1933 ACT FILE NO.: 333-178561
1940 ACT FILE NO.: 811-21056
CIK: 1533793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: ADVISORS DISCIPLINED TRUST 829
B. Name of depositor: ADVISORS ASSET MANAGEMENT, INC.
C. Complete address of depositor's principal executive offices:
18925 Base Camp Road
Monument, Colorado 80132
D. Name and complete address of agent for service:
WITH A COPY TO:
Scott Colyer Scott R. Anderson
ADVISORS ASSET MANAGEMENT, INC. CHAPMAN AND CUTLER LLP
18925 Base Camp Road 111 West Monroe Street
Monument, Colorado 80132 Chicago, Illinois 60603-4080
E. Title of securities being registered: Units of undivided beneficial
interest in the trust
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F. Approximate date of proposed public offering:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
[X] Check box if it is proposed that this filing will become effective on
March 15, 2012 at 2:00 p.m. pursuant to Rule 487.
PREFERRED INCOME OPPORTUNITIES PORTFOLIO 2-YR, SERIES 2012-1
(ADVISORS DISCIPLINED TRUST 829)
A portfolio of shares of
preferred securities seeking
high current income
PROSPECTUS
MARCH 15, 2012
[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.
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INVESTMENT SUMMARY
INVESTMENT OBJECTIVE
The trust seeks to provide high current income.
PRINCIPAL INVESTMENT STRATEGY
The trust seeks to provide high current income by investing in a diversified
portfolio of preferred securities.
Preferred securities combine some of the characteristics of both stocks and
bonds. Like bonds, the preferred securities selected for the portfolio pay a
fixed rate of income and are sold on the basis of yield. However, like common
stocks, they are traded on major exchanges. Preferred securities are "senior
securities" which have preference over common stocks, but not debt, of an
issuer. Generally, the issuing company must pay all income payments on its
preferred securities before additional earnings are made available for
distribution to common stockholders. Preferred securities often have a yield
advantage over common stocks as well as comparably rated fixed-income
investments. Of course, as with any similar investments, there can be no
guarantee that the objective of the trust will be achieved.
PRINCIPAL RISKS
As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
* SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall over
time.
* THE VALUE OF PREFERRED SECURITIES MAY FALL IF INTEREST RATES, IN GENERAL,
RISE. No one can predict whether interest rates will rise or fall in the
future.
* THE ISSUER OF A SECURITY MAY BE UNWILLING OR UNABLE TO MAKE INCOME PAYMENTS
IN THE FUTURE. This may reduce the level of income the trust receives
which would reduce your income and cause the value of your units to fall.
* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the primary offering period.
* CERTAIN OF THE SECURITIES HELD BY THE TRUST ARE EITHER RATED BELOW INVESTMENT
GRADE BY ONE OR MORE RATINGS AGENCIES OR ARE UNRATED. THESE SECURITIES MAY
BE CONSIDERED TO BE SPECULATIVE AND MAY BE SUBJECT TO GREATER MARKET AND
CREDIT RISKS. ACCORDINGLY, THE RISK OF DEFAULT MAY BE HIGHER THAN INVESTMENT
GRADE SECURITIES. In addition, these securities may be more sensitive to
interest rate changes and may be more likely to make early returns of
principal.
* THE TRUST WILL RECEIVE EARLY RETURNS OF PRINCIPAL IF SECURITIES ARE CALLED OR
SOLD BEFORE THE TRUST TERMINATION. If this happens your income will
decline and you may not be able to reinvest the money you receive at as
high a yield.
* SECURITIES OF FOREIGN COMPANIES HELD BY THE TRUST PRESENT RISKS BEYOND THOSE
OF U.S. ISSUERS. These risks may include market and political factors
related to the company's foreign market, international trade conditions,
less regulation, smaller or less liquid markets, increased volatility,
differing accounting practices and changes in the value of foreign
currencies.
* THE TRUST IS CONSIDERED TO BE CONCENTRATED IN SECURITIES ISSUED BY COMPANIES
IN THE FINANCIAL SERVICES INDUSTRY, SUCH AS BANKS, INSURANCE COMPANIES AND
INVESTMENT FIRMS. Negative developments in the financial services industry
will affect the value of your investment more than would be the case in a
more diversified investment.
* WE<F1>* DO NOT ACTIVELY MANAGE THE PORTFOLIO. Except in limited
circumstances, the trust will generally hold, and continue to buy, shares
of the same securities even if their market value declines.
<F1>* "AAM," "we" and related terms mean Advisors Asset Management, Inc., the
trust sponsor, unless the context clearly suggests otherwise.
2 Investment Summary
WHO SHOULD INVEST
You should consider this investment if you want:
* to own a defined portfolio of preferred securities.
* the potential to receive monthly distributions of income.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in preferred
securities.
* seek capital appreciation without current income.
------------------------------------------------------------
ESSENTIAL INFORMATION
---------------------
UNIT PRICE AT INCEPTION $10.0000
INCEPTION DATE March 15, 2012
TERMINATION DATE March 14, 2014
ESTIMATED NET ANNUAL DISTRIBUTIONS
First year* $0.6881 per unit
Second year* $0.6732 per unit
DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month
CUSIP NUMBERS
Standard Accounts
Cash distributions 00770N222
Reinvest distributions 00770N230
Fee Based Accounts
Cash distributions 00770N248
Reinvest distributions 00770N255
TICKER SYMBOL ADTPUX
MINIMUM INVESTMENT $1,000/100 units
------------------------------------------------------------
* As of March 14, 2012 and may vary thereafter.
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FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that you
may incur based on a $10 unit price. Actual expenses may vary.
AS A % AMOUNT
OF $1,000 PER 100
SALES FEE INVESTED UNITS
------------------------
Initial sales fee 1.00% $10.00
Deferred sales fee 2.45 24.50
Creation & development fee 0.50 5.00
------- -------
Maximum sales fee 3.95% $39.50
======= =======
ORGANIZATION COSTS 0.50% $5.00
======= =======
AS A % AMOUNT
ANNUAL OF NET PER 100
OPERATING EXPENSES ASSETS UNITS
------------------------
Trustee fee & expenses 0.19% $1.79
Supervisory, evaluation
and administration fees 0.10 1.00
------- -------
Total 0.29% $2.79
======= =======
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The initial sales fee is the difference between the total sales fee (maximum
of 3.95% of the unit offering price) and the sum of the remaining deferred sales
fee and the total creation and development fee. The deferred sales fee is fixed
at $0.245 per unit and is paid in three monthly installments beginning
October 20, 2012. 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
six months).
EXAMPLE
This example helps you compare the cost of this trust with other unit trusts
and mutual funds. In the example we assume that the expenses do not change and
that the trust's annual return is 5%. Your actual returns and expenses will
vary. Based on these assumptions, you would pay these expenses for every
$10,000 you invest in the trust:
1 year $472
2 years (life of trust) $501
These amounts are the same regardless of whether you sell your investment at the
end of a period or continue to hold your investment.
Investment Summary 3
PREFERRED INCOME OPPORTUNITIES PORTFOLIO 2-YR, SERIES 2012-1
(ADVISORS DISCIPLINED TRUST 829)
PORTFOLIO
AS OF THE TRUST INCEPTION DATE, MARCH 15, 2012
PERCENTAGE OF MARKET COST OF
NUMBER AGGREGATE OFFERING REDEMPTION VALUE PER SECURITIES
OF SHARES ISSUER(1) PRICE PROVISIONS(2) SHARE(3) TO TRUST(3)(4)
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES -- 100.00%
FINANCIALS - 88.01%
231 Aegon NV, 8.00%, due 2/15/2042 (5) 4.01% 8/15/2017 @ 25 $25.77 $5,953
230 Ares Capital Corp, 7.75%, due 10/15/2040 4.00 10/15/2015 @ 25 25.82 5,939
222 Aviva PLC, 8.25%, due 12/1/2041 (5) 4.01 12/1/2016 @ 25 26.84 5,959
230 Barclays Bank PLC, Series 5, 8.125% (5) 4.00 6/15/2013 @ 25 25.81 5,936
231 BB&T Capital Trust VII, 8.10%, due 11/1/2064 (6) 4.03 11/1/2014 @ 25 25.90 5,983
229 Citigroup Capital XII, 8.50%, due 3/30/2040 3.99 3/30/2015 @ 25 25.90 5,931
233 CommonWealth REIT, Series E, 7.25% 4.02 5/15/2016 @ 25 25.66 5,979
230 Deutsche Bank Contingent Capital Trust III, 7.60% 4.01 2/20/2018 @ 25 25.87 5,950
229 Digital Realty Trust Inc, Series E, 7.00% 3.98 9/15/2016 @ 25 25.85 5,920
225 Endurance Specialty Holdings Ltd, Series A, 7.75% (5) 4.01 12/15/2015 @ 25 26.47 5,956
234 First Republic Bank/CA, Series A, 6.70% 3.99 1/30/2017 @ 25 25.32 5,925
236 Hospitality Properties Trust, Series D, 7.125% 4.00 1/15/2017 @ 25 25.15 5,936
216 HSBC Holdings PLC, Series 2, 8.00% (5) 3.98 12/15/2015 @ 25 27.40 5,918
232 ING Groep NV, 8.50% (5) 3.99 9/15/2013 @ 25 25.57 5,932
223 KKR Financial Holdings LLC, 8.375%, due 11/15/2041 3.97 11/15/2016 @ 25 26.45 5,898
225 Lloyds Banking Group PLC, 7.75%, due 7/15/2050 (5) 4.01 7/15/2015 @ 25 26.49 5,960
234 Maiden Holdings North America Ltd,
8.25%, due 6/15/2041 (5) 4.04 6/15/2016 @ 25 25.62 5,995
238 National Retail Properties Inc, Series D, 6.625% 3.99 2/23/2017 @ 25 24.92 5,931
223 PartnerRe Ltd, Series E, 7.25% (5) 3.96 6/1/2016 @ 25 26.36 5,878
229 Principal Financial Group Inc, Series B, 6.518% 3.99 6/30/2015 @ 25 25.90 5,931
216 Santander Finance Preferred SAU, Series 10, 10.50% (5) 3.99 9/29/2014 @ 25 27.45 5,929
226 TCF Capital I, 10.75%, due 8/15/2068 4.04 8/15/2013 @ 25 26.58 6,007
TELECOMMUNICATION SERVICES - 11.99%
224 Qwest Corp, 7.50%, due 9/15/2051 3.99 9/15/2016 @ 25 26.43 5,920
219 Telephone & Data Systems Inc, 7.00%, due 3/15/2060 4.00 3/15/2016 @ 25 27.12 5,939
222 United States Cellular Corp, 6.95%, due 5/15/2060 4.00 5/15/2016 @ 25 26.76 5,941
--------- ----------
100.00% $148,546
========= ==========
See "Notes to Portfolio"
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4 Investment Summary
Notes to Portfolio
(1) Shown under this heading is the stated dividend rate of each of the
securities, expressed as an annual dollar amount or as a percentage of par
or stated value. Each security was originally issued with a par or stated
value per share equal to $25. Securities are represented by contracts to
purchase securities.
(2) The securities are first redeemable on such date and at such price as
listed above. Optional redemption provisions, which may be exercised in
whole or in part, are at prices of par or stated value. Optional
redemption provisions generally will occur at times when the redeemed
securities have an offering side evaluation which represents a premium over
par or stated value. To the extent that the securities were acquired at a
price higher than the redemption price, this will represent a loss of
capital when compared with the public offering price of the units when
acquired. Distributions to unitholders will generally be reduced by the
amount of the dividends which otherwise would have been paid with respect
to redeemed securities, and any principal amount received on such
redemption after satisfying any redemption requests for units received by
the trust will be distributed to unitholders. Certain of the securities
have provisions which would allow for their redemption prior to the
earliest stated call date pursuant to the occurrence of certain
extraordinary events.
(3) The value of each security is based on the most recent closing sale price
of each security as of the close of regular trading on the New York Stock
Exchange on the business day prior to the trust's inception date. In
accordance with Accounting Standards Codification 820, "Fair Value
Measurements", the trust's investments are classified as Level 1, which
refers to security prices determined using quoted prices in active markets
for identical securities.
(4) The cost of the securities to the sponsor and the sponsor's profit or
(loss) (which is the difference between the cost of the securities to the
sponsor and the cost of the securities to the trust) are $148,546 and $0,
respectively.
(5) This is a security issued by a foreign company that trades on a U.S.
securities exchange.
Preferred securities comprise approximately 100.00% of the investments in
the trust, broken down by country of organization of the issuer as set
forth below:
Bermuda 12.01%
Netherlands 8.00%
Spain 3.99%
United Kingdom 16.00%
United States 60.00%
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(6) The security has a "make whole" call option and may be redeemable in whole
or in part at the option of the issuer at a redemption price generally
equal to the greater of (i) 100% of the aggregate principal amount of the
security or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon, discounted to the date of
redemption on a periodic basis at a set premium to the then current
applicable Treasury Rate plus accrued and unpaid interest on the principal
amount being redeemed to the date of redemption.
Investment Summary 5
UNDERSTANDING YOUR INVESTMENT
HOW TO BUY UNITS
You can buy units of the trust on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMPORTFOLIOS.COM. The public offering
price of units includes:
* the net asset value per unit plus
* 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 value of the security. We
will only do this if a security is not principally traded on a national
securities exchange or if the market quotes are unavailable or inappropriate.
We determined the initial prices of the securities shown under "Portfolio" in
this prospectus as described above at the close of regular trading on the New
York Stock Exchange on the business day before the date of this prospectus. On
the first day we sell units we will compute the unit price as of the close of
regular trading on the New York Stock Exchange or the time the registration
statement filed with the Securities and Exchange Commission becomes effective,
if later.
ORGANIZATION COSTS. During the initial offering period, part of the value of
the securities represents an amount that will pay the costs of creating your
trust. These costs include the costs of preparing the registration statement
and legal documents, federal and state registration fees, the initial fees and
expenses of the trustee and the initial audit. Your trust will sell securities
to reimburse us for these costs at the end of the initial offering period or
after six months, if earlier. The value of your units will decline when the
trust pays these costs.
TRANSACTIONAL SALES FEE. You pay a fee in connection with purchasing units.
We refer to this
6 Understanding Your Investment
fee as the "transactional sales fee." The transactional sales fee has both an
initial and a deferred component and equals 3.45% of the public offering price
per unit based on a $10 public offering price per unit. This percentage amount
of the transactional sales fee is based on the unit price on the trust's
inception date. The transactional sales fee equals the difference between the
total sales fee and the creation and development fee. As a result, the
percentage and dollar amount of the transactional sales fee will vary as the
public offering price per unit varies. The transactional sales fee does not
include the creation and development fee which is described under "Expenses."
The maximum sales fee equals 3.95% of the public offering price per unit at
the time of purchase. You pay the initial sales fee at the time you buy units.
The initial sales fee is the difference between the total sales fee percentage
(maximum of 3.95% of the public offering price per unit) and the sum of the
remaining fixed dollar deferred sales fee and the total fixed dollar creation
and development fee. The initial sales fee will be approximately 1.00% of the
public offering price per unit depending on the public offering price per unit.
The deferred sales fee is fixed at $0.245 per unit. Your trust pays the
deferred sales fee in equal monthly installments as described on page 3. If you
redeem or sell your units prior to collection of the total deferred sales fee,
you will pay any remaining deferred sales fee upon redemption or sale of your
units.
If you purchase units after the last deferred sales fee payment has been
assessed, the secondary market sales fee is equal to 3.95% of the public
offering price and does not include deferred payments.
MINIMUM PURCHASE. The minimum amount you can purchase of the trust appears
on page 3 under "Essential Information", but such amounts may vary depending on
your selling firm.
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
fee you pay. It is your financial professional's responsibility to alert us of
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.
Large Purchases. You can reduce your sales fee by increasing the size of
your investment:
IF YOU PURCHASE: YOUR FEE WILL BE:
------------------------------------------
Less than $50,000 3.95%
$50,000 - $99,999 3.70
$100,000 - $249,999 3.45
$250,000 - $499,999 3.10
$500,000 - $999,999 2.95
$1,000,000 or more 2.45
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We apply these fees as a percent of the public offering price per unit at the
time of purchase. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled due to
the requirements that only whole units be issued.
You aggregate initial offering period unit orders submitted by the same
person for units of any of the trusts we sponsor on any single day from any one
broker-dealer to qualify for a purchase
Understanding Your Investment 7
level. If you purchase initial offering period units that qualify for the fee
account or rollover/exchange discount described below and also purchase
additional initial offering period units on a single day from the same broker-
dealer that do not qualify for the fee account or rollover/exchange discount,
you aggregate all initial offering period units purchased for purposes of
determining the applicable breakpoint level in the table above on the additional
units, but such additional units will not qualify for the fee account or
rollover/exchange discount described below. Secondary market unit purchases are
not aggregated with initial offering period unit purchases for purposes of
determining the applicable breakpoint level. You can also include these orders
as your own for purposes of this aggregation:
* orders submitted by your spouse or children (including step-children)
under 21 years of age living in the same household and
* orders submitted by your trust estate or fiduciary accounts.
