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. 7
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. |
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INVESTMENT
SUMMARY |
* |
AAM, we and related terms mean Advisors Asset Management, Inc., the trust sponsor, unless the context clearly suggests otherwise. |
Understanding Your InvestmentHow to Buy UnitsFee Accounts). Unitholders that purchase units at the Fee Account Public Offering Price per Unit at Inception of $10.0000 (Fee Account Initial Unit Price) shown under Investment SummaryEssential Information could receive up to a 13.00% return (equal to a 9.72% annualized return) on their investment if the price of the Market Reference increases by up to 13.00%. If the price of the Market Reference increases by more than 13.00%, unitholders that purchase at the Fee Account Initial Unit Price are capped at a return of 13.00% (equal to a 9.72% annualized return). If the price of the Market Reference stays the same or decreases by up to 7.00%, unitholders that purchase units at the Fee Account Initial Unit Price are intended to receive a return of 0.00%. Unitholders that purchase at such price will lose part of their investment if the price of the Market Reference decreases by more than 7.00% and could lose up to 93.00% of their investment depending on the decrease (buffered returns). 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 unitholders date of purchase.
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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 $336.31 (113% of the Initial Market Reference Level) (the Cap), the proceeds from the Options are intended to be approximately $11.30 per unit. This equates to a return of approximately 11.47% (equal to a 8.59% annualized return) on an investment at the Initial Unit Price or 13.00% (equal to a 9.72% annualized return) on an investment at the Fee Account Initial Unit Price, which represents a maximum capped return. |
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If at the close of the New York Stock Exchange on the Option Expiration Date the Market Reference Level is between $297.62 and $336.31 (100% to 113% of the Initial Market Reference Level), the proceeds from the Options are intended to be between approximately $10.00 and $11.30 per unit. This equates to a return of approximately -1.35% (i.e. a loss of 1.35%) to 11.47% (equal to a 8.59% annualized return) on an investment at the Initial Unit Price or 0.00% to 13.00% (equal to a 9.72% annualized return) on an investment at the Fee Account Initial Unit Price. |
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If at the close of the New York Stock Exchange on the Option Expiration Date the Market Reference Level is between $276.78 and $297.62 (93% to 100% of the Initial Market Reference Level), the proceeds from the Options are intended to be approximately $10.00 per unit. This equates to a return of approximately -1.35% (i.e. a loss of 1.35%) on an investment at the Initial Unit Price or 0.00% on an investment at the Fee Account Initial Unit Price. |
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If at the close of the New York Stock Exchange on the Option Expiration Date the Market Reference Level is less than $276.78 (93% of the Initial Market Reference Level) the proceeds from the Options over the life of the trust are intended to be between approximately $0.70 and $10.00 per unit. This equates to a return of approximately between -93.09% (i.e. a loss of 93.09%) and -1.35% (i.e. a loss of 1.35%) on an investment at the Initial Unit Price or between -93.00% (i.e. a loss of 93.00%) and 0.00% on an investment at the Fee Account Initial Unit Price. |
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want to own securities representing interests in written and purchased option contracts in a single investment. |
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seek the potential for buffered returns subject to a capped amount at termination based on the price performance of the Market Reference. |
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are comfortable foregoing the potential for gains greater than 11.47% (for units purchased at the Initial Unit Price), and 13.00% (for units purchased at the Fee Account Initial Unit Price). |
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are uncomfortable with the risks of an unmanaged investment in written and purchased option contracts. |
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are uncomfortable with exposure to the risks associated with the Options. |
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are uncomfortable with exposure to the price performance of the Market Reference. |
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are uncomfortable with the possibility of losing up to 93.09% of your investment. |
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are seeking unlimited capital appreciation potential and do not want potential returns capped. |
ESSENTIAL INFORMATION | ||||||||
Public Offering Price per |
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Unit at Inception* |
$10.1377 | |||||||
Fee Account Public Offering Price per Unit at Inception* |
$10.0000 | |||||||
Initial Net Asset Value per Unit at Inception* |
$9.8910 | |||||||
Inception date |
September 26, 2019 | |||||||
Mandatory Termination Date |
January 19, 2021 | |||||||
Distribution dates |
25th day of December | |||||||
Record dates |
10th day of December | |||||||
CUSIP Numbers |
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Standard Accounts |
00780A228 | |||||||
Fee Based Accounts |
00780A236 | |||||||
Ticker Symbol |
MLTABX | |||||||
Minimum investment |
$1,000/100 units | |||||||
Tax Structure |
Regulated Investment Company |
* As of
September 25
, 2019 and may vary thereafter.
Investors will not purchase units at the net asset value per unit.
Sales Fee |
As a % of $1,000 Invested |
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Amount per 100 Units |
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Transactional sales fee |
1.36 | % | $13.77 | |||||||
Creation & development fee |
0.59 | 6.00 | ||||||||
Maximum sales fee |
1.95 | % | $ | 19.77 | ||||||
Organization Costs |
0.48 | % | $ | 4.90 |
Annual operating expenses |
As a % of Net Assets |
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Amount per 100 Units |
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Trustee fee & expenses |
0.15 | % | $1.50 | |||||||
Supervisory, evaluation and administration fees |
0.10 | 1.00 | ||||||||
Total |
0.25 | % | $ | 2.50 |
1 year |
$ | 268 | ||||
16 months (approximate life of trust) |
$ | 276 |
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The trusts investment strategy is designed to achieve its investment objective over the life of the trust. The trusts investment strategy has not been designed to achieve its objective if units are bought after the trusts inception date or redeemed prior to the trusts mandatory termination date. |
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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. |
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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 companys capital structure, and represent a residual claim on the issuers 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. |
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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. |
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The trust return is subject to a capped upside. The intended return for units purchased on the trusts 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 $11.30 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 $11.30 per trust unit. |
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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. |
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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 7.00% 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 trusts 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 trusts portfolio, or increases in potential tax-related and other expenses of the trust above estimated levels. |
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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. |
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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. |
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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 References returns to be lower than if it employed an active strategy. |
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Index Tracking Risk. While the Market Reference is intended to track the performance of the Underlying Index, the Market References 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. |
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The trust may experience substantial downside from the Options and option contract positions may expire worthless. |
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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. |
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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. |
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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 trusts portfolio or due to adverse tax law or other changes affecting treatment of the Options. |
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The cash deposited may be insufficient to meet the expenses of the trust. If the cash balances in the trusts 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. |
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The trustee has the power to terminate your trust early in limited cases as described under Understanding Your InvestmentHow Your Trust WorksTermination 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. |
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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. |
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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. |
ACE MLTSM, Buffered Portfolio Series
2019-1
(Advisors Disciplined Trust 1682)
Portfolio As of the
Initial Date of Deposit, September 26, 2019
Description
of Options(1)(4) |
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Strike Price |
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Strike Price
as a Percentage of the Initial Market Reference Level |
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Number of Option Contracts(4) |
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Market Value per Option(2) |
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Percentage of Aggregate Offering Price |
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Cost of Securities to Trust(2) |
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OPTIONS 100.00% |
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Purchased Options 107.10% |
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Purchased Call Options on the SPDR® S&P 500®
ETF Trust, Expiring January 15, 2021 (3) |
$ | 0.03 | 0.01 | % | 5 | $ | 29,104 | 99.21 | % | $ | 145,520 | ||||||||||||||||
Purchased Put Options on the SPDR® S&P 500®
ETF Trust, Expiring January 15, 2021 (3) |
297.62 | 100.00 | 5 | 2,316 | 7.89 | 11,580 | |||||||||||||||||||||
Written Options -7.10% |
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Written Call Options on the SPDR® S&P 500®
ETF Trust, Expiring January 15, 2021 (3) |
336.31 | 113.00 | 5 | -516 | -1.76 | -2,580 | |||||||||||||||||||||
Written Put Options on the SPDR® S&P 500®
ETF Trust, Expiring January 15, 2021 (3) |
276.78 | 93.00 | 5 | -1,568 | -5.34 | -7,840 | |||||||||||||||||||||
TOTAL |
100.00 | % | $ | 146,680 | |||||||||||||||||||||||
See 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 trusts 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 sponsors 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 $146,781 and ($101), 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 investments assigned level as described above. The following table summarizes the trusts investments as of September 26, 2019, based on inputs used to value them: |
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Level 1 |
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Level 2 |
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Level 3 |
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Purchased Options |
$ - | $ | 157,100 | $ - | ||||||||||
Written
Options |
- | (10,420 | ) | - | ||||||||||
Total |
$ - | $ | 146,680 | $ - |
(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 Options strike price multiplied by 100. |
UNDERSTANDING YOUR INVESTMENT |
PRINCIPAL INVESTMENT STRATEGY
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 $10.00 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 0.01%) to the
trust on the Option Expiration Date.
filings made by the issuer and to
other publicly available information (e.g. the issuers annual report) to obtain an understanding of the issuers 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.
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.
Amount for Trust divided by
the Initial NAV of $9.8910. 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.
