0000891092-19-008343.txt : 20191028 0000891092-19-008343.hdr.sgml : 20191028 20190809163118 ACCESSION NUMBER: 0000891092-19-008343 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20190809 DATE AS OF CHANGE: 20190926 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Advisors Disciplined Trust 1682 CENTRAL INDEX KEY: 0001662283 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-210905 FILM NUMBER: 191013344 BUSINESS ADDRESS: STREET 1: 18925 BASE CAMP ROAD SUITE 203 CITY: MONUMENT STATE: CO ZIP: 80132 BUSINESS PHONE: 719 488 9956 MAIL ADDRESS: STREET 1: 18925 BASE CAMP ROAD SUITE 203 CITY: MONUMENT STATE: CO ZIP: 80132 S-6/A 1 e6142s6a.htm FORM S-6/A

1933 Act File No.: 333-210905

1940 Act File No.: 811-21056

CIK No.: 1662283

 

Securities and Exchange Commission

Washington, D.C. 20549

 

AMENDMENT NO. 4 TO REGISTRATION STATEMENT ON Form S-6

 

For Registration under the Securities Act

of 1933 of Securities of Unit Investment

Trusts Registered on Form N-8B-2

 

A.Exact name of trust: Advisors Disciplined Trust 1682

 

B.Name of depositor: Advisors Asset Management, Inc.

 

C.Complete address of depositor’s principal executive offices:


18925 Base Camp Road

Monument, Colorado 80132

 

D.Name and complete address of agent for service:

 

  With a copy to:
   
Scott Colyer Scott R. Anderson
Advisors Asset Management, Inc. Chapman and Cutler LLP
18925 Base Camp Road 111 West Monroe Street
Monument, Colorado 80132 Chicago, Illinois 60603-4080

 

E.Title of securities being registered: Units of undivided beneficial interest

 

F.Approximate date of proposed public offering:

As Soon As Practicable After The Effective Date Of The Registration Statement

Check box if it is proposed that this filing will become effective on _______________ at ______ pursuant to Rule 487.

 

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

 

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

Preliminary Prospectus Dated August 9, 2019
Subject to Completion

ACE MLTSM, Buffered Portfolio Series 2019-1

(Advisors Disciplined Trust 1682)

 

A portfolio of exchange listed
options seeking to provide
enhanced returns based on the
price performance of shares of the
SPDR® S&P 500® ETF Trust
with a buffer, subject to a capped amount

Prospectus

__________, 2019


As with any investment, the Securities and Exchange Commission has not approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any contrary representation is a criminal offense.   

All information set forth in this prospectus is subject to change on or prior to the initial date of deposit. The terms of the options and the trust will be determined as of the initial date of deposit based on market conditions and other factors. The final terms of the trust, including the final terms of the options will be set forth in the final trust prospectus. Please review the final trust prospectus prior to making any investment decision regarding the trust.

 
 

INVESTMENT SUMMARY
              
 

MARKET LINKED TRUSTS

This trust is a “Market Linked Trust”. AAM’s* Market Linked Trusts are unit investment trusts designed to provide an amount per unit linked to a market reference.

INVESTMENT OBJECTIVE

The trust seeks to provide enhanced returns based on the price performance of the SPDR® S&P 500® ETF Trust (the “Market Reference”) with a buffer, subject to a capped amount. There is no assurance the trust will achieve its objective and investment in units of the trust has the potential for the loss of some or all of your original investment.

PRINCIPAL INVESTMENT STRATEGY

The trust seeks to achieve its objective by investing in a portfolio consisting of purchased and written FLexible EXchange Options (the “Options”); and cash to pay for fees and expenses of the trust. The Options are listed on the Chicago Board Options Exchange (the “CBOE”) and are guaranteed by the Options Clearing Corporation (the “OCC”). The Options reference shares of the Market Reference which has a share price of $______ (the “Initial Market Reference Level”) as of the close of the New York Stock Exchange on __________, 2019 and entitle or obligate the holder to purchase or sell shares of the Market Reference at each Option’s strike price on _____________, 20__ (the “Option Expiration Date”) (three business days prior to the trust’s Mandatory Termination Date). The Options are intended to be liquidated on the Option Expiration Date, rather than be exercised, in order to avoid having the trust receive shares of the Market Reference or be obligated to deliver shares of the Market Reference.


*
  “AAM,” “we” and related terms mean Advisors Asset Management, Inc., the trust sponsor, unless the context clearly suggests otherwise.

The trust’s portfolio consists of ________% in Options and __________% in cash as of the close of business on the day prior to the trust’s inception and may vary thereafter.

The Options are intended to generate returns based on the price performance of the Market Reference. The Market Reference is an exchange-traded fund that seeks to track the performance of the S&P 500® Index (the “Underlying Index”). Unitholders may receive up to a __% return on their investment if the price of the Market Reference increases by up to __%. If the price of the Market Reference increases by more than __%, unitholder returns are capped at a return of __%. If the price of the Market Reference stays the same or decreases by up to __%, unitholders are intended to receive no return on their investment (buffered returns). Unitholders will lose part of their investment if the price of the Market Reference decreases by more than __% and could lose up to __% of their investment depending on the decrease (buffered returns). These amounts are based on a unitholder purchasing units at the “Public Offering Price per Unit at Inception” of $__ per unit shown under “Investment Summary—Essential Information” (the “Initial Unit Price”). Eligible unitholders who purchase units at the Fee Account discount have the potential to receive better returns than those shown above (see “Understanding Your Investment—How to Buy Units—Fee Accounts”). Unitholders that purchase units at the “Fee Account Public Offering Price per Unit at Inception” of $______ (“Fee Account Initial Unit Price”) shown under “Investment Summary—Essential Information” could receive up to a __% return on their investment if the price of the Market Reference increases by up to __%. If the price of the Market Reference stays the same or decreases by up to __%, unitholders that purchase units at the Fee Account Initial Unit Price are intended to receive a return of __%. Unitholders will not necessarily purchase units at these prices but at the unit price computed as of the close of the New York Stock Exchange on a unitholder’s date of purchase.

2      Investment Summary

 
 

The trust seeks to provide returns net of all estimated trust fees and expenses based on the price performance of the Market Reference for units purchased at the trust’s inception date and held until the mandatory termination date as follows:

  If at the close of the New York Stock Exchange on the Option Expiration Date the price of the Market Reference (the “Market Reference Level”) is greater than or equal to $___ (___% of the Initial Market Reference Level) (the “Cap”), the proceeds from the Options are intended to be approximately $___ per unit. This equates to a return of approximately ___% on an investment at the Initial Unit Price or ___% on an investment at the Fee Account Initial Unit Price, which represents a maximum capped return.
  If at the close of the New York Stock Exchange on the Option Expiration Date the Market Reference Level is between $___ and $___ (___% to ___% of the Initial Market Reference Level), the proceeds from the Options are intended to be between approximately $___ and $___ per unit. This equates to a return of approximately 0% to ___% on an investment at the Initial Unit Price or ___% to ___% on an investment at the Fee Account Initial Unit Price, which represents an enhanced return above the price performance of the Market Reference.
  If at the close of the New York Stock Exchange on the Option Expiration Date the Market Reference Level is between $___ and $___ (___% to 100% of the Initial Market Reference Level), the proceeds from the Options are intended to be approximately $___ per unit. This equates to a return of approximately 0% on an investment at the Initial Unit Price or ___% on an investment at the Fee Account Initial Unit Price.
  If at the close of the New York Stock Exchange on the Option Expiration Date the Market Reference Level is less than $___ (___% of the Initial Market Reference Level) the proceeds from the Options over the life of the trust are intended to be between approximately $___ and $___ per unit. This equates to a return of approximately between ___% (i.e. a loss of ___%) and 0% on an investment at the Initial Unit Price or between ___% (i.e. a loss of ___%) and 0% on an investment at the Fee Account Initial Unit Price.

See “Understanding Your Investment—Additional Information About the Principal Investment Strategy” for more information about the Options and principal investment strategy of the trust.

Investment Summary      3

 
 

GRAPH OF HYPOTHETICAL TOTAL AMOUNT FOR TRUST

 

[Final graph with numbered axes to be included based on the final trust terms].

The graph above is a hypothetical illustration of the mathematical principles underlying the Options and the operation of the trust’s investment strategy. There is no assurance that the trust will achieve its investment objective through the use of this strategy. Illustrations of the possible returns of the trust’s investment strategy assuming different Market Reference Levels on the Option Expiration Date appear under “Understanding Your Investment—Hypothetical Examples” in this prospectus. You may realize a return (including a potential loss) that is higher or lower than the intended returns as a result of redeeming units prior to the trust’s mandatory termination date and in various circumstances (as described below) including where Options are otherwise liquidated by the trust prior to their expiration or maturity, if the trust is unable to maintain the proportional relationship (as described below) of the Options based on the number of Option contracts in the trust’s portfolio, or if there are increases in expenses of the trust above estimated levels. The Options are intended to be liquidated on the Option Expiration Date, rather than be exercised, in order to avoid having the trust receive shares of the Market Reference or be obligated to deliver shares of the Market Reference. As a result, the return actually realized on the Optionsupon liquidation could vary from the returns that would be realized if the Options were exercised based on the price of shares of the Market Reference as of the close of the market on the Option Expiration Date. The “proportional relationship” of the Options referred to throughout the prospectus that the trust seeks to maintain refers to the proportion of the particular types of Options as of the trust’s inception. For example, if the trust’s portfolio included 100 purchased call options (with a particular strike and expiration) for every 50 written put options (with a particular strike and expiration) at inception, the trust would seek to maintain that 100 contracts to 50 contracts proportional relationship. See “Investment Summary—Portfolio” for the actual number of Option contracts at inception. As described above, under certain limited circumstances provided in the trust agreement, Options may be liquidated by the trust prior to the Option Expiration Date or maturity, respectively. These circumstances may include paying expenses, satisfy unit redemptions by unitholders, protecting the trust in limited circumstances and making required distributions or avoiding imposition of taxes on the trust as described under “Understanding Your Investment—How Your Trust Works—Changing Your Portfolio”.

4      Investment Summary

 
 

WHO SHOULD INVEST

You should consider this investment if you:

  want to own securities representing interests in written and purchased option contracts in a single investment.
  seek the potential for buffered returns subject to a capped amount at termination based on the price performance of the Market Reference.

You should not consider this investment if you:

  are uncomfortable with the risks of an unmanaged investment in written and purchased option contracts.
  are uncomfortable with exposure to the risks associated with the Options.
  are uncomfortable with exposure to the price performance of the Market Reference.
  are seeking unlimited capital appreciation potential and do not want potential returns capped.
ESSENTIAL INFORMATION  
 
Public Offering Price per
                             
Unit at Inception*
                    $_____     
 
Fee Account Public Offering
Price per Unit at Inception*
                    $10.000     
 
Initial Net Asset Value per
Unit at Inception*†
                    $_____      
 
Inception date
                      _________, 2019      
 
Mandatory Termination Date
                      _________, ____      
 
Distribution dates
                      25th day of December  
Record dates
                      10th day of December  
 
Initial distribution date
                      _________25, 2019     
Initial record date
                      _________10, 2019     
 
CUSIP Numbers
                             
Standard Accounts
                      _________      
Fee Based Accounts
                      _________      
 
Ticker Symbol
                      _______      
 
Minimum investment
                    $1,000/100 units  
 
Tax Structure
                      Regulated Investment Company      

* As of ____________, 2019 and may vary thereafter.
† Investors will not purchase units at the net asset value per unit.

FEES AND EXPENSES

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

Sales Fee
         As a %
of $1,000
Invested

   
Amount
per 100
Units

Transactional sales fee
                        ____%             $    ____       
Creation & development fee
                      ____                       ____      
Maximum sales fee
                      ____%                $ ____      
Organization Costs
                      ____%                $ ____      
 
Annual operating expenses
         As a %
of Net
Assets

   
Amount
per 100
Units

Trustee fee & expenses
                        _.__%                   $    _____      
Supervisory, evaluation and administration fees
                      _.__                       _____      
Total
                      _.__%                $ _____      
 

The transactional sales fee is paid at the time of a unit purchase and is the difference between the total sales fee (maximum of ____% of the unit offering price) and the total creation and development fee. The creation and development fee is fixed at $____ per unit and is paid at the end of the initial offering period (anticipated to be one day). If you purchase units after the creation and development fee is paid, the secondary market transactional sales fee is equal to ______ % of the public offering price per unit and you will not pay a creation and development fee.