The discounts described above apply only to initial offering period
purchases.
Fee Accounts. Investors may purchase units through registered investment
advisers, certified financial planners or registered broker-dealers who in each
case either charge investor accounts ("Fee Accounts") periodic fees for
brokerage services, financial planning, investment advisory or asset management
services, or provide such services in connection with an investment account for
which a comprehensive "wrap fee" charge ("Wrap Fee") is imposed. You should
consult your financial 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%
=======
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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
8 Understanding Your Investment
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 firms that allow such persons to
participate in this employee discount program are eligible for the discount.
Rollover/Exchange Option. We waive a portion of the sales fee on units of
the trust offered in this prospectus if you buy your units with redemption or
termination proceeds from any of our other unit investment trusts (regardless of
sponsor). The discounted public offering price per unit for these transactions
is equal to the regular public offering price per unit less 1.00%. However, if
you invest redemption or termination proceeds of $500,000 or more in units of
the trust, the maximum sales fee on your units will be limited to the maximum
sales fee for the applicable amount invested in the table under "Large
Purchases" above. To qualify for this discount, the termination or redemption
proceeds used to purchase units of the trust offered in this prospectus must be
derived from a transaction that occurred within 30 calendar days of your
purchase of units of the trust offered in this prospectus. In addition, the
discount will only be available for investors that utilize the same broker-
dealer (or a different broker-dealer with appropriate notification) for both the
unit purchase and the transaction resulting in the receipt of the termination or
redemption proceeds used for the unit purchase. You may be required to provide
appropriate documentation or other information to your broker-dealer to evidence
your eligibility for this sales fee discount.
Please note that if you purchase units of the trust in this manner using
redemption proceeds from trusts which assess the amount of any remaining
deferred sales fee at redemption, you should be aware that any deferred sales
fee remaining on these units will be deducted from those redemption proceeds.
These discounts apply only to initial offering period purchases.
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 and creation and development fee that
will be collected on such units at the time of reinvestment. The dollar value
of these units will fluctuate over time.
RETIREMENT ACCOUNTS. The portfolio may be suitable for purchase in tax-
advantaged retirement accounts. You should contact your financial professional
about the accounts offered and any additional fees imposed.
HOW TO SELL YOUR UNITS
You can sell or redeem your units on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMPORTFOLIOS.COM or through your
financial professional. The sale and redemption price of
Understanding Your Investment 9
units is equal to the net asset value per unit, provided that you will not pay
any remaining creation and development fee or organization costs if you sell or
redeem units during the initial offering period. The sale and redemption price
is sometimes referred to as the "liquidation price." You pay any remaining
deferred sales fee when you sell or redeem your units. Certain broker-dealers
may charge a transaction or other fee for processing unit redemption or sale
requests.
SELLING UNITS. We may maintain a secondary market for units. This means
that if you want to sell your units, we may buy them at the current net asset
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value, provided that you will not pay any remaining creation and development fee
or organization costs if you sell units during the initial offering period. We
may then resell the units to other investors at the public offering price or
redeem them for the redemption price. Our secondary market repurchase price is
the same as the redemption price. Certain broker-dealers might also maintain a
secondary market in units. You should contact your financial professional for
current repurchase prices to determine the best price available. We may
discontinue our secondary market at any time without notice. Even if we do not
make a market, you will be able to redeem your units with the trustee on any
business day for the current redemption price.
REDEEMING UNITS. You may also redeem your units directly with the trustee,
The Bank of New York Mellon, on any day the New York Stock Exchange is open.
The redemption price that you will receive for units is equal to the net asset
value per unit, provided that you will not pay organization costs if you redeem
units during the initial offering period. You will pay any remaining creation
and development fee or deferred sales fee at the time you redeem units. You
will receive the net asset value for a particular day if the trustee receives
your completed redemption request prior to the close of regular trading on the
New York Stock Exchange. Redemption requests received by authorized financial
professionals prior to the close of regular trading on the New York Stock
Exchange that are properly transmitted to the trustee by the time designated by
the trustee, are priced based on the date of receipt. Redemption requests
received by the trustee after the close of regular trading on the New York Stock
Exchange, redemption requests received by authorized financial professionals
after that time or redemption requests received by such persons that are not
transmitted to the trustee until after the time designated by the trustee, are
priced based on the date of the next determined redemption price provided they
are received in a timely manner by the trustee on such date. It is the
responsibility of authorized financial professionals to transmit redemption
requests received by them to the trustee so they will be received in a timely
manner. If your request is not received in a timely manner or is incomplete in
any way, you will receive the next net asset value computed after the trustee
receives your completed request.
If you redeem your units, the trustee will generally send you a payment for
your units no later than seven days after it receives all necessary
documentation (this will usually only take three business days). The only time
the trustee can delay your payment is if the New York Stock Exchange is closed
(other than weekends or holidays), the Securities and Exchange Commission
determines that trading on that exchange is restricted or an emergency exists
making sale or evaluation of the securities not reasonably practicable, and for
any other period that the Securities and Exchange Commission permits.
You can request an in-kind distribution of the securities underlying your
units if you tender at
10 Understanding Your Investment
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.
EXCHANGE OPTION. You may be able to exchange your units for units of our
other unit trusts at a reduced sales fee. You can contact your financial
professional for more information about trusts currently available for
exchanges. Before you exchange units, you should read the prospectus carefully
and understand the risks and fees. You should then discuss this option with
your financial professional to determine whether your investment goals have
changed, whether current trusts suit you and to discuss tax consequences. We
may discontinue this option upon sixty days notice.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays distributions of its net
investment income (pro-rated on an annual basis) along with any excess capital
on each monthly distribution date to unitholders of record on the preceding
record date. The record and distribution dates are shown under "Essential
Information" in the "Investment Summary" section of this prospectus. In some
cases, your trust might pay a special distribution if it holds an excessive
amount of cash pending distribution. For example, this could happen as a result
of a merger or similar transaction involving a company whose stock is in your
portfolio. The trust will also generally make required distributions or
distributions to avoid imposition of tax at the end of each year because it is
structured as a "regulated investment company" for federal tax purposes. The
amount of your distributions will vary from time to time as companies change
their dividends or trust expenses change.
When the trust receives dividends or other income payments from a portfolio
security, the trustee credits the dividends to the trust's accounts. In an
effort to make relatively regular income distributions, the trust's monthly
income distribution is equal to one-twelfth of the estimated net annual income
to be received by the trust after deduction of trust operating expenses.
Because the trust does not receive income payments from the portfolio securities
at a constant rate throughout the year, the trust's income distributions to
unitholders may be more or less than the amount credited to the trust accounts
as of the record date. For the purpose of minimizing fluctuation in income
distributions, the trustee is authorized to advance such amounts as may be
necessary to provide income distributions of approximately equal amounts. The
trustee will be reimbursed, without interest, for any such advances from
available income received by the trust on the ensuing record date.
ESTIMATED ANNUAL DISTRIBUTIONS. The estimated net annual distributions are
shown under "Essential Information" in the "Investment Summary" section of this
prospectus. We generally base the estimate of the income the trust may receive
on annualizing the most recent ordinary dividend declared by an issuer (or
adding the most recent interim and final dividends declared for certain foreign
issuers) or on scheduled income payments. However, dividend conventions for
certain companies and/or certain countries differ from those typically used in
the United
Understanding Your Investment 11
States and in certain instances, dividends paid or declared over several years
or other periods were used to estimate annual distributions. Certain securities
may have floating income rates that may change over the life of the trust. Due
to these and various other factors, actual income payments received by the trust
will most likely differ from the most recent annualized dividends or scheduled
income payments. The actual net annual distributions you will receive will vary
with changes in the trust's fees and expenses, in income payments received and
with the sale of securities.
REPORTS. The trustee or your financial professional will make available to
you a statement showing income and other receipts of your trust for each
distribution. Each year the trustee will also provide an annual report on your
trust's activity and certain tax information. You can request copies of
security evaluations to enable you to complete your tax forms and audited
financial statements for your trust, if available.
INVESTMENT RISKS
All investments involve risk. This section describes the main risks that can
impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK is the risk that the value of the securities in your trust will
fluctuate. This could cause the value of your units to fall below your original
purchase price. Market value fluctuates in response to various factors. These
can include changes in interest rates, inflation, the financial condition of a
security's issuer, perceptions of the issuer, or ratings on a security. Even
though we supervise your portfolio, you should remember that we do not manage
your portfolio. Your trust will not sell a security solely because the market
value falls as is possible in a managed fund.
INTEREST RATE RISK is the risk that the value of the securities will fall if
interest rates increase. Securities that pay a fixed rate of return typically
fall in value when interest rates rise and rise in value when interest rates
fall.
INCOME PAYMENT RISK is the risk that an issuer of a security is unwilling or
unable to meet its obligation to pay income and/or principal on the security.
CALL RISK is the risk that the issuer redeems or "calls" a security. An
issuer might call a security if interest rates fall and the security pays a
higher interest or dividend rate or if it no longer needs the money for the
original purpose. If an issuer calls a security, the trust will distribute the
proceeds to you but your future income distributions will fall. You might not
be able to reinvest these proceeds at as high a yield. A security's call price
could be less than the price the trust paid for the security and could be below
the security's original par or face value. You could also receive less than the
amount you paid for your units. If enough securities in the trust are called,
the trust could terminate early. Some or all of the securities may also be
subject to extraordinary optional or mandatory redemptions if certain events
occur, such as certain changes in tax laws, the substantial damage or
destruction by fire or other casualty of the project for which the proceeds of
the securities were used, and various other events. The call provisions are
described in general terms in the "Portfolio" under "Redemption Provisions".
HIGH YIELD SECURITY RISK. The trust may invest in high yield securities or
unrated securities.
12 Understanding Your Investment
High yield, high risk securities are subject to greater market fluctuations and
risk of loss than securities with higher investment ratings. The value of these
securities will decline significantly with increases in interest rates, not only
because increases in rates generally decrease values, but also because increased
rates may indicate an economic slowdown. An economic slowdown, or a reduction
in an issuer's creditworthiness, may result in the issuer being unable to
maintain earnings at a level sufficient to maintain interest and principal
payments.
High-yield or "junk" securities, the generic names for securities rated below
"BBB" by Standard & Poor's or "Baa" by Moody's, are frequently issued by
corporations in the growth stage of their development or by established
companies who are highly leveraged or whose operations or industries are
depressed. Securities rated below BBB or Baa are considered speculative as
these ratings indicate a quality of less than investment grade. Because high-
yield securities are generally subordinated obligations and are perceived by
investors to be riskier than higher rated securities, their prices tend to
fluctuate more than higher rated securities and are affected by short-term
credit developments to a greater degree.
The market for high-yield securities is smaller and less liquid than that for
investment grade securities. Due to the smaller, less liquid market for high-
yield securities, the bid-offer spread on such securities is generally greater
than it is for investment grade securities and the purchase or sale of such
securities may take longer to complete.
PREFERRED SECURITIES. The trust invests in preferred securities including
preferred stocks, trust preferred securities or other similar securities.
Preferred stocks are unique securities that combine some of the characteristics
of both common stocks and bonds. Preferred stocks generally pay a fixed rate of
return and are sold on the basis of current yield, like bonds. However, because
they are equity securities, preferred stocks provide equity ownership of a
company and the income is paid in the form of dividends. Preferred stocks
typically have a yield advantage over common stocks as well as comparably-rated
fixed income investments. Preferred stocks are typically subordinated to bonds
and other debt instruments in a company's capital structure, in terms of
priority to corporate income, and therefore will be subject to greater credit
risk than those debt instruments.
Trust preferred securities are limited-life preferred securities typically
issued by corporations, generally in the form of interest-bearing notes or
preferred securities, or by an affiliated business trust of a corporation,
generally in the form of beneficial interests in subordinated debentures or
similarly structured securities. Distribution payments of the trust preferred
securities generally coincide with interest payments on the underlying
obligations. Trust preferred securities generally have a yield advantage over
traditional preferred stocks, but unlike preferred stocks, distributions are
generally treated as interest rather than dividends for federal income tax
purposes and therefore, are not eligible for the dividends-received deduction or
the lower federal tax rates applicable to qualified dividends. Trust preferred
securities prices fluctuate for several reasons including changes in investors'
perception of the financial condition of an issuer or the general condition of
the market for trust preferred securities, or when political or economic events
affecting the issuers occur. Trust preferred securities are also sensitive to
interest rate fluctuations, as the cost of capital rises and borrowing costs
increase in a rising interest rate environment and the risk that a trust
preferred security may be called for redemption in a falling interest rate
environment.
Understanding Your Investment 13
Trust preferred securities are also subject to unique risks which include the
fact that dividend payments will only be paid if interest payments on the
underlying obligations are made, which interest payments are dependent on the
financial condition of the issuer and may be deferred for up to 20 consecutive
quarters. During any deferral period, investors are generally taxed as if the
portfolio had received current income. In such a case, unitholders will have
income taxes due prior to receiving cash distributions to pay such taxes. In
addition, the underlying obligations, and thus the trust preferred securities,
may be prepaid after a stated call date or as a result of certain tax or
regulatory events. Preferred securities are typically subordinated to bonds and
other debt instruments in a company's capital structure, in terms of priority to
corporate income, and therefore will be subject to greater credit risk than
those debt instruments.
FOREIGN ISSUER RISK. Because the trust invests in securities of foreign
companies, the trust involves additional risks that differ from an investment
exclusively in domestic securities. These risks include the risk of losses due
to future political and economic developments, international trade conditions,
foreign withholding taxes and restrictions on foreign investments and exchange
of securities. The trust also involves the risk that fluctuations in exchange
rates between the U.S. dollar and foreign currencies may negatively affect the
value of the securities. The trust involves the risk that information about the
securities is not publicly available or is inaccurate due to the absence of
uniform accounting and financial reporting standards. In addition, some foreign
securities markets are less liquid than U.S. markets. This could cause the
trust to buy securities at a higher price or sell securities at a lower price
than would be the case in a highly liquid market. Foreign securities markets
are often more volatile and involve higher trading costs than U.S. markets, and
foreign companies, securities markets and brokers are also generally not subject
to the same level of supervision and regulation as in the U.S. Certain
securities may be held in the form of American Depositary Receipts or other
similar receipts (ADRs). ADRs represent receipts for foreign common stock
deposited with a custodian (which may include the trustee of your trust). The
ADRs in the trust, if any, trade in the U.S. in U.S. dollars and are registered
with the Securities and Exchange Commission. ADRs generally involve the same
types of risks as foreign securities held directly. Some ADRs may experience
less liquidity than the underlying securities traded in their home market.
CONCENTRATION RISK is the risk that the value of your trust is more
susceptible to fluctuations based on factors that impact a particular industry
because the portfolio concentrates in securities issued by companies within that
industry. A portfolio "concentrates" in an industry when securities in a
particular industry make up 25% or more of the portfolio.
The trust invests significantly in BANKS AND OTHER FINANCIAL SERVICES
COMPANIES or related subsidiaries. Banks and their holding companies are
especially subject to the adverse effects of economic recession; volatile
interest rates; portfolio concentrations in geographic markets and in commercial
and residential real estate loans; and competition from new entrants in their
fields of business. In addition, banks and their holding companies are
extensively regulated at both the federal and state level and may be adversely
affected by increased regulations. Banks will face increased competition from
nontraditional lending sources as regulatory changes, such as the Gramm-Leach-
Bliley financial services overhaul legislation, permit new entrants to offer
various financial products.
14 Understanding Your Investment
Technological advances such as the Internet allow these nontraditional lending
sources to cut overhead and permit the more efficient use of customer data.
Banks are already facing tremendous pressure from mutual funds, brokerage firms
and other financial service providers in the competition to furnish services
that were traditionally offered by banks.
Companies engaged in investment management and broker-dealer activities are
subject to volatility in their earnings and share prices that often exceeds the
volatility of the equity market in general. Adverse changes in the direction of
the stock market, investor confidence, equity transaction volume, the level and
direction of interest rates and the outlook of emerging markets could adversely
affect the financial stability, as well as the stock prices, of these companies.
Additionally, competitive pressures, including increased competition with new
and existing competitors, the ongoing commoditization of traditional businesses
and the need for increased capital expenditures on new technology could
adversely impact the profit margins of companies in the investment management
and brokerage industries. Companies involved in investment management and
broker-dealer activities are also subject to extensive regulation by government
agencies and self-regulatory organizations, and changes in laws, regulations or
rules, or in the interpretation of such laws, regulations and rules could
adversely affect the stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management industry
underwrite, sell or distribute property, casualty and business insurance. Many
factors affect insurance, reinsurance and risk management company profits,
including interest rate movements, the imposition of premium rate caps, a
misapprehension of the risks involved in given underwritings, competition and
pressure to compete globally, weather catastrophes or other disasters and the
effects of client mergers. Already extensively regulated, insurance companies'
profits may be adversely affected by increased government regulations or tax law
changes.