Hypothetical Examples | |||||||||||
Hypothetical Market Reference Level |
Hypothetical Option Proceeds (per Unit) | Hypothetical Returns | |||||||||
Percentage Change |
Market Reference Level |
ITM Purchased Call Options |
ATM Purchased Put Options |
OTM Written Call Options |
OTM Written Put Options |
Hypothetical Total Amount for Trust |
Initial NAV ( $9.8910) |
Initial Unit Price ( $10.1377) |
Fee Account Initial Unit Price ($10.0000) | ||
35% | $401.79 | $13.50 | $0.00 | -$2.20 | $0.00 | $11.30 | 14.25% | 11.47% | 13.00% | ||
30% | $386.91 | $13.00 | $0.00 | -$1.70 | $0.00 | $11.30 | 14.25% | 11.47% | 13.00% | ||
25% | $372.03 | $12.50 | $0.00 | -$1.20 | $0.00 | $11.30 | 14.25% | 11.47% | 13.00% | ||
20% | $357.14 | $12.00 | $0.00 | -$0.70 | $0.00 | $11.30 | 14.25% | 11.47% | 13.00% | ||
15% | $342.26 | $11.50 | $0.00 | -$0.20 | $0.00 | $11.30 | 14.25% | 11.47% | 13.00% | ||
10% | $327.38 | $11.00 | $0.00 | $0.00 | $0.00 | $11.00 | 11.22% | 8.51% | 10.00% | ||
5% | $312.50 | $10.50 | $0.00 | $0.00 | $0.00 | $10.50 | 6.16% | 3.58% | 5.00% | ||
3% | $306.55 | $10.30 | $0.00 | $0.00 | $0.00 | $10.30 | 4.14% | 1.60% | 3.00% | ||
0% | $297.62 | $10.00 | $0.00 | $0.00 | $0.00 | $10.00 | 1.11% | -1.35% | 0.00% | ||
-3% | $288.69 | $9.70 | $0.30 | $0.00 | $0.00 | $10.00 | 1.11% | -1.35% | 0.00% | ||
-5% | $282.74 | $9.50 | $0.50 | $0.00 | $0.00 | $10.00 | 1.11% | -1.35% | 0.00% | ||
-10% | $267.86 | $9.00 | $1.00 | $0.00 | -$0.30 | $9.70 | -1.93% | -4.31% | -2.99% | ||
-15% | $252.98 | $8.50 | $1.50 | $0.00 | -$0.80 | $9.20 | -6.98% | -9.25% | -8.00% | ||
-20% | $238.10 | $8.00 | $2.00 | $0.00 | -$1.30 | $8.70 | -12.04% | -14.18% | -13.00% | ||
-25% | $223.22 | $7.50 | $2.50 | $0.00 | -$1.80 | $8.20 | -17.09% | -19.11% | -18.00% | ||
-30% | $208.33 | $7.00 | $3.00 | $0.00 | -$2.30 | $7.70 | -22.15% | -24.04% | -23.00% | ||
-35% | $193.45 | $6.50 | $3.50 | $0.00 | -$2.80 | $7.20 | -27.20% | -28.98% | -28.00% | ||
-40% | $178.57 | $6.00 | $4.00 | $0.00 | -$3.30 | $6.70 | -32.26% | -33.91% | -33.00% | ||
-45% | $163.69 | $5.50 | $4.50 | $0.00 | -$3.80 | $6.20 | -37.32% | -38.84% | -38.00% | ||
-50% | $148.81 | $5.00 | $5.00 | $0.00 | -$4.30 | $5.70 | -42.37% | -43.77% | -43.00% | ||
-55% | $133.93 | $4.50 | $5.50 | $0.00 | -$4.80 | $5.20 | -47.43% | -48.71% | -48.00% | ||
-60% | $119.05 | $4.00 | $6.00 | $0.00 | -$5.30 | $4.70 | -52.48% | -53.64% | -53.00% | ||
-65% | $104.17 | $3.50 | $6.50 | $0.00 | -$5.80 | $4.20 | -57.54% | -58.57% | -58.00% | ||
-70% | $89.29 | $3.00 | $7.00 | $0.00 | -$6.30 | $3.70 | -62.60% | -63.51% | -63.00% | ||
-75% | $74.41 | $2.50 | $7.50 | $0.00 | -$6.80 | $3.20 | -67.65% | -68.44% | -68.00% | ||
-80% | $59.52 | $2.00 | $8.00 | $0.00 | -$7.30 | $2.70 | -72.71% | -73.37% | -73.00% | ||
-85% | $44.64 | $1.50 | $8.50 | $0.00 | -$7.80 | $2.20 | -77.76% | -78.30% | -78.00% | ||
-90% | $29.76 | $1.00 | $9.00 | $0.00 | -$8.30 | $1.70 | -82.82% | -83.24% | -83.01% | ||
-95% | $14.88 | $0.50 | $9.50 | $0.00 | -$8.80 | $1.20 | -87.87% | -88.17% | -88.01% | ||
-100% | $0.00 | $0.00 | $10.00 | $0.00 | -$9.30 | $0.70 | -92.92% | -93.09% | -93.00% |
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the trust receiving $12.50 per unit on the ITM Purchased Call Options; |
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the trust paying $1.20 per unit on the OTM Written Call Options; and |
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no amounts being paid on the OTM Written Put Options or ATM Purchased Put Options (i.e. expiring worthless). |
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the trust receiving $10.30 per unit on the ITM Purchased Call Options; and |
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no amounts being paid on the OTM Written Call Options, OTM Written Put Options or ATM Purchased Put Options (i.e. expiring worthless). |
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the trust receiving a payment of $10.00 per unit on the ITM Purchased Call Options; and |
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no payments being made on the OTM Written Call Options, the OTM Written Put Options or the ATM Purchased Put Options (i.e. expiring worthless). |
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the trust receiving $9.70 per unit on the ITM Purchased Call Options; |
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the trust receiving $0.30 per unit on the ATM Purchased Put Options; and |
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no amounts being paid on the OTM Written Call Options or the OTM Written Put Options (i.e. expiring worthless). |
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the trust receiving $2.50 per unit on the ITM Purchased Call Options; |
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the trust paying $6.80 per unit on the OTM Written Put Options; |
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the trust receiving $7.50 per unit on the ATM Purchased Put Options; |
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no amounts being paid on the OTM Written Call Options (i.e. expiring worthless). |
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the net asset value per unit plus |
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cash to pay organization costs plus |
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the sales fee. |
Transactional sales fee |
0.00 | % | ||||
Creation and development fee |
0.60 | % | ||||
Total sales fee |
0.60 | % |
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.
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.
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.
there are significant increases in
the Market Reference Level, the amount you may receive is capped at $11.30 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 trusts 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 trusts portfolio or increases in potential expenses of the trust above estimated levels.
Insurance Corporation or any other
government agency.
|
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. |
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.
of the sales fee when they sell
units. During the initial offering period, the broker-dealer concession or agency commission for broker-dealers and other firms is 1.25% of the public
offering price per unit at the time of the transaction. After the initial offering period, the broker-dealer concession or agency commission for
secondary market transactions is equal to 1.25% 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.
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 |
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 intermediarys 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 intermediarys 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.
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.
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.
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.
Advisors Disciplined Trust 1682 Statement of Financial Condition as of September 26, 2019 |
|
|
|
|||||||||||
Investment
in securities |
||||||||||||||
Contracts
to purchase purchased Options (1)(2) |
$ | 157,100 | ||||||||||||
Cash
(3)(4) |
2,110 | |||||||||||||
Total |
$ | 159,210 | ||||||||||||
Liabilities
and interest of investors |
||||||||||||||
Liabilities: |
||||||||||||||
Value
of written Options (1) |
$ | 10,420 | ||||||||||||
Organization
costs (3) |
729 | |||||||||||||
Creation
and development fee (4) |
893 | |||||||||||||
$ | 12,042 | |||||||||||||
Interest
of investors: |
||||||||||||||
Cost
to investors (5) |
150,839 | |||||||||||||
Less:
sales fee (4)(5) |
2,049 | |||||||||||||
Less:
organization costs and creation and development fee (3)(4)(5) |
1,622 | |||||||||||||
Net
interest of investors |
147,168 | |||||||||||||
Total |
$ | 159,210 | ||||||||||||
Number
of units |
14,879 | |||||||||||||
Net
asset value per unit |
$ | 9.8910 |
(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 $0.049 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 trusts 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 1.95% of the public offering price. The creation and development fee is equal to $0.06 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. |
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 14 Hypothetical Examples 19 How to Buy Units 21 How to Sell Your Units 22 Distributions 22 Investment Risks 25 How Your Trust Works 28 Taxes 31 Expenses 32 Experts 32 Additional Information 33 Report of Independent Registered Public Accounting Firm 34 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 |
BUFFERED PORTFOLIO,
SERIES
2019-1
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. 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 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. 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
-6-
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
-7-
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 Reserve Account of a trust and, to the extent funds are not sufficient therein, from the Income Account, 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.