EXAMPLE

This example helps you compare the cost of this trust with other unit investment 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
                   $ _____      
__ years (approximate life of trust)
                   $ _____      
 

These amounts are the same regardless of whether you sell your investment at the end of a period or continue to hold your investment.

Investment Summary      5

 
 

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:

  The trust’s investment strategy is designed to achieve its investment objective over the life of the trust. The trust’s investment strategy has not been designed to achieve its objective if units are bought after the trust’s inception date or redeemed prior to the trust’s mandatory termination date.
  Security prices will fluctuate. The value of your investment may fall over time. An investment in units represents an indirect investment in the Options. Amounts available to distribute to unitholders at termination will depend primarily on the performance of the Options and are not guaranteed. The units, upon termination of the trust and at any other point in time, may be worth less than the original investment.
  The trust is subject to market risk related to the Market Reference, the Underlying Index and securities in the Underlying Index held by the Market Reference. The Options represent indirect positions in the Market Reference and are subject to risks associated with changes in value as the Market Reference Level rises or falls. The investment in the Options includes the risk that their value may be adversely affected by various factors affecting the Market Reference, the Underlying Index and the value of the securities in the Underlying Index held by the Market Reference. The Market Reference is an exchange-traded fund that seeks to track the performance of the Underlying Index which consists of common stock of 500 leading companies in leading industries of the U.S. economy. Stocks are subject to the risk that their prices will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. The Underlying Index tracks a subset of the U.S. stock market, which could cause the Underlying Index and Market Reference to perform differently from the overall stock market. In addition, the Underlying Index and Market Reference may, at times, become focused in stocks of a particular market sector, which would subject the Market Reference and the trust to proportionately higher exposure to the risks of that sector. Although common stocks have historically generated higher average returns than fixed-income securities over the long term, common stocks also have experienced significantly more volatile returns. Common stocks are structurally subordinated to preferred stocks, bonds and other debt instruments in a company’s capital structure, and represent a residual claim on the issuer’s assets that have no value unless such assets are sufficient to cover all other claims. The value of the Options is based on the value of the Market Reference Level as of the close of the market on the Option Expiration Date only, and will be substantially determined by market conditions as of such time.
  The trust seeks to provide returns related to the price performance of the Market Reference only, which does not include returns from dividends paid by the Market Reference. The Options reference the price of shares of the Market Reference only and not dividend payments paid by the Market Reference.
  The trust return is subject to a capped upside. The intended return for units purchased on the trust’s inception date and held for the life of the trust is based on the Market Reference Level and the value of the Options on the Option Expiration Date and is subject to a capped amount of $____ per trust unit and may represent a return that is worse than the performance of the Market Reference. Even if there are significant increases in the Market Reference Level, the

6      Investment Summary

 
 


    amount you may receive is capped at $ per trust unit.
  You may lose all or a portion of your investment. The trust does not provide principal protection and you may not receive a return of the capital you invest.
  You may experience significant losses on your investment up to an almost total loss on your investment if the price of the Market Reference decreases by greater than % from the Initial Market Reference Level. You may realize a return (including a loss) that is higher or lower than the intended returns as a result of redeeming units prior to the trust’s mandatory termination date and in various circumstances including where Options are liquidated by the trust prior to their expiration, if the trust is unable to maintain the proportional relationship of the Options based on the number of Option contracts in the trust’s portfolio, or increases in potential tax-related and other expenses of the trust above estimated levels.
  The written Options create an obligation for the trust. As a result, after the premium is received on the written Options, the written Options will reduce the value of your units.
  The values of the Options do not increase or decrease at the same rate as changes in the price of the Market Reference or the Underlying Index. The Options are all European style options, which means that they will be exercisable at the strike price only on the Option Expiration Date. Prior to their expiration on the Option Expiration Date, the value of the Options is determined based upon market quotations, the last asked or bid price in the over-the-counter market or using other recognized pricing methods. The value of the Options prior to their expiration on the Option Expiration Date may vary because of factors other than the price of the Market Reference. Factors that may influence the value of the Options include interest rate changes, implied volatility levels of the Market Reference, the Underlying Index and securities comprising the Underlying Index and implied dividend levels of the Market Reference, the Underlying Index and securities comprising the Underlying Index, among others. The value of the Market Reference may not increase or decrease at the same rate as the Underlying Index due to “tracking error” described below.
  Certain features of the Market Reference, which is an exchange-traded fund, will impact the value of the units. The value of the Market Reference is subject to factors such as the following:
o
  Passive Investment Risk. The Market Reference is not actively managed and attempts to track the performance of an unmanaged index of securities. This differs from an actively managed fund, which typically seeks to outperform a benchmark index. As a result, the Market Reference will hold constituent securities of the Underlying Index regardless of the current or projected performance on a specific security or particular industry or market sector. Maintaining investments in the securities regardless of market conditions of the performance of individual securities could cause the Market Reference’s returns to be lower than if it employed an active strategy.
o
  Index Tracking Risk. While the Market Reference is intended to track the performance of the Underlying Index, the Market Reference’s returns may not match or achieve a high degree of correlation with the return of the Underlying Index due to expenses and transaction costs. In addition, it is possible that the Market Reference may not always fully replicate the performance of the Underlying Index.

Investment Summary      7

 
 

  The trust may experience substantial downside from the Options and option contract positions may expire worthless.
  Credit risk is the risk an issuer, guarantor or counterparty of a security in the trust is unable or unwilling to meet its obligation on the security. The OCC acts as guarantor and central counter-party with respect to the Options. As a result, the ability of the trust to meet its objective depends on the OCC being able to meet its obligations.
  Liquidity risk is the risk that the value of a security will fall in value if trading in the security is limited or absent. The Options are listed on the CBOE; however, no one can guarantee that a liquid secondary trading market will exist for the Options. Trading in the Options may be less deep and liquid than certain other securities. The Options may be less liquid than certain non-customized options. In a less liquid market for the Options, liquidating the Options may require the payment of a premium (for written Options) or acceptance of a discounted price (for purchased Options) and may take longer to complete. In a less liquid market for the Options, the liquidation of a large number of options may more significantly impact the price. A less liquid trading market may adversely impact the value of the Options and your units and result in the trust being unable to achieve its investment objective.
  The trust might not achieve its objective in certain circumstances. Certain circumstances under which the trust might not achieve its objective include if the trust disposes of Options early, if the trust is unable to maintain the proportional relationship among the Options in the trust’s portfolio or due to adverse tax law or other changes affecting treatment of the Options.
  The cash deposited may be insufficient to meet the expenses of the trust. If the cash balances in the trust’s accounts are insufficient to provide for expenses and other amounts payable by the trust, the trust may sell trust property to pay such amounts. These sales may result in losses to unitholders and the inability of the trust to meet its investment objective. There is no assurance that your investment will maintain its size or composition.
  The trustee has the power to terminate your trust early in limited cases as described under “Understanding Your Investment—How Your Trust Works—Termination of Your Trust” including 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. If the trust terminates early, the trust may suffer losses and be unable to achieve its investment objective. This could result in a reduction in the value of units and result in a significant loss to investors.
  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.
  We do not actively manage the portfolio. Except in limited circumstances, the trust will hold, and continue to buy interests in the same securities even if their market value declines.

8      Investment Summary

 
 


ACE MLTSM, Buffered Portfolio Series 2019-1

(Advisors Disciplined Trust 1682)
Portfolio — As of the Initial Date of Deposit, ____________, 2019

Description of Options(1)(4)



   
Strike
Price

   
Strike Price as
a Percentage
of the Initial
Market
Reference
Level

   
Number
of Option
Contracts(4)

   
Market
Value per
Option(2)

   
Percentage
of
Aggregate
Offering
Price

   
Cost of
Securities
to Trust(2)

OPTIONS — ______%
                                                                                                                               
Purchased Options — ______%
                                                                                                                                 
Purchased Call Options on the SPDR® S&P 500® ETF Trust, Expiring ____________, 2020 (3)
                                                                                                                                 
Purchased Call Options on the SPDR® S&P 500® ETF Trust, Expiring ____________, 2020 (3)
                                                                                                                                 
Purchased Put Options on the SPDR® S&P 500® ETF Trust, Expiring ____________, 2020 (3)
                                                                                                                                 
Written Options — ______%
                                                                                                                                 
Written Call Options on the SPDR® S&P 500® ETF Trust, Expiring ____________, 2020 (3)
                                                                                                                                 
Written Put Options on the SPDR® S&P 500® ETF Trust, Expiring ____________, 2020 (3)
                                                                                                                                 
TOTAL
                                                                                                       __.__%                 $ ______      
See “Notes to Portfolio”
 


Investment Summary      9

 
 

Notes to Portfolio

(1)
  Securities are represented by contracts to purchase such securities.
(2)
  Advisors Asset Management, Inc. is the evaluator of the trust. Capelogic, Inc., an independent pricing service, determined the initial prices of the securities shown in this prospectus at the close of regular trading on the New York Stock Exchange on the business day before the date of this prospectus. The value of Options is based on the last quoted sale price for the Options (bid-side for the purchased Options and ask-side for the written Options). Accounting Standards Codification 820, “Fair Value Measurements” establishes a framework for measuring fair value and expands disclosure about fair value measurements in financial statements for the trust. The framework under the standard is comprised of a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
  Level 1:  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the trust has the ability to access as of the measurement date.
  Level 2:  Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
  Level 3:  Significant unobservable inputs that reflect a trust’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
  The cost of the securities to the sponsor and the sponsor’s profit or (loss) (which is the difference between the cost of the securities to the sponsor and the cost of the securities to the trust) are $__________ and $__________, respectively. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing those securities. Changes in valuation techniques may result in transfers in or out of an investment’s assigned level as described above. The following table summarizes the trust’s investments as of ____________, 2019, based on inputs used to value them:



   
Level 1
   
Level 2
   
Level 3
Purchased Options
                   $                $                $      
Written Options
                                                                     
Total
                   $                $                $      
 
(3)
  This is a non-income producing security.
(4)
  Each Option contract entitles the holder thereof (i.e. the purchaser) to purchase (for the call options) or sell (for the put options) 100 shares of the Market Reference on the Option Expiration Date at the Option’s strike price multiplied by 100.

10      Investment Summary

 
 

UNDERSTANDING YOUR INVESTMENT
              
 

ADDITIONAL INFORMATION ABOUT THE
PRINCIPAL INVESTMENT STRATEGY

The Options. The trust’s initial portfolio includes five types of Options including both written and purchased put and call options (as further described below). The Options are all European style options, which means that they will be exercisable at the strike price only on the Option Expiration Date. The Options are all FLexible EXchange Options (“FLEX Options”). FLEX Options are customized option contracts available through national securities exchanges that are guaranteed for settlement by the OCC, a market clearinghouse. The Options are listed on the CBOE. FLEX Options provide investors with the ability to customize assets and indices referenced by the options, exercise prices, exercise styles (i.e. American-style exercisable any time prior to the expiration date or European-style exercisable only on the option expiration date) and expiration dates, while achieving price discovery in competitive, transparent auctions markets and avoiding the counterparty exposure of over-the-counter option positions.

Each Option contract entitles the holder thereof (i.e. the purchaser of the Option) the option to purchase (for the call options) or sell (for the put options) 100 shares of the Market Reference as of the close of the market on the Option Expiration Date for the strike price multiplied by 100. The trust is designed so that any amount owed by the trust on the written Options will be covered by payouts at expiration from the purchased Options. The trust receives premiums in exchange for the written Options and pays premiums in exchange for the purchased Options. The OCC and securities exchange that the Options are listed on do not charge ongoing fees to writers or purchasers of the Options during their life for continuing to hold the option contracts.

The OCC guarantees performance by each of the counterparties to FLEX Options, becoming the “buyer for every seller and the seller for every buyer,” protecting clearing members and options traders from counterparty risk. Subject to determination by the Securities Committee of the OCC, adjustments may be made to the Options for certain events (collectively “Corporate Actions”) specified in the OCC’s by-laws and rules: certain stock dividends or distributions, stock splits, reverse stock splits, rights offerings, distributions, reorganizations, recapitalizations, or reclassifications with respect to an underlying security, or a merger, consolidation, dissolution or liquidation of the issuer of the underlying security. According to the OCC’s by-laws, the nature and extent of any such adjustment is to be determined by the OCC’s Securities Committee, in light of the circumstances known to it at the time such determination is made, based on its judgment as to what is appropriate for the protection of investors and the public interest, taking into account such factors as fairness to holders and writers (or purchasers and sellers) of the affected options, the maintenance of a fair and orderly market in the affected options, consistency of interpretation and practice, efficiency of exercise settlement procedures, and the coordination with other clearing agencies of the clearance and settlement of transactions in the underlying interest.

The information set forth above relating to the Options, FLEX Options generally and the OCC has been obtained from the OCC. The description and terms of the Options to be entered into with the OCC are set forth in the by-laws and rules of the OCC, available at www.optionsclearing.com. Please see www.optionsclearing.com for more information relating thereto, which websites are not considered part of this prospectus nor are they incorporated by reference herein.

At-The-Money Purchased Call Options (“ATM Purchased Call Options”). The ATM Purchased Call Options are call options purchased by the trust, each with a strike price of $___ (approximately ___% of the Initial Market Reference

Understanding Your Investment      11

 
 


Level). If the Market Reference Level is less than or equal to the strike price at the close of the New York Stock Exchange on the Option Expiration Date, the ATM Purchased Call Options will expire without net proceeds being payable to the trust (i.e. the ATM Purchased Call Options will expire worthless). If the Market Reference Level is greater than the strike price at the close of the New York Stock Exchange on the Option Expiration Date, then the ATM Purchased Call Options are intended to collectively provide for per unit dollar amount proceeds of $___ multiplied by ((the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date divided by the Initial Market Reference Level) minus ___%) to the trust on the Option Expiration Date.

In-The-Money Purchased Call Options (“ITM Purchased Call Options”). The ITM Purchased Call Options are call options purchased by the trust, each with a strike price of $___ (approximately ___% of the Initial Market Reference Level). If the Market Reference Level is less than or equal to the strike price at the close of the New York Stock Exchange on the Option Expiration Date, the ITM Purchased Call Options will expire without net proceeds being payable to the trust (i.e. the ITM Purchased Call Options will expire worthless). If the Market Reference Level is greater than the strike price at the close of the New York Stock Exchange on the Option Expiration Date, then the ITM Purchased Call Options are intended to collectively provide for per unit dollar amount proceeds of $___ multiplied by ((the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date divided by the Initial Market Reference Level) minus ___%) to the trust on the Option Expiration Date.

Out-Of-The-Money Written Call Options (“OTM Written Call Options”). The OTM Written Call Options are call options written by the trust, each with a strike price of $___ (approximately ___% of the Initial Market Reference Level). If the Market Reference Level is less than or equal to the strike price at the close of the New York Stock Exchange on the Option Expiration Date, the OTM Written Call Options will expire without net proceeds being payable by the trust (i.e. the OTM Written Call Options will expire worthless). If the Market Reference Level is greater than the strike price at the close of the New York Stock Exchange on the Option Expiration Date, then the OTM Written Call Options are intended to collectively provide for the trust to deliver proceeds with a per unit dollar amount of $___ multiplied by ((the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date divided by the Initial Market Reference Level) minus ___%) on the Option Expiration Date.

At-The-Money Purchased Put Options (“ATM Purchased Put Options”). The ATM Purchased Put Options are put options purchased by the trust, each with a strike price at $___ (approximately ___% of the Initial Market Reference Level). If the Market Reference Level is greater than or equal to the strike price at the close of the New York Stock Exchange on the Option Expiration Date, the ATM Purchased Put Options will expire without net proceeds being payable to the trust (i.e. the ATM Purchased Put Options will expire worthless). If the Market Reference Level is less than the strike price at the close of the New York Stock Exchange on the Option Expiration Date, then the ATM Purchased Put Options are intended to collectively provide for per unit dollar amount proceeds of $___ multiplied by (___% minus (the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date divided by the Initial Market Reference Level)) to be made to the trust on the Option Expiration Date.

Out-Of-The-Money Written Put Options (“OTM Written Put Options”). The OTM Written Put Options are put options written by the trust, each with a strike price at $___ (approximately ___% of the Initial Market Reference Level). If the Market Reference Level is greater than or equal to the strike price at the close of the New York Stock Exchange on the Option

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Expiration Date, the OTM Written Put Options will expire without net proceeds being payable by the trust (i.e. the OTM Written Put Options will expire worthless). If the Market Reference Level is less than the strike price at the close of the New York Stock Exchange on the Option Expiration Date, then the OTM Written Put Options are intended to collectively provide for the trust to deliver proceeds with a per unit dollar amount of $___ multiplied by (___% minus (the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date divided by the Initial Market Reference Level)) on the Option Expiration Date.

The Market Reference and the Underlying Index. The summary information below regarding the Market Reference and the Underlying Index comes from the Market Reference’s filings with the U.S. Securities and Exchange Commission (“SEC”). You are urged to refer to the SEC filings made by the issuer and to other publicly available information (e.g. the issuer’s annual report) to obtain an understanding of the issuer’s business and financial prospects. The summary information contained below is not designed to be, and should not be interpreted as, an effort to present information regarding the financial prospects of any issuer or any trends, events or other factors that may have a positive or negative influence on those prospects or as an endorsement of any particular issuer or exchange-traded fund. We have not undertaken any independent review or due diligence of the SEC filings of the issuer of the Market Reference or of any other publicly available information regarding such issuer.

The Market Reference is an exchange-traded fund that trades on the NYSE Arca, Inc. stock exchange under the ticker symbol “SPY”. We have derived all information regarding the Market Reference contained in this prospectus from the prospectus for the Market Reference, dated January 29, 2019. Such information reflects the policies of, and is subject to change by the Market Reference’s sponsor, PDR Services, LLC. Such information is subject to change and we have not independently verified its accuracy. Information concerning the Market Reference provided to or filed with the SEC can be located by reference to SEC file numbers 811-06125 and 33-46080. Information from outside sources is not incorporated by reference in, and should not be considered part of, this prospectus. Information taken directly from the Market Reference’s SEC filing of its 2019 prospectus is included in quotation marks.

“The [Market Reference] seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index. The [Market Reference] seeks to achieve its investment objective by holding a portfolio of the common stocks that are included in the [Underlying] Index (the “Portfolio”), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the [Underlying] Index. [T]he term “Portfolio Securities” refers to the common stocks that are actually held by the [Market Reference] and make up the [Market Reference]’s Portfolio, while the term “Index Securities” refers to the common stocks that are included in the [Underlying] Index, as determined by the index provider, S&P Dow Jones Indices LLC (“S&P”). At any time, the Portfolio will consist of as many of the Index Securities as is practicable. To maintain the correspondence between the composition and weightings of Portfolio Securities and Index Securities State Street Global Advisors Trust Company (the “Trustee” [of the Market Reference] or its parent company, State Street Bank and Trust Company (“SSBT”) adjusts the Portfolio from time to time to conform to periodic changes made by S&P to the identity and/or relative weightings of Index Securities in the [Underlying] Index. The Trustee or SSBT aggregates certain of these adjustments and makes changes to the Portfolio at least monthly, or more frequently in the case of significant changes to the [Underlying] Index.

The [Underlying] Index includes five hundred (500) selected companies, all of which are listed on national stock exchanges and spans over

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25 separate industry groups. As of December 31, 2018, the five largest industry groups represented in the Index were: Software & Services 10.96%; Pharmaceuticals, Biotechnology & Life Sciences 8.86%; Media & Entertainment 7.96%; Health Care Equipment & Services 6.68%; and Capital Goods 6.46%. Since 1968, the [Underlying] Index has been a component of the U.S. Commerce Department’s list of Leading Indicators that track key sectors of the U.S. economy. Current information regarding the market value of the [Underlying] Index is available from market information services. The [Underlying] Index is determined, comprised and calculated without regard to the [Market Reference].”

The trust is not sponsored, endorsed, sold or promoted by SPDR® S&P 500® ETF Trust, PDR Services, LLC or S&P Dow Jones Indices LLC. SPDR® S&P 500® ETF Trust, PDR Services, LLC and S&P Dow Jones Indices LLC have not passed on the legality or suitability of, or the accuracy or adequacy of, descriptions and disclosures relating to the trust or the Options. SPDR® S&P 500® ETF Trust, PDR Services, LLC and S&P Dow Jones Indices LLC make no representations or warranties, express or implied, regarding the advisability of investing in the trust or the Options or results to be obtained by the trust or the Options, unitholders or any other person or entity from use of the Market Reference. SPDR® S&P 500® ETF Trust, PDR Services, LLC and S&P Dow Jones Indices LLC have no liability in connection with the management, administration, marketing or trading of the trust or the Options.

Shares of the Market Reference may be invested in directly without paying the fees and expenses associated with the trust. There are a variety other investments available that track or reference the Underlying Index.

HYPOTHETICAL EXAMPLES

The following table and examples illustrate the payments on the Options and how the trust’s investment strategy is intended to work.

The table and examples are hypothetical illustration of the mathematical principles underlying the Options and the trust’s investment strategy. The table and examples are not intended to predict or project the performance of the Options or the trust. The actual distributions that you receive will vary from these illustrations with changes in expenses and early liquidation of Options. For an explanation of the Option computations and the trust’s intended returns on a per unit basis, please refer to the discussion under “Investment Summary—Principal Investment Strategy” and “Understanding Your Investment—Additional Information about the Principal Investment Strategy—The Options”. The examples assume that units are not sold back to us or redeemed early. All figures in the table and examples below assume that the Options are held until the applicable Option expiration date and units of the trust are held until the trust’s mandatory termination date. Unitholders will not purchase units at the Initial Unit Price or Fee Account Initial Unit Price but at the unit price computed as of the close of the New York Stock Exchange on a unitholder’s date of purchase. No investors will purchase at the Initial Net Asset Value per Unit as shown under “Essential Information”. Those returns are for illustrative purposes only and are intended to reflect the intended return on the portfolio without application of sales fees or organization costs. Amounts assume all proceeds on the Options are received when due and that there are no defaults. Unitholders will pay a sales fee in connection with the purchase of units which is shown under “Essential Information” but such amounts are not deducted from the amounts shown in the table or examples so are not reflected in the tables or examples as separate amounts. Unitholders will pay organization costs of the trust which are shown under “Essential Information” but those amounts are paid by cash deposited at inception so are not reflected in the table or examples as separate amounts. Unitholders will bear the trust’s annual operating expenses shown under “Essential Information” but those amounts are paid by cash deposited at inception

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so are not reflected in the table or examples as separate amounts. Unitholders should review the “Investment Summary—Fees and Expenses” section to understand all fees and expenses borne by unitholders in an investment in units of the trust.

The following table illustrates the payments on the Options and examples of hypothetical trust returns (including a loss) for units held from the trust inception date to the scheduled mandatory termination date of the trust. The amounts shown for the “Hypothetical Total Amount for Trust” reflect proceeds from the Options The “Hypothetical Returns” based on the “Initial NAV” represents the intended percentage return on the portfolio of Options over the life of the trust gross of any sales fees or organization costs. It is calculated by taking the amount shown under “Hypothetical Total Amount for Trust” divided by the Initial NAV of $____. It is for illustrative purposes only and does not represent the price any unitholder will pay for units or the returns any unitholders will receive. The “Hypothetical Returns” based on the “Initial Unit Price” represents the percentage return an investor would receive if they bought units at the Initial Unit Price and received the amount shown under “Hypothetical Total Amount for Trust” on such units. The “Hypothetical Returns” based on the “Fee Account Initial Unit Price” represents the percentage return an investor would receive if they bought units at the Fee Account Initial Unit Price and received the amount shown under “Hypothetical Total Amount for Trust” on such units.