Financial services companies have faced significant difficulty recently
related to the downturn in the housing and mortgage lending markets,
corresponding declines in the value of mortgage-backed securities and the
resulting impact on all areas of the financial services industry and the broader
economy. These difficulties have given rise to considerable uncertainty
regarding the global economy and financial services companies, in particular.
The downturn has also led to considerable write-downs in the values of many
assets held by financial services companies and a tightening of credit markets
that has been marked by a general unwillingness of many entities to extend
credit. These factors have caused a significant need for many financial
services companies to raise capital to meet obligations and to satisfy
regulatory and contractual capital requirements. Many well-established
financial services companies have been forced to seek additional capital through
issuances of new preferred or common equity and certain companies have been
forced to agree to be acquired by other companies (or sell some or all of their
assets to other companies). In some cases government assistance, guarantees or
direct participation in investments or acquisitions have been necessary to
facilitate these transactions. In addition, concerns regarding these issues
and their potential negative impact to the U.S. and global economies have
resulted in extreme volatility in securities prices and uncertain market
conditions.
Understanding Your Investment 15
In response to these issues, government authorities in the U.S. and other
countries have initiated and may continue to engage in administrative and
legislative action intended to address both short- and long-term difficulties
facing the housing and mortgage lending markets, mortgage backed securities, the
financial services industry and the broader economy. These government actions
may include, but are not limited to, restrictions on investment activities;
increased oversight, regulation and involvement in financial services company
practices; adjustments to capital requirements; the acquisition of interests in
and the extension of credit to private entities; and increased investigation
efforts into the actions of companies and individuals in the financial service
industry. No one can predict any action that might be taken or the effect any
action or inaction will have. It is possible that any actions taken by
government authorities will not address or help improve the state of these
difficulties as intended. No one can predict the impact that the recent
difficulties will have on the economy, generally or financial services
companies. The difficulties and corresponding government action or inaction may
have far reaching consequences and your investment may be adversely affected by
such developments.
REAL ESTATE INVESTMENT TRUSTS. The trust may invest in securities issued by
real estate investment trusts (REITs). Many factors can have an adverse impact
on the performance of a particular REIT, including its cash available for
distribution, the credit quality of a particular REIT or the real estate
industry generally. The success of REITs depends on various factors, including
the occupancy and rent levels, appreciation of the underlying property and the
ability to raise rents on those properties. Economic recession, overbuilding,
tax law changes, higher interest rates or excessive speculation can all
negatively impact REITs, their future earnings and share prices.
Risks associated with the direct ownership of real estate include, among
other factors,
* general U.S. and global as well as local economic conditions,
* decline in real estate values,
* the financial health of tenants,
* overbuilding and increased competition for tenants,
* oversupply of properties for sale,
* changing demographics,
* changes in interest rates, tax rates and other operating expenses, changes
in government regulations,
* faulty construction and the ongoing need for capital improvements,
* regulatory and judicial requirements, including relating to liability for
environmental hazards,
* changes in neighborhood values and buyer demand, and
* the unavailability of construction financing or mortgage loans at rates
acceptable to developers.
Variations in rental income and space availability and vacancy rates in terms
of supply and demand are additional factors affecting real estate generally and
REITs in particular. Properties owned by a REIT may not be adequately insured
against certain losses and may be subject to significant environmental
liabilities, including remediation costs.
The value of real estate investments may also be affected by the downturn in
the subprime mortgage lending market in the United States.
16 Understanding Your Investment
Subprime loans have higher defaults and losses than prime loans. Subprime loans
also have higher serious delinquency rates than prime loans. The downturn in
the subprime mortgage lending market may have far-reaching consequences into
many aspects and geographic regions of the real estate business, and
consequently, the value of the portfolio may decline in response to such
developments.
You should also be aware that REITs may not be diversified and are subject to
the risks of financing projects. The real estate industry may be cyclical, and,
if a fund acquires REIT securities at or near the top of the cycle, there is
increased risk of a decline in value of the REIT securities. Recent demand for
certain types of real estate may have inflated the value of real estate. This
may increase the risk of a substantial decline in the value of such real estate
and increase the risk of a decline in the value of the securities. REITs are
also subject to defaults by borrowers and the market's perception of the REIT
industry generally.
Because of their structure, and a current legal requirement that they
distribute at least 90% of their taxable income to shareholders annually, REITs
require frequent amounts of new funding, through both borrowing money and
issuing stock. Thus, REITs historically have frequently issued substantial
amounts of new equity shares (or equivalents) to purchase or build new
properties. This may have adversely affected REIT equity share market prices.
Both existing and new share issuances may have an adverse effect on these prices
in the future, especially if REITs continue to issue stock when real estate
prices are relatively high and stock prices are relatively low.
The value of REITs may also be affected by the downturn in the housing and
mortgage lending markets. In response, government authorities have initiated
and may continue to engage in administrative and legislative action intended to
address both short- and long-term difficulties facing the housing and mortgage
lending markets and the broader economy. No one can predict the action that
might be taken or the effect any action or inaction will have and it is possible
that any actions taken by government authorities will not address or help
improve the state of these difficulties as intended. The downturn and
corresponding government action may have far reaching consequences into many
geographic regions and, consequently, the value of securities in the portfolio
may decline in response to such developments.
LEGISLATION AND LITIGATION RISK is the risk that various legislative
initiatives will be proposed from time to time in the United States and abroad
which may have a negative impact on certain of the companies represented in the
trust. Tax legislation proposed by the President or Congress, tax regulations
proposed by the U.S. Treasury or positions taken by the Internal Revenue Service
could affect the value of the trust by changing the taxation or tax
characterizations of the securities or dividends and other income paid by or
related to such securities. Congress has considered such proposals in the past
and may do so in the future. No one can predict whether any legislation will be
proposed, adopted or amended and no one can predict the impact that any
legislation might have on the trust or its portfolio securities. In addition,
litigation regarding any of the issuers of the securities or of the industries
represented by these issuers may negatively impact the share prices of these
securities. No one can predict what impact any pending or threatened litigation
will have on the share prices of the securities.
LIQUIDITY RISK is the risk that the value of a security will fall if trading
in the security is limited or absent. No one can guarantee that a liquid
trading market will exist for any security.
Understanding Your Investment 17
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. Under normal
circumstances, the trust will invest at least 80% of its assets in preferred
securities. Your trust will generally buy and sell securities:
* to pay expenses,
* to issue additional units or redeem units,
* in limited circumstances to protect the trust,
* to make required distributions or avoid imposition of taxes on the trust,
or
* as permitted by the trust agreement.
When your trust sells securities, the composition and diversity of the
securities in the portfolio may be altered. If a public tender offer has been
made for a security or a merger, acquisition or similar transaction has been
announced affecting a security, the trustee may either sell the security or
accept a tender offer if the supervisor determines that the action is in the
best interest of unitholders. The trustee will distribute any cash proceeds to
unitholders. If your trust receives securities or other property, it will
either hold the securities or property in the portfolio or sell the securities
or property and distribute the proceeds. If any contract for the purchase of
securities fails, the sponsor will refund the cash and sales fee attributable to
the failed contract to unitholders on or before the next distribution date
unless substantially all of the moneys held to cover the purchase are reinvested
in substitute securities in accordance with the trust agreement. The sponsor
may direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of the sponsor,
would make retention of the securities detrimental to the trust. In such a
case, the sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities 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
18 Understanding Your Investment
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.
The trustee will notify you of any termination and sell any remaining
securities. The trustee will send your final distribution to you within a
reasonable time following liquidation of all the securities after deducting
final expenses. Your termination distribution may be less than the price you
originally paid for your units.
THE SPONSOR. The sponsor of the trust is Advisors Asset Management, Inc. We
are a broker-dealer specializing in providing trading and support services to
broker-dealers, registered representatives, investment advisers and other
financial professionals. Our headquarters are located at 18925 Base Camp Road,
Monument, Colorado 80132. You can contact our unit investment trust division at
8100 East 22nd Street North, Building 800, Suite 102, Wichita, Kansas 67226 or
by using the contacts listed on the back cover of this prospectus. AAM is a
registered broker-dealer and investment adviser, a member of the Financial
Industry Regulatory Authority, Inc. (FINRA) and Securities Investor Protection
Corporation (SIPC) and a registrant of the Municipal Securities Rulemaking Board
(MSRB). If we fail to or cannot perform our duties as sponsor or become
bankrupt, the trustee may replace us, continue to operate your trust without a
sponsor, or terminate your trust.
We and your trust have adopted a code of ethics requiring our employees who
have access to
Understanding Your Investment 19
information on trust transactions to report personal securities transactions.
The purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to your trust.
The sponsor or an affiliate may use the list of securities in the trust in
its independent capacity (which may include acting as an investment adviser or
broker-dealer) and distribute this information to various individuals and
entities. The sponsor or an affiliate may recommend or effect transactions in
the securities. This may also have an impact on the price your trust pays for
the securities and the price received upon unit redemption or trust termination.
The sponsor may act as agent or principal in connection with the purchase and
sale of securities, including those held by the trust, and may act as a
specialist market maker in the securities. The sponsor may also issue reports
and make recommendations on the securities in the trust. The sponsor or an
affiliate may have participated in a public offering of one or more of the
securities in the trust. The sponsor, an affiliate or their employees may have
a long or short position in these securities or related securities. An officer,
director or employee of the sponsor or an affiliate may be an officer or
director for the issuers of the securities.
THE TRUSTEE. The Bank of New York Mellon is the trustee of your trust. Its
principal unit investment trust division office is located at 2 Hanson Place,
12th Floor, Brooklyn, New York 11217. You can contact the trustee by calling
the telephone number on the back cover of this prospectus or by writing to its
unit investment trust office. We may remove and replace the trustee in some
cases without your consent. The trustee may also resign by notifying us and
investors.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. We pay part of the sales fee to these distribution firms when
they sell units. During the initial offering period, the distribution fee (the
broker-dealer concession or agency commission) for broker-dealers and other
firms is as follows:
TRANSACTION CONCESSION OR
AMOUNT: AGENCY COMMISSION:
------------------------------------------
Less than $50,000 3.10%
$50,000 - $99,999 2.85
$100,000 - $249,999 2.60
$250,000 - $499,999 2.30
$500,000 - $999,999 2.20
$1,000,000 or more 1.75
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We apply these concessions or agency commissions as a percent of the public
offering price per unit at the time of the transaction. We also apply the
different levels on a unit basis using a $10 unit equivalent. The broker-dealer
concession or agency commission is 65% of the sales fee for secondary market
sales. For transactions involving unitholders of other unit investment trusts
who use their redemption or termination proceeds to purchase units of the trust,
the distribution fee is 2.15% of the public offering price per unit. No
distribution fee is paid to broker-dealers or other selling firms in connection
with unit sales in Fee Accounts subject to a Wrap Fee.
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
20 Understanding Your Investment
trust are eligible to receive the additional compensation described below. Such
payments will be in addition to the regular concessions paid to firms as set
forth in the applicable trust's prospectus. The additional concession is based
on total initial offering period sales of all Volume Concession A trusts during
a calendar quarter as set forth in the following table:
INITIAL OFFERING PERIOD SALES VOLUME
DURING CALENDAR QUARTER CONCESSION
---------------------------------------------------------
Less than $10,000,000 0.000%
$10,000,000 but less than $25,000,000 0.050
$25,000,000 but less than $50,000,000 0.100
$50,000,000 but less than $75,000,000 0.110
$75,000,000 but less than $100,000,000 0.120
$100,000,000 but less than $250,000,000 0.125
$250,000,000 but less than $500,000,000 0.135
$500,000,000 or more 0.150
|
This volume concession 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 for
calendar quarter sales, the trust's prospectus must include disclosure related
to this additional Volume Concession A compensation; a trust is not eligible for
this additional Volume Concession A compensation if the prospectus for such
trust does not include disclosure related to this additional Volume Concession A
compensation. Broker-dealer firms will not receive additional compensation
unless they sell at least $10.0 million of units of Volume Concession A trusts
during a calendar quarter. For example, if a firm sells $9.5 million of units
of Volume Concession A trusts in the initial offering period during a calendar
quarter, the firm will not receive any additional compensation with respect to
such trusts. Once a firm reaches a particular breakpoint during a quarter, the
firm will receive the stated volume concession on all initial offering period
sales of Volume Concession A trusts during the applicable quarter. For example,
if a firm sells $12.5 million of units of Volume Concession A trusts in the
initial offering period during a calendar quarter, the firm will receive
additional compensation of 0.05% of $12.5 million and if a firm sells $27.0
million of units of Volume Concession A trusts in the initial offering period
during a calendar quarter, the firm will receive additional compensation of
0.100% of $27.0 million.
In addition, dealer firms will not receive volume concessions on the sale of
units which are not subject to a transactional sales charge. However, such
sales will be included in determining whether a firm has met the sales level
breakpoints for volume concessions. Secondary market sales of all unit trusts
are excluded for purposes of these volume concessions. We will pay these
amounts out of our own assets within a reasonable time following each calendar
quarter.
Any sales fee discount is borne by the broker-dealer or selling firm out of
the distribution fee. We reserve the right to change the amount of concessions
or agency commissions from time to time.
We currently provide, at our own expense and out of our own profits,
additional compensation and benefits to broker-dealers who sell units of this
trust and our other products. This compensation is intended to result in
additional sales of our products and/or compensate broker-dealers and financial
advisors for past sales. A number of factors are considered in determining
whether to pay these additional amounts. Such factors may include, but are not
limited to, the level or type of services provided by the intermediary, the
level or expected level of sales of our products by the intermediary or its
agents, the placing of our products on a preferred or recommended product list
and access to an intermediary's personnel. We
Understanding Your Investment 21
may make these payments for marketing, promotional or related expenses,
including, but not limited to, expenses of entertaining retail customers and
financial advisors, advertising, sponsorship of events or seminars, obtaining
information about the breakdown of unit sales among an intermediary's
representations or offices, obtaining shelf space in broker-dealer firms and
similar activities designed to promote the sale of our products. We make such
payments to a substantial majority of intermediaries that sell our products. We
may also make certain payments to, or on behalf of, intermediaries to defray a
portion of their costs incurred for the purpose of facilitating unit sales, such
as the costs of developing or purchasing trading systems to process unit trades.
Payments of such additional compensation described in this paragraph and the
volume concessions described above, some of which may be characterized as
"revenue sharing," may 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 the trust. This may not be
sufficient for you to use for the purpose of avoiding penalties under federal
tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
TRUST STATUS. The trust intends to qualify as a "regulated investment
company" under the federal tax laws. If the trust qualifies as a regulated
investment company and distributes its income as required by the tax law, the
trust generally will not pay federal income taxes.
DISTRIBUTIONS. Trust distributions are generally taxable. After the end of
each year, you will receive a tax statement that separates your trust's
distributions into three categories, ordinary income distributions, capital
gains dividends and
22 Understanding Your Investment
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 the trust may be taxed at the capital gains tax
rates. Generally, you will treat all capital gains dividends as long-term
capital gains regardless of how long you have owned your units. To determine
your actual tax liability for your capital gains dividends, you must calculate
your total net capital gain or loss for the tax year after considering all of
your other taxable transactions, as described below. In addition, the trust may
make distributions that represent a return of capital for tax purposes and thus
will generally not be taxable to you. The tax status of your distributions from
your trust is not affected by whether you reinvest your distributions in
additional units or receive them in cash. The income from your trust that you
must take into account for federal income tax purposes is not reduced by amounts
used to pay a deferred sales fee, if any. The tax laws may require you to treat
distributions made to you in January as if you had received them on December 31
of the previous year. Under the "Health Care and Education Reconciliation Act
of 2010," income from the trust may also be subject to a new 3.8 percent
"medicare tax" imposed for taxable years beginning after 2012. This tax will
generally apply 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 the trust because the dividends received deduction is
generally not available for distributions from regulated investment companies.
However, certain ordinary income dividends on units that are attributable to
qualifying dividends received by the trust from certain corporations may be
designated by the trust as being eligible for the dividends received deduction.
SALE OR REDEMPTION OF UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this
gain or loss, you must subtract your tax basis in your units from the amount you
receive in the transaction. Your tax basis in your units is generally equal to
the cost of your units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your units.