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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 Reserve, 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 Reserve, 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 Reserve, 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 Reserve, 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 Reserve, 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. Cash has been deposited to pay the costs of organization, but to the extent such cash is insufficient, 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 independent pricing agent, independent auditors and legal counsel
The following exhibits:
1.1 | Trust Agreement. |
1.1.1 | Standard Terms and Conditions of Trust. Reference is made to Exhibit 1.1.1 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1670 (File No. 333-210025) as filed on May 6, 2016. |
1.2 | Certificate of Amendment of Certificate of Incorporation and Certificate of Merger of Advisors Asset Management, Inc. Reference is made to Exhibit 1.2 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011. |
1.3 | Bylaws of Advisors Asset Management, Inc. Reference is made to Exhibit 1.3 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011. |
1.5 | Form of Dealer Agreement. Reference is made to Exhibit 1.5 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 262 (File No. 333-150575) as filed of June 17, 2008. |
2.2 | Form of Code of Ethics. Reference is made to Exhibit 2.2 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1853 (File No. 333-221628) as filed on February 21, 2018. |
3.1 Opinion and consent of counsel as to legality of securities being registered.
3.3 Opinion of counsel as to the Trustee and the Trust.
4.1 | Consent of independent pricing agent. |
4.2 | Consent of independent registered public accounting firm. |
6.1 | Directors and Officers of Advisors Asset Management, Inc. Reference is made to Exhibit 6.1 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1911 (File No. 333-227343) as filed on November 9, 2018. |
7.1 | Power of Attorney. Reference is made to Exhibit 7.1 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1485 (File No. 333-203629) as filed on May 15, 2015. |
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 September 26, 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 September 26, 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.
Exhibit 1.1
Advisors Disciplined Trust 1682
Trust Agreement
Dated: September 26, 2019
This Trust Agreement among Advisors Asset Management, Inc., as Depositor, Evaluator and Supervisor, and The Bank of New York Mellon, as Trustee, sets forth certain provisions in full and incorporates other provisions by reference to the document entitled “Standard Terms and Conditions of Trust For Advisors Disciplined Trust, Effective for Unit Investment Trusts Investing in Equity Securities Established On and After May 1, 2016” (the “Standard Terms and Conditions of Trust”) and such provisions as are set forth in full and such provisions as are incorporated by reference constitute a single instrument. All references herein to Articles and Sections are to Articles and Sections of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein contained, the Depositor, Trustee, Evaluator and Supervisor agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions contained in the Standard Terms and Conditions of Trust are herein incorporated by reference in their entirety and shall be deemed to be a part of this instrument as fully and to the same extent as though said provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities listed in the Schedules hereto have been deposited in trust under this Trust Agreement.
2. The fractional undivided interest in and ownership of a Trust represented by each Unit thereof is a fractional amount, the numerator of which is one and the denominator of which is the amount set forth under “Understanding Your Investment—Statement of Financial Condition—Number of units” in the Prospectus for the Trust.
3. The aggregate number of Units described in Section 2.03(a) of the Standard Terms and Conditions of Trust for a Trust is that number of Units set forth under “Understanding Your Investment—Statement of Financial Condition—Number of units” in the Prospectus for the Trust.
4. The term “Deferred Sales Charge Payment Dates” for a Trust shall mean the dates, if any, specified for deferred sales fee installments under “Investment Summary—Fees and Expenses” in the Prospectus for the Trust.
5. The term “Distribution Date” for a Trust shall mean the “Distribution dates” set forth under “Investment Summary—Essential Information” in the Prospectus for the Trust.
6. The term “First Settlement Date” shall mean the second Business Day following the Initial Date of Deposit.
7. The term “Mandatory Termination Date” for a Trust shall mean the “Termination date” set forth under “Investment Summary—Essential Information” in the Prospectus for the Trust.
8. The term “Record Date” for a Trust shall mean the “Record dates” set forth under “Investment Summary—Essential Information” in the Prospectus for the Trust.
9. For purposes of the definition of the term “Income Distribution”, Section 3.05(b)(ii)(A) of the Standard Terms and Conditions of Trust shall apply.
10. The Depositor’s annual compensation as set forth under Section 3.13 of the Standard Terms and Conditions of Trust shall be that dollar amount per 100 Units set forth under “Investment Summary—Fees and Expenses—Annual operating expenses—Supervisory, evaluation and administration fees” in the Prospectus for the Trust.
11. The Trustee’s annual compensation as set forth under Section 7.04 of the Standard Terms and Conditions of Trust shall be $0.0105 per Unit.
12. Section 1.01(42) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“(42) ‘Percentage Ratio’ shall mean with respect to a Trust, the percentage relationship among the Securities based on the number of contracts of each Option per Unit, the principal amount of each Bond per Unit and the number of shares of each Equity Security per Unit compared to all Securities attributable to each Unit existing immediately prior to the related additional deposit of Securities. The Percentage Ratio shall be adjusted to the extent necessary, and may be rounded, to reflect the occurrence of a stock dividend, a stock split or a similar event which affects the capital structure of the issuer of a Security.”
13. Section 1.01(50) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
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“(50) ‘Rollover Distribution’ shall have the meaning assigned to it in Section 6.04.”
14. Section 1.01(51) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“(51) ‘Rollover Unitholder’ shall have the meaning assigned to it in Section 6.04.”
15. Section 1.01(52) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“(52) ‘Securities’ shall mean any Bonds, Equity Securities and Options.”
16. Section 1.01 of the Standard Terms and Conditions of Trust is amended by adding the following subsection immediately after Section 1.01(65):
“(66) ‘Options’ shall mean any put, call, straddle, option or privilege on a security or other asset, or on a group or index of securities or other assets, including such securities that are Contract Securities, deposited in irrevocable trust and listed in the schedule(s) to the Trust Agreement or which are deposited in or purchased on behalf of a Trust pursuant to Section 2.01(b) or as otherwise permitted hereby, and any securities received in addition to, or in exchange, substitution or replacement for, such securities, as may from time to time continue to be held as a part of the Trust.
(67) ‘Bonds’ shall mean debt obligations of corporations, municipalities, government entities, sovereigns or other entities including such securities that are Contract Securities and delivery statements relating to ‘when issued’ and/or ‘regular way’ contracts, if any, for the purchase of certain bonds, deposited in irrevocable trust and listed in the schedule(s) to the Trust Agreement or which are deposited in or purchased on behalf of a Trust pursuant to Section 2.01(b) or as otherwise permitted hereby, and any obligations received in addition to, or in exchange, substitution or replacement for, such obligations, as may from time to time continue to be held as part of the Trust.
(68) ‘Equity Securities’ shall mean any equity securities, including preferred securities, of corporations or other entities, including such securities that are Contract Securities, deposited in irrevocable trust and listed in the schedule(s) to the Trust Agreement or which are deposited in or purchased on behalf of a Trust pursuant to Section 2.01(b) or as otherwise permitted hereby, and any securities received in addition to, or in exchange, substitution or replacement for, such securities, as may from time to time continue to be held as a part of the Trust.”
17. Section 2.01(a) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“(a) The Depositor, on the date of the Trust Agreement, has deposited with the Trustee in trust the Securities listed in the schedule(s) attached to the Trust Agreement in bearer form or duly endorsed in blank or accompanied by all necessary instruments of assignment and transfer in proper form to be held, managed and applied by the Trustee as herein provided. The Depositor
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shall deliver to the Trustee the Securities listed on said schedule(s) to the Trust Agreement which were represented by Contract Securities within ninety (90) calendar days after the date of the Trust Agreement (the “Delivery Period”). If a contract for such Contract Securities is terminated a party thereto for any reason beyond the control of the Depositor or if for any other reason the Securities to be delivered pursuant to such contract are not delivered to the Trust by the end of the Delivery Period, the Trustee shall immediately draw on the Letter of Credit, if any, in its entirety, apply the moneys in accordance with Section 2.01(d), and the Depositor shall forthwith take the remedial action specified in Section 3.12. In the event that the Trustee draws on the Letter of Credit, the Trustee shall provide the Depositor with notice upon the withdrawal. If the Depositor does not take the action specified in Section 3.12 within ninety (90) calendar days of the end of the Delivery Period, the Trustee shall forthwith take the action specified in Section 3.12. The Depositor, on the date of the Trust Agreement, has also deposited with the Trustee in trust an amount of cash to be deposited in the Reserve Account described in Section 3.04 and reserved for the payment of organization costs pursuant to Section 3.01, any Creation and Development Fee pursuant to Section 3.15 and other fees and expenses of the Trust, including, but not limited to, fees and expenses payable pursuant to Sections 3.08, 3.13, 7.04 and 9.05. Notwithstanding anything in Section 3.04, cash held in the Reserve Account that is reserved for payment of the foregoing fees and expenses (including Cash deposited pursuant to Section 2.01(b)) shall not be withdrawn from the Reserve Account or distributed to any unitholder prior to termination of the Trust for any other purpose except upon the instruction of the Depositor after determination that such amounts are no longer necessary for payment of such fees and expenses.”