The amounts and examples are based on various hypothetical levels of the “Market Reference Level” on the Option Expiration Date. The “Percentage Change” is the Market Reference Level at the close of the market on the Option Expiration Date divided by the Market Reference Level at trust inception and is shown for illustrative purposes only based on these different Market Reference levels. These percentage changes represent the percentage increase or decrease of the Market Reference levels from the trust’s inception to the close of the New York Stock Exchange on the Option Expiration Date.

The amounts under “Hypothetical Option Proceeds (per Unit)” for each of the five Options represent the net amounts due or owed, per trust unit, at the Option Expiration Date on each Option based on the corresponding “Market Reference Level”. The amounts under “Hypothetical Total Amount for Trust” are the sums of those five amounts. Positive amounts represent an amount to be received by the trust on the Options. Negative amounts represent an amount to be paid by the trust on the Options. The Options are intended to be liquidated on the Option Expiration Date, rather than be exercised, in order to avoid having the trust receive shares of the Market Reference or be obligated to deliver shares of the Market Reference. As a result, the return actually realized on the Options upon liquidation could vary from the returns that would be realized if the Options were exercised based on the price of shares of the Market Reference as of the close of the market on the Option Expiration Date. For an explanation of the Options including relevant computations, please refer to the discussion under “Understanding Your Investment—Additional Information about the Principal Investment Strategy—The Options”.

All figures in the table assume that the Options are held to Option Expiration Date and units are held until the trust’s mandatory termination date. The actual amounts that you receive or actual losses that you experience may vary from these estimates with changes in expenses or a change in the proportional relationship of the Options based on the number of Option contracts. The table and examples below are provided for illustrative purposes only and are hypothetical. The table and examples do not purport to be representative of every possible scenario concerning the Market Reference. No one can predict the performance of the Market Reference. The assumptions made in connection with the table and examples may not

Understanding Your Investment      15

 
 


reflect actual events. You should not take this information as an indication or assurance of the expected performance of the Market Reference, the Options or the return on the trust units. The actual overall performance of the trust will vary with fluctuations in the value of the Options during the trust’s life, changes in trust expenses and liquidations of Options during the trust’s life, among other things.

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Hypothetical Examples

 

 

Hypothetical Market
Reference Level
   Hypothetical Option Proceeds (per Unit)    Hypothetical
Returns

Percentage
Change

Market
Reference
Level
  ATM
Purchased
Call
Options
ITM
Purchased
Call
Options
OTM
Written
Call
Options
ATM
Purchased
Put
Options
OTM
Written
Put
Options
Hypothetical
Total
Amount
for Trust
  Initial NAV
( $_____)

Initial Unit
Price
( $10)

Fee Account
Initial Unit
Price
($______)
35%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
30%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
25%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
20%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
15%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
10%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
5%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
3%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
0%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-3%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-5%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-10%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-15%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-20%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-25%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-30%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-35%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-40%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-45%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-50%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-55%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-60%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-65%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-70%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-75%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-80%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-85%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-90%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-95%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%
-100%     $ ____       $ ____     $ ____     $ ____     $ ____     $ ____     $ ____   ____% ____% ____%

 

 

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The following examples illustrate how payments are designed to operate in different hypothetical scenarios.

Example—The Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date is $___ (125% of the Initial Market Reference Level—an increase of 25%).

Using this set of facts, the total hypothetical amount per unit over the trust’s life is approximately $___, consisting of the following intended amounts:

  the trust receiving $___ per unit on the ATM Purchased Call Options;
  the trust receiving $___ per unit on the ITM Purchased Call Options;
  the trust paying $___ per unit on the OTM Written Call Options; and
  no amounts being paid on the OTM Written Put Options or ATM Purchased Put Options (i.e. expiring worthless).

Example—The Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date is $___ (103% of the Initial Market Reference Level—an increase of 3%).

Using this set of facts, the total hypothetical amount per unit over the trust’s life is approximately $___, consisting of the following intended amounts:

  the trust receiving $___ per unit on the ATM Purchased Call Options;
  the trust receiving $___ per unit on the ITM Purchased Call Options; and
  no amounts being paid on the OTM Written Call Options, OTM Written Put Options or ATM Purchased Put Options (i.e. expiring worthless).

Example—The Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date is $___ (100% of the Initial Market Reference Level—no change).

Using this set of facts, the total hypothetical amount per unit over the trust’s life is approximately $___, consisting of the following intended amounts:

  the trust receiving a payment of $___ per unit on the ITM Purchased Call Options; and
  no payments being made on the ATM Purchased Call Options, the OTM Written Call Options, the OTM Written Put Options or the ATM Purchased Put Options (i.e. expiring worthless).

Example—The Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date is $___ (97% of the Initial Market Reference Level—a decrease of 3%).

Using this set of facts, the total hypothetical amount per unit over the trust’s life is approximately $___, consisting of the following intended amounts:

  the trust receiving $___ per unit on the ITM Purchased Call Options;
  the trust receiving $___ per unit on the ATM Purchased Put Options; and
  no amounts being paid on the ATM Purchased Call Options, the OTM Written Call Options or the OTM Written Put Options (i.e. expiring worthless).

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Example—The Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date is $___ (25% of the Initial Market Reference Level—a decrease of 75%).

Using this set of facts, the total hypothetical amount per unit over the trust’s life is approximately $___, consisting of the following intended amounts:

  the trust receiving $___ per unit on the ITM Purchased Call Options;
  the trust paying $___ per unit on the OTM Written Put Options;
  the trust receiving $___ per unit on the ATM Purchased Put Options;
  no amounts being paid on the ATM Purchased Call Options or OTM Written Call Options (i.e. expiring worthless).

Understanding Your Investment      19

 
 

HOW TO BUY UNITS

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

  the net asset value per unit plus
  cash to pay organization costs plus
  the sales fee.

The “net asset value per unit” is the value of the securities, cash and other assets in a trust reduced by the liabilities of a trust divided by the total units outstanding. In calculating the net asset value per unit, the values of the written Options are netted against the value of the purchased Options. We often refer to the public offering price of units as the “offer price” or “purchase price.” The offer price will be effective for all orders received prior to the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time). If we receive your order prior to the close of regular trading on the New York Stock Exchange or authorized financial professionals receive your order prior to that time and properly transmit the order to us by the time that we designate, then you will receive the price computed on the date of receipt. If we receive your order after the close of regular trading on the New York Stock Exchange, if authorized financial professionals receive your order after that time or if orders are received by such persons and are not transmitted to us by the time that we designate, then you will receive the price computed on the date of the next determined offer price provided that your order is received in a timely manner on that date. It is the responsibility of the authorized financial professional to transmit the orders that they receive to us in a timely manner. Certain broker-dealers may charge a transaction or other fee for processing unit purchase orders.

Organization Costs. During the initial offering period, part of the value of the units represents an amount of cash deposited to pay the costs of creating your trust. These costs include the costs of preparing the registration statement and legal documents, federal and state registration fees, the initial fees and expenses of the trustee and the initial audit. Your trust will reimburse us for these costs at the end of the initial offering period or after six months, if earlier. The value of your units will decline when the trust pays these costs.

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 determine the value of the Options based on our good faith determination of the Options’ fair value. We generally determine the value of the Options based on the last quoted sale price for the Options where readily available and appropriate. In cases where the Options were not traded on the valuation date or where the evaluator determines that market quotations are unavailable or inappropriate, the value of the Options is based on the last asked or bid price in the over-the-counter market if available and appropriate. If market quotes, ask prices and bid prices are unavailable or inappropriate, each Option’s value is based on the evaluator’s good faith determination of the fair value of the Options at its reasonable discretion based on the following methods or any combination thereof whichever the evaluator deems appropriate: (a) on the basis of the current ask or bid price for comparable options, (ii) by determining the valuation of the Option on the ask or bid side of the market by appraisal or (iii) by any combination of the above. During the initial offering period such determination for the purchased Options is generally on the basis of ask prices and for the written Options is generally on the basis of bid prices. After the initial offering period ends, such determination for the purchased Options will generally be on the basis of bid prices and for the written Options will generally be on the basis of ask prices.

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The ask side price generally represents the price at which dealers, market-makers or investors in the market are willing to sell a security and the bid side evaluation generally represents the price that dealers, market-makers or investors in the market are willing to pay to buy a security. The bid side evaluation is lower than the ask side evaluation. As a result of this pricing method, unitholders should expect a decrease in the net asset value per unit on the day following the end of the initial offering period equal to the difference between the current ask side evaluations and bid side evaluations of the Options.

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

Transactional Sales Fee. You pay a fee in connection with purchasing units. We refer to this fee as the “transactional sales fee.” You pay the transactional sales fee at the time you buy units. The maximum sales fee equals ___% of the public offering price per unit at the time of purchase. The transactional sales fee is the difference between the total sales fee percentage (maximum of ___% of the public offering price per unit) and the remaining fixed dollar creation and development fee ($___ per unit during the initial offering period). The transactional sales fee equals ___% of the public offering price per unit during the initial offering period based on a $__ public offering price per unit, which is the unit price on the day before the trust’s inception date. Since the transactional sales fee actually equals the difference between the total sales fee and the remaining creation and development fee, the percentage and dollar amount of the transactional sales fee will vary as the public offering price per unit varies. The transactional sales fee does not include the creation and development fee which is described under “Fees and Expenses.” If you purchase units after the creation and development fee is paid, the secondary market transactional sales fee is equal to _____% of the public offering price per unit.

Fee Accounts. Investors may purchase units through registered investment advisers, certified financial planners or registered broker-dealers who in each case either charge investor accounts (“Fee Accounts”) periodic fees for brokerage services, financial planning, investment advisory or asset management services, or provide such services in connection with an investment account for which a comprehensive “wrap fee” charge (“Wrap Fee”) is imposed. You should consult your financial professional to determine whether you can benefit from these accounts. If units of the trust are purchased for a Fee Account and the units are subject to a Wrap Fee in such Fee Account (i.e., the trust is “Wrap Fee Eligible”), then investors may be eligible to purchase units of the trust in these Fee Accounts at a reduced fee. During the initial offering period, investors may be eligible to purchase units of the trust in these Fee Accounts that are not subject to the transactional sales fee but will be subject to the creation and development fee that is retained by the sponsor. For example, this table illustrates the sales fee you will pay as a percentage of a $10 public offering price per unit which is the unit price on the day before the trust’s inception date (the percentage will vary with the unit price).

Transactional sales fee
                       0.00%       
Creation and development fee
                       ____%      
Total sales fee
                       ____%      

For units purchased in the secondary market, investors may be eligible to purchase units of the trust in these Fee Accounts at the public offering price less the regular dealer concession. Certain Fee Account investors may be assessed transaction or other fees on the purchase and/or redemption of units by their broker-dealer or other processing organizations for providing

Understanding Your Investment      21

 
 


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.

Minimum Purchase. The minimum amount you can purchase of the trust appears under “Essential Information”, but such amounts may vary depending on your selling firm.

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

HOW TO SELL YOUR UNITS

You can sell or redeem your units on any business day the New York Stock Exchange is open by contacting your financial professional. Unit prices are available daily on the Internet at www.AAMlive.com or through your financial professional. The sale and redemption price of units is equal to the net asset value per unit, provided that you will not pay any remaining creation and development fee or organization costs if you sell or redeem units during the initial offering period. The sale and redemption price is sometimes referred to as the “liquidation price”. Certain broker-dealers may charge a transaction or other fee for processing unit redemption or sale requests.

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

Redeeming Units. Unitholders may also redeem 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 a unitholder will receive for units is equal to the net asset value per unit, provided that unitholders will not pay any remaining creation and development fee or organization costs if they redeem units during the initial offering period. A redeeming unitholder will receive the net asset value for a particular day if the trustee receives the 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 a request is not received in a timely manner or is incomplete in any way, the unitholder 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

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

If we repurchase units, we may redeem such units. When the sponsor redeems units, it is eligible to receive either a cash payment or receive an in-kind distribution. If we receive an in-kind distribution, the trustee must follow certain requirements set forth in the trust agreement in connection with the redemption. The trust agreement provides that in these cases (1) we are an affiliated redeeming unitholder and will receive our proportionate share of the trust’s current net asset value (as all redeeming unitholders are entitled to receive), (2) the securities transferred must be valued in the same manner as they are valued for computing the net asset value, (3) neither we nor any other party with a pecuniary incentive to influence the transfer or distribution may select or influence the selection of the transferred securities, (4) the trust must distribute its proportionate share of every asset in the trust’s portfolio with limited exceptions, (5) the transfer or distribution cannot favor us to the detriment of any other unitholder and (6) the trustee will monitor each in-kind redemption for compliance with these requirements and maintain records for each transfer or distribution. No unitholder other than the sponsor is eligible to receive an in-kind distribution in connection with a unit redemption.

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

Distributions. Your trust generally pays distributions of its net investment income along with any excess capital on each 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. The trust is not intended to make distributions during its life. In some cases, your trust might pay a special distribution if it holds an excessive amount of cash pending distribution. 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 any distributions will vary from time to time as trust expenses change or due to other factors.

Investors who purchase units between a record date and a distribution date will receive their first distribution on the second distribution date after the purchase.

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

Understanding Your Investment      23

 
 


your units will also fall. We cannot guarantee that your trust will achieve its objective or that your investment return will be positive over any period.

Market Risk. Market risk is the risk that the value of the securities in your trust will fluctuate. This could cause the value of your units to fall below your original purchase price. Market values fluctuate in response to various factors. These can include factors such as changes in interest rates, inflation, the financial condition of a security’s issuer, perceptions of the issuer, or ratings on a security. While the Options are individually related to the Market Reference Level, the return on the Options depends on the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date. Even though we supervise your portfolio, you should remember that we do not manage your portfolio. Your trust will not liquidate an asset solely because the market value falls as is possible in a managed fund.

Options Risk. The value of the Options will be affected by changes in the value of the Market Reference, the Underlying Index and its underlying securities, changes in interest rates, changes in the actual and perceived volatility of the stock market, the Market Reference, the Underlying Index and its underlying securities, and the remaining time to the Option Expiration Date, among other things. The value of the Options does not increase and decrease at the same rate as the Market Reference Level. However, as an option approaches its expiration date, its value is expected to increasingly move with the applicable reference. The written Options create an obligation for the trust. As a result, after the premium is received on the written Options, the written Options will reduce the value of your units. The trust may experience substantial downside from specific option contracts positions and option contract positions may expire worthless. The Options are intended to be liquidated on the Option Expiration Date, rather than be exercised, in order to avoid having the trust receive shares of the Market Reference Asset or be obligated to deliver shares of the Market Reference. As a result, the return actually realized on the Options upon liquidation could vary from the returns that would be realized if the Options were exercised based on the price of shares of the Market Reference as of the close of the market on the Option Expiration Date.

Market Reference Performance and Equity Risk. The Options contracts represent indirect positions in the Market Reference and are subject to changes in value as the Market Reference Level rises or falls. The anticipated proceeds from of the Options is based on the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date, and will be substantially determined by market conditions and the Market Reference Level and the value of the securities comprising the Market Reference as of such time. The Market Reference Level will fluctuate over time based on changes in the value of the Underlying Index and securities represented by the Market Reference which are subject to risks associated with investments in equity securities including changes in general economic conditions, expectations for future economic growth and corporate profits, interest rates and the supply and demand for securities.

Potential for Loss of Some or All of Your Investment. Your investment in the trust may result in a significant loss including the possibility of the loss of all of your initial investment.

Credit Risk. An issuer, guarantor or counter-party of a security in the trust is unable or unwilling to meet its obligation on the security. The OCC is guarantor and central counterparty with respect to the Options. As a result, the ability of the trust to meet its objective depends on the OCC being able to meet its obligations.

Capped Upside. The intended returns for units purchased on the trust’s inception date and held for the life of the trust is based on the performance of the Market Reference and is subject to a capped amount of $____ per trust unit and may represent a return that is worse than the performance of the Market Reference. Even if

24      Understanding Your Investment

 
 


there are significant increases in the Market Reference Level, the amount you may receive is capped at $___ per trust unit. You may experience significant losses on your investment if the value of the Market Reference declines. You may realize a return (including a loss) that is higher or lower than the intended returns as a result of redeeming units prior to the trust’s mandatory termination date and in various circumstances including where Options are otherwise liquidated by the trust prior to their expiration or maturity, if the trust is unable to maintain the proportional relationship of the Options based on the number of Option contracts in the trust’s portfolio or increases in potential expenses of the trust above estimated levels.

Legislation Risk. Tax legislation proposed by the President or Congress, tax regulations proposed by the U.S. Treasury or positions taken by the Internal Revenue Service could affect the value of the trust by changing the taxation or tax characterizations of the portfolio 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. Various legislative initiatives will be proposed from time to time in the United States and abroad which may have a negative impact on certain of the companies represented in the trust. In addition, 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 whether any legislation will be proposed, adopted or amended by Congress and no one can predict the impact that any other legislation might have on the trust or its portfolio securities.

Tax Risk. The trust must satisfy certain diversification tests based on the value of its investments in order to continue to qualify as a regulated investment company and have special tax treatment, as detailed in the “Understanding Your Investment—Taxes” section of this prospectus.

Implied Volatility Risk. This is the risk that the value of the Options may change with the implied volatility of the Market Reference and the securities comprising the Market Reference. No one can predict whether implied volatility will rise or fall in the future.

Liquidity Risk. This 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 secondary trading market will exist for the securities. Trading in the Options may be less deep and liquid than certain other securities. The Options may be less liquid than certain non-customized options. In a less liquid market for the Options, liquidating the Options may require the payment of a premium or acceptance of a discounted price and may take longer to complete. In a less liquid market for the Options, the liquidation of a large number of options may more significantly impact the price. A less liquid trading market may adversely impact the value of the Options and your units.

Early Trust Termination. The trustee has the power to terminate your trust early in limited cases as described under “Understanding Your Investment—How Your Trust Works—Termination of Your Trust” including 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. If the trust terminates early, the trust may suffer losses and be unable to achieve its investment objective. This could result in a reduction in the value of units and result in a significant loss to investors.

Sale of Trust Property to Pay Trust Expenses. Cash deposited in the trust may be insufficient to satisfy the fees and expenses of the trust. If the cash balances are insufficient to provide for fees, expenses and other amounts payable by the trust, the trust may sell trust property to pay such amounts. These sales may result in losses to unitholders and the inability of the trust to meet its investment objective.

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

Understanding Your Investment      25

 
 


Insurance Corporation or any other government agency.

HOW YOUR TRUST WORKS

Your Trust. Your trust is a unit investment trust registered under the Investment Company Act of 1940. We created the trust under a trust agreement between Advisors Asset Management, Inc. (as depositor/sponsor, evaluator and supervisor) and The Bank of New York Mellon (as trustee). To create your trust, we caused securities to be deposited 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.

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

  to pay expenses,
  to issue additional units or redeem units,
  in limited circumstances to protect the trust,
  to make required distributions or avoid imposition of taxes on the trust, or
  as permitted by the trust agreement.

When your trust sells securities, the composition and diversity of the securities in the portfolio may be altered. However, if the trustee sells securities to redeem units or pay trust expenses or sales charges, the trustee will do so, as nearly as practicable, on a pro rata basis. Your trust will generally reject any offer for securities or other property in exchange for the securities in its portfolio. If your trust receives securities or other property, it will either hold the securities or property in the portfolio or sell the securities or property and distribute the proceeds.

We may increase the size of your trust as we sell units. If we create additional units, we will seek to replicate the existing portfolio. If your trust buys securities, it may pay brokerage or other acquisition fees. You could experience a dilution of your investment because of these fees and fluctuations in security prices between the time we create units and the time your trust buys the securities. Because the trusts pay the brokerage fees associated with the creation of new units and with the sale of securities to meet redemption and exchange requests, frequent redemption and exchange activity will likely result in higher brokerage expenses. When your trust buys or sells securities, we may direct that it place orders with and pay brokerage commissions to brokers that sell units or are affiliated with your trust or the trustee.

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

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

Termination of Your Trust. Your trust will terminate on the mandatory termination date set forth under “Essential Information” in the

26      Understanding Your Investment

 
 

“Investment Summary” section of this prospectus or upon the earlier maturity, payment, redemption, sale or other liquidation of all of the securities in the portfolio. The trustee may terminate your trust early if the value of the trust is less than 40% of the original value of the securities in the trust at the time of deposit. At this size, the expenses of your trust may create an undue burden on your investment. The trustee may terminate your trust is it fails to qualify as a “regulated investment company” for tax purposes. Investors owning two-thirds of the units in your trust may also vote to terminate the trust early. The trustee will liquidate the trust in the event that a sufficient number of units not yet sold to the public are tendered for redemption so that the net worth of a trust would be reduced to less than 40% of the value of the securities at the time they were deposited in a trust. If this happens, we will refund any sales charge that you paid.

You will receive your final distribution within a reasonable time following liquidation of all the securities after deducting final expenses. Your termination distribution may be less than the price you originally paid for your units.

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

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

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

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

How We Distribute Units. We sell units to the public through broker-dealers and other firms. These distribution firms each receive part

Understanding Your Investment      27

 
 


of the sales fee when they sell units. During the initial offering period, the broker-dealer concession or agency commission for broker-dealers and other firms is ____% of the public offering price per unit at the time of the transaction. After the initial offering period, the broker-dealer concession or agency commission for secondary market transactions is equal to ___% of the public offering price per unit at the time of the transaction. No broker-deal concession or agency commission is paid to broker-dealers, investment advisers or other selling firms in connection with unit sales in Fee Accounts subject to a Wrap Fee.

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 trusts offered in this prospectus are Volume Concession A trusts. Broker-dealers and other firms that sell units of any Volume Concession A trust are eligible to receive the additional compensation described below. Such payments will be in addition to the regular concessions paid to firms as set forth in the applicable trust’s prospectus.

The additional concession for sales in a calendar month is based on total initial offering period sales of all Volume Concession A trusts during the 12-month period through the end of the preceding calendar month as set forth in the following table:

Initial Offering Period Sales
In Preceding 12 Months
         Volume
Concession
$25,000,000 but less than $100,000,000
                      0.035 %    
$100,000,000 but less than $150,000,000
                      0.050     
$150,000,000 but less than $250,000,000
                      0.075     
$250,000,000 but less than $1,000,000,000
                      0.100     
$1,000,000,000 but less than $5,000,000,000
                      0.125     
$5,000,000,000 but less than $7,500,000,000
                      0.150     
$7,500,000,000 or more
                      0.175     

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

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

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

We currently may provide, at our own expense and out of our own profits, additional compensation and benefits to broker-dealers and other firms who sell units of your 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

28      Understanding Your Investment

 
 


by the intermediary, the level or expected level of sales of our products by the intermediary or its agents, the placing of our products on a preferred or recommended product list and access to an intermediary’s personnel. We may make these payments for marketing, promotional or related expenses, including, but not limited to, expenses of entertaining retail customers and financial advisors, advertising, sponsorship of events or seminars, obtaining information about the breakdown of unit sales among an intermediary’s representatives or offices, obtaining shelf space in broker-dealer firms and similar activities designed to promote the sale of our products. We make such payments to a substantial majority of intermediaries that sell our products. We may also make certain payments to, or on behalf of, intermediaries to defray a portion of their costs incurred for the purpose of facilitating unit sales, such as the costs of developing or purchasing trading systems to process unit trades. Payments of such additional compensation described in this paragraph and the volume concessions described above, some of which may be characterized as “revenue sharing,” may create an incentive for financial intermediaries and their agents to sell or recommend our products, including your 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 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

Understanding Your Investment      29

 
 


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 3.8 percent “medicare tax”. 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. If the Option contracts are collapsed into a single contract or if the gain on one or more of the Option contracts is greater than the gain that the trust would have recognized had the trust held the underlying referenced securities, all or a portion of the capital gain recognized by the trust may be recharacterized as ordinary income. In certain circumstances, an interest charge may also be applied.

Capital Gains and Losses and Certain Ordinary Income Dividends. If you are an individual, the maximum marginal stated federal tax rate for net capital gain is generally 20% for taxpayers in the 37% tax bracket, 15% for taxpayers below the maximum 15% amount and 0% for taxpayers below the maximum zero rate amount. Some portion of your capital gains dividends may be subject to higher maximum marginal stated federal income tax rates. Capital gains may also be subject to the “medicare tax” described above. The maximum 15% rate amount is $479,000 for joint returns. The maximum zero rate amount is $77,200. Both are adjusted for inflation.

Net capital gain equals net long-term capital gain minus net short-term capital loss for the taxable year. Capital gain or loss is long-term if the holding period for the asset is more than one year and is short-term if the holding period for the asset is one year or less. You must exclude the date you purchase your units to determine your holding period. However, if you receive a capital gain dividend from your trust and sell your unit at a loss after holding it for six months or less, the loss will be recharacterized as long-term capital loss to the extent of the capital gain dividend received. The tax rates for capital gains realized from assets held for one year or less are generally the same as for ordinary income. The Internal Revenue Code treats certain capital gains as ordinary income in special situations. If the Option contracts are collapsed into a single contract or if the gain on one or more of the Option contracts is greater than the gain that the

30      Understanding Your Investment

 
 


trust would have recognized had the trust held the underlying referenced securities, all or a portion of the capital gain recognized by the trust may be recharacterized as ordinary income. In certain circumstances, an interest charge may also be applied.

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. 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. However, to the extent the Options are fully offsetting positions, the ability of the fund to obtain long-term capital gain treatment may be reduced. Also, to the extent the gain on the Options exceeds the gain on the Market Reference, there is a risk that Section 1260 of the Internal Revenue Code will recharacterize such excess gain as ordinary income.

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 income tax purposes.

Deductibility of Trust Expenses. Expenses incurred and deducted by your trust will generally not be treated as income taxable to you. In some cases, however, you may be required to treat your portion of these trust expenses as income. In these cases you may be able to take a deduction for these expenses. However, certain miscellaneous itemized deductions, such as investment expenses, may be deducted by individuals only to the extent that all of these deductions exceed 2% of the individual’s adjusted gross income. Some individuals may also be subject to further limitations on the amount of their itemized deductions, depending on their income.

Foreign Tax Credit. If your trust invests in any foreign securities, the tax statement that you receive may include an item showing foreign taxes your trust paid to other countries. In this case, dividends taxed to you will include your share of the taxes your trust paid to other countries. You may be able to deduct or receive a tax credit for your share of these taxes.

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 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

Understanding Your Investment      31

 
 


subject to the distribution requirement and would be taken into account for purposes of the 4% excise tax. Dividends paid by PFICs are not treated as qualified dividend income.

Foreign Investors. If you are a foreign investor (i.e., an investor other than a U.S. citizen or resident or a U.S. corporation, partnership, estate or trust), you should be aware that, generally, subject to applicable tax treaties, distributions from the trust will be characterized as dividends for federal income tax purposes (other than dividends which the trust properly reports as capital gain dividends) and will be subject to U.S. income taxes, including withholding taxes, subject to certain exceptions described below. However, distributions received by a foreign investor from the trust that are properly reported 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 addition, distributions in respect of units may be subject to a U.S. withholding tax of 30% in the case of distributions to (i) certain non-U.S. financial institutions that have not entered into an agreement with the U.S. Treasury to collect and disclose certain information and are not resident in a jurisdiction that has entered into such an agreement with the U.S. Treasury and (ii) certain other non-U.S. entities that do not provide certain certifications and information about the entity’s U.S. owners. Dispositions of units by such persons may be subject to such withholding. 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 $___ per unit. The trustee will deduct this amount from your trust’s assets as of the close of the initial offering period. Cash has been deposited to pay this amount. No portion of this fee is applied to the payment of distribution expenses or as compensation for sales efforts. This fee will not be deducted from proceeds received upon a repurchase, redemption or exchange of units before the close of the initial public offering period.

Your trust will pay a fee to the trustee for its services. The trustee also benefits when it holds cash for your trust in non-interest bearing accounts. Your trust will reimburse us as supervisor, evaluator and sponsor for providing portfolio supervisory services, for evaluating your portfolio and for providing bookkeeping and administrative services. Our reimbursements may exceed the costs of the services we provide to your trust but will not exceed the costs of services provided to all of our unit investment trusts in any calendar year. All of these fees may adjust for inflation without your approval. Cash has been deposited to pay these amounts.

Your trust will also pay its general operating expenses. Your trust may pay expenses such as trustee expenses (including legal and auditing expenses), various governmental charges, fees for extraordinary trustee services, costs of taking action to protect your trust, costs of indemnifying the trustee and the sponsor, legal fees and expenses and expenses incurred in contacting you. Your trust may pay the costs of updating its registration statement each year. The trustee will generally pay trust expenses from the cash deposited to pay these amounts but in some cases may sell securities to pay trust expenses.

32      Understanding Your Investment

 
 

EXPERTS

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

Independent Registered Public Accounting Firm. Grant Thornton LLP, independent registered public accounting firm, audited the statement of financial condition and the portfolio in this prospectus.

ADDITIONAL INFORMATION

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

Understanding Your Investment      33

 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Sponsor and Unitholders
Advisors Disciplined Trust 1682

Opinion on the financial statements

We have audited the accompanying statement of financial condition, including the trust portfolio on pages 5 through 8 of Advisors Disciplined Trust 1682 (the “Trust”) as of _______, 2019, the initial date of deposit, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as of _______, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of cash or irrevocable letter of credit deposited for the purchase of securities as shown in the statement of financial condition as of _______, 2019 by correspondence with The Bank of New York Mellon, Trustee. We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

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

Chicago, Illinois
_______, 2019

34      Understanding Your Investment

 
 

Advisors Disciplined Trust 1682

Statement of Financial Condition as of _________, 2019



   

   

   

 
Investment in securities
          
Contracts to purchase purchased Options (1)(2)
$          
Cash (3)(4)
          
Total
$  
Liabilities and interest of investors
          
Liabilities:
           
Value of written Options (1)
          
Organization costs (3)
          
Creation and development fee (4)
          
 
          
Interest of investors:
           
Cost to investors (5)
          
Less: sales fee (4)(5)
          
Less: organization costs and creation and development fee (3)(4)(5)
          
Net interest of investors
          
Total
$  
 
Number of units
          
 
Net asset value per unit
$  
 
(1)
  The trust invests in a portfolio of Options. Aggregate cost of the securities is listed under the “Portfolio” and is based on their underlying value.
(2)
  Cash or an irrevocable letter of credit has been deposited with the trustee covering the funds necessary for the purchase of securities in the trust represented by purchase contracts.
(3)
  A portion of the public offering price represents an amount of cash sufficient to pay for all or a portion of the costs incurred in establishing the trust. These costs have been estimated at $_____ per unit for the trust. A distribution will be made as of the earlier of the close of the initial offering period or six months following the trust’s inception date to an account maintained by the trustee from which this obligation of the investors will be satisfied. To the extent the actual organization costs are greater than the estimated amount, only the estimated organization costs added to the public offering price will be reimbursed to the sponsor and deducted from the assets of the trust.
(4)
  The total sales fee consists of a transactional sales fee and a creation and development fee. The transactional sales fee is equal to the difference between the maximum sales fee and the creation and development fee. The maximum sales fee is equal to ___% of the public offering price. The creation and development fee is equal to $___ per unit. A portion of the public offering price per unit consists of an amount of cash to pay this fee.
(5)
  The aggregate cost to investors includes the applicable sales fee assuming no reduction of sales fees.

Understanding Your Investment      35

 
 

Contents

Investment Summary

 
A concise description
of essential information
about the portfolio
              
 

2      Market Linked Trusts

2      Investment Objective

2      Principal Investment Strategy

4      Graph of Hypothetical Total Amount for Trust

5      Who Should Invest

5      Essential Information

5      Fees and Expenses

6      Principal Risks

9      Portfolio

 
Understanding Your Investment

 
Detailed information to help you understand your investment
              

11    Additional Information about the Principal Investment Strategy

14    Hypothetical Examples

20    How to Buy Units

22    How to Sell Your Units

23    Distributions

23    Investment Risks

26    How Your Trust Works

29    Taxes

32    Expenses

33    Experts

33    Additional Information

34    Report of Independent Registered Public Accounting Firm

35    Statement of Financial Condition

 
Where to Learn More

 
You can contact us for free information about this and other investments, including the Information Supplement
              
Visit us on the Internet
http://www.AAMlive.com

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 1682
Securities Act file number:   333-210905
Investment Company Act file number:   811-21056
 

ACE MLTSM
BUFFERED PORTFOLIO,
SERIES 2019-1

PROSPECTUS

___________, 2019



 
 

Advisors Disciplined Trust 1682

 

ACE MLTSM, Buffered Portfolio Series 2019-1

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 for each applicable trust. Investors should obtain and read the prospectus prior to purchasing units of a trust. You can obtain the prospectus without charge at www.aamlive.com or by contacting your financial professional or by contacting the unit investment trust division of Advisors Asset Management, Inc. at 18925 Base Camp Road, Suite 203, Monument, Colorado 80132 or at 8100 East 22nd Street North, Building 800, Suite 102, Wichita, Kansas 67226 or by calling (877) 858-1773. This Information Supplement is dated as of the date of the prospectus.

Contents

General Information 2
Investment Objective and Policies 3
Risk Factors 5
Administration of the Trust 10
Portfolio Transactions and Brokerage Allocation 19
Purchase, Redemption and Pricing of Units 19
Performance Information 27

 

 

General Information

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

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

Neither the sponsor nor the trustee shall be liable in any way for any failure in any of the securities. However, should any contract for the purchase of any of the securities initially deposited in a trust fail, the sponsor will, unless substantially all of the moneys held in the trust to cover such purchase are reinvested in substitute securities in accordance with the trust agreement, refund the cash and sales charge attributable to such failed contract to all unitholders on the next distribution date.

 

Investment Objective and Policies

The trust seeks to provide enhanced returns based on the performance of the SPDR® S&P 500® ETF Trust (the “Market Reference”) with a buffer, subject to a capped amount. The prospectus provides additional information regarding the trust’s objective and investment strategy.

 

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The trust is a UIT and is not an “actively managed” fund. Traditional methods of investment management for a managed fund typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analysis. The portfolio of a trust, however, will not be actively managed and therefore the adverse financial condition of an issuer will not necessarily require the sale of its securities from a portfolio.

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

 

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reinvestment of the proceeds of the sale of such security in any other securities which meet the criteria necessary for inclusion in such trust on the initial date of deposit.

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

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

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

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

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

The Replacement Securities must be securities as originally selected for deposit in a trust or, in the case of a trust that is a RIC for tax purposes, securities which the sponsor determines to

 

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be similar in character as the securities originally selected for deposit in the trust and the purchase of the Replacement Securities may not adversely affect the federal income tax status of the trust. The Replacement Securities must be purchased within thirty days after the deposit of the Failed Security. Whenever a Replacement Security is acquired for a trust, the trustee shall notify all unitholders of the trust of the acquisition of the Replacement Security and shall, on the next monthly distribution date which is more than thirty days thereafter, make a pro rata distribution of the amount, if any, by which the cost to the trust of the Failed Security exceeded the cost of the Replacement Security. The trustee will not be liable or responsible in any way for depreciation or loss incurred by reason of any purchase made pursuant to, or any failure to make any purchase of Replacement Securities. The sponsor will not be liable for any failure to instruct the trustee to purchase any Replacement Securities, nor shall the trustee or sponsor be liable for errors of judgment in connection with Failed Securities or Replacement Securities.

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

Risk Factors

Market Risk. Market risk is the risk that the value of the securities in your trust will fluctuate. This could cause the value of your units to fall below your original purchase price. Market values fluctuate in response to various factors. These can include factors such as changes in interest rates, inflation, the financial condition of a security’s issuer, perceptions of the issuer, or ratings on a security. While the Options are individually related to the Market Reference Level, the return on the Options depends on the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date. Even though we supervise your portfolio, you should remember that we do not manage your portfolio. Your trust will not liquidate an asset solely because the market value falls as is possible in a managed fund.

Options Risk. The value of the Options will be affected by changes in the value of the Market Reference, the Underlying Index and its underlying securities, changes in interest rates, changes in the actual and perceived volatility of the stock market, the Market Reference, the Underlying Index and its underlying securities, and the remaining time to the Option Expiration Date, among other things. The value of the Options does not increase and decrease at the same rate as the Market Reference Level. However, as an option approaches its expiration date, its value is expected to increasingly move with the applicable reference. The written Options create an obligation for the trust. As a result, after the premium is received on the written Options, the written Options will reduce the value of your units. The trust may experience substantial downside from specific option contracts positions and option contract positions may expire worthless. The Options are intended to be liquidated on the Option Expiration Date, rather than

 

-5-

 

be exercised, in order to avoid having the trust receive shares of the Market Reference Asset or be obligated to deliver shares of the Market Reference. As a result, the return actually realized on the Options upon liquidation could vary from the returns that would be realized if the Options were exercised based on the price of shares of the Market Reference as of the close of the market on the Option Expiration Date.

Market Reference Performance and Equity Risk. The Options contracts represent indirect positions in the Market Reference and are subject to changes in value as the Market Reference Level rises or falls. The anticipated proceeds from of the Options is based on the Market Reference Level at the close of the New York Stock Exchange on the Option Expiration Date, and will be substantially determined by market conditions and the Market Reference Level and the value of the securities comprising the Market Reference as of such time. The Market Reference Level will fluctuate over time based on changes in the value of the Underlying Index and securities represented by the Market Reference which are subject to risks associated with investments in equity securities including changes in general economic conditions, expectations for future economic growth and corporate profits, interest rates and the supply and demand for securities.

Potential for Loss of Some or All of Your Investment. Your investment in the trust may result in a significant loss including the possibility of the loss of all of your initial investment.

Credit Risk. An issuer, guarantor or counterparty of a security in the trust is unable or unwilling to meet its obligation on the security. The OCC is guarantor and central counterparty with respect to the Options. As a result, the ability of the trust to meet its objective depends on the OCC being able to meet its obligations.

Capped Upside. The intended returns for units purchased on the trust’s inception date and held for the life of the trust is based on the performance of the Market Reference and is subject to a capped amount of $____ per trust unit and may represent a return that is worse than the performance of the Market Reference. Even if there are significant increases in the Market Reference Level, the amount you may receive is capped at $___ per trust unit. You may experience significant losses on your investment if the value of the Market Reference declines. You may realize a return (including a loss) that is higher or lower than the intended returns as a result of redeeming units prior to the trust’s mandatory termination date and in various circumstances including where Options are otherwise liquidated by the trust prior to their expiration or maturity, if the trust is unable to maintain the proportional relationship of the Options based on the number of Option contracts in the trust’s portfolio or increases in potential expenses of the trust above estimated levels.

Legislation Risk. Tax legislation proposed by the President or Congress, tax regulations proposed by the U.S. Treasury or positions taken by the Internal Revenue Service could affect the value of the trust by changing the taxation or tax characterizations of the portfolio 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. Various legislative initiatives will be proposed from time to time in the United States and abroad which may have a negative impact on certain of the companies represented in the trust. In addition, litigation regarding any of the issuers of the

 

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securities or of the industries represented by these issuers may negatively impact the share prices of these securities. No one can predict whether any legislation will be proposed, adopted or amended by Congress and no one can predict the impact that any other legislation might have on the trust or its portfolio securities.

Tax Risk. The trust must satisfy certain diversification tests based on the value of its investments in order to continue to qualify as a regulated investment company and have special tax treatment, as detailed in the “Understanding Your Investment—Taxes” section of this prospectus.

Implied Volatility Risk. This is the risk that the value of the Options may change with the implied volatility of the Market Reference and the securities comprising the Market Reference. No one can predict whether implied volatility will rise or fall in the future.

Liquidity Risk. This 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 secondary trading market will exist for the securities. Trading in the Options may be less deep and liquid than certain other securities. The Options may be less liquid than certain noncustomized options. In a less liquid market for the Options, liquidating the Options may require the payment of a premium or acceptance of a discounted price and may take longer to complete. In a less liquid market for the Options, the liquidation of a large number of options may more significantly impact the price. A less liquid trading market may adversely impact the value of the Options and your units.

Early Trust Termination. The trustee has the power to terminate your trust early in limited cases as described under “Understanding Your Investment—How Your Trust Works—Termination of Your Trust” including 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. If the trust terminates early, the trust may suffer losses and be unable to achieve its investment objective. This could result in a reduction in the value of units and result in a significant loss to investors.

Sale of Trust Property to Pay Trust Expenses. Cash deposited in the trust may be insufficient to satisfy the fees and expenses of the trust. If the cash balances are insufficient to provide for fees, expenses and other amounts payable by the trust, the trust may sell trust property to pay such amounts. These sales may result in losses to unitholders and the inability of the trust to meet its investment objective.

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.

Additional Deposits. The trust agreement authorizes the sponsor to increase the size of a trust and the number of units thereof by the deposit of additional securities, or cash (including a letter of credit or the equivalent) with instructions to purchase additional securities, in such trust and the issuance of a corresponding number of additional units. In connection with these deposits, existing and new investors may experience a dilution of their investments and a reduction in their anticipated income because of fluctuations in the prices of the securities

 

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between the time of the deposit and the purchase of the securities and because a trust will pay the associated brokerage fees and other acquisition costs.

Administration of the Trust

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

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

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

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

 

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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.

Statements to Unitholders. With each distribution, the trustee will furnish to each unitholder a statement of the amount of income and the amount of other receipts, if any, which are being distributed, expressed in each case as a dollar amount per unit.

The accounts of a trust are required to be audited annually, at the related trust’s expense, by independent public accountants designated by the sponsor, unless the sponsor determines that such an audit is not required. The accountants’ report for any audit will be furnished by the trustee to any unitholder upon written request. Within a reasonable period of time after the last business day of each calendar year, the trustee shall furnish to each person who at any time during such calendar year was a unitholder of a trust a statement, covering such calendar year, setting forth for such trust:

(A)       As to the Income Account:

(1)the amount of income received on the securities (including income received as a portion of the proceeds of any disposition of securities);
(2)the amounts paid for purchases of replacement securities or for purchases of securities otherwise pursuant to the applicable trust agreement, if any, and for redemptions;
(3)the deductions, if any, from the Income Account for payment into the Reserve Account;
(4)the deductions for applicable taxes and fees and expenses of the trustee, the sponsor, the evaluator, the supervisor, counsel, auditors and any other expenses paid by the trust;
(5)the amounts reserved for purchases of contract securities, for purchases made pursuant to replace failed contract securities or for purchases of securities otherwise pursuant to the applicable trust agreement, if any;
(6)the deductions for payment of the sponsor’s expenses of maintaining the registration of the trust units, if any;
(7)the aggregate distributions to unitholders; and
(8)the balance remaining after such deductions and distributions, expressed both as a total dollar amount and as a dollar amount per unit outstanding on the last business day of such calendar year;

(B)       As to the Capital Account:

 

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(1)the net proceeds received due to sale, maturity, redemption, liquidation or disposition of any of the securities, excluding any portion thereof credited to the Income Account;
(2)the amount paid for purchases of replacement securities or for purchases of securities otherwise pursuant to the applicable trust agreement, if any, and for redemptions;
(3)the deductions, if any, from the Capital Account for payments into the Reserve Account;
(4)the deductions for payment of applicable taxes and fees and expenses of the trustee, the sponsor, the evaluator, the supervisor, counsel, auditors and any other expenses paid by the trust;
(5)the deductions for payment of the sponsor’s expenses of organizing the trust;
(6)the amounts reserved for purchases of contract securities, for purchases made pursuant to replace failed contract securities or for purchases of securities otherwise pursuant to the trust agreement, if any;
(7)the deductions for payment of deferred sales charge and creation and development fee, if any;
(8)the deductions for payment of the sponsor’s expenses of maintaining the registration of the trust units, if any;
(9)the aggregate distributions to unitholders; and
(10)the balance remaining after such distributions and deductions, expressed both as a total dollar amount and as a dollar amount per unit outstanding on the last business day of such calendar year; and

(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

 

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

Rights of Unitholders. The death or incapacity of any unitholder will not operate to terminate a trust nor entitle legal representatives or heirs to claim an accounting or to bring any action or proceeding in any court for partition or winding up of the trust, nor otherwise affect the rights, obligations and liabilities of the parties to the applicable trust agreement. No unitholder shall have the right to control the operation and management of a trust in any manner, except to vote with respect to the amendment of the related trust agreement or termination of the trust.

Amendment. Each trust agreement may be amended from time to time by the sponsor and trustee or their respective successors, without the consent of any of the unitholders, (i) to cure any ambiguity or to correct or supplement any provision which may be defective or inconsistent with any other provision contained in the trust agreement, (ii) to change any provision required by the SEC or any successor governmental agency, (iii) to make such other provision in regard to matters or questions arising under the trust agreement as shall not materially adversely affect the interests of the unitholders or (iv) to make such amendments as may be necessary (a) for a trust to continue to qualify as a RIC for federal income tax purposes if the trust has elected to be taxed as such under the United States Internal Revenue Code of 1986, as amended, or (b) to prevent a trust from being deemed an association taxable as a corporation for federal income tax purposes if the trust has not elected to be taxed as a RIC under the United States Internal Revenue Code of 1986, as amended. A trust agreement may not be amended, however, without the consent of all unitholders of the related trust then outstanding, so as (1) to permit, except in accordance with the terms and conditions thereof, the acquisition thereunder of any securities other than those specified in the schedules to the trust agreement or (2) to reduce the percentage of units the holders of which are required to consent to certain of such amendments. A trust agreement may not be amended so as to reduce the interest in the trust represented by units without the consent of all affected unitholders.

Except for the amendments, changes or modifications described above, neither the sponsor nor the trustee nor their respective successors may consent to any other amendment, change or modification of a trust agreement without the giving of notice and the obtaining of the approval or consent of unitholders representing at least 66 2/3% of the units then outstanding of the affected trust. No amendment may reduce the aggregate percentage of units the holders of which are required to consent to any amendment, change or modification of a trust agreement without the consent of the unitholders of all of the units then outstanding of the affected trust and in no event may any amendment be made which would (1) alter the rights to the unitholders of the trust as against each other, (2) provide the trustee with the power to engage in business or investment activities other than as specifically provided in the trust agreement, (3) adversely

 

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affect the tax status of the related trust for federal income tax purposes or result in the units being deemed to be sold or exchanged for federal income tax purposes or (4) unless a trust has elected to be taxed as a RIC for federal income tax purposes, result in a variation of the investment of unitholders in the trust. The trustee will notify unitholders of a trust of the substance of any such amendment to the trust agreement for such trust.

Termination. Each trust agreement provides that the related trust shall terminate upon the maturity, redemption, sale or other disposition of the last of the securities held in the trust but in no event is it to continue beyond the trust’s mandatory termination date. If the value of a trust shall be less than 40% of the total value of securities deposited in the trust during the initial offering period, the trustee may, in its discretion, and shall, when so directed by the sponsor, terminate the trust. A trust may be terminated at any time by the holders of units representing 66 2/3% of the units thereof then outstanding. A trust will be liquidated by the trustee in the event that a sufficient number of units of the trust not yet sold are tendered for redemption by the sponsor, so that the net worth of the trust would be reduced to less than 40% of the value of the securities at the time they were deposited in the trust. If a trust is liquidated because of the redemption of unsold units by the sponsor, the sponsor will refund to each purchaser of units of the trust the entire sales charge paid by such purchaser.

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

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

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

 

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distribution option at any time upon sixty days written notice to the unitholders. Special federal income tax consequences will result if a unitholder requests an in kind distribution.

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

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

The Trustee. The trustee is The Bank of New York Mellon, a trust company organized under the laws of New York. The Bank of New York Mellon has its principal unit investment trust division offices at 2 Hanson Place, 12th Floor, Brooklyn, New York 11217, (800) 848-6468. The Bank of New York Mellon is subject to supervision and examination by the Superintendent of Banks of the State of New York and the Board of Governors of the Federal Reserve System, and its deposits are insured by the Federal Deposit Insurance Corporation to the extent permitted by law.

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

The trustee or successor trustee must deliver a copy of the notice of resignation to all unitholders then of record, not less than sixty days before the date specified in such notice when such resignation is to take effect. The sponsor upon receiving notice of such resignation is obligated to appoint a successor trustee promptly. If, upon such resignation, no successor trustee has been appointed and has accepted the appointment within thirty days after notification, the retiring trustee may apply to a court of competent jurisdiction for the appointment of a successor. In case at any time the trustee shall not meet the requirements set forth in the trust agreement, or shall become incapable of acting, or if a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the trustee in an involuntary case, or the trustee shall commence a voluntary case, under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for the trustee or for any substantial part of its property shall be appointed, or the trustee shall generally fail to pay its debts as they become due, or shall fail to meet such written standards for the trustee’s performance as shall be established from time to time by the sponsor, or if the sponsor determines in good faith that there has occurred either (1) a material deterioration in the creditworthiness of the trustee or (2) one or more grossly negligent acts on the part of the trustee with respect to a trust, the sponsor, upon sixty days’ prior written notice,

 

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may remove the trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee. Notice of such removal and appointment shall be delivered to each unitholder by the successor trustee. Upon execution of a written acceptance of such appointment by such successor trustee, all the rights, powers, duties and obligations of the original trustee shall vest in the successor. The trustee must be a corporation organized under the laws of the United States, or any state thereof, be authorized under such laws to exercise trust powers and have at all times an aggregate capital, surplus and undivided profits of not less than $5,000,000.

The Sponsor. The sponsor of each trust is Advisors Asset Management, Inc. The sponsor is a broker-dealer specializing in providing services to broker-dealers, registered representatives, investment advisers and other financial professionals. The sponsor’s headquarters are located at 18925 Base Camp Road, Monument, Colorado 80132. You can contact Advisors Asset Management, Inc. at 8100 East 22nd Street North, Building 800, Suite 102, Wichita, Kansas 67226 or by using the contacts listed on the back cover of the prospectus. The sponsor is a registered broker-dealer and investment adviser and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”), and a registrant of the Municipal Securities Rulemaking Board (“MSRB”).

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

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

The Evaluator and Supervisor. Advisors Asset Management, Inc., the sponsor, also serves as evaluator and supervisor. The evaluator and supervisor may resign or be removed by the sponsor and trustee in which event the sponsor or trustee may appoint a successor having qualifications and at a rate of compensation satisfactory to the sponsor or, if the appointment is made by the trustee, the trustee. Such resignation or removal shall become effective upon acceptance of appointment by the successor evaluator. If upon resignation of the evaluator no successor has accepted appointment within thirty days after notice of resignation, the evaluator may apply to a court of competent jurisdiction for the appointment of a successor. Notice of such resignation or removal and appointment shall be delivered by the trustee to each unitholder.

 

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

The trust agreement provides that the trustee shall be under no liability for any action taken in good faith in reliance upon prima facie properly executed documents or for the disposition of moneys, securities or certificates except by reason of its own gross negligence, bad faith or willful misconduct, nor shall the trustee be liable or responsible in any way for depreciation or loss incurred by reason of the sale by the trustee of any securities. In the event that the sponsor shall fail to act, the trustee may act and shall not be liable for any such action taken by it in good faith. The trustee shall not be personally liable for any taxes or other governmental charges imposed upon or in respect of the securities or upon the interest thereof. In addition, the trust agreement contains other customary provisions limiting the liability of the trustee.

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

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

 

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

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

The following additional charges are or may be incurred by a trust in addition to any other fees, expenses or charges described in the prospectus: (a) fees for the trustee’s extraordinary services; (b) expenses of the trustee (including legal and auditing expenses and reimbursement of the cost of advances to the trust for payment of expenses and distributions, but not including any fees and expenses charged by an agent for custody and safeguarding of securities) and of counsel, if any; (c) various governmental charges; (d) expenses and costs of any action taken by the trustee to protect the trust or the rights and interests of the unitholders; (e) indemnification of the

 

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

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

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

 

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Contents of Registration Statement

This 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:

1.1Trust Agreement (to be filed by amendment).
1.1.1Standard Terms and Conditions of Trust (to be filed by amendment).
1.2Certificate 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.
1.3Bylaws 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.
1.5Form of Dealer Agreement. Reference is made to Exhibit 1.5 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 262 (File No. 333-150575) as filed of June 17, 2008.
2.2Form of Code of Ethics. Reference is made to Exhibit 2.2 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1853 (File No. 333-221628) as filed on February 21, 2018.
3.1Opinion of counsel as to legality of securities being registered (to be filed by amendment).
3.3Opinion of counsel as to the Trustee and the Trust (to be filed by amendment).
4.1Consent of evaluator (to be filed by amendment).
4.2Consent of independent auditors (to be filed by amendment).
6.1Directors 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 1911 (File No. 333-227343) as filed on November 9, 2018.
7.1Power of Attorney. Reference is made to Exhibit 7.1 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1485 (File No. 333-203629) as filed on May 15, 2015.
 

 

Signatures

Pursuant to the requirements of the Securities Act of 1933, the Registrant, Advisors Disciplined Trust 1682 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 August 9, 2019.

 

Advisors Disciplined Trust 1682
   
By Advisors Asset Management, Inc., Depositor
   
   
By             /s/ ALEX R. MEITZNER                   
  Alex R. Meitzner
  Senior Vice President

 

 

Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below on August 9, 2019 by the following persons in the capacities indicated.

SIGNATURE TITLE  
     
Scott I. Colyer Director of Advisors Asset )
  Management, Inc. )
     
Lisa A. Colyer Director of Advisors Asset )
  Management, Inc. )
     
James R. Costas Director of Advisors Asset )
  Management, Inc. )
     
Christopher T. Genovese Director of Advisors Asset )
  Management, Inc. )
     
Randy J. Pegg Director of Advisors Asset )
  Management, Inc. )
     
Jack Simkin Director of Advisors Asset )
  Management, Inc. )
     
Bart P. Daniel Director of Advisors Asset )
  Management, Inc. )

 

By /s/ ALEX R. MEITZNER
  Alex R. Meitzner
  Attorney-in-Fact*

 

 

*An executed copy of each of the related powers of attorney is filed herewith or incorporated herein by reference as Exhibit 7.1.

 

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111 West Monroe Street

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www.chapman.com

 

August 9, 2019

Elena Stojic

Securities and Exchange Commission

100 F Street NE

Washington D.C. 20549

Re: Advisors Disciplined Trust 1682 (the “Fund”)
(File No. 333-210905)(CIK 1662283)

Ms. Stojc:

Transmitted herewith on behalf of Advisors Asset Management, Inc. (the “Sponsor”), depositor and principal underwriter of the Fund, is Amendment No. 4 to the Registration Statement on Form S-6 for the registration under the Securities Act of 1933 (the “Securities Act”) of units representing the ownership of interests in the unit investment trust of the Fund (the “Trust”).

The Registration Statement on Form S-6 relating to the Fund was initially filed with the Securities and Exchange Commission (the “Commission”) on April 25, 2016 and was amended on June 17, 2016 and July 25, 2016 in response to comments from the Commission. Marianne Dobelbower confirmed that the staff of the Commission had no further comments on the Registration Statement in a conversation with Matthew Wirig on September 15, 2016. On July 2, 2019 the Registration Statement was amended to change the Trust’s name and make several updates to simplify the Trust’s structure along with corresponding updates to disclosures.

We received comments from the staff of the Commission in a call between Elena Stojic and Matthew Wirig on August 5, 2019 requesting that we make certain changes to the Registration Statement. We have addressed those comments herein and the prospectus has been revised in accordance with the comments of the staff. Capitalized terms used herein and not otherwise defined use the definitions included in the Registration Statement. The following are our responses to the Commission’s comments:

Comment 1

The comment noted that intended returns for the Trust based on different price performance scenarios of the Market Reference are shown under “Investment Summary—Principal Investment Strategy”. The comment requested that we describe whether these returns are net of all estimated Trust fees and expenses and, if not, add clarifying disclosures. As disclosed in the third paragraph under “Investment Summary—Principal Investment Strategy”, the intended returns shown are net of all estimated trust fees and expenses.

Comment 2

The comment requested that we submit a draft preliminary prospectus to the staff of the Commission at least two weeks in advance of the Trust’s date of deposit with numbers filled in for

 

 

all blanks in the prospectus based on hypothetical pricing and terms of the Options. The staff of the Commission understands that we will not have actual final information until the Trust’s date of deposit and so these numbers will be purely hypothetical and are intended for the staff’s disclosure review purposes only. Ms. Stojic indicated that this could be done in an attachment to a correspondence filing separate from the current filing. A draft preliminary prospectus with that information will be submitted as a PDF attachment to a correspondence filing at least two weeks in advance of the Trust’s date of deposit in accordance with the staff’s comment.

Comment 3

The comment requested that certain “Principal Risks” that had been included in the July 25, 2016 version of the prospectus, but that were removed from the July 2, 2019 version, be considered for inclusion in the prospectus. Those risks have been included in the prospectus in accordance with the staff’s comment.

Comment 4

The comment requested that disclosure of the obligations created by written options be added to the “Principal Risks” section of the prospectus if written options are expected to be include in the Trust’s portfolio. Disclosure has been added in accordance with the staff’s comment.

Comment 5

The comment requested an explanation of why the following disclosure, which was included in the July 25, 2016 version of the prospectus, was not included in the July 2, 2019 version of the Registration Statement: “All or a portion of the Treasury Obligations may be pledged as collateral in order to secure the trust’s obligation to pay amounts payable by the trust on the written Options in excess of the amounts receivable by the trust on the purchased Options. As a result, the Options will be fully covered and no additional collateral will be necessary during the life of the trust.” The Sponsor has indicated that the Trust’s portfolio will not include Treasury Obligations and amounts receivable by the Trust on the purchased Options will be greater than amounts payable by the Trust on written Options. As a result, the Trust will not be required to pledge Treasury Obligations as collateral in order to secure the trust’s obligation.

Comment 6

The comment noted that investors will not purchase units in the primary offering period at the net asset value per unit at inception and requested that related disclosure be added under “Essential Information” in the prospectus. Disclosure has been added in accordance with the staff’s comment.

Comment 7

The commented requested that the second sentence under “Administration of the Trust—Rights of Unitholders” be deleted from the Information Supplement. This sentence has been deleted in accordance with the staff’s comment.

 

 

We have been advised that the Sponsor would like to activate the Fund and have the Registration Statement declared effective on September 26, 2019. An appropriate amendment to the Registration Statement to reflect such deposit will be promptly filed with the Commission at that time, accompanied by the request of the Sponsor that the Registration Statement be made effective.

If you have any questions, please do not hesitate to contact Scott R. Anderson at (312) 845-3834 or Matthew T. Wirig at (312) 845-3432.

 

  Very truly yours,
   
  Chapman and Cutler LLP
   
   
  By          /s/ CHAPMAN AND CUTLER LLP    
  Chapman and Cutler LLP