CAPITAL GAINS AND LOSSES AND CERTAIN ORDINARY INCOME DIVIDENDS. If you are
an individual, the maximum marginal federal tax rate for net capital gain is
generally 15% (generally 0% for certain taxpayers in the 10% and 15% tax
brackets). These capital gains rates are generally effective for taxable years
beginning before January 1, 2013. For later periods, if you are an individual,
the maximum marginal federal tax rate for net capital gain is generally 20% (10%
for certain taxpayers in the 10% and 15% tax brackets). The 20% rate is reduced
to 18% for net capital gains from most property acquired after December 31, 2000
with a holding period of more than five years, and the 10% rate is reduced to 8%
for net capital gains from most property (regardless of when acquired) with a
holding period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the
Understanding Your Investment 23
date you purchase your units to determine your holding period. However, if you
receive a capital gain dividend from your trust and sell your unit at a loss
after holding it for six months or less, the loss will be recharacterized as
long-term capital loss to the extent of the capital gain dividend received. The
tax rates for capital gains realized from assets held for one year or less are
generally the same as for ordinary income. The Internal Revenue Code treats
certain capital gains as ordinary income in special situations.
Ordinary income dividends received by an individual unitholder from a
regulated investment company such as the trust are generally taxed at the same
rates that apply to net capital gain (as discussed above), provided certain
holding period requirements are satisfied and provided the dividends are
attributable to qualifying dividends received by the trust itself. These
special rules relating to the taxation of ordinary income dividends from
regulated investment companies generally apply to taxable years beginning before
January 1, 2013. The trust will provide notice to its unitholders of the amount
of any distribution which may be taken into account as a dividend which is
eligible for the 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.
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 tax purposes.
DEDUCTIBILITY OF TRUST EXPENSES. Expenses incurred and deducted by your
trust will generally not be treated as income taxable to you. In some cases,
however, you may be required to treat your portion of these trust expenses as
income. In these cases you may be able to take a deduction for these expenses.
However, certain miscellaneous itemized deductions, such as investment expenses,
may be deducted by individuals only to the extent that all of these deductions
exceed 2% of the individual's adjusted gross income.
FOREIGN TAX CREDIT. If your trust invests in any foreign securities, the tax
statement that you receive may include an item showing foreign taxes your trust
paid to other countries. In this case, dividends taxed to you will include your
share of the taxes your trust paid to other countries. You may be able to
deduct or receive a tax credit for your share of these taxes.
INVESTMENTS IN CERTAIN FOREIGN CORPORATIONS. If the trust holds an equity
interest in any "passive foreign investment companies" ("PFICs"), which are
generally certain foreign corporations that receive at least 75% of their annual
gross income from passive sources (such as interest, dividends, certain rents
and royalties or capital gains) or that hold at least 50% of their assets in
investments producing such passive income, the trust could be subject to U.S.
federal income tax and additional interest charges on gains and certain
distributions with respect to those equity interests, even if all the income or
gain is timely distributed to its unitholders. The trust will not be able to
pass through to its unitholders any credit or deduction for such taxes. The
trust may be able to make an election that could ameliorate these adverse tax
consequences. In this
24 Understanding Your Investment
case, the trust would recognize as ordinary income any increase in the value of
such PFIC shares, and as ordinary loss any decrease in such value to the extent
it did not exceed prior increases included in income. Under this election, the
trust might be required to recognize in a year income in excess of its
distributions from PFICs and its proceeds from dispositions of PFIC stock during
that year, and such income would nevertheless be subject to the distribution
requirement and would be taken into account for purposes of the 4% excise tax.
Dividends paid by PFICs will not be 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 the trust will be characterized as dividends for federal
income tax purposes (other than dividends which the trust designates as capital
gain dividends) and will be subject to U.S. income taxes, including withholding
taxes, subject to certain exceptions described below. However, distributions
received by a foreign investor from the trust that are properly designated by
the trust as capital gain dividends may not be subject to U.S. federal income
taxes, including withholding taxes, provided that the trust makes certain
elections and certain other conditions are met. In the case of dividends with
respect to taxable years of the trust beginning prior to 2012, distributions
from the trust that are properly designated 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 after December 31, 2012 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 (ii) certain other non-
U.S. entities that do not provide certain certifications and information about
the entity's U.S. owners. You should also consult your tax advisor with respect
to other U.S. tax withholding and reporting requirements.
EXPENSES
Your trust will pay various expenses to conduct its operations. The "Fees
and Expenses" section of the "Investment Summary" in this prospectus shows the
estimated amount of these expenses.
The sponsor will receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, 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
Understanding Your Investment 25
cash for your trust in non-interest bearing accounts. Your trust will reimburse
us as supervisor, evaluator and sponsor for providing portfolio supervisory
services, for evaluating your portfolio and for providing bookkeeping and
administrative services. Our reimbursements may exceed the costs of the
services we provide to your trust but will not exceed the costs of services
provided to all of our unit investment trusts in any calendar year. All of
these fees may adjust for inflation without your approval.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and the
sponsor, legal fees and expenses, expenses incurred in contacting you and costs
incurred to reimburse the trustee for advancing funds to meet distributions.
Your trust may pay the costs of updating its registration statement each year.
The trustee will generally pay trust expenses from distributions received on the
securities but in some cases may sell securities to pay trust expenses.
EXPERTS
LEGAL MATTERS. Chapman and Cutler LLP acts as counsel for the trust and has
given an opinion that the units are validly issued. Dorsey &Whitney LLP acts as
counsel for the trustee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Grant Thornton LLP,
independent registered public accounting firm, audited the statement of
financial condition and the portfolio included in this prospectus.
ADDITIONAL INFORMATION
This prospectus does not contain all the information in the registration
statement that your trust filed with the Securities and Exchange Commission.
The Information Supplement, which was filed with the Securities and Exchange
Commission, includes more detailed information about the securities in your
portfolio, investment risks and general information about your trust. You can
obtain the Information Supplement by contacting us or the Securities and
Exchange Commission as indicated on the back cover of this prospectus. This
prospectus incorporates the Information Supplement by reference (it is legally
considered part of this prospectus).
26 Understanding Your Investment
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISORS DISCIPLINED TRUST 829
We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 4 and 5, of Advisors Disciplined Trust 829 as of
March 15, 2012, the initial date of deposit. The statement of financial
condition is the responsibility of the trust's sponsor. Our responsibility is
to express an opinion on this statement of financial condition based on our
audit.
We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the statement of financial condition is free of material misstatement. The
trust is not required to have, nor were we engaged to perform an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of financial condition, assessing the accounting
principles used and significant estimates made by the sponsor, as well as
evaluating the overall statement of financial condition presentation. Our
procedures included confirmation with The Bank of New York Mellon, trustee, of
cash or an irrevocable letter of credit deposited for the purchase of securities
as shown in the statement of financial condition as of March 15, 2012. We
believe that our audit of the statement of financial condition provides a
reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above presents
fairly, in all material respects, the financial position of Advisors Disciplined
Trust 829 as of March 15, 2012, in conformity with accounting principles
generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
March 15, 2012
ADVISORS DISCIPLINED TRUST 829
STATEMENT OF FINANCIAL CONDITION AS OF MARCH 15, 2012
---------------------------------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . . . . . . . . . $ 148,546
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,546
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 750
Deferred sales fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,676
Creation and development fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750
----------
5,176
----------
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,050
Less: initial sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,504
Less: deferred sales fee, creation & development fee and organization costs (3)(4)(5) . . 5,176
----------
Net interest of investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,370
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,546
==========
Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,005
==========
Net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.555
==========
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the evaluator.
(2) Cash or an irrevocable letter of credit has been deposited with the trustee
covering the funds (aggregating $200,000) 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 $0.05 per unit for the
trust. A distribution will be made as of the earlier of the close of the
initial offering period or six months following the trust's inception date
to an account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent the actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be reimbursed to the sponsor
and deducted from the assets of the trust.
(4) The total sales fee consists of an initial sales fee, a deferred sales fee
and a creation & 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 & development fee. On the
inception date, the total sales fee is 3.95% of the public offering price
per unit. The deferred sales fee is equal to $0.245 per unit and the
creation &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.
|
Understanding Your Investment 27
CONTENTS
INVESTMENT SUMMARY
-----------------------------------------------------------------------
A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
3 Who Should Invest
3 Essential Information
3 Fees and Expenses
4 Portfolio
UNDERSTANDING YOUR INVESTMENT
-----------------------------------------------------------------------
Detailed information to 6 How to Buy Units
help you understand 9 How to Sell Your Units
your investment 11 Distributions
12 Investment Risks
18 How the Trust Works
22 Taxes
25 Expenses
26 Experts
26 Additional Information
27 Report of Independent Registered
Public Accounting Firm
27 Statement of Financial Condition
WHERE TO LEARN MORE
-----------------------------------------------------------------------
You can contact us for VISIT US ON THE INTERNET
free information about http://www.AAMportfolios.com
this and other investments, BY E-MAIL
including the Information info@AAMportfolios.com
Supplement CALL ADVISORS ASSET MANAGEMENT, INC.
(877) 858-1773
CALL THE BANK OF NEW YORK MELLON
(800) 848-6468
|
ADDITIONAL INFORMATION
This prospectus does not contain all information filed with the
Securities and Exchange Commission. To obtain or copy this
information including the Information Supplement (a duplication
fee may be required):
E-MAIL: publicinfo@sec.gov
WRITE: Public Reference Section
Washington, D.C. 20549
VISIT: http://www.sec.gov
(EDGAR Database)
CALL: 1-202-551-8090
(only for information on the operation of the
Public Reference Section)
|
REFER TO:
ADVISORS DISCIPLINED TRUST 829
Securities Act file number: 333-178561
Investment Company Act file number: 811-21056
PREFERRED INCOME
OPPORTUNITIES
PORTFOLIO 2-YR,
SERIES 2012-1
PROSPECTUS
MARCH 15, 2012
[LOGO]
AAM
ADVISORS
ASSET MANAGEMENT
ADVISORS DISCIPLINED TRUST 829
PREFERRED INCOME OPPORTUNITIES PORTFOLIO 2-YR, SERIES 2012-1
INFORMATION SUPPLEMENT
This Information Supplement provides additional information concerning each
trust described in the prospectus for the Advisors Disciplined Trust series
identified above. This Information Supplement should be read in conjunction
with the prospectus. It is not a prospectus. It does not include all of the
information that an investor should consider before investing in a trust. It
may not be used to offer or sell units of a trust without the prospectus. This
Information Supplement is incorporated into the prospectus by reference and has
been filed as part of the registration statement with the Securities and
Exchange Commission. Investors should obtain and read the prospectus prior to
purchasing units of a trust. You can obtain the prospectus without charge by
contacting your financial professional or by contacting the unit investment
trust division of Advisors Asset Management, Inc. at 18925 Base Camp Road, Suite
203, Monument, Colorado 80132, at 8100 East 22nd Street North, Building 800,
Suite 102, Wichita, Kansas 67226 or by calling (877) 858-1773. This Information
Supplement is dated as of the date of the prospectus.
CONTENTS
General Information 2
Investment Objective and Policies 3
Risk Factors 5
Administration of the Trust 14
Portfolio Transactions and Brokerage Allocation 23
Purchase, Redemption and Pricing of Units 23
Taxation 28
Performance Information 31
Description of Securities Ratings 31
|
GENERAL INFORMATION
Each trust is one of a series of separate unit investment trusts created
under the name Advisors Disciplined Trust and registered under the Investment
Company Act of 1940. Each trust was created as a common law trust on the
inception date described in the prospectus under the laws of the state of
New York. Each trust was created under a trust agreement among Advisors Asset
Management, Inc. (as sponsor, evaluator and supervisor) and The Bank of New York
Mellon (as trustee).
When your trust was created, the sponsor delivered to the trustee
securities or contracts for the purchase thereof for deposit in the trust and
the trustee delivered to the sponsor documentation evidencing the ownership of
units of the trust. At the close of the New York Stock Exchange on the trust's
inception date, the number of units may be adjusted so that the public offering
price per unit equals $10. The number of units, fractional interest of each
unit in the trust and estimated income distributions per unit will increase or
decrease to the extent of any adjustment. Additional units of each trust may be
issued from time to time by depositing in the trust additional securities (or
contracts for the purchase thereof together with cash or irrevocable letters of
credit) or cash (including a letter of credit or the equivalent) with
instructions to purchase additional securities. As additional units are issued
by a trust as a result of the deposit of additional securities by the sponsor,
the aggregate value of the securities in the trust will be increased and the
fractional undivided interest in the trust represented by each unit will be
decreased. The sponsor may continue to make additional deposits of securities
into a trust, provided that such additional deposits will be in amounts, which
will generally maintain the existing relationship among the shares of the
securities in such trust. Thus, although additional units will be issued, each
unit will generally continue to represent the same number of shares of each
security. If the sponsor deposits cash to purchase additional securities,
existing and new investors may experience a dilution of their investments and a
reduction in their anticipated income because of fluctuations in the prices of
the securities between the time of the deposit and the purchase of the
securities and because the trust will pay any associated brokerage fees.
The trustee has not participated in the selection of the securities
deposited in the trust and has no responsibility for the composition of the
trust portfolio.
Each unit initially offered represents an undivided interest in the related
trust. To the extent that any units are redeemed by the trustee or additional
units are issued as a result of additional securities being deposited by the
sponsor, the fractional undivided interest in a trust represented by each
unredeemed unit will increase or decrease accordingly, although the actual
interest in such trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the trustee by
unitholders, which may include the sponsor, or until the termination of the
trust agreement.
A trust consists of (a) the securities listed under "Portfolio" in the
prospectus as may continue to be held from time to time in the trust, (b) any
additional securities acquired and held by the trust pursuant to the provisions
of the trust agreement and (c) any cash held in the accounts of the trust.
Neither the sponsor nor the trustee shall be liable in any way for any failure
in any of the securities. However, should any contract for the purchase of any
of the securities initially
-2-
deposited in a trust fail, the sponsor will, unless substantially all of the
moneys held in the trust to cover such purchase are reinvested in substitute
securities in accordance with the trust agreement, refund the cash and sales fee
attributable to such failed contract to all unitholders on the next distribution
date.
INVESTMENT OBJECTIVE AND POLICIES
The Preferred Income Opportunities Portfolio seeks high current income
through investment in a diversified portfolio consisting of shares of preferred
securities. There is, of course, no guarantee that the trust will achieve its
objectives.
The trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analysis. The portfolio of a trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from a portfolio.
The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in special circumstances as provided in the
trust agreement. Thus, the assets of a trust will generally remain unchanged
under normal circumstances. The trust agreement provides that the sponsor may
(but need not) direct the trustee to dispose of a security in certain events
such as the issuer having defaulted on the payment on any of its outstanding
obligations or the price of a security has declined to such an extent or other
such credit factors exist so that in the opinion of the supervisor the retention
of such securities would be detrimental to the trust.
If a public tender offer has been made for a security or a merger,
acquisition or similar transaction has been announced affecting a security, the
trustee may either sell the security or accept a tender offer if the supervisor
determines that the action is in the best interest of unitholders. The trustee
will distribute any excess cash proceeds to unitholders. If your trust receives
securities or other property, it will either hold the securities or property in
the portfolio or sell the securities or property and distribute the proceeds.
The sponsor may direct the reinvestment of security sale proceeds if the sale is
the direct result of serious adverse credit factors which, in the opinion of the
sponsor, would make retention of the securities detrimental to the trust. In
such a case, the sponsor may, but is not obligated to, direct the reinvestment
of sale proceeds in any other securities that meet the criteria for inclusion in
the trust on the trust's inception date. The sponsor may also instruct the
trustee to take action necessary to ensure that the portfolio continues to
satisfy the qualifications of a regulated investment company for federal tax
purposes if the trust has elected to be taxed as a regulated investment company.
The trustee may sell securities, designated by the supervisor, from a trust
for the purpose of redeeming units of such trust tendered for redemption and the
payment of expenses.
In addition, if a trust has elected to be taxed as a regulated investment
company, the trustee may dispose of certain securities and take such further
action as may be needed from time to time to ensure that a trust continues to
satisfy the qualifications of a regulated investment company, including the
requirements with respect to diversification under Section 851 of the
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Internal Revenue Code, and as may be needed from time to time to avoid the
imposition of any tax on a trust or undistributed income of a trust as a
regulated investment company.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Capital
Account of a trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided herein, in the prospectus or in the
trust agreement, the acquisition by a trust of any securities other than the
portfolio securities is prohibited.
Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or otherwise liquidated and because the
proceeds from such events will be distributed to unitholders and will not be
reinvested, no assurance can be given that a trust will retain for any length of
time its present size and composition. Neither the sponsor nor the trustee
shall be liable in any way for any default, failure or defect in any security.