18. The third paragraph of Section 2.01(b) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“In connection with and at the time of any deposit of additional Securities pursuant to this Section 2.01(b), the Depositor shall replicate Cash (as defined below) received or receivable by the Trust as of the date of such deposit. For purposes of this paragraph, “Cash” means, as to the Capital Account, cash or other property (other than Securities) on hand in the Capital Account or receivable and to be credited to the Capital Account as of the date of the deposit (other than amounts to be distributed solely to persons other than holders of Units created by the deposit) and, as to the Income Account, cash or other property (other than Securities) to be credited to the Income Account received by the Trust as of the date of the deposit or receivable by the Trust in respect of a record date for a payment on a Security which has occurred or will occur before the Trust will be the holder of record of a Security, reduced by the amount of any cash or other property received or receivable on any Security allocable (in accordance with the Trustee’s calculations of distributions from the Income Account pursuant to Section 3.05) to a distribution made or to be made in respect of a Record Date occurring prior to the deposit and, as to the Reserve Account, cash on hand in the Reserve Account or receivable and to be credited to the Reserve Account as of the date of the deposit (other than amounts to be withdrawn or distributed from the Reserve Account as permitted by Sections 2.01(a) and 3.04). Such replication will be made on the basis of a fraction, the numerator of which is the number of Units created by the deposit and the denominator of which is the number of Units which are outstanding immediately prior to the deposit.”
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19. Section 3.01 of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“Section 3.01. Initial Cost. Subject to reimbursement as hereinafter provided, the cost of organizing the Trust and the sale of the Units shall be borne by the Depositor, provided, however, that the liability on the part of the Depositor under this Section 3.01 shall not include any fees or other expenses incurred in connection with the administration of the Trust subsequent to the deposit referred to in Section 2.01. At the earlier of six (6) months after the Initial Date of Deposit or the conclusion of the initial offering period (as certified by the Depositor to the Trustee), the Trustee shall withdraw from the Reserve Account, or, if sufficient funds are not available in the Reserve Account, from the Income Account, or, if sufficient funds are not available in the Income Account, from the Capital Account, and pay to the Depositor the Depositor’s reimbursable expenses of organizing the Trust in an amount certified to the Trustee by the Depositor. In no event shall the amount paid by the Trustee to the Depositor for the Depositor’s reimbursable expenses of organizing the Trust exceed the estimated per Unit amount of organization costs set forth in the Prospectus for the Trust multiplied by the number of Units of the Trust outstanding at the earlier of six (6) months after the Initial Date of Deposit or the conclusion of the initial offering period; nor shall the Depositor be entitled to or request reimbursement for expenses of organizing the Trust incurred after the earlier of six (6) months after the Initial Date of Deposit or the conclusion of the initial offering period. If the cash balance of the aforementioned Accounts is insufficient to make such withdrawal, the Trustee shall, as directed by the Depositor, sell Securities identified by the Supervisor, or distribute to the Depositor Securities having a value, as determined under Section 5.01 as of the date of distribution, sufficient for such reimbursement provided that such distribution is permissible under applicable laws and regulations. Securities sold or distributed to the Depositor to reimburse the Depositor pursuant to this Section shall be sold or distributed by the Trustee, to the extent practicable, in the Percentage Ratio then existing (unless the Trust is a RIC, in which case sales or distributions by the Trustee shall be made in accordance with the instructions of the Supervisor or its designees). The reimbursement provided for in this Section shall be for the account of Unitholders of record at the earlier of six (6) months after the Initial Date of Deposit or the conclusion of the initial offering period. Any assets deposited with the Trustee in respect of the expenses reimbursable under this Section 3.01 shall be held and administered as assets of the Trust for all purposes hereunder. Any cash which the Depositor has identified as to be used for reimbursement of expenses pursuant to this Section 3.01 shall be held by the Trustee, without interest, and reserved for such purposes and, accordingly, prior to the earlier of six (6) months after the Initial Date of Deposit or the conclusion of the initial offering period, shall not be subject to distribution or, unless the Depositor otherwise directs, used for payment of redemptions in excess of the per Unit amount payable pursuant to the next sentence. If a Unitholder redeems Units prior to the earlier of six months after the Initial Date of Deposit or the conclusion of the initial offering period, the Trustee shall pay the Unitholder, in addition to the Unit Value of the tendered Units (in the computation of which the expenses reimbursable pursuant to this Section shall have been deducted), unless otherwise directed by the Depositor, an amount equal to the estimated per Unit cost of organizing the Trust set forth in the Prospectus, or such lower revision thereof most recently communicated to the Trustee by the Depositor, multiplied by the number of Units tendered for redemption; to the extent the cash on hand in the Trust is insufficient for such payments, the Trustee shall have the power to sell Securities in accordance with Section 6.02. As used herein, the Depositor’s reimbursable expenses of organizing the Trust shall include, but are not limited to,
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the cost of the initial preparation and typesetting of the registration statement, prospectuses (including preliminary prospectuses), the Indenture, and other documents relating to a Trust Securities and Exchange Commission 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 licensing 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.”
20. Section 3.02 of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“Section 3.02. Income Account. The Trustee shall collect the dividends, interest or other like cash distributions on the Securities in each Trust as such becomes payable (including all moneys representing penalties for the failure to make timely payments on the Securities, or as liquidated damages for default or breach of any condition or term of the Securities or of the underlying instrument relating to any Securities and other income attributable to a Failed Contract Security for which no Replacement Security has been obtained pursuant to Section 3.12 hereof and interest accrued but unpaid prior to the date of deposit of the Securities) in trust and including that part of the proceeds of the sale, liquidation, redemption, prepayment or maturity of any Bonds or insurance payments thereon which represent interest thereon and credit such income to a separate account for each Trust to be known as the “Income Account.”Any distributions received by the Trustee in a form other than cash (other than a non-taxable distribution of the shares of the distributing entity, which shall be returned by the Trust) shall be dealt with in the manner described in Section 3.11 and shall be retained or disposed of by a Trust according to those provisions. The proceeds of any disposition shall be credited to the Income Account of the Trust. The Trustee shall not be liable or responsible in any way for depreciation or loss incurred by reason of any such sale.”
21. Section 3.05(a) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“(a) The Trustee, as of the First Settlement Date, shall advance from its own funds and shall pay to the Unitholders of each Trust then of record the amount of interest accrued on the Bonds deposited in such Trust. The Trustee shall be entitled to reimbursement for such advancement from interest received by the respective Trust before any further distributions shall be made from the Income Account to Unitholders of the Trust. The Trustee shall also advance from its own funds and pay the appropriate persons the amount of any interest which accrues on any “when, as and if issued” or “delayed delivery” Bonds deposited in a Trust from the First Settlement Date to the respective dates of delivery to the Trust of any such Bonds. Subsequent distributions shall be made as hereinafter provided. Subsequent distributions of funds from the Income Account of a Trust shall be made on the applicable Record Dates of a Trust as described herein. On or promptly after the last Business Day of each month, the Trustee shall satisfy itself as to the adequacy of the Reserve Account, making any further credits thereto as may appear appropriate in accordance with Section 3.04 and shall then with respect to each Trust:
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(i) deduct from the Reserve Account, or to the extent funds are not available in the Reserve Account, from the Income Account or, to the extent funds are not available in the Income Account, from the Capital Account and pay to itself individually the amounts that it is at the time entitled to receive pursuant to Section 7.04;
(ii) deduct from the Reserve Account, or to the extent funds are not available in the Reserve Account, from the Income Account of the Trust, and, to the extent funds are not sufficient in the Income Account, from the Capital Account of the Trust, amounts necessary to pay any unpaid expenses of the Trust, including registration charges, state blue sky fees, printing costs, attorneys’ fees, auditing costs and other miscellaneous out-of-pocket expenses, as certified by the Depositor, incurred in keeping the registration of the Units and the Trust on a current basis pursuant to Section 9.05;
(iii) deduct from the Reserve Account, or to the extent funds are not available in the Reserve Account, from the Income Account or, to the extent funds are not available in the Income Account, from the Capital Account and pay to, or reserve for, the Depositor, Supervisor and Evaluator, as applicable, the amount that it is entitled to receive pursuant to Section 3.13;
(iv) deduct from the Reserve Account, or to the extent funds are not available in the Reserve Account, from the Income Account or, to the extent funds are not available in the Income Account, from the Capital Account and pay to counsel, as hereinafter provided for, an amount equal to unpaid fees and expenses, if any, of such counsel pursuant to Section 3.08, as certified to by the Depositor; and
(v) Notwithstanding any of the previous provisions, if a Trust is a RIC, the Trustee is directed to make any distribution or take any action necessary in order to maintain the qualification of the Trust as a RIC for federal income tax purposes or 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.”
22. The first paragraph of section 3.06 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“With each distribution from the Income or Capital Accounts of a Trust the Trustee shall set forth, either in the instrument by means of which payment of such distribution is made or in an accompanying statement, the amount being distributed from each such Account and, if from the Income Account, the amount of accrued interest (uncollected and not available for distribution) on the Record Date for such distribution, each expressed as a dollar amount per Unit.”
23. Section 3.06(A)(1) of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(1) the amount of income received on the Securities including amounts received as a portion of the proceeds of any disposition of Securities and accreted original discount on the Bonds;”
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24. Section 3.07 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 3.07. Sale of Securities. (a) If necessary, in order to maintain the sound investment character of a Trust, the Depositor may direct the Trustee to sell, liquidate or otherwise dispose of Securities in such Trust at such price and time and in such manner as shall be determined by the Depositor, 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 on any of the Securities 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 after declared and when due and payable from 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 or guarantor 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 pursuant to Section 9.02;
(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) with respect to an Index Trust, that the Security has been removed from the Trust’s Target Index;
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(x) with respect to an Index Trust, that the Security is over-represented in the Trust’s portfolio in comparison to such Security’s weighting in the Trust’s Target Index;
(xi) if the Trust is a Grantor Trust, 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;
(xii) if the Trust is a RIC, that such sale is necessary or advisable (A) to maintain the qualification of the Trust as a RIC for federal income tax purposes 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;
(xiii) 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 Code;
(xiv) 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;
(xv) that any action or proceeding has been instituted in law or equity seeking to restrain or enjoin the payment of principal or interest on any Bonds, attacking the constitutionality of any enabling legislation or alleging and seeking to have judicially determined the illegality of the issuing body or the constitution of its governing body or officers, the illegality, irregularity or omission of any necessary acts or proceedings preliminary to the issuance of such Bonds, or seeking to restrain or enjoin the performance by the officers or employees of any such issuing body of any improper or illegal act in connection with the administration of funds necessary for debt service on such Bonds or otherwise; or that there exists any other legal question or impediment affecting such Securities or the payment of debt service on the same;
(xvi) that any Bonds are the subject of an advanced refunding. For the purposes of this Section 3.07(a)(xvi), “an advanced refunding” shall mean when refunding bonds are issued and the proceeds thereof are deposited in an irrevocable trust to retire the Bonds on or before their redemption date; or
(xvii) that as of any Record Date any of the Bonds are scheduled to be redeemed and paid prior to the next succeeding Distribution Date; provided, however, that as the result of such redemption the Trustee will receive funds in an amount sufficient to enable the Trustee to include in the next distribution from the Capital Account at least $1.00 per 100 Units.
(b) In the event a Security is sold pursuant to Section 3.07(a)(v) as a direct result of serious adverse credit factors affecting the issuer of such Security and the Trust is a RIC, then the Depositor may, if permitted by applicable law, but is not obligated, to direct the reinvestment of
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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.
(c) In the event a Security is sold pursuant to Section 3.07(a)(ix) and the Trust is a RIC, the Depositor may direct the reinvestment of the proceeds of the sale of such Security, to the extent practicable, into any security which replaces such Security as a component of the Trust’s Target Index or, if no security so replaces such Security, into any other Securities which are under-represented in the Trust’s portfolio in comparison to their weighting in the Trust’s Target Index. In the event a Security is sold pursuant to Section 3.07(a)(x) and the Trust is a RIC, the Depositor may direct the reinvestment of the proceeds of the sale of such Security, to the extent practicable, into any other Securities which are under-represented in the Trust’s portfolio in comparison to their weighting in the Trust’s Target Index. Without limiting the generality of the foregoing, in determining whether such reinvestment is practicable, the Depositor may, but is not obligated to, specifically consider the ability of the Trust to reinvest such proceeds into round lots of a Security.
(d) Upon receipt of such direction from the Depositor to dispose of Securities as described in this Section 3.07 upon which the Trustee shall rely, the Trustee shall proceed to sell or liquidate the specified Securities in accordance with such direction, and upon the receipt of the proceeds of any such sale or liquidation, after deducting therefrom any fees and expenses of the Trustee connected with such sale or liquidation and any brokerage charges, taxes or other governmental charges shall deposit such net proceeds in the applicable Capital Account; provided, however, that the Trustee shall not liquidate or sell any Bonds upon receipt of a direction from the Depositor pursuant to Section 3.07(a)(xvii), unless the Trustee shall receive on account of such sale or liquidation the full principal amount of such Bonds, plus the premium, if any, and the interest accrued and to accrue thereon to the date of the redemption of such Bonds.
(e) The Trustee shall not be liable or responsible in any way for depreciation or loss incurred by reason of any sale made pursuant to any such direction or by reason of the failure of the Depositor to give any such direction, and in the absence of such direction the Trustee shall have no duty to sell or liquidate any Securities under this Section 3.07.
(f) If Options have been written with respect to Equity Securities, such Equity Securities cannot be sold or liquidated without also closing out the related Options positions.
(g) If Options have been written by the Trust where potential amounts owed on such Options are covered by potential payouts at expiration by Options purchased by the Trust, then such purchased Options cannot be liquidated without also closing out the related written Option positions.”
25. Section 3.08 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 3.08. Counsel. The Depositor may employ from time to time as it may deem necessary a firm of attorneys for any legal services that may be required in connection with the disposition of underlying securities pursuant to Section 3.07. The fees and expenses of such
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counsel shall be paid by the Trustee from the Reserve, Income and Capital Accounts of the appropriate Trust as provided for in Section 3.05.”
26. Section 3.09 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 3.09. Notice and Sale by Trustee. If at any time dividends, interest, principal or other payments, after declared and when due and payable on any of the Securities shall not have been paid within thirty (30) days, the Trustee shall notify the Depositor thereof. If within thirty (30) days after such notification the Depositor has not given any instruction to sell or to hold or has not taken any other action in connection with such Securities, the Trustee may in its discretion sell such Securities forthwith, and the Trustee shall not be liable or responsible in any way for depreciation or loss incurred by reason of such sale.”
27. Section 3.10(b) of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(b) Each Trust shall indemnify, defend and hold harmless the Depositor from and against any loss, liability or expense incurred in acting as Depositor of such Trust (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 hereunder. The Depositor shall not be under any obligation to appear in, prosecute or defend any legal action which in its opinion may involve it in any expense or liability; provided, however, that the Depositor may in its discretion undertake any such action which it may deem necessary or desirable in respect of this Indenture and the rights and duties of the parties hereto and the interests of the Unitholders hereunder and, in such event, the legal expenses and costs of any such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust concerned and shall be paid directly by the Trustee out of the Reserve, Income and Capital Accounts of such Trust.”
28. Section 3.10(d)(i) of the Standard Terms and Conditions of Trust is replaced in its entirety with the following:
“(i) The Depositor may resign and be discharged hereunder, by executing an instrument in writing resigning as Depositor and filing the same with the Trustee, not less than sixty (60) days before the date specified in such instrument when such resignation is to take effect. Upon effective resignation hereunder, the resigning Depositor shall be discharged and shall no longer be liable in any manner hereunder except as to acts or omissions occurring prior to such resignation and any successor depositor appointed by the Trustee pursuant to Section 7.01(g) shall thereupon perform all duties and be entitled to all rights under this Indenture. The successor Depositor shall not be under any liability hereunder for occurrences or omissions prior to the execution of such instrument. Notice of such resignation and appointment of a successor depositor shall be delivered by the Trustee to each Unitholder then of record.”
29. The first paragraph of Section 3.11 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
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“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 the Securities (including but not limited to the making of any demand, direction, request, giving of any notice, consent or waiver or the voting with respect to any matter relating to the Securities), the Trustee shall promptly notify the Depositor and shall thereupon take such action or refrain from taking any action as the Depositor shall in writing direct which includes electronic communication; provided, however, that if the Depositor shall not within five (5) Business Days of the giving of such notice to the Depositor direct the Trustee to take or refrain from taking any action, the Trustee shall take such action or refrain from taking any action, (i) so as to insure that the Equity 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 Equity Securities that are held by owners other than the Trust and (ii) as it, in its sole discretion, shall deem advisable with respect to the Bonds. 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 Fund Shares (including but not limited to the making of any demand, direction, request, giving of any notice, consent or waiver or the voting with respect to any matter relating to the Equity Securities), the Trustee shall promptly notify the Depositor and shall 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 Trust.”
30. The second paragraph of Section 3.13 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“If the cash balance in the Reserve, Income and Capital Accounts shall be insufficient to provide for amounts payable pursuant to this Section 3.13, the Trustee shall have the power to sell Securities and apply the proceeds of any such sale in payment of the amounts payable pursuant to this Section 3.13, provided that Securities shall be sold by the Trustee, to the extent practicable, in the Percentage Ratio then existing.”
31. The first paragraph of Section 3.15 of the Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 3.15. Creation and Development Fee. If the Prospectus related to a Trust specifies a creation and development fee (the “Creation and Development Fee”), the Trustee shall, on such date or dates set forth in the Prospectus for a Trust withdraw from the Reserve Account an amount equal to the entire Creation and Development Fee and credit such amount to a special non-Trust account designated by the Depositor out of which the Creation and Development Fee will be distributed to the Depositor (the “Creation and Development Account”). The reimbursement provided for in this Section shall be for the account of Unitholders of record at the conclusion of the initial offering period and shall have no effect on the Unit Value prior to such date. If the balance in the Reserve Account is insufficient to make any such withdrawal, the Trustee shall, as directed by the Depositor, either advance funds in an amount equal to the proposed withdrawal and be entitled to reimbursement of such advance from the Income Account, or, if sufficient funds are not available in the Income Account, from the Capital Account, or sell Securities and credit the proceeds thereof to the Creation and Development Account to the extent payable pursuant to this Section 3.15. If the Trust is terminated pursuant to Section 7.01(h), the Depositor agrees to
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reimburse Unitholders for any amounts of the Creation and Development Fee collected by the Depositor to which it is not entitled. All advances made by the Trustee pursuant to this Section shall be secured by a lien on the Trust prior to the interest of Unitholders. Notwithstanding the foregoing, the Depositor shall not receive any amount of Creation and Development Fee which exceeds the maximum amount per Unit stated in the Prospectus. The Depositor agrees to reimburse the Trust and any Unitholder any amount of Creation and Development Fee it receives which exceeds the amount which the Depositor may receive under applicable laws, regulations and rules.”
32. The Standard Terms and Conditions of Trust shall be amended to include the following sections:
“Section 3.20. Refunding Bonds. In the event that an offer shall be made by an obligor of any of the Bonds in a Trust to issue new obligations in exchange and substitution for any issue of Bonds pursuant to a plan for the refunding or refinancing of such Bonds, the Depositor shall instruct the Trustee in writing to reject such offer and either to hold or sell such Bonds, except that if (1) the issuer is in default with respect to such Bonds or (2) in the opinion of the Depositor, given in writing to the Trustee, the issuer will probably default with respect to such Bonds in the reasonably foreseeable future, the Depositor shall instruct the Trustee in writing to accept or reject such offer or take any other action with respect thereto as the Depositor may deem proper. Any obligation so received in exchange shall be deposited hereunder and shall be subject to the terms and conditions of this Indenture to the same extent as the Bonds originally deposited hereunder. Within five (5) days after such deposit, notice of such exchange and deposit shall be given by the Trustee to each Unitholder of such Trust, including an identification of the Bonds eliminated and the securities substituted therefor.
Section 3.21. Trustee Not Required to Amortize. Nothing in this Indenture, or otherwise, shall be construed to require the Trustee to make any adjustments between the Income and Capital Accounts of any Trust by reason of any premium or discount in respect of any of the Bonds.”
33. Section 5.01 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 5.01. Evaluation of Securities. (a) The Evaluator shall determine separately, and shall promptly furnish to the Trustee and the Depositor upon request, the value of each issue of Securities (including Contract Securities) (“Evaluation”) as of the Evaluation Time (i) on each Business Day during the period which the Units are being offered for sale to the public and (ii) on any other day on which a Trust Evaluation is to be made pursuant to Section 6.01 or which is requested by the Depositor or the Trustee. As part of the Trust Evaluation, the Evaluator shall determine separately and promptly furnish to the Trustee and the Depositor upon request the Evaluation of each issue of Securities initially deposited in a Trust on the Initial Date of Deposit. The Evaluator’s determination of the offering prices of the Securities on the Initial Date of Deposit shall be included in the schedule(s) attached to the Trust Agreement.
(b) During the initial offering period of a Trust (as determined by the Depositor and described in the related Prospectus) the Evaluation for each Security shall be made in the following
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manner: (i) with respect to Securities for which market quotations are readily available, such Evaluation shall be made on the basis of the current market value of such Securities; and (ii) with respect to other Securities’ such Evaluation shall be made on the basis of the fair value of such Securities as determined in good faith by the Evaluator. If the Securities are listed on a national or foreign securities exchange and market quotations of such Securities are readily available, the market value of such Securities shall generally be based on the last available closing sale price at or immediately prior to the Evaluation Time on the exchange or market which is the principal market therefor, which shall be deemed to be the New York Stock Exchange if the Securities are listed thereon (unless the Evaluator deems such price inappropriate as a basis for evaluation) or, if there is no such available sale price on such exchange at the last available ask prices of the Securities or the last available bid price in the case of Options written by the Trust. If the Securities are not so listed or, if so listed, the principal market therefor is other than on such exchange, or if there is no such available sale price on such exchange, such Evaluation shall generally be based on the following methods or any combination thereof whichever the Evaluator deems appropriate: (i) in the case of Equity Securities and purchased Options, on the basis of the current ask price for comparable securities and in the case of written Options, on the basis of the current bid price for comparable securities (unless the Evaluator deems such price inappropriate as a basis for evaluation), (ii) on the basis of current offering prices for the Bonds; (iii) if current ask or offering prices are not available for the Securities, on the basis of current ask or offering prices for comparable securities, (iv) by determining the valuation of Securities on the ask or offering side of the market by appraisal, or on the bid side of the market for written Options, (v) by causing the value of the Securities to be determined by others engaged in the practice of evaluation, quoting or appraising comparable securities or (vi) by any combination of the above. With respect to Fund Shares that are not listed on a national or foreign securities exchange, such valuations shall be made on the basis of the current net asset value of such shares as determined by the issuers of such Fund Shares. If the Trust holds Securities denominated in a currency other than U.S. dollars, the Evaluation of such Security shall be converted to U.S. dollars based on current offering side exchange rates (unless the Evaluator deems such prices inappropriate as a basis for valuation). As used herein, the closing sale price is deemed to mean the most recent closing sale price on the relevant securities exchange at or immediately prior to the Evaluation Time. For each Evaluation, the Evaluator shall also confirm and furnish to the Depositor the calculation of the Trust Evaluation to be computed pursuant to Section 6.01.
(c) Following the initial offering period, for purposes of the Trust Evaluations required by Section 6.01 in determining Redemption Price and Unit Value and for secondary market purchases, Evaluation of the Securities shall be made in the manner described in Section 5.01(b), on the basis of the last available bid prices of the securities (rather than ask or offer prices) except that Evaluations of Options written by the Trust will be made on the basis of the ask prices (rather than bid prices), and except in those cases in which the Securities are listed on a national securities exchange or a foreign securities exchange and the last available sale prices are utilized. In addition, with respect to each Security which is traded principally on a foreign securities exchange, the Evaluator shall (i) not make the addition specified in the fourth sentence of Section 5.01(b) and (ii) shall reduce the Evaluation of each Security by the amount of any liquidation costs (other than brokerage costs incurred on any national securities exchange) and any capital gains or other taxes which would be incurred by the Trust upon the sale of such Security, such taxes being computed as if the Security were sold on the date of the Evaluation.”
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34. The first paragraph of Section 6.01 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“As of the Evaluation Time (a) on the last Business Day of each year, (b) on the day on which any Unit is tendered for redemption and (c) on any other day desired by the Trustee or requested by the Depositor, the Trustee shall: add (i) all moneys on deposit in a Trust or moneys in the process of being collected from matured interest coupons or bonds matured or called for redemption prior to maturity (excluding cash, cash equivalents or Letters of Credit deposited pursuant to Section 2.01 hereof for the purchase of Contract Securities, unless such cash or Letters of Credit have been deposited in the Income and Capital Accounts because of failure to apply such moneys to the purchase of Contract Securities pursuant to the provisions of Sections 2.01, 3.02 and 3.03, plus (ii) the aggregate Evaluation of all Securities (including Contract Securities and additional Securities for which purchase contracts have been entered into pursuant to the Depositor’s instructions pursuant to clause (ii) of the first sentence of Section 2.01(b), less the purchase price of such contracts) on deposit in such Trust (such Evaluation to be made on the basis of the aggregate underlying value of the Securities as determined in Section 5.01(b) for the purpose of computing redemption value of Units as set forth in Section 6.02), plus (iii) all other income from the Securities (including dividends receivable on the Equity Securities trading ex-dividend as of the date of such valuation and including interest accrued on the Bonds not subject to collection and distribution) as of the Evaluation Time on the date of such Evaluation together with all other assets of such Trust. For each such computation there shall be deducted from the sum of the above (i) amounts representing any applicable taxes or charges payable out of the respective Trust and for which no deductions shall have previously been made for the purpose of addition to the Reserve Account, (ii) amounts representing estimated accrued expenses of such Trust including but not limited to unpaid fees and expenses of the Trustee, the Evaluator, the Supervisor, the Depositor and counsel, in each case as reported by the Trustee to the Depositor on or prior to the date of computation, (iii) amounts representing unpaid organization costs, (iv) if the Prospectus for a Trust provides that the Creation and Development Fee, if any, accrues on a daily basis, amounts representing unpaid accrued Creation and Development fees, (v) if the Prospectus for a Trust provides that the deferred sales charge, if any, accrues on a daily basis, amounts representing unpaid accrued deferred sales charge, and (vi) any amounts identified by the Trustee, as of the date of such computation, as held for distribution to Unitholders of record as of an Income or Capital Account Record Date, or for payment of the Redemption Price of Units tendered, prior to such date. The resulting figure is herein called a “Trust Evaluation.” The value of the pro rata share of each Unit of the respective Trust determined on the basis of any such evaluation shall be referred to herein as the “Unit Value.” Amounts receivable by the Trust in foreign currency shall be reported to the Evaluator who shall convert the same to U.S. dollars based on current exchange rates, in the same manner as provided in Section 5.01(b) or 5.01(c), as applicable, for the conversion of the valuation of foreign Securities, and the Evaluator shall report such conversion with each Evaluation made pursuant to Section 5.01.”
35. Section 6.02(b) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(b) Subject to the restrictions set forth in the Prospectus of a Trust, Unitholders of a Trust who redeem that minimum number of Units of a Trust set forth in the Prospectus for such Trust
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may request a distribution in-kind (an “In Kind Distribution”) of (i) such Unitholder’s pro rata portion of each of the Securities listed on a United States securities exchange or primarily traded in a United States securities market or trading system in such Trust, in whole shares, and (ii) cash equal to such Unitholder’s pro rata portion of the Reserve, Income and Capital Accounts as follows: (X) a pro rata portion of the net sale proceeds of Securities representing any fractional shares included in such Unitholder’s pro rata share of the Securities and of Securities that are not listed on a United States securities exchange or primarily traded in a United States securities market or trading system and (Y) such other cash as may properly be included in such Unitholder’s pro rata share of the sum of the cash balances of the Reserve, Income and Capital Accounts in an amount equal to the Unit Value determined on the basis of a Trust Evaluation made in accordance with Section 6.01 determined by the Trustee on the date of tender less amounts determined in clauses (i) and (ii)(X) of this Section. Subject to Section 6.04 with respect to Rollover Unitholders, to the extent possible, distributions of Securities pursuant to an In Kind Distribution shall be made by the Trustee through the distribution of each of the Securities in book entry form to the account of the Unitholder’s bank or broker-dealer at the Depository Trust Company. Any In Kind Distribution will be reduced by customary transfer and registration charges.”
36. The third paragraph of Section 6.02(d) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“If the Depositor does not elect to purchase any Units of a Trust tendered to the Trustee for redemption, or if Units are being tendered by the Depositor for redemption, that portion of the Redemption Price which represents dividends or interest shall be withdrawn from the Income Account of such Trust to the extent available. The balance paid on any redemption, including accrued interest, if any, shall be withdrawn from the Reserve and Capital Accounts of such Trust to the extent that funds are available for such purpose. If such available balance shall be insufficient, the Trustee shall sell such of the Securities held in such Trust, currently designated for such purposes by the Supervisor, as the Trustee in its sole discretion shall deem necessary. The Trustee is authorized to advance funds to the Trust for the payment of the Redemption Price and to reimburse itself the amount of such advance from the proceeds of Securities sold or when sufficient funds are next available in the Capital Account. In the event that funds are withdrawn from such Capital Account for payment of accrued interest, such Capital Account shall be reimbursed for such funds so withdrawn when sufficient funds are next available in such Income Account.”
37. The first paragraph of Section 7.01 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 7.01. General Definition of Trustee’s Liabilities, Rights and Duties. The Trustee shall in its discretion undertake such action as it may deem necessary at any and all times to protect each Trust and the rights and interests of the Unitholders thereof pursuant to the terms of this Indenture, provided, however, that the expenses and costs of such actions, undertakings or proceedings shall be reimbursable to the Trustee from the Reserve, Income and Capital Accounts of such Trust and the payment of such costs and expenses shall be secured by a prior lien on such Trust.”
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38. Section 7.01(d) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(d) the Trustee shall not be under any obligation to appear in, prosecute or defend any action, which in its opinion may involve it in expense or liability, unless, as often as required by the Trustee, it shall be furnished with reasonable security and indemnity against such expense or liability, and any pecuniary cost of the Trustee from such actions shall be deductible from and a charge against the Reserve, Income and Capital Accounts of the affected Trust;”
39. Section 7.01(e)(i) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(e) (i) Subject to the provisions of subparagraph (ii) of this paragraph, the Trustee may employ agents, sub-custodians, attorneys, accountants and auditors and shall not be answerable for the default or misconduct of any such agents, sub-custodians, attorneys, accountants or auditors if such agents, sub-custodians, attorneys, accountants or auditors shall have been selected with reasonable care. The Trustee shall be fully protected in respect of any action under this Indenture taken or suffered in good faith by the Trustee, in accordance with the opinion of counsel, which may be counsel to the Depositor acceptable to the Trustee; provided, however, that this disclaimer of liability shall not (A) excuse the Trustee from the responsibilities specified in subparagraph (ii) below or (B) limit the obligation of the Trustee to indemnify the Trust under paragraph 7.01(f). The fees and expenses charged by such agents, sub-custodians, attorneys, accountants or auditors shall constitute an expense of the Trustee reimbursable from the Reserve, Income and Capital Accounts of the affected Trust as set forth in Section 7.04;”
40. Section 7.01 of the Standard Terms and Conditions of Trust is amended by adding the following immediately after Section 7.01(e)(iii):
“(iv) With the prior consent of the Trustee, the Depositor is authorized to engage a securities intermediary or intermediary custodian and the Trustee shall place and maintain Options with such securities depository or intermediary custodian that is a clearing member of the Options Clearing Corporation in compliance with Rule 17f-4 under the Investment Company Act of 1940, as amended, and Securities and Exchange Commission guidance (including, without limitation, that certain no-action letter to Institutional Equity Fund (available February 27, 1984)). The securities depository or intermediary custodian shall be Pershing LLC or such other securities depository or intermediary custodian as shall be appointed from time to time. The Depositor shall require that each such securities depository or intermediary custodian be: (A) obligated to exercise no less than due care in accordance with reasonable commercial standards in discharging its duty as a securities depository or intermediary to obtain and thereafter maintain the Options; and (B) required to provide, promptly upon request by the Trustee or Depositor, such reports as are available concerning the internal accounting controls and financial strength of the depository or custodian. The Depositor shall obtain a certificate from the securities depository or intermediary custodian to provide to the Trustee confirming the qualification of such a securities depository or intermediary custodian to act as custodian of Trust assets under Rule 17f-4 under the Investment Company Act of 1940, and will obtain on an annual basis information which shall permit the Depositor and the Trustee to conduct an analysis of the custody risks associated with maintaining
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assets with such securities depository or intermediary custodian. The Depositor shall take such action as the Depositor deems appropriate in the event the Depositor and the Trustee determines the custody of the Options shall no longer be maintained by the securities depository or intermediary custodian.”
41. Section 7.01(g) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
(g) if at any time the Depositor shall resign or fail to undertake or perform any of the duties which by the terms of this Indenture are required by it to be undertaken or performed, or such Depositor shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of such Depositor or of its property shall be appointed, or any public officer shall take charge or control of such Depositor or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then in any such case, the Trustee may: (i) appoint a successor depositor who shall act hereunder in all respects in place of such Depositor which successor shall be satisfactory to the Trustee, and which may be compensated at rates deemed by the Trustee to be reasonable under the circumstances, by deduction ratably from the Reserve Account of the affected Trust, or, to the extent funds are not available in the Reserve Account, from the Income Account of the affected Trust or, to the extent funds are not available in the Income Account, from the Capital Account of the affected Trust but no such deduction shall be made exceeding such reasonable amount as the Securities and Exchange Commission may prescribe in accordance with Section 26(a)(2)(C) of the Investment Company Act of 1940, as amended, or (ii) act hereunder in its own discretion without appointing any successor depositor and receive additional compensation at rates determined as provided in clause (i); or (iii) terminate and liquidate the affected Trust in the manner provided in Section 9.02;”
42. Section 7.01(i) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(i) in no event shall the Trustee be liable for any taxes or other governmental charges imposed upon or in respect of the Securities or upon the interest thereon or upon it as Trustee hereunder or upon or in respect of any Trust which it may be required to pay under any present or future law of the United States of America or of any other taxing authority having jurisdiction in the premises. For all such taxes and charges and for any expenses, including counsel fees, which the Trustee may sustain or incur with respect to such taxes or charges, the Trustee shall be reimbursed and indemnified out of the Reserve, Income and Capital Accounts of the affected Trust, and the payment of such amounts so paid by the Trustee shall be secured by a lien on such Trust prior to the interests of the Unitholders;”
43. The third paragraph of Section 7.02 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“If provided for in the Prospectus for a Trust, the Trustee shall pay, or reimburse to the Depositor, the expenses related to the updating of the Trust’s registration statement, to the extent of legal fees, typesetting fees, electronic filing expenses and regulatory filing fees. Such expenses shall be paid from the Reserve Account, or, to the extent funds are not available from the Reserve
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Account, from the Income Account, or to the extent funds are not available in the Income Account, from the Capital Account, against an invoice or invoices therefor presented to the Trustee by the Depositor. By presenting such invoice or invoices, the Depositor shall be deemed to certify, upon which certification the Trustee is authorized conclusively to rely, that the amounts claimed therein are properly payable pursuant to this paragraph. The Depositor shall provide the Trustee, from time to time as requested, an estimate of the amount of such expenses, which the Trustee shall use for the purpose of estimating the accrual of Trust expenses. The amount paid by the Trust pursuant to this paragraph in each year shall be separately identified in the annual statement provided to Unitholders. The Depositor shall assure that the Prospectus for the Trust contains such disclosure as shall be necessary to permit payment by the Trust of the expenses contemplated by this paragraph under applicable laws and regulations. The provisions of this paragraph shall not limit the authority of the Trustee to pay, or reimburse to the Depositor or others, such other or additional expenses as may be determined to be payable from the Trust as provided herein.”
44. Section 7.04 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“Section 7.04. Compensation. For services performed under this Indenture the Trustee shall be paid a fee at an annual rate in the amount per Unit set forth in the Trust Agreement. The Trustee shall charge a pro rated portion of its annual fee at the times specified in Section 3.05, 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 accrue daily and be based on the number of Units outstanding on the first (1st) 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 above provided that total adjustment upward does not, at the time of such adjustment, exceed the percentage of the total increase, after the date hereof, 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 hereunder shall not be required for any such adjustment or increase. Such compensation shall be calculated and paid in installments by the Trustee against the Reserve, Income and Capital Accounts of each Trust at the times specified in Section 3.05; provided, however, that such compensation shall be deemed to provide only for the usual, normal and proper functions undertaken as Trustee pursuant to this Indenture. The Trustee shall also charge the Income and Capital Accounts of each Trust for any and all expenses and disbursements incurred hereunder, including license fees, if any, expenses incurred in printing and delivering quarterly, semi-annual or annual communications to Unitholders if the Prospectus so provides, legal and auditing expenses, and for any extraordinary services performed by the Trustee hereunder relating to such Trust.
The Trustee shall be indemnified ratably by the affected Trusts 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
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the premises. If the cash balances in the Reserve, Income and Capital Accounts of the affected Trust shall be insufficient to provide for amounts payable pursuant to this Section 7.04, the Trustee shall have the power to sell (i) Securities of the affected Trust from the Securities designated to be sold pursuant to Section 6.02, or (ii) if no such Securities have been so designated, such Securities of the affected Trust as the Trustee may see fit to sell in its own discretion, and to apply the proceeds of any such sale in payment of the amounts payable pursuant to this Section 7.04.
Notwithstanding anything to the contrary herein, if the Trustee sells or otherwise liquidates Fund Shares pursuant to this Section 7.04, the Trustee shall do so, as nearly as practicable, on a pro rata basis among all Securities held by a Trust.
The Trustee shall not be liable or responsible in any way for depreciation or loss incurred by reason of any sale of Securities made pursuant to this Section 7.04. Any moneys payable to the Trustee pursuant to this Indenture shall be secured by a prior lien on the affected Trust.”
45. The second paragraph of Section 9.02 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“In the event of any termination of the Trust prior to the Mandatory Termination Date, the Trustee shall proceed to liquidate the Securities then held and make the payments and distributions provided for hereinafter in this Section 9.02, except that in such event, the distribution to each Unitholder shall be made in cash and shall be such Unitholder’s pro rata interest in the balance of the Reserve, Capital and Income Accounts after the deductions herein provided. In the event that the Trust shall terminate on the Mandatory Termination Date, the Trustee shall, not less than thirty (30) days prior to the Mandatory Termination Date, send a written notice to all Unitholders of record. If such Unitholder owns the minimum number of Units set forth in a Trust’s Prospectus, such notice shall further indicate that such Unitholder may elect to receive an In Kind Distribution in connection with the termination of such Trust (as described in Section 6.02). The Trustee will honor duly executed requests for In Kind Distributions received by the close of business ten (10) Business Days prior to the Mandatory Termination Date. Unitholders who do not effectively request an In Kind Distribution shall receive their distribution upon termination in cash. Notwithstanding anything to the contrary herein, no Unitholder of a Grantor Trust may elect to receive an In Kind Distribution in connection with the termination of such Trust within thirty (30) days of the termination of such Trust.”
46. The fourth paragraph of Section 9.02 of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“In connection with the termination of a Trust, the Trustee will liquidate the Securities not segregated for In Kind Distributions during such period and in such daily amounts as the Supervisor shall direct. The Depositor shall direct the liquidation of the Securities in such manner as to effectuate orderly sales and a minimal market impact. Notwithstanding the foregoing, the Depositor shall direct the liquidation of Options in a Trust in an effort to liquidate all such Options prior to the expiration of such Options, provided, however, if the Depositor determines that it is in the best interest of the Trust, the Depositor may direct the Trustee to take such action as is necessary to exercise each in-the-money purchased Option and to provide for the settlement of the
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exercise of any written Option assigned to the Trust. In the event the Depositor does not provide directions as to the liquidation of Securities, the Securities shall be sold within a reasonable period and in such manner as the Trustee, in its sole discretion, shall determine, provided that the Trustee shall liquidate each Option position in a Trust on its expiration date prior to expiration or exercise, provided further that if any Option is not so liquidated, the Trustee shall take such action as is necessary to exercise each in-the-money purchased Option and to provide for the settlement of the exercise of any written Option assigned to the Trust. The Trustee shall not be liable for or responsible in any way for depreciation or loss incurred by reason of any sale or sales made in accordance with the Depositor’s direction or, in the absence of such direction, in the exercise of the discretion granted by this Section 9.02. The Trustee shall deduct from the proceeds of these sales and pay any tax or governmental charges and any brokerage commissions in connection with such sales. Amounts received by the Trustee representing the proceeds from the sales of Securities shall be credited to the Capital Account.”
47. Section 9.02(a) through (c) of Standard Terms and Conditions of Trust shall be replaced in its entirety with the following:
“(a) deduct from the Reserve Account, or, to the extent funds are not available from the Reserve Account, from the Income Account of such Trust or, to the extent that funds are not available in the Income Account of such Trust, from the Capital Account of such Trust, and pay to itself individually an amount equal to the sum of (i) its accrued compensation for its ordinary recurring services, (ii) any compensation due it for its extraordinary services in connection with such Trust, and (iii) any costs, expenses or indemnities in connection with such Trust as provided herein;
(b) deduct from the Reserve Account, or, to the extent funds are not available from the Reserve Account, from the Income Account of such Trust or, to the extent that funds are not available in the Income Account, from the Capital Account of such Trust, and pay accrued and unpaid fees of the Depositor and counsel (and Supervisor and Evaluator, if applicable) in connection with such Trust, if any;
(c) deduct from the Reserve Account, or, to the extent funds are not available from the Reserve Account, from the Income Account of such Trust or the Capital Account of such Trust any amounts which may be required to be deposited in the Reserve Account to provide for payment of any applicable taxes or other governmental charges and any other amounts which may be required to meet expenses incurred under this Indenture in connection with such Trust;”
48. Notwithstanding anything to the contrary in the Standard Terms and Conditions of Trust, no Unitholder other than the Depositor may request a distribution of Securities in-kind pursuant to Sections 6.02, 6.04 or 9.02.
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In Witness Whereof, the undersigned have caused this Trust Agreement to be executed; all as of the day, month and year first above written.
Advisors Asset Management, Inc. | |
By /s/ALEX R. MEITZNER | |
Senior Vice President |
The Bank of New York Mellon | |
By /s/GERARDO CIPRIANO | |
Vice President | |
Exhibit 1.1
Schedule A to Trust Agreement
Securities Initially Deposited
in
Advisors Disciplined Trust 1682
Incorporated herein by this reference and made a part hereof is the schedule set forth under “Investment Summary—Portfolio” in the Prospectus for the Trust.
111 West Monroe Street Chicago, IL 60603-4080 T 312.845.3000 F 312.701.2361 www.chapman.com |
Exhibit 3.1
September 26, 2019
Advisors Asset Management, Inc.
18925 Base Camp Road
Monument, Colorado 80132
Re: Advisors Disciplined Trust 1682 (the “Fund”)
(File No. 333-210905)
Ladies and Gentlemen:
We have served as counsel for the Fund, in connection with the preparation, execution and delivery of a trust agreement dated as of the date shown above (the “Indenture”) among Advisors Asset Management, Inc., as depositor, supervisor and evaluator (the “Depositor”) and The Bank of New York Mellon, as trustee (the “Trustee”), pursuant to which the Depositor has delivered to and deposited the securities listed in the schedule to the Indenture with the Trustee and pursuant to which the Trustee has provided to or on the order of the Depositor documentation evidencing ownership of units (the “Units”) of fractional undivided interest in and ownership of the unit investment trust of the Fund (the “Trust”), created under said Indenture.
In connection therewith we have examined such pertinent records and documents and matters of law as we have deemed necessary in order to enable us to express the opinions hereinafter set forth. We have assumed the genuineness of all agreements, instruments and documents submitted to us as originals and the conformity to originals of all copies thereof submitted to us. We have also assumed the genuineness of all signatures and the legal capacity of all persons executing agreements, instruments and documents examined or relied upon by us.
We have not reviewed the financial statements, compilation of the securities to be acquired by the Trust, or other financial or statistical data contained in the registration statement and the prospectus, as to which we understand you have been furnished with the reports of the accountants appearing in the registration statement and the prospectus. In addition, we have made no specific inquiry as to whether any stop order or investigatory proceedings have been commenced with respect to the registration statement or the Depositor nor have we reviewed court or governmental agency dockets.
Statements in this opinion as to the validity, binding effect and enforceability of agreements, instruments and documents are subject: (i) to limitations as to enforceability imposed by bankruptcy, reorganization, moratorium, insolvency and other laws of general application relating to or affecting the enforceability of creditors’ rights, and (ii) to limitