are otherwise
properly attributable to the period to which such distribution relates. Because
the trust does not receive dividends from the portfolio securities at a constant
rate throughout the year, the trust's income distributions to unitholders may be
more or less than the amount credited to the trust accounts as of the record
date. In the event that the amount on deposit in the Income Account is not
sufficient for the payment of the amount intended to be distributed to
unitholders on the basis of the computation described above, the trustee is
authorized to advance its own funds and cause to be deposited in and credited to
the Income Account such amounts as may be required to permit payment of the
related distribution to be made as described above. In such an event, the
trustee shall be entitled to be reimbursed, without interest, out of income
payments received by the trust subsequent to the date of such advance. Any such
advance shall be reflected in the Income Account until repaid.

GENERAL. Persons who purchase units will commence receiving distributions
only after such person becomes a record owner. A person will become the owner
of units, and thereby a unitholder of record, on the date of settlement provided
payment has been received. Notification to the trustee of the transfer of units
is the responsibility of the purchaser, but in the normal course of business the
selling broker-dealer provides such notice.

The trustee will periodically deduct from the Income Account of a trust
and, to the extent funds are not sufficient therein, from the Capital Account of
the trust amounts necessary to pay the expenses of the trust. The trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of a trust.
Amounts so withdrawn shall not be considered a part of the related trust's
assets until such time as the trustee shall return all or any part of such
amounts to the appropriate accounts. In

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addition, the trustee may withdraw from the Income and Capital Accounts of a
trust such amounts as may be necessary to cover redemptions of units.

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 is not required. The
accountants' report for any audit will be furnished by the trustee to any
unitholder upon written request. Within a reasonable period of time after the
last business day of each calendar year, the trustee shall furnish to each
person who at any time during such calendar year was a unitholder of a trust a
statement, covering such calendar year, setting forth for such trust:

(A) As to the Income Account:

(1) the amount of income received on the securities (including income
received as a portion of the proceeds of any disposition of
securities);

(2) the amounts paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the applicable
trust agreement, if any, and for redemptions;

(3) the deductions, if any, from the Income Account for payment into
the Reserve Account;

(4) the deductions for applicable taxes and fees and expenses of the
trustee, the sponsor, the evaluator, the supervisor, counsel,
auditors and any other expenses paid by the trust;

(5) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the applicable
trust agreement, if any;

(6) the deductions for payment of the sponsor's expenses of
maintaining the registration of the trust units, if any;

(7) the aggregate distributions to unitholders; and

(8) the balance remaining after such deductions and distributions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year;

(B) As to the Capital Account:

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(1) the net proceeds received due to sale, maturity, redemption,
liquidation or disposition of any of the securities, excluding
any portion thereof credited to the Income Account;

(2) the amount paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the applicable
trust agreement, if any, and for redemptions;

(3) the deductions, if any, from the Capital Account for payments
into the Reserve Account;

(4) the deductions for payment of applicable taxes and fees and
expenses of the trustee, the sponsor, the evaluator, the
supervisor, counsel, auditors and any other expenses paid by the
trust;

(5) the deductions for payment of the sponsor's expenses of
organizing the trust;

(6) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;

(7) the deductions for payment of deferred sales charge and creation
and development fee, if any;

(8) the deductions for payment of the sponsor's expenses of
maintaining the registration of the trust units, if any;

(9) the aggregate distributions to unitholders; and

(10) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year; and

(1) a list of the securities held as of the last business day of such
calendar year and a list which identifies all securities sold or
other securities acquired during such calendar year, if any;

(2) the number of units outstanding on the last business day of such
calendar year;

(3) the unit value based on the last trust evaluation of such trust
made during such calendar year; and

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(4) the amounts actually distributed during such calendar year from
the Income and Capital Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for such distributions.

RIGHTS OF UNITHOLDERS. 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 the trust, nor otherwise affect the rights, obligations and
liabilities of the parties to the applicable trust agreement. By purchasing
units of a trust, each unitholder expressly waives any right he may have under
any rule of law, or the provisions of any statute, or otherwise, to require the
trustee at any time to account, in any manner other than as expressly provided
in the applicable trust agreement, in respect of the portfolio securities or
moneys from time to time received, held and applied by the trustee under the
trust agreement. 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 related trust agreement or termination of the trust.

AMENDMENT. Each trust agreement may be amended from time to time by the
sponsor and trustee or their respective successors, without the consent of any
of the unitholders, (i) to cure any ambiguity or to correct or supplement any
provision which may be defective or inconsistent with any other provision
contained in the trust agreement, (ii) to change any provision required by the
SEC or any successor governmental agency, (iii) 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 (iv) to make
such amendments as may be necessary (a) for a trust to continue to qualify as a
RIC 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 a 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 RIC
under the United States Internal Revenue Code of 1986, as amended. A trust
agreement may not be amended, however, without the consent of all unitholders of
the related trust then outstanding, so as (1) to permit, except in accordance
with the terms and conditions thereof, the acquisition thereunder 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. A trust agreement may not be amended so
as to reduce the interest in the 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 nor their respective successors may consent
to any other amendment, change or modification of a 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 a
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 of the trust 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

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affect the tax status of the related 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 a trust has elected to be taxed as a RIC for federal
income tax purposes, result in a variation of the investment of unitholders in
the trust. The trustee will notify unitholders of a trust of the substance of
any such amendment to the trust agreement for such trust.

TERMINATION. Each trust agreement provides that the related trust shall
terminate upon the maturity, redemption, sale or other disposition of the last
of the securities held in the trust but in no event is it to continue beyond the
trust's mandatory termination date. If the value of a trust shall be less than
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 of the trust the entire sales
charge paid by such purchaser.

Beginning nine business days prior to, but no later than, the scheduled
termination date described in the prospectus for a trust, the trustee may begin
to sell all of the remaining underlying securities on behalf of unitholders in
connection with the termination of the trust. The sponsor may assist the
trustee in these sales and receive compensation to the extent permitted by
applicable law. The sale proceeds will be net of any incidental expenses
involved in the sales.

The sponsor will generally instruct the trustee to sell the securities as
quickly as practicable during the termination proceedings without in its
judgment materially adversely affecting the market price of the securities, but
it is expected that all of the securities will in any event be disposed of
within a reasonable time after a trust's termination. The sponsor does not
anticipate that the period will be longer than one month, and it could be as
short as one day, depending on the liquidity of the securities being sold. The
liquidity of any security depends on the daily trading volume of the security
and the amount that the sponsor has available for sale on any particular day.
Of course, no assurances can be given that the market value of the securities
will not be adversely affected during the termination proceedings.

Not less than thirty days prior to termination of a trust, the trustee will
notify unitholders thereof of the termination and provide a form allowing
qualifying unitholders to elect an in kind distribution, if applicable. If
applicable, a unitholder who owns the minimum number of units described in the
prospectus may request an in kind distribution from the trustee instead of cash.
To the extent possible, the trustee will make an in kind distribution through
the distribution of each of the securities of a trust in book entry form to the
account of the unitholder's bank or broker-dealer at Depository Trust Company.
The unitholder will be entitled to receive whole shares of each of the
securities comprising the portfolio of the related trust and cash from the
Income and Capital Account equal to the fractional shares to which the
unitholder is entitled. The trustee may adjust the number of shares of any
security included in a unitholder's in kind

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distribution to facilitate the distribution of whole shares. The sponsor may
terminate the in kind distribution option at any time upon sixty days written
notice to the unitholders. Special federal income tax consequences will result
if a unitholder requests an in kind distribution.

Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust not segregated for in kind distribution. After
paying all expenses and charges incurred by a trust, the trustee will distribute
to unitholders thereof their pro rata share of the balances remaining in the
Income and Capital Accounts of the trust.

The sponsor may, but is not obligated to, offer for sale units of a
subsequent series of a trust at approximately the time of the mandatory
termination date. If the sponsor does offer such units for sale, unitholders
may be given the opportunity to purchase such units at a public offering price.
There is, however, no assurance that units of any new series of a trust will be
offered for sale at that time, or if offered, that there will be sufficient
units available for sale to meet the requests of any or all unitholders.

THE TRUSTEE. The trustee is The Bank of New York 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.

Under each trust agreement, the trustee or any successor trustee may resign
and be discharged of the trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor. If the trustee
merges or is consolidated with another entity, the resulting entity shall be the
successor trustee without the execution or filing of any paper instrument or
further act.

The trustee or successor trustee must deliver 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

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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 by
written instrument, in duplicate, one copy of which shall be delivered to the
trustee so removed and one copy to the successor trustee. Notice of such
removal and appointment shall be delivered to each unitholder by the successor
trustee. 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 each 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 Advisors Asset Management, Inc. 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").

Under each trust agreement, the sponsor may resign and be discharged of the
trust created by the trust agreement by executing an instrument in writing and
filing the same with the trustee. If the sponsor merges or is consolidated with
another entity, the resulting entity shall be the successor sponsor without the
execution or filing of any paper instrument or further act.

If at any time the sponsor shall resign or fail to undertake or perform any
of the duties which by the terms of a trust agreement are required by it to be
undertaken or performed, or the sponsor shall become incapable of acting or
shall be adjudged a bankrupt or insolvent, or a receiver of the sponsor or of
its property shall be appointed, or any public officer shall take charge or
control of the sponsor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, 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
SEC, (b) terminate the trust agreement and liquidate the related trust as
provided therein, or (c) continue to act as trustee without appointing a
successor sponsor and receive additional compensation deemed by the trustee to
be reasonable and not exceeding such reasonable amounts as may be prescribed by
the SEC.

THE EVALUATOR AND SUPERVISOR. Advisors Asset Management, Inc., the
sponsor, also serves as evaluator and supervisor. The evaluator and supervisor
may resign or be removed by the sponsor and trustee in which event the sponsor
or trustee may appoint a successor having qualifications and at a rate of
compensation satisfactory to the sponsor or, if the appointment is made by the
trustee, the trustee. 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 delivered by the trustee to each unitholder.

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LIMITATIONS ON LIABILITY. The sponsor, evaluator, and supervisor are
liable for the performance of their obligations arising from their
responsibilities under the trust agreement but will be under no liability to any
trust or unitholders for taking any action or refraining from any action in good
faith pursuant to the trust agreement or for errors in judgment, or for
depreciation or loss incurred by reason of the purchase or sale of securities,
provided, however, that such parties will not be protected against any liability
to which they would otherwise be subjected by reason of their own willful
misfeasance, bad faith or gross negligence in the performance of their duties or
its reckless disregard for their duties under the trust agreement. Each trust
will indemnify, defend and hold harmless each of the sponsor, supervisor and
evaluator from and against any loss, liability or expense incurred in acting in
such capacity (including the cost and expenses of the defense against such loss,
liability or expense) other than by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the applicable trust agreement.
Such parties are not under any obligation to appear in, prosecute or defend any
legal action which in their opinion may involve them in any expense or
liability. The trustee will be indemnified by each trust and held harmless
against any loss or liability accruing to it without gross negligence, bad faith
or willful misconduct on its part, arising out of or in connection with the
acceptance or administration of the trust, including the costs and expenses
(including counsel fees) of defending itself against any claim of liability in
the premises.

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,
nor shall the trustee be liable or responsible in any way for depreciation or
loss incurred by reason of the sale by the trustee of any securities. In the
event that the sponsor shall fail to act, the trustee may act and shall not be
liable for any such action taken by it in good faith. The trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the securities or upon the interest thereof. In addition, the trust
agreement contains other customary provisions limiting the liability of the
trustee.

EXPENSES OF THE TRUST. The sponsor may receive a fee from your trust for
creating and developing the trust, including determining the trust's objectives,
policies, composition and size, selecting service providers and information
services and for providing other similar administrative and ministerial
functions. The amount of this "creation and development fee" is set forth in the
prospectus. The trustee will deduct this amount from your trust's assets as of
the close of the initial offering period. No portion of this fee is applied to
the payment of distribution expenses or as compensation for sales efforts. This
fee will not be deducted from proceeds received upon a repurchase, redemption or
exchange of units before the close of the initial public offering period.

For services performed under a trust's trust agreement the trustee shall be
paid a fee at an annual rate in the amount per unit set forth in such trust
agreement. The trustee shall charge a pro-rated portion of its annual fee at the
times specified in such trust agreement, which pro-rated portion shall be
calculated on the basis of the largest number of units in such trust at any time
during the primary offering period. After the primary offering period has
terminated, the fee shall

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accrue daily and be based on the number of units outstanding on the first
business day of each calendar year in which the fee is calculated or the number
of units outstanding at the end of the primary offering period, as appropriate.
The annual trustee fee shall be prorated for any calendar year in which the
trustee provides services during less than the whole of such year. The trustee
may from time to time adjust its compensation as set forth in the trust
agreement provided that total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent of Shelter" or similar index, if such
index should no longer be published. The consent or concurrence of any
unitholder shall not be required for any such adjustment or increase. Such
compensation shall be calculated and paid in installments by the trustee against
the Income and Capital Accounts of each trust; provided, however, that such
compensation shall be deemed to provide only for the usual, normal and proper
functions undertaken as trustee pursuant to the trust agreement. The trustee
shall also charge the Income and Capital Accounts of each trust for any and all
expenses and disbursements incurred as provided in the trust agreement.

As compensation for portfolio supervisory services in its capacity as
supervisor, evaluation services in its capacity as evaluator and for providing
bookkeeping and other administrative services of a character described in
Section 26(a)(2)(C) of the Investment Company Act, the sponsor shall be paid an
annual fee in the amount per unit set forth in the trust agreement for a trust.
The sponsor shall receive a pro-rated portion of its annual fee from the trustee
upon receipt of an invoice by the trustee from the sponsor, upon which, as to
the cost incurred by the sponsor of providing such services the trustee may
rely. Such fee shall be calculated on the basis of the largest number of units
in such trust at any time during the primary offering period. After the primary
offering period has terminated, the fee shall accrue daily and be based on the
number of units outstanding on the first business day of each calendar year in
which the fee is calculated or the number of units outstanding at the end of the
primary offering period, as appropriate. Such annual fee shall be prorated for
any calendar year in which the sponsor provides services during less than the
whole of such year, but in no event shall such compensation when combined with
all compensation received from a trust for providing such services in any
calendar year exceed the aggregate cost to the sponsor for providing such
services, in the aggregate. Such compensation may, from time to time, be
adjusted provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase in consumer prices for
services as measured by the United States Department of Labor Consumer Price
Index entitled "All Services Less Rent of Shelter" or similar index, if such
index should no longer be published. The consent or concurrence of any
unitholder shall not be required for any such adjustment or increase. Such
compensation shall be charged against the Income and/or Capital Accounts of a
trust.

The following additional charges are or may be incurred by a trust in
addition to any other fees, expenses or charges described in the prospectus:
(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

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trustee for any loss or liability accruing to it without gross negligence, bad
faith or willful misconduct on its part arising out of or in connection with the
acceptance or administration of the trust; (f) indemnification of the sponsor
for any loss, liability or expense incurred in acting in that capacity other
than by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or its reckless disregard of its obligations and
duties under the trust agreement; (g) indemnification of the supervisor for any
loss, liability or expense incurred in acting as supervisor of the trust other
than by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under the trust agreement; (h) indemnification of the
evaluator for any loss, liability or expense incurred in acting as evaluator of
the trust other than by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the trust agreement; (i)
expenditures incurred in contacting unitholders upon termination of the trust;
and (j) license fees for the right to use trademarks and trade names,
intellectual property rights or for the use of databases and research owned by
third-party licensors. The sponsor is authorized to obtain from Mutual Fund
Quotation Service (or similar service operated by The Nasdaq Stock Market, Inc.
or its successor) a UIT ticker symbol for each trust and to contract for the
dissemination of the unit prices through that service. A trust will bear any
cost or expense incurred in connection with the obtaining of the ticker symbol
and the dissemination of unit prices. A trust may pay the costs of updating its
registration statement each year. All fees and expenses are payable out of a
trust and, when owing to the trustee, are secured by a lien on the trust. If
the balances in the Income and Capital Accounts are insufficient to provide for
amounts payable by the trust, the trustee has the power to sell securities to
pay such amounts. These sales may result in capital gains or losses to
unitholders.

Each trust will pay the costs of organizing the trust. These costs may
include, but are not limited to, the cost of the initial preparation and
typesetting of the registration statement, prospectuses (including preliminary
prospectuses), the trust agreement and other documents relating to the
applicable trust, SEC and state blue sky registration fees, the costs of the
initial valuation of the portfolio and audit of a trust, the costs of a
portfolio consultant, if any, one-time license fees, if any, the initial fees
and expenses of the trustee, and legal and other out-of-pocket expenses related
thereto but not including the expenses incurred in the printing of prospectuses
(including preliminary prospectuses), expenses incurred in the preparation and
printing of brochures and other advertising materials and any other selling
expenses. A trust may sell securities to reimburse the sponsor for these costs
at the end of the initial offering period or after six months, if earlier. The
value of the units will decline when a trust pays these costs.

PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION. When a trust sells
securities, the composition and diversity of the securities in the trust may be
altered. In order to obtain the best price for a trust, it may be necessary for
the sponsor to specify minimum amounts in which blocks of securities are to be
sold. In effecting purchases and sales of a trust's portfolio securities, the
sponsor may direct that orders be placed with and brokerage commissions be paid
to brokers, including the sponsor or brokers which may be affiliated with the
trust, the sponsor, the trustee or dealers participating in the offering of
units.

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CONTENTS OF REGISTRATION STATEMENT

This Registration Statement comprises the following:
The facing sheet
The prospectus and information supplement
The signatures
The consents of evaluator, independent auditors and legal counsel

The following exhibits:

1.1 Trust Agreement (to be filed by amendment).

1.1.1 Standard Terms and Conditions of Trust (to be filed by amendment).

1.2 Certificate of Amendment of Certificate of Incorporation and Certificate
of Merger of Advisors Asset Management, Inc. Reference is made to
Exhibit 1.2 to the Registration Statement on Form S-6 for Advisors
Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011.

1.3 Bylaws of Advisors Asset Management, Inc. Reference is made to
Exhibit 1.3 to the Registration Statement on Form S-6 for Advisors
Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011.

1.5 Form of Dealer Agreement. Reference is made to Exhibit 1.5 to the
Registration Statement on Form S-6 for Advisors Disciplined Trust 262
(File No. 333-150575) as filed of June 17, 2008.

2.2 Form of Code of Ethics. Reference is made to Exhibit 2.2 to the
Registration Statement on Form S-6 for Advisors Disciplined Trust 1853
(File No. 333-221628) as filed on February 21, 2018.

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 1878 (File No. 333-223970) as filed on
July 6, 2018.

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 1921 has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wichita and State of Kansas on September 28, 2018.

ADVISORS DISCIPLINED TRUST 1921

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 September 28, 2018 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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