In the event of a failure to deliver any security that has been purchased for a
trust under a contract ("Failed Securities"), the sponsor is authorized under
the trust agreement to direct the trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such trust.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities must be equity securities of
the type selected for the trust and must not adversely affect the federal income
tax status of the trust. Whenever a Replacement Security is acquired for a
trust, the trustee shall notify all unitholders of the trust of the acquisition
of the Replacement Security and shall, on the next monthly distribution date
which is more than 30 days thereafter, make a pro rata distribution of the
amount, if any, by which the cost to the trust of the Failed Security exceeded
the cost of the Replacement Security. Once all of the securities in a trust are
acquired, the trustee will have no power to vary the investments of the trust,
i.e., the trustee will have no managerial power to take advantage of market
variations to improve a unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the sponsor will refund the sales fee attributable to such Failed
Securities to all unitholders of the trust and the trustee will distribute the
cash attributable to such Failed Securities not more than 30 days after the date
on which the trustee would have been required to purchase a Replacement
Security. In addition, unitholders should be aware that, at the time of receipt
of such cash, they may not be able to reinvest such proceeds in other securities
at a return equal to or in excess of the return which such proceeds would have
earned for unitholders of such trust.
In the event that a Replacement Security is not acquired by a trust, the
income for such trust may be reduced.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security that might reasonably be
expected to have a material adverse effect on the trust. At any time after the
trust's inception, litigation may be instituted on a variety of grounds with
respect to the securities. The sponsor is unable to predict whether any such
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litigation may be instituted, or if instituted, whether such litigation might
have a material adverse effect on the trust. The sponsor and the trustee shall
not be liable in any way for any default, failure or defect in any security.
RISK FACTORS
MARKET RISK. Because the trust invests in securities, you should understand
the risks of investing in securities before purchasing units. These risks
include the risk that the financial condition of the company or the general
condition of the stock market may worsen and the value of the securities (and
therefore units) will fall. Securities are especially susceptible to general
stock market movements. The value of securities often rises or falls rapidly and
unpredictably as market confidence and perceptions of companies change. These
perceptions are based on factors including expectations regarding government
economic policies, inflation, interest rates, economic expansion or contraction,
political climates and economic or banking crises. The value of units will
fluctuate with the value of the securities in the trust and may be more or less
than the price you originally paid for your units. As with any investment, we
cannot guarantee that the performance of the trust will be positive over any
period of time. Because the trust is unmanaged, the Trustee will not sell
securities in response to market fluctuations as is common in managed
investments. In addition, because some trusts hold a relatively small number of
securities, you may encounter greater market risk than in a more diversified
investment.
PREFERRED STOCK RISKS. Preferred stocks may be susceptible to general stock
market movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions are based
on unpredictable factors, including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, market liquidity, and global or regional political, economic or
banking crises. Preferred stocks are also vulnerable to Congressional reductions
in the dividends-received deduction which would adversely affect the after-tax
return to the investors who can take advantage of the deduction. Such a
reduction might adversely affect the value of preferred stocks in general.
Holders of preferred stocks, as owners of the entity, have rights to receive
payments from the issuers of those preferred stocks that are generally
subordinate to those of creditors of, or holders of debt obligations or, in some
cases, other senior preferred stocks of, such issuers. Preferred stocks do not
represent an obligation of the issuer and, therefore, do not offer any assurance
of income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or senior preferred
stocks will create prior claims for payment of principal and interest and senior
dividends which could adversely affect the ability and inclination of the issuer
to declare or pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market fluctuations for
as long as the preferred stocks remain outstanding, and thus the value of the
securities may be expected to fluctuate over the life of the trust to values
higher or lower than those prevailing on the trust's inception date.
TRUST PREFERRED SECURITIES RISKS. Holders of trust preferred securities
incur risks in addition to or slightly different than the typical risks of
holding preferred stocks. Trust preferred securities are limited-life preferred
securities that are typically issued by corporations, generally
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in the form of interest-bearing notes or preferred securities issued by
corporations, or by an affiliated business trust of a corporation, generally in
the form of beneficial interests in subordinated debentures issued by the
corporation, or similarly structured securities. The maturity and dividend rate
of the trust preferred securities are structured to match the maturity and
coupon interest rate of the interest-bearing notes, preferred securities or
subordinated debentures. Trust preferred securities usually mature on the stated
maturity date of the interest-bearing notes, preferred securities or
subordinated debentures and may be redeemed or liquidated prior to the stated
maturity date of such instruments for any reason on or after their stated call
date or upon the occurrence of certain circumstances at any time. Trust
preferred securities generally have a yield advantage over traditional preferred
stocks, but unlike preferred stocks, distributions on the trust preferred
securities are generally treated as interest rather than dividends for federal
income tax purposes and therefore, are not eligible for the dividends-received
deduction or the lower federal tax rates applicable to qualified dividends.
Unlike most preferred stocks, distributions received from trust preferred
securities are generally not eligible for the dividends received deduction.
Certain of the risks unique to trust preferred securities include: (i)
distributions on trust preferred securities will be made only if interest
payments on the interest-bearing notes, preferred securities or subordinated
debentures are made; (ii) a corporation issuing the interest-bearing notes,
preferred securities or subordinated debentures may defer interest payments on
these instruments for up to 20 consecutive quarters and if such election is
made, distributions will not be made on the trust preferred securities during
the deferral period; (iii) certain tax or regulatory events may trigger the
redemption of the interest-bearing notes, preferred securities or subordinated
debentures by the issuing corporation and result in prepayment of the trust
preferred securities prior to their stated maturity date; (iv) future
legislation may be proposed or enacted that may prohibit the corporation from
deducting its interest payments on the interest-bearing notes, preferred
securities or subordinated debentures for tax purposes, making redemption of
these instruments likely; (v) a corporation may redeem the interest-bearing
notes, preferred securities or subordinated debentures in whole at any time or
in part from time to time on or after a stated call date; (vi) trust preferred
securities holders have very limited voting rights; and (vii) payment of
interest on the interest-bearing notes, preferred securities or subordinated
debentures, and therefore distributions on the trust preferred securities, is
dependent on the financial condition of the issuing corporation.
FINANCIAL SERVICES INDUSTRY. Your trust may concentrate in securities of
issuers in the financial services industry.
Banks and their holding companies are especially subject to the adverse
effects of economic recession; volatile interest rates; portfolio concentrations
in geographic markets and in commercial and residential real estate loans; and
competition from new entrants in their fields of business. In addition, banks
and their holding companies are extensively regulated at both the federal and
state level and may be adversely affected by increased regulations. Banks will
face increased competition from nontraditional lending sources as regulatory
changes, such as the Gramm-Leach-Bliley financial services overhaul legislation,
permit new entrants to offer various financial products. Technological advances
such as the Internet allow these nontraditional lending sources to cut overhead
and permit the more efficient use of customer data. Banks are already facing
tremendous pressure from mutual funds, brokerage firms and other financial
service providers in the competition to furnish services that were traditionally
offered by banks.
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Companies engaged in investment management and broker-dealer activities are
subject to volatility in their earnings and share prices that often exceeds the
volatility of the equity market in general. Adverse changes in the direction of
the stock market, investor confidence, equity transaction volume, the level and
direction of interest rates and the outlook of emerging markets could adversely
affect the financial stability, as well as the stock prices, of these companies.
Additionally, competitive pressures, including increased competition with new
and existing competitors, the ongoing commoditization of traditional businesses
and the need for increased capital expenditures on new technology could
adversely impact the profit margins of companies in the investment management
and brokerage industries. Companies involved in investment management and
broker-dealer activities are also subject to extensive regulation by government
agencies and self-regulatory organizations, and changes in laws, regulations or
rules, or in the interpretation of such laws, regulations and rules could
adversely affect the stock prices of such companies.
Companies involved in the insurance, reinsurance and risk management
industry underwrite, sell or distribute property, casualty and business
insurance. Many factors affect insurance, reinsurance and risk management
company profits, including interest rate movements, the imposition of premium
rate caps, a misapprehension of the risks involved in given underwritings,
competition and pressure to compete globally, weather catastrophes or other
disasters and the effects of client mergers. Already extensively regulated,
insurance companies' profits may be adversely affected by increased government
regulations or tax law changes.
Financial services companies have faced significant difficulty related to
the downturn in the housing and mortgage lending markets, corresponding declines
in the value of mortgage-backed securities and the resulting impact on all areas
of the financial services industry and the broader economy. These difficulties
have given rise to considerable uncertainty regarding the global economy and
financial services companies, in particular. The downturn has also led to
considerable write-downs in the values of many assets held by financial services
companies and a tightening of credit markets that has been marked by a general
unwillingness of many entities to extend credit. These factors have caused a
significant need for many financial services companies to raise capital to meet
obligations and to satisfy regulatory and contractual capital requirements.
Many well-established financial services companies have been forced to seek
additional capital through issuances of new preferred or common equity and
certain companies have been forced to agree to be acquired by other companies
(or sell some or all of their assets to other companies). In some cases
government assistance, guarantees or direct participation in investments or
acquisitions have been necessary to facilitate these transactions. In
addition, concerns regarding these issues and their potential negative impact to
the U.S. and global economies have resulted in extreme volatility in securities
prices and uncertain market conditions.
In response to these issues, government authorities in the U.S. and other
countries have initiated and may continue to engage in administrative and
legislative action intended to address both short- and long-term difficulties
facing the housing and mortgage lending markets, mortgage backed securities, the
financial services industry and the broader economy. These government actions
may include, but are not limited to, restrictions on investment activities;
increased oversight, regulation and involvement in financial services company
practices;
-7-
adjustments to capital requirements; the acquisition of interests in and the
extension of credit to private entities; and increased investigation efforts
into the actions of companies and individuals in the financial service industry.
No one can predict any action that might be taken or the effect any action or
inaction will have. It is possible that any actions taken by government
authorities will not address or help improve the state of these difficulties as
intended. No one can predict the impact that the difficulties will have on the
economy, generally or financial services companies. The difficulties and
corresponding government action or inaction may have far reaching consequences
and your investment may be adversely affected by such developments.
Banks and their holding companies are subject to extensive federal
regulation and, when such institutions are state-chartered, to state regulation
as well. Such regulations impose strict capital requirements and limitations on
the nature and extent of business activities that banks may pursue. Furthermore,
bank regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose significant
risks to the soundness of such institution or the safety of the federal deposit
insurance fund. Regulatory actions, such as increases in the minimum capital
requirements applicable to banks and increases in deposit insurance premiums
required to be paid by banks and thrifts to the Federal Deposit Insurance
Corporation ("FDIC"), can negatively impact earnings and the ability of a
company to pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or their
holding companies, or insures against any risk of investment in the securities
issued by such institutions.
The statutory requirements applicable to, and regulatory supervision of,
banks and their holding companies have increased significantly and have
undergone substantial change in the past. To a great extent, these changes are
embodied in the Financial Institutions Reform, Recovery and Enforcement Act,
enacted in August 1989; the Federal Deposit Insurance Corporation Improvement
Act of 1991, and the regulations promulgated under these laws. The impact of
these laws on the business, financial condition and prospects of the Securities
in the Trust's portfolio cannot be predicted with certainty. The Gramm-Leach-
Bliley financial services overhaul legislation allows banks, securities firms
and insurance companies to form one-stop financial conglomerates marketing a
wide range of financial service products to investors. This legislation will
likely result in increased merger activity and heightened competition among
existing and new participants in the field. Legislation to liberalize interstate
banking has also been enacted. Under the legislation, banks are able to purchase
or establish subsidiary banks in any state. Since mid-1997, banks have been
allowed to turn existing banks into branches. Consolidation may continue. The
Securities and Exchange Commission and the Financial Accounting Standards Board
require the expanded use of market value accounting by banks and have imposed
rules requiring market accounting for investment securities held in trading
accounts or available for sale. Adoption of additional such rules may result in
increased volatility in the reported health of the industry, and mandated
regulatory intervention to correct such problems. Additional legislative and
regulatory changes may be forthcoming. For example, the bank regulatory
authorities have proposed substantial changes to the Community Reinvestment Act
and fair lending laws, rules and regulations, and there can be no certainty as
to the effect, if any, that such changes would have on the Securities in the
Trust's portfolio. In addition, from time to time the deposit insurance system
is reviewed by Congress and federal regulators, and
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proposed reforms of that system could, among other things, further restrict the
ways in which deposited moneys can be used by banks or reduce the dollar amount
or number of deposits insured for any depositor. Such reforms could reduce
profitability, as investment opportunities available to bank institutions become
more limited and as consumers look for savings vehicles other than bank
deposits. Banks face significant competition from other financial institutions
such as mutual funds, credit unions, mortgage banking companies and insurance
companies, and increased competition may result from legislative broadening of
regional and national interstate banking powers. Among other benefits, such
legislation allows banks and bank holding companies to acquire across previously
prohibited state lines and to consolidate their various bank subsidiaries into
one unit. Neither the Sponsor nor the Underwriter makes any prediction as to
what, if any, manner of bank regulatory actions might ultimately be adopted or
what ultimate effect such actions might have on the Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5% of the
outstanding shares of any class of voting securities of a bank or bank holding
company, (2) acquiring control of a bank or another bank holding company, (3)
acquiring all or substantially all the assets of a bank, or (4) merging or
consolidating with another bank holding company, without first obtaining Federal
Reserve Board ("FRB") approval. In considering an application with respect to
any such transaction, the FRB is required to consider a variety of factors,
including the potential anti-competitive effects of the transaction, the
financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws. In addition, the federal
Change In Bank Control Act and various state laws impose limitations on the
ability of one or more individuals or other entities to acquire control of banks
or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company experiencing earnings weaknesses should not pay cash
dividends which exceed its net income or which could only be funded in ways that
would weaken its financial health, such as by borrowing. The FRB also may impose
limitations on the payment of dividends as a condition to its approval of
certain applications, including applications for approval of mergers and
acquisitions. Neither the Sponsor nor the Underwriter makes any prediction as to
the effect, if any, such laws will have on the Securities or whether such
approvals, if necessary, will be obtained.
Companies engaged in investment management and brokerage activities are
subject to the adverse effects of economic recession, volatile interest rates,
and competition from new entrants in their fields of business. Adverse changes
in the direction of the stock market, investor confidence, the financial health
of customers, equity transaction volume, the level and direction of interest
rates and the outlook of emerging markets could adversely affect the financial
stability, as well as the stock prices, of these companies. Additionally,
competitive pressures,
-9-
including increased competition from new and existing competitors, the ongoing
commoditization of traditional businesses and the need for increased capital
expenditures on new technology could adversely impact the profit margins of
companies in the investment management and brokerage industries. Companies
involved in investment management and brokerage activities are also subject to
extensive regulation by government agencies and self-regulatory organizations,
and changes in laws, regulations or rules, or in the interpretation of such
laws, regulations and rules could adversely affect the stock prices of such
companies.
Companies involved in the insurance, reinsurance and risk management
industry underwrite, sell or distribute property, casualty and business
insurance. Many factors affect insurance, reinsurance and risk management
company profits, including but not limited to interest rate movements, the
imposition of premium rate caps, a misapprehension of the risks involved in
given underwritings, competition and pressure to compete globally, weather
catastrophes or other natural or man-made disasters and the effects of client
mergers. Individual companies may be exposed to material risks including reserve
inadequacy and the inability to collect from reinsurance carriers. Insurance
companies are subject to extensive governmental regulation, including the
imposition of maximum rate levels, which may not be adequate for some lines of
business. Proposed or potential tax law changes may also adversely affect
insurance companies' policy sales, tax obligations and profitability. In
addition to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressure to compete globally.
In addition to the normal risks of business, companies involved in the
insurance and risk management industry are subject to significant risk factors,
including those applicable to regulated insurance companies, such as:
* the inherent uncertainty in the process of establishing property-liability
loss reserves, and the fact that ultimate losses could materially exceed
established loss reserves, which could have a material adverse effect on
results of operations and financial condition;
* the fact that insurance companies have experienced, and can be expected in
the future to experience, catastrophic losses, which could have a material
adverse impact on their financial conditions, results of operations and
cash flow;
* the inherent uncertainty in the process of establishing property-liability
loss reserves due to changes in loss payment patterns caused by new claim
settlement practices;
* the need for insurance companies and their subsidiaries to maintain
appropriate levels of statutory capital and surplus, particularly in light
of continuing scrutiny by rating organizations and state insurance
regulatory authorities, and in order to maintain acceptable financial
strength or claims-paying ability ratings;
-10-
* the extensive regulation and supervision to which insurance companies are
subject, and various regulatory and other legal actions;
* the adverse impact that increases in interest rates could have on the value
of an insurance company's investment portfolio and on the attractiveness of
certain of its products; and
* the uncertainty involved in estimating the availability of reinsurance and
the collectibility of reinsurance recoverables.
The state insurance regulatory framework has, during recent years, come
under increased federal scrutiny, and certain state legislatures have considered
or enacted laws that alter and, in many cases, increase state authority to
regulate insurance companies and insurance holding company systems. Further, the
National Association of Insurance Commissioners ("NAIC") and state insurance
regulators are re-examining existing laws and regulations, specifically focusing
on insurance companies, interpretations of existing laws and the development of
new laws. In addition, Congress and certain federal agencies have investigated
the condition of the insurance industry in the United States to determine
whether to promulgate additional federal regulation. The Sponsor is unable to
predict whether any state or federal legislation will be enacted to change the
nature or scope of regulation of the insurance industry, or what effect, if any,
such legislation would have on the industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the amount of
investments in certain investment categories. Failure to comply with these laws
and regulations would cause non-conforming investments to be treated as non-
admitted assets for purposes of measuring statutory surplus and, in some
instances, would require divestiture.
The value of securities issued by financial services companies may also be
affected by the downturn in the housing and mortgage lending markets,
corresponding declines in the value of mortgage backed securities and the
resulting impact on all areas of the financial services industry. In response,
government authorities have initiated and may continue to engage in
administrative and legislative action intended to address both short- and long-
term difficulties facing the housing and mortgage lending markets, mortgage
backed securities, the financial services industry and the broader economy.
These government actions may include, but are not limited to, restrictions on
investment options, increased oversight, regulation and involvement in financial
services company practices, adjustments to capital requirements, the acquisition
of interests in and the extension of credit to private entities and increased
investigation efforts into the actions of companies and individuals in the
financial service industry. No one can predict the action that might be taken
or the effect any action or inaction will have and it is possible that any
actions taken by government authorities will not address or help improve the
state of these difficulties as intended. The downturn and corresponding
government action may have far reaching consequences into many geographic
regions and areas of financial services companies and, consequently, the value
of securities in the portfolio may decline in response to such developments.
-11-
UTILITIES. The trust may invest significantly in public utility companies.
General problems of the public utility industry include the difficulty in
obtaining an adequate return on invested capital despite frequent increases in
rates which have been granted by the public service commissions having
jurisdiction, the difficulty in financing large construction programs during an
inflationary period, the restrictions on operations and increased cost and
delays attributable to environmental, nuclear safety and other regulatory
considerations, the difficulty of the capital markets absorbing utility debt and
equity securities, the difficulty in obtaining fuel for electric generation at
reasonable prices, regulatory restrictions on the ability to pass increasing
wholesale costs along to the retail and business customer, and the effects of
energy conservation. There is no assurance that public service commissions will
grant rate increases in the future or that any such increases will be timely or
adequate to cover operating and other expenses and debt service requirements.
Public utilities which are issuers of the securities have been experiencing many
of these problems in varying degrees. Furthermore, utility stocks are
particularly susceptible to interest rate risk, generally exhibiting an inverse
relationship to interest rates. As a result, electric utility stock prices may
be adversely affected as interest rates rise. Similarly, the success of certain
companies is tied to a relatively small concentration of products or
technologies with intense competition between companies. There can be no
assurance that these customers will place additional orders, or that an issuer
of securities will obtain orders of similar magnitude as past orders from other
customers. Accordingly, a decline in demand for products or technologies or from
such customers could have a material adverse impact on issuers of the
securities.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged and the
appropriate rate of return on an approved asset base, which must be approved by
the state commissions. Certain utilities have had difficulty from time to time
in persuading regulators, who are subject to political pressures, to grant rate
increases necessary to maintain an adequate return on investment. Any unexpected
limitations could negatively affect the profitability of utilities whose budgets
are planned far in advance. In addition, gas pipeline and distribution companies
have had difficulties in adjusting to short and surplus energy supplies,
enforcing or being required to comply with long-term contracts and avoiding
litigation with their customers, on the one hand, or suppliers, on the other. In
2001, two California public electric utilities claimed inability to meet their
obligations to their suppliers in the deregulated wholesale market for
electricity due to regulatory restrictions on their ability to pass increasing
costs along to their customers in the retail market. These defaults led their
wholesale suppliers to threaten to institute involuntary bankruptcy proceedings
against the utility companies. Subsequently, one of the utility companies filed
a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code of
1978. Furthermore, regulatory authorities, which may be subject to political and
other pressures, may not grant future rate increases, or may impose accounting
or operational policies, any of which could adversely affect a company's
profitability and its stock price. In late 2001, a trader and marketer of
utilities, commodities and financial and risk management services filed a
voluntary petition for relief under Chapter 11 as a result of being negatively
impacted by several of these and other factors.
Certain of the issuers of the securities may own or operate nuclear
generating facilities. Governmental authorities may from time to time review
existing, and impose additional, requirements governing the licensing,
construction and operation of nuclear power plants. Nuclear generating projects
in the electric utility industry have experienced substantial cost
-12-
increases, construction delays and licensing difficulties. These have been
caused by various factors, including inflation, high financing costs, required
design changes and rework, allegedly faulty construction, objections by groups
and governmental officials, limits on the ability to obtain financing, reduced
forecasts of energy requirements and economic conditions. This experience
indicates that the risk of significant cost increases, delays and licensing
difficulties remain present until completion and achievement of commercial
operation of any nuclear project. Also, nuclear generating units in service have
experienced unplanned outages or extensions of scheduled outages due to
equipment problems or new regulatory requirements sometimes followed by a
significant delay in obtaining regulatory approval to return to service. A major
accident at a nuclear plant anywhere could cause the imposition of limits or
prohibitions on the operation, construction or licensing of nuclear units.
In view of the uncertainties discussed above, there can be no assurance
that any utility company's share of the full cost of nuclear units under
construction ultimately will be recovered in rates or the extent to which a
company could earn an adequate return on its investment in such units. The
likelihood of a significantly adverse event occurring in any of the areas of
concern described above varies, as does the potential severity of any adverse
impact. It should be recognized, however, that one or more of such adverse
events could occur and individually or collectively could have a material
adverse impact on a company's financial condition, the results of its
operations, its ability to make interest and principal payments on its
outstanding debt or to pay dividends.
Other general problems of the electric, gas and water utility industries
(including state and local joint action power agencies) include rising costs of
rail transportation to transport fossil fuels, the uncertainty of transmission
service costs for both interstate and intrastate transactions, changes in tax
laws which adversely affect a utility's ability to operate profitably, increased
competition in service costs, recent reductions in estimates of future demand
for electricity and gas in certain areas of the country, restrictions on
operations and increased cost and delays attributable to environmental
considerations, uncertain availability and increased cost of capital,
unavailability of fuel for electric generation at reasonable prices, including
the steady rise in fuel costs and the costs associated with conversion to
alternate fuel sources such as coal, availability and cost of natural gas for
resale, technical and cost factors and other problems associated with
construction, licensing, regulation and operation of nuclear facilities for
electric generation, including, among other considerations, the problems
associated with the use of radioactive materials and the disposal of radioactive
wastes, and the effects of energy and environmental conservation efforts. Each
of the problems referred to could adversely affect the ability of the issuers of
any securities to make dividend payments and the value of such securities on
redemption of your units.
HIGH YIELD SECURITY RISK. The trust may invest in high yield securities or
unrated securities. High yield, high risk securities are subject to greater
market fluctuations and risk of loss than securities with higher investment
ratings. The value of these securities will decline significantly with
increases in interest rates, not only because increases in rates generally
decrease values, but also because increased rates may indicate an economic
slowdown. An economic slowdown, or a reduction in an issuer's creditworthiness,
may result in the issuer being unable to maintain earnings at a level sufficient
to maintain interest and principal payments.
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High-yield or "junk" securities, the generic names for securities rated
below "BBB" by Standard & Poor's or "Baa" by Moody's, are frequently issued by
corporations in the growth stage of their development or by established
companies who are highly leveraged or whose operations or industries are
depressed. Securities rated below BBB or Baa are considered speculative as
these ratings indicate a quality of less than investment grade. Because high-
yield securities are generally subordinated obligations and are perceived by
investors to be riskier than higher rated securities, their prices tend to
fluctuate more than higher rated securities and are affected by short-term
credit developments to a greater degree.
The market for high-yield securities is smaller and less liquid than that
for investment grade securities. Due to the smaller, less liquid market for
high-yield securities, the bid-offer spread on such securities is generally
greater than it is for investment grade securities and the purchase or sale of
such securities may take longer to complete.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities between the time of the deposit and the purchase
of the securities and because a trust will pay the associated brokerage fees and
other acquisition costs.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Income received by a trust is credited by
the trustee to the Income Account for the trust. All other receipts are
credited by the trustee to a separate Capital Account for the trust. The
trustee will normally distribute any income received by a trust on each
distribution date or shortly thereafter to unitholders of record on the
preceding record date. The trust will also generally make required distributions
or distributions to avoid imposition of tax at the end of each year if it has
elected to be taxed as a "regulated investment company" for federal tax
purposes. Unitholders will receive an amount substantially equal to their pro
rata share of the estimated net annual income distributions to be received by
the trust. All distributions will be net of applicable expenses. There is no
assurance that any actual distributions will be made since all income received
may be used to pay expenses. In addition, excess amounts from the Capital
Account of a trust, if any, will be distributed at least annually to the
unitholders then of record. Proceeds received from the disposition of any of
the securities after a record date and prior to the following distribution date
will be held in the Capital Account and not distributed until the next
distribution date applicable to the Capital Account. The trustee shall be
required to make a distribution from the Capital Account if the cash balance on
deposit therein available for distribution shall be sufficient to distribute at
least $1.00 per unit. The trustee is not required to pay interest on funds held
in the Capital or Income Accounts (but may itself earn interest thereon and
therefore benefits from the use of such funds).
The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such
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portion of the unitholders' pro rata share of the estimated annual income
distributions to be received by the trust after deducting estimated expenses.
Because income is not received by a trust at a constant rate throughout the
year, such distributions to unitholders are expected to fluctuate. Persons who
purchase units will commence receiving distributions only after such person
becomes a record owner. A person will become the owner of units, and thereby a
unitholder of record, on the date of settlement provided payment has been
received. Notification to the trustee of the transfer of units is the
responsibility of the purchaser, but in the normal course of business the
selling broker-dealer provides such notice.
The trustee will periodically deduct from the Income Account of a trust
and, to the extent funds are not sufficient therein, from the Capital Account of
a trust amounts necessary to pay the expenses of the trust. The trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of a trust.
Amounts so withdrawn shall not be considered a part of a trust's assets until
such time as the trustee shall return all or any part of such amounts to the
appropriate accounts. In addition, the trustee may withdraw from the Income and
Capital Accounts of a trust such amounts as may be necessary to cover
redemptions of units.
DISTRIBUTION REINVESTMENT. Unitholders may reinvest distributions into
additional units of their trust without a sales fee. Your trust will pay any
deferred sales fee and creation and development fee per unit regardless of any
sales fee discounts. However, if you are eligible to receive a discount such
that the sales fee you must pay is less than the applicable deferred sales fee
and creation and development fee, you will be credited the difference between
your sales fee and the deferred sales fee and the creation and development fee
at the time you buy your units. Accordingly, if you reinvest distributions into
additional units of your trust, you will be credited the amount of any remaining
deferred sales fee and creation and development fee on such units at the time of
reinvestment.
STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will
furnish to each unitholder a statement of the amount of income and the amount of
other receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust are required to be audited annually, at the related
trust's expense, by independent public accountants designated by the sponsor,
unless the sponsor determines that such an audit would not be in the best
interest of the unitholders of the trust. The accountants' report will be
furnished by the trustee to any unitholder upon written request. Within a
reasonable period of time after the end of each calendar year, the trustee shall
furnish to each person who at any time during the calendar year was a unitholder
of a trust a statement, covering the calendar year, setting forth for the trust:
(A) As to the Income Account:
(1) the amount of income received on the securities (including income
received as a portion of the proceeds of any disposition of
securities);
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(2) the amounts paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Income Account for payment into
the Reserve Account;
(4) the deductions for applicable taxes and fees and expenses of the
trustee, the depositor, the evaluator, the supervisor, counsel,
auditors and any other expenses paid by the trust;
(5) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(6) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(7) the aggregate distributions to unitholders; and
(8) the balance remaining after such deductions and distributions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year;
(B) As to the Capital Account:
(1) the net proceeds received due to sale, maturity, redemption,
liquidation or disposition of any of the securities, excluding
any portion thereof credited to the Income Account;
(2) the amount paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Capital Account for payments
into the Reserve Account;
(4) the deductions for payment of applicable taxes and fees and
expenses of the trustee, the depositor, the evaluator, the
supervisor, counsel, auditors and any other expenses paid by the
trust;
(5) the deductions for payment of the depositor's expenses of
organizing the trust;
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(6) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(7) the deductions for payment of deferred sales fee and creation and
development fee, if any;
(8) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(9) the aggregate distributions to unitholders; and
(10) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year; and
(C) the following information:
(1) a list of the securities held as of the last business day of such
calendar year and a list which identifies all securities sold or
other securities acquired during such calendar year, if any;
(2) the number of units outstanding on the last business day of such
calendar year;
(3) the unit value based on the last trust evaluation of such trust
made during such calendar year; and
(4) the amounts actually distributed during such calendar year from
the Income and Capital Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for such distributions.
RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
AMENDMENT AND TERMINATION. The trust agreement may be amended from time to
time by the sponsor and trustee or their respective successors, without the
consent of any of the unitholders, (i) to cure any ambiguity or to correct or
supplement any provision which may be defective or inconsistent with any other
provision contained in the trust agreement, (ii) to make such other provision in
regard to matters or questions arising under the trust agreement as shall not
materially adversely affect the interests of the unitholders or (iii) to make
such amendments
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as may be necessary (a) for the trust to continue to qualify as a regulated
investment company for federal income tax purposes if the trust has elected to
be taxed as such under the United States Internal Revenue Code of 1986, as
amended, or (b) to prevent the trust from being deemed an association taxable as
a corporation for federal income tax purposes if the trust has not elected to be
taxed as a regulated investment company under the United States Internal Revenue
Code of 1986, as amended. The trust agreement may not be amended, however,
without the consent of all unitholders then outstanding, so as (1) to permit,
except in accordance with the terms and conditions thereof, the acquisition
hereunder of any securities other than those specified in the schedules to the
trust agreement or (2) to reduce the percentage of units the holders of which
are required to consent to certain of such amendments. The trust agreement may
not be amended so as to reduce the interest in a trust represented by units
without the consent of all affected unitholders. Except for the amendments,
changes or modifications described above, neither the sponsor nor the trustee
may consent to any other amendment, change or modification of the trust
agreement without the giving of notice and the obtaining of the approval or
consent of unitholders representing at least 66 2/3% of the units then
outstanding of the affected trust. No amendment may reduce the aggregate
percentage of units the holders of which are required to consent to any
amendment, change or modification of the trust agreement without the consent of
the unitholders of all of the units then outstanding of the affected trust and
in no event may any amendment be made which would (1) alter the rights to the
unitholders as against each other, (2) provide the trustee with the power to
engage in business or investment activities other than as specifically provided
in the trust agreement, (3) adversely affect the tax status of the trust for
federal income tax purposes or result in the units being deemed to be sold or
exchanged for federal income tax purposes or (4) unless the trust has elected to
be taxed as a regulated investment company for federal income tax purposes,
result in a variation of the investment of unitholders in the trust. The
trustee will notify unitholders of the substance of any such amendment.
The trust agreement provides that a trust shall terminate upon the
liquidation, redemption or other disposition of the last of the securities held
in the trust but in no event is it to continue beyond the mandatory termination
date. If the value of a trust shall be less than the applicable minimum value
stated in the prospectus (generally 40% of the total value of securities
deposited in the trust during the initial offering period), the trustee may, in
its discretion, and shall, when so directed by the sponsor, terminate the trust.
A trust may be terminated at any time by the holders of units representing 66
2/3% of the units thereof then outstanding. In addition, the sponsor may
terminate a trust if it is based on a security index and the index is no longer
maintained. A trust will be liquidated by the trustee in the event that a
sufficient number of units of the trust not yet sold are tendered for redemption
by the sponsor, so that the net worth of the trust would be reduced to less than
40% of the value of the securities at the time they were deposited in the trust.
If a trust is liquidated because of the redemption of unsold units by the
sponsor, the sponsor will refund to each purchaser of units the entire sales fee
paid by such purchaser.
Beginning nine business days prior to, but no later than, the scheduled
termination date described in the prospectus, the trustee may begin to sell all
of the remaining underlying securities on behalf of unitholders in connection
with the termination of the trust. The sponsor may assist the trustee in these
sales and receive compensation to the extent permitted by applicable law. The
sale proceeds will be net of any incidental expenses involved in the sales.
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The sponsor will generally instruct the trustee to sell the securities as
quickly as practicable during the termination proceedings without in its
judgment materially adversely affecting the market price of the securities, but
it is expected that all of the securities will in any event be disposed of
within a reasonable time after a trust's termination. The sponsor does not
anticipate that the period will be longer than one month, and it could be as
short as one day, depending on the liquidity of the securities being sold. The
liquidity of any security depends on the daily trading volume of the security
and the amount that the sponsor has available for sale on any particular day.
Of course, no assurances can be given that the market value of the securities
will not be adversely affected during the termination proceedings.
Approximately thirty days prior to termination of a trust, the trustee will
notify unitholders of the termination and provide a form allowing qualifying
unitholders to elect an in-kind distribution. A unitholder who owns the minimum
number of units described in the prospectus may request an in-kind distribution
from the trustee instead of cash. The trustee will make an in-kind distribution
through the distribution of each of the securities of the trust in book entry
form to the account of the unitholder's bank or broker-dealer at Depository
Trust Company. The unitholder will be entitled to receive whole shares of each
of the securities comprising the portfolio of a trust and cash from the Capital
Account equal to the fractional shares to which the unitholder is entitled. The
trustee may adjust the number of shares of any security included in a
unitholder's in-kind distribution to facilitate the distribution of whole
shares. The sponsor may terminate the in-kind distribution option at any time
upon notice to the unitholders. Special federal income tax consequences will
result if a unitholder requests an in-kind distribution.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust and, after paying all expenses and charges
incurred by the trust, will distribute to unitholders thereof their pro rata
share of the balances remaining in the Income and Capital Accounts of the trust.
The sponsor may, but is not obligated to, offer for sale units of a
subsequent series of a trust at approximately the time of the mandatory
termination date. If the sponsor does offer such units for sale, unitholders
may be given the opportunity to purchase such units at a public offering price
that includes a reduced sales fee. There is, however, no assurance that units
of any new series of a trust will be offered for sale at that time, or if
offered, that there will be sufficient units available for sale to meet the
requests of any or all unitholders.
THE TRUSTEE. The trustee is The Bank of New York Mellon, a trust company
organized under the laws of New York. The Bank of New York Mellon has its
principal unit investment trust division offices at 2 Hanson Place, 12th Floor,
Brooklyn, New York 11217, (800) 848-6468. The Bank of New York Mellon is subject
to supervision and examination by the Superintendent of Banks of the State of
New York and the Board of Governors of the Federal Reserve System, and its
deposits are insured by the Federal Deposit Insurance Corporation to the extent
permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust
agreement, the trustee shall keep records of all transactions at its office.
Such records shall include the name and address of, and the number of
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units held by, every unitholder of a trust. Such books and records shall be
open to inspection by any unitholder at all reasonable times during usual
business hours. The trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation. The trustee shall keep a certified copy or duplicate original of
the trust agreement on file in its office available for inspection at all
reasonable times during usual business hours by any unitholder, together with a
current list of the securities held in each trust. Pursuant to the trust
agreement, the trustee may employ one or more agents for the purpose of custody
and safeguarding of securities comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor.
The trustee or successor trustee must mail a copy of the notice of
resignation to all unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. In case at any time the trustee
shall not meet the requirements set forth in the trust agreement, or shall
become incapable of acting, or if a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the trustee in an
involuntary case, or the trustee shall commence a voluntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the trustee or for any substantial part of its
property shall be appointed, or the trustee shall generally fail to pay its
debts as they become due, or shall fail to meet such written standards for the
trustee's performance as shall be established from time to time by the sponsor,
or if the sponsor determines in good faith that there has occurred either (1) a
material deterioration in the creditworthiness of the trustee or (2) one or more
grossly negligent acts on the part of the trustee with respect to a trust, the
sponsor, upon sixty days' prior written notice, may remove the trustee and
appoint a successor trustee, as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the trustee so removed and
one copy to the successor trustee. Notice of such removal and appointment shall
be mailed to each unitholder by the sponsor. Upon execution of a written
acceptance of such appointment by such successor trustee, all the rights,
powers, duties and obligations of the original trustee shall vest in the
successor. The trustee must be a corporation organized under the laws of the
United States, or any state thereof, be authorized under such laws to exercise
trust powers and have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
THE SPONSOR. The sponsor of the trust is Advisors Asset Management, Inc.
acting through its unit investment trust division. The sponsor is a broker-
dealer specializing in providing services to broker-dealers, registered
representatives, investment advisers and other financial professionals. The
sponsor's headquarters are located at 18925 Base Camp Road, Monument, Colorado
80132. You can contact the unit investment trust division at 8100 East 22nd
Street North, Building 800, Suite 102, Wichita, Kansas 67226 or by using the
contacts listed on the back cover of the prospectus. The sponsor is a registered
broker-dealer and investment
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adviser and a member of the Financial Industry Regulatory Authority, Inc.
(FINRA) and the Securities Investor Protection Corporation (SIPC), and a
registrant of the Municipal Securities Rulemaking Board (MSRB).
If at any time the sponsor shall fail to perform any of its duties under
the trust agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, (b) terminate the trust agreement and liquidate any trust as
provided therein, or (c) continue to act as trustee without terminating the
trust agreement.
THE EVALUATOR AND SUPERVISOR. Advisors Asset Management, Inc., the
sponsor, also serves as evaluator and supervisor. The evaluator and supervisor
may resign or be removed by the sponsor and trustee in which event the sponsor
or trustee is to use its best efforts to appoint a satisfactory successor. Such
resignation or removal shall become effective upon acceptance of appointment by
the successor evaluator. If upon resignation of the evaluator no successor has
accepted appointment within thirty days after notice of resignation, the
evaluator may apply to a court of competent jurisdiction for the appointment of
a successor. Notice of such resignation or removal and appointment shall be
mailed by the trustee to each unitholder.
LIMITATIONS ON LIABILITY. The sponsor, evaluator, and supervisor are
liable for the performance of their obligations arising from their
responsibilities under the trust agreement but will be under no liability to the
unitholders for taking any action or refraining from any action in good faith
pursuant to the trust agreement or for errors in judgment, except in cases of
its own gross negligence, bad faith or willful misconduct or its reckless
disregard for its duties thereunder. The sponsor shall not be liable or
responsible in any way for depreciation or loss incurred by reason of the sale
of any securities.
The trust agreement provides that the trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys, securities or certificates
except by reason of its own gross negligence, bad faith or willful misconduct,
or its reckless disregard for its duties under the trust agreement, nor shall
the trustee be liable or responsible in any way for depreciation or loss
incurred by reason of the sale by the trustee of any securities. In the event
that the sponsor shall fail to act, the trustee may act and shall not be liable
for any such action taken by it in good faith. The trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the securities or upon the interest thereof. In addition, the trust
agreement contains other customary provisions limiting the liability of the
trustee.
The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides that the determinations made by the evaluator shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the evaluator shall be under no liability to the trustee or
unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
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EXPENSES OF THE TRUST. The sponsor will not charge a trust any fees for
services performed as sponsor. The sponsor will receive a portion of the sale
commissions paid in connection with the purchase of units and will share in
profits, if any, related to the deposit of securities in the trust.
The sponsor may receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. The amount of this
"creation and development fee" is set forth in the prospectus. The trustee will
deduct this amount from your trust's assets as of the close of the initial
offering period. No portion of this fee is applied to the payment of
distribution expenses or as compensation for sales efforts. This fee will not be
deducted from proceeds received upon a repurchase, redemption or exchange of
units before the close of the initial public offering period.
The trustee receives for its services that fee set forth in the prospectus.
The trustee's fee which is calculated and paid monthly is based on the total
number of units of the related trust outstanding as of January 1 for any annual
period, except during the initial offering period the fee will be based on the
units outstanding at the end of each month. The trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Capital and Income Accounts since these Accounts are non-interest bearing
and the amounts earned by the trustee are retained by the trustee. Part of the
trustee's compensation for its services to a trust is expected to result from
the use of these funds.
The supervisor will charge a trust a surveillance fee for services
performed for the trust in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the sponsor of providing such services. Such fee shall be based on the
total number of units of the related trust outstanding as of January 1 for any
annual period, except during the initial offering period the fee will be based
on the units outstanding at the end of each month.
For evaluation of the securities in a trust, the evaluator shall receive an
evaluation fee in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation from other unit investment trusts for which the sponsor acts as
sponsor and provides evaluation services, exceed the aggregate cost of providing
such services. Such fee shall be based on the total number of units of the
related trust outstanding as of January 1 for any annual period, except during
the initial offering period the fee will be based on the units outstanding at
the end of each month.
For providing bookkeeping and administrative services to a trust, the
sponsor shall receive an administration fee in an amount not to exceed that
amount set forth in the prospectus but in no event will such compensation, when
combined with all compensation from other unit investment trusts for which the
sponsor acts as sponsor and provides evaluation services, exceed the aggregate
cost of providing such services. Such fee shall be based on the total number of
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units of the related trust outstanding as of January 1 for any annual period,
except during the initial offering period the fee will be based on the units
outstanding at the end of each month.
The trustee's fee, sponsor's fee for providing bookkeeping and
administrative services to the trust, supervisor's fee and evaluator's fee are
deducted from the Income Account of the related trust to the extent funds are
available and then from the Capital Account. Each such fee (other than any
creation and development fee) may be increased without approval of unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index or
any equivalent index substituted therefor.
The following additional charges are or may be incurred by the trust:
(a) fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses and reimbursement of the cost of advances
to the trust for payment of expenses and distributions, but not including any
fees and expenses charged by an agent for custody and safeguarding of
securities) and of counsel, if any; (c) various governmental charges;
(d) expenses and costs of any action taken by the trustee to protect the trust
or the rights and interests of the unitholders; (e) indemnification of the
trustee for any loss, liability or expense incurred by it in the administration
of the trust not resulting from negligence, bad faith or willful misconduct on
its part or its reckless disregard of its obligations under the trust agreement;
(f) indemnification of the sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct or its reckless disregard for its obligations under the trust
agreement; and (g) expenditures incurred in contacting unitholders upon
termination of the trust. The fees and expenses set forth herein are payable
out of a trust and, when owing to the trustee, are secured by a lien on the
trust. If the balances in the Income and Capital Accounts are insufficient to
provide for amounts payable by the trust, the trustee has the power to sell
securities to pay such amounts. These sales may result in capital gains or
losses to unitholders. A trust may pay the costs of updating its registration
statement each year.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
When a trust sells securities, the composition and diversity of the
securities in the trust may be altered. In order to obtain the best price for a
trust, it may be necessary for the sponsor to specify minimum amounts in which
blocks of securities are to be sold. In effecting purchases and sales of a
trust's portfolio securities, the sponsor may direct that orders be placed with
and brokerage commissions be paid to brokers, including brokers which may be
affiliated with the trust, the sponsor or dealers participating in the offering
of units.
PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. The public offering price per unit is equal to the net asset
value per unit plus organization costs plus the applicable sales fee referred to
in the prospectus. The initial sales fee is equal to the difference between the
maximum sales fee and the sum of the remaining deferred sales fee and the total
creation and development fee. The sales fee as a percentage of the public
offering price and the net amount invested is set forth in the prospectus. The
deferred sales fee is a fixed dollar
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amount and will be collected in installments as described in the prospectus. The
creation and development fee is a fixed dollar amount and will be collected at
the end of the initial offering period as described in the prospectus. Units
purchased after the initial deferred sales fee payment will be subject to the
remaining deferred sales fee payments. Units sold or redeemed prior to such
time as the entire applicable deferred sales fee has been collected will be
assessed the remaining deferred sales fee at the time of such sale or
redemption. Units sold or redeemed prior to such time as the entire applicable
creation and development fee has been collected will not be assessed the
remaining creation and development fee at the time of such sale or redemption.
During the initial offering period, a portion of the public offering price
includes an amount of securities to pay for all or a portion of the costs
incurred in establishing a trust. These costs include the cost of preparing the
registration statement, the trust indenture and other closing documents,
registering units with the Securities and Exchange Commission and states, the
initial audit of the trust portfolio, legal fees and the initial fees and
expenses of the trustee. These costs will be deducted from a trust as of the
end of the initial offering period or after six months, if earlier. Certain
broker-dealers may charge a transaction fee for processing unit purchases.
As indicated above, the initial public offering price of the units was
established by dividing the aggregate underlying value of the securities by the
number of units outstanding. Such price determination as of the opening of
business on the date a trust was created was made on the basis of an evaluation
of the securities in the trust prepared by the evaluator. After the opening of
business on this date, the evaluator will appraise or cause to be appraised
daily the value of the underlying securities as of the close of regular trading
on the New York Stock Exchange on days the New York Stock Exchange is open and
will adjust the public offering price of the units commensurate with such
valuation. Such public offering price will be effective for all orders received
at or prior to the close of regular trading on the New York Stock Exchange on
each such day as discussed in the prospectus. Orders received by the trustee,
sponsor or authorized financial professionals for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price as discussed in the
prospectus.
Had units of a trust been available for sale at the close of business on
the business day before the inception date of the trust, the public offering
price would have been as shown under "Essential Information" in the prospectus.
The public offering price per unit of a trust on the date of the prospectus or
on any subsequent date will vary from the amount stated under "Essential
Information" in the prospectus in accordance with fluctuations in the prices of
the underlying securities. Net asset value per unit is determined by dividing
the value of a trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of units outstanding. The portfolio securities
are valued by the evaluator as follows: If the security is listed on a national
securities exchange, the evaluation will generally be based on the last sale
price on the exchange (unless the evaluator deems the price inappropriate as a
basis for evaluation). If the security is not so listed or, if so listed and
the principal market for the security is other than on the exchange, the
evaluation will generally be made by the evaluator in good faith based on an
appraisal of the fair value of the securities using recognized pricing methods.
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The foregoing evaluations and computations shall be made as of the close of
regular trading on the New York Stock Exchange, on each business day commencing
with the trust's inception date of the securities, effective for all sales made
during the preceding 24-hour period.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of units on the date of settlement provided payment has been received.
Cash, if any, made available to the sponsor prior to the date of settlement for
the purchase of units may be used in the sponsor's business and may be deemed to
be a benefit to the sponsor, subject to the limitations of the Securities
Exchange Act of 1934.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the National Association of Securities Dealers, Inc. and through others.
Sales may be made to or through dealers at prices which represent discounts from
the public offering price as set forth in the prospectus. Certain commercial
banks may be making units available to their customers on an agency basis. The
sponsor reserves the right to change the discounts from time to time.
We may provide, at our own expense and out of our own profits, additional
compensation and benefits to broker-dealers who sell shares of units of this
trust and our other products. This compensation is intended to result in
additional sales of our products and/or compensate broker-dealers and financial
advisors for past sales. We may make these payments for marketing, promotional
or related expenses, including, but not limited to, expenses of entertaining
retail customers and financial advisors, advertising, sponsorship of events or
seminars, obtaining shelf space in broker-dealer firms and similar activities
designed to promote the sale of the our products. These arrangements will not
change the price you pay for your units.
The sponsor reserves the right to reject, in whole or in part, any order
for the purchase of units.
PROFITS OF SPONSOR. The sponsor will receive gross sales fees equal to the
percentage of the offering price of the units of such trusts stated in the
prospectus and will pay a portion of such sales fees to dealers and agents. In
addition, the sponsor may realize a profit or a loss resulting from the
difference between the purchase prices of the securities to the sponsor and the
cost of such securities to a trust. The sponsor may also realize profits or
losses with respect to securities deposited in a trust which were acquired from
underwriting syndicates of which the sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated or
competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The sponsor may realize additional profits
or losses during the initial offering period on unsold units as a result of
changes in the daily evaluation of the securities in a trust.
MARKET FOR UNITS. After the initial offering period, while not obligated
to do so, the sponsor may, subject to change at any time, maintain a market for
units of the trust offered hereby and to continuously offer to purchase said
units at the net asset value determined by the evaluator, provided that the
repurchase price will not be reduced by any remaining creation and
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development fee or organization costs during the initial offering period. While
the sponsor may repurchase units from time to time, it does not currently intend
to maintain an active secondary market for units. Unitholders who wish to
dispose of their units should inquire of their broker as to current market
prices in order to determine whether there is in existence any price in excess
of the redemption price and, if so, the amount thereof. Unitholders who sell or
redeem units prior to such time as the entire deferred sales fee on such units
has been collected will be assessed the amount of the remaining deferred sales
fee at the time of such sale or redemption. Unitholders who sell or redeem units
prior to such time as the entire creation and development fee on such units has
been collected will not be assessed the amount of the remaining creation and
development fee at the time of such sale or redemption. The offering price of
any units resold by the sponsor will be in accord with that described in the
currently effective prospectus describing such units. Any profit or loss
resulting from the resale of such units will belong to the sponsor. If the
sponsor decides to maintain a secondary market, it may suspend or discontinue
purchases of units of the trust if the supply of units exceeds demand, or for
other business reasons.
REDEMPTION. A unitholder who does not dispose of units in the secondary
market described above may cause units to be redeemed by the trustee by making a
written request to the trustee at its unit investment trust division office.
Unitholders must sign the request exactly as their names appear on the records
of the trustee. Additional documentation may be requested, and a signature
guarantee is always required, from corporations, executors, administrators,
trustees, guardians or associations. The signatures must be guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("STAMP") or
such other signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the trustee.
Redemption shall be made by the trustee no later than the seventh day
following the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the redemption price, determined as set
forth below under "Computation of Redemption Price," as of the close of regular
trading on the New York Stock Exchange next following such tender, multiplied by
the number of units being redeemed. Any units redeemed shall be canceled and
any undivided fractional interest in the related trust extinguished. The price
received upon redemption might be more or less than the amount paid by the
unitholder depending on the value of the securities in the trust at the time of
redemption. Unitholders who sell or redeem units prior to such time as the
entire deferred sales fee on such units has been collected will be assessed the
amount of the remaining deferred sales fee at the time of such sale or
redemption. Unitholders who sell or redeem units prior to such time as the
entire creation and development fee on such units has been collected will not be
assessed the amount of the remaining creation and development fee at the time of
such sale or redemption. Certain broker-dealers may charge a transaction fee
for processing redemption requests.
Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the unitholder only when filing a tax return. Under normal circumstances, the
trustee obtains the unitholder's tax identification number from the selling
broker. However, any time a unitholder elects to tender units for redemption,
such unitholder should make sure that
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the trustee has been provided a certified tax identification number in order to
avoid this possible "back-up withholding." In the event the trustee has not
been previously provided such number, one must be provided at the time
redemption is requested. Any amounts paid on redemption representing interest
shall be withdrawn from the Income Account of a trust to the extent that funds
are available for such purpose. All other amounts paid on redemption shall be
withdrawn from the Capital Account for a trust.
Unitholders tendering units for redemption may request a distribution in
kind (a "Distribution In Kind") from the trustee in lieu of cash redemption of
an amount and value of securities per unit equal to the redemption price per
unit as determined as of the evaluation time next following the tender, provided
that the tendering unitholder meets the requirements stated in the prospectus
and the unitholder has elected to redeem at least thirty days prior to the
termination of the trust. If the unitholder meets these requirements, a
Distribution In Kind will be made by the trustee through the distribution of
each of the securities of the trust in book entry form to the account of the
unitholder's bank or broker-dealer at Depository Trust Company. The tendering
unitholder shall be entitled to receive whole shares of each of the securities
comprising the portfolio of the trust and cash from the Capital Account equal to
the fractional shares to which the tendering unitholder is entitled. The
trustee shall make any adjustments necessary to reflect differences between the
redemption price of the units and the value of the securities distributed in
kind as of the date of tender. If funds in the Capital Account are insufficient
to cover the required cash distribution to the tendering unitholder, the trustee
may sell securities. The in kind redemption option may be terminated by the
sponsor at any time.
The trustee is empowered to sell securities in order to make funds
available for the redemption of units. To the extent that securities are sold
or redeemed in-kind, the size of a trust will be, and the diversity of a trust
may be, reduced but each remaining unit will continue to represent approximately
the same proportional interest in each security. Sales may be required at a
time when securities would not otherwise be sold and may result in lower prices
than might otherwise be realized. The price received upon redemption may be
more or less than the amount paid by the unitholder depending on the value of
the securities in the portfolio at the time of redemption.
The trustee is irrevocably authorized in its discretion, if the sponsor
does not elect to purchase any unit tendered for redemption, in lieu of
redeeming such units, to sell such units in the over-the-counter market for the
account of tendering unitholders at prices which will return to the unitholders
amounts in cash, net after brokerage commissions, transfer taxes and other
charges, equal to or in excess of the redemption price for such units. In the
event of any such sale, the trustee shall pay the net proceeds thereof to the
unitholders on the day they would otherwise be entitled to receive payment of
the redemption price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which (as determined by the Securities
and Exchange Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of which
disposal by the trustee of securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying
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securities in accordance with the trust agreement; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The trustee is
not liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The redemption price for units of each
trust is computed by the evaluator as of the evaluation time stated in the
prospectus next occurring after the tendering of a unit for redemption and on
any other business day desired by it, by:
A. Adding: (1) the cash on hand in the trust other than cash deposited in the
trust to purchase securities not applied to the purchase of such securities
and (2) the aggregate value of each issue of the securities held in the
trust as determined by the evaluator as described above;
B. Deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account; (2) an amount representing estimated accrued expenses, including
but not limited to fees and expenses of the trustee (including legal and
auditing fees), the evaluator, the sponsor and counsel, if any; (3) cash
held for distribution to unitholders of record as of the business day prior
to the evaluation being made; and (4) other liabilities incurred by the
trust, provided that the redemption price will not be reduced by any
remaining creation and development fee or organization costs during the
initial offering period; and
C. Finally dividing the results of such computation by the number of units of
the trust outstanding as of the date thereof.
RETIREMENT PLANS. A trust may be suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received under each of the foregoing
plans are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered
by brokerage firms and other financial institutions. The trust will lower the
minimum investment requirement for IRA accounts. Fees and charges with respect
to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units will not be evidenced by
certificates. Units may be purchased in denominations of one unit or any
multiple thereof, subject to the minimum investment requirement. Fractions of
units, if any, will be computed to three decimal places.
TAXATION
The prospectus contains a discussion of certain U.S. federal income tax
issues concerning your trust and the purchase, ownership and disposition of
trust units. The discussion below supplements the prospectus discussion and is
qualified in its entirety by the prospectus
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discussion. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of trust units, as well as the tax consequences arising under the
laws of any state, locality, non-U.S. country, or other taxing jurisdiction.
The federal income tax summary below and in the prospectus is based in part
on the advice of counsel to your trust. The Internal Revenue Service could
disagree with any conclusions set forth in these discussions. In addition, our
counsel was not asked to review, and has not reached a conclusion with respect
to the federal income tax treatment of the assets to be held by your trust. This
may not be sufficient for prospective investors to use for the purpose of
avoiding penalties under federal tax law.
If so indicated in the prospectus, your trust intends (i) to elect and (ii)
to qualify annually as a regulated investment company under the Code and to
comply with applicable distribution requirements so that it will not pay federal
income tax on income and capital gains distributed to its unitholders.
To qualify for the favorable U.S. federal income tax treatment generally
accorded to regulated investment companies, your trust must, among other things,
(a) derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies or other income
derived with respect to its business of investing in such stock, securities or
currencies, and net income from certain publicly traded partnerships; (b)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the trust's assets is represented by
cash and cash items (including receivables), U.S. government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer generally limited for the purposes of
this calculation to an amount not greater than 5% of the value of the trust's
total assets and not greater than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities (other than U.S. government securities or the
securities of other regulated investment companies) of any one issuer, or two or
more issuers which the trust controls and are engaged in the same, similar or
related trades or businesses, or the securities of certain publicly traded
partnerships; and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net short-
term capital gains in excess of net long-term capital losses but excludes net
capital gain, if any) and at least 90% of its net tax-exempt interest income
each taxable year.
As a regulated investment company, your trust generally will not be subject
to U.S. federal income tax on its investment company taxable income (as that
term is defined in the Code, but without regard to the deduction for dividends
paid) and net capital gain (the excess of net long-term capital gain over net
short term capital loss), if any, that it distributes to unitholders. The trusts
intend to distribute to its unitholders, at least annually, substantially all of
its investment company taxable income and net capital gain. If your trust
retains any net capital gain or investment company taxable income, it will
generally be subject to federal income tax at regular corporate rates on the
amount retained. In addition, amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible
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4% excise tax unless, generally, your trust distributes during each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for the one-year period ending October 31 of the
calendar year, and (3) any ordinary income and capital gains for previous years
that were not distributed during those years. To prevent application of the
excise tax, your trust intends to make its distributions in accordance with the
calendar year distribution requirement. Further, if your trust retains any net
capital gain, the trust may designate the retained amount as undistributed
capital gains in a notice to unitholders who, if subject to federal income tax
on long-term capital gains (i) will be required to include in income for federal
income tax purposes, as long-term capital gain, their share of such
undistributed amount, and (ii) will be entitled to credit their proportionate
share of the tax paid by the trust against their federal income tax liabilities
if any, and to claim refunds to the extent the credit exceeds such liabilities.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by your trust in October, November or December with a
record date in such a month and paid by your trust during January of the
following calendar year. These distributions will be taxable to unitholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
If your trust failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the trust would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its unitholders) and all distributions out of earnings and
profits would be taxed to unitholders as ordinary dividend income.
If the trust is treated as holding directly or indirectly 10 percent or
more of the combined voting power of the stock of a foreign corporation, and all
U.S. shareholders collectively own more than 50 percent of the vote or value of
the stock of such corporation, the foreign corporation may be treated as a
"controlled foreign corporation" (a "CFC") from a U.S. tax perspective. In such
circumstances, the trust will be required to include certain types of passive
income and certain other types of income relating to insurance, sales and
services with related parties and oil related income in the trust's taxable
income whether or not such income is distributed.
If the trust holds an equity interest in any "passive foreign investment
companies" ("PFICs"), which are generally certain foreign corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rents and royalties or capital gains) or that hold
at least 50% of their assets in investments producing such passive income, the
trust could be subject to U.S. federal income tax and additional interest
charges on gains and certain distributions with respect to those equity
interests, even if all the income or gain is timely distributed to its
unitholders. The trust will not be able to pass through to its unitholders any
credit or deduction for such taxes. The trust may be able to make an election
that could ameliorate these adverse tax consequences. In this case, the trust
would recognize as ordinary income any increase in the value of such PFIC
shares, and as ordinary loss any decrease in such value to the extent it did not
exceed prior increases included in income. Under this election, the trust might
be required to recognize in a year income in excess of its distributions
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from PFICs and its proceeds from dispositions of PFIC stock during that year,
and such income would nevertheless be subject to the distribution requirement
and would be taken into account for purposes of the 4% excise tax (described
above). Dividends paid by PFICs will not be treated as qualified dividend
income.
PERFORMANCE INFORMATION
Information contained in this Information Supplement or in the prospectus,
as it currently exists or as further updated, may also be included from time to
time in other prospectuses or in advertising material. Information on the
performance of a trust strategy or the actual performance of a trust may be
included from time to time in other prospectuses or advertising material and may
reflect sales fees and expenses of a trust. The performance of a trust may also
be compared to the performance of money managers as reported in SEI Fund
Evaluation Survey or of mutual funds as reported by Lipper Analytical Services
Inc. (which calculates total return using actual dividends on ex-dates
accumulated for the quarter and reinvested at quarter end), Money Magazine Fund
Watch (which rates fund performance over a specified time period after sales fee
and assuming all dividends reinvested) or Wiesenberger Investment Companies
Service (which states fund performance annually on a total return basis) or of
the New York Stock Exchange Composite Index, the American Stock Exchange Index
(unmanaged indices of stocks traded on the New York and American Stock
Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks) or the Standard & Poor's 500 Index (an
unmanaged diversified index of 500 stocks) or similar measurement standards
during the same period of time.
DESCRIPTION OF SECURITIES RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES. A Standard &
Poor's issue credit rating is a current opinion of the creditworthiness of an
obligor with respect to a specific financial obligation, a specific class of
financial obligations, or a specific financial program (including ratings on
medium-term note programs and commercial paper programs). It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation and takes into account the currency in
which the obligation is denominated. The issue credit rating is not a
recommendation to purchase, sell, or hold a financial obligation, inasmuch as it
does not comment as to market price or suitability for a particular investor.
Issue credit ratings are based on current information furnished by the
obligors or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
credit rating and may, on occasion, rely on unaudited financial information.
Credit ratings may be changed, suspended, or withdrawn as a result of changes
in, or unavailability of, such information, or based on other circumstances.
Issue credit ratings can be either long term or short term. Short-term
ratings are generally assigned to those obligations considered short-term in the
relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days, including
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commercial paper. Short-term ratings are also used to indicate the
creditworthiness of an obligor with respect to put features on long-term
obligations. The result is a dual rating, in which the short-term rating
addresses the put feature, in addition to the usual long-term rating. Medium-
term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following
considerations:
* Likelihood of payment capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation;
* Nature of and provisions of the obligation;
* Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above. (Such differentiation applies when an entity has
both senior and subordinated obligations, secured and unsecured obligations, or
operating company and holding company obligations.) Accordingly, in the case of
junior debt, the rating may not conform exactly with the category definition.
AAA--An obligation rated 'AAA' has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA--An obligation rated 'AA' differs from the highest-rated obligations only to
a small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A--An obligation rated 'A' is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher-
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB--An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, and C
Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
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BB--An obligation rated 'BB' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B--An obligation rated 'B' is more vulnerable to nonpayment than obligations
rated 'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC--An obligation rated 'CCC' is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC--An obligation rated 'CC' is currently highly vulnerable to nonpayment.
C--A subordinated debt or preferred stock obligation rated 'C' is currently
highly vulnerable to nonpayment. The 'C' rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action taken, but payments
on this obligation are being continued. A 'C' also will be assigned to a
preferred stock issue in arrears on dividends or sinking fund payments, but that
is currently paying.
D--An obligation rated 'D' is in payment default. The 'D' rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
Plus (+) or minus (-)--The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within the
major rating categories.
N.R.--This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.
MOODY'S INVESTORS SERVICE, INC. Preferred Stock Ratings
Moody's preferred stock ratings are opinions of the relative credit risk of
fixed-income obligations with an original maturity of one year or more. They
address the possibility that a financial obligation will not be honored as
promised. Such ratings reflect both the likelihood of default and any financial
loss suffered in the event of default.
Aaa--Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.
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Aa--Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.
A--Obligations rated A are considered upper-medium grade and are subject to low
credit risk.
Baa--Obligations rated Baa are subject to moderate credit risk. They are
considered medium-grade and as such may possess certain speculative
characteristics.
Ba--Obligations rated Ba are judged to have speculative elements and are subject
to substantial credit risk.
B--Obligations rated B are considered speculative and are subject to high credit
risk.
Caa--Obligations rated Caa are judged to be of poor standing and are subject to
very high credit risk.
Ca--Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
C--Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.
Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
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CONTENTS OF REGISTRATION STATEMENT
This Amendment to the Registration Statement comprises the following:
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.
1.1.1 Standard Terms and Conditions of Trust. Reference is made to Exhibit
1.1.1 to the Registration Statement on Form S-6 for Advisor's Disciplined
Trust, Series 13 (File No. 333-116816) as filed on August 5, 2004.
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 of Form S-6 for Advisors Disciplined Trust 262
(File No. 333-150575) as filed of June 17, 2008.
2.2 Form of Code of Ethics. Reference is made to Exhibit 2.2 to the
Registration Statement on Form S-6 for Advisor's Disciplined Trust 73
(File No. 333-131959) as filed on March 16, 2006.
3.1 Opinion of counsel as to legality of securities being registered.
3.3 Opinion of counsel as to the Trustee and the Trust.
4.1 Consent of evaluator.
4.2 Consent of independent registered public accounting firm.
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 736 (File No. 333-174382) as filed on
August 18, 2011.
7.1 Power of Attorney. Reference is made to Exhibit 7.1 to the Registration
Statement on Form S-6 for Advisor's Disciplined Trust 213
(File No. 333-148484) as filed on January 4, 2008.
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SIGNATURES
The Registrant, Advisors Disciplined Trust 829, hereby identifies Matrix
Unit Trust, Series 1, Series 2, Series 3, Series 4, Series 5 and Series 8;
Advisor's Disciplined Trust, Series 10, Series 11 and Series 13; Advisor's
Disciplined Trust 23 and 40; and Advisors Disciplined Trust 256, 318, 404, 460,
518, 533, 544, 560, 588, 595, 610, 625, 677, 678, 699, 731, 782, 785, 803, 814,
820 and 839 for purposes of the representations required by Rule 487 and
represents the following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not differ
materially in type or quality from those deposited in such previous series;
(2) that, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration Statement is
being filed, this Registration Statement does not contain disclosures that
differ in any material respect from those contained in the registration
statements for such previous series as to which the effective date was
determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Advisors Disciplined Trust 829 has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Wichita and State of Kansas on the 15th day of
March, 2012.
ADVISORS DISCIPLINED TRUST 829
By ADVISORS ASSET MANAGEMENT, INC., DEPOSITOR
By: /s/ ALEX R. MEITZNER
-----------------------------
Alex R. Meitzner
Senior Vice President
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Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on March 15, 2012 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. )
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Christopher T. Genovese Director of Advisors Asset )
Management, Inc. )
Randy J. Pegg Director of Advisors Asset )
Management, Inc. )
R. Scott Roberg Director of Advisors Asset )
Management, Inc. )
Jack Simkin Director of Advisors Asset )
Management, Inc. )
Andrew Williams 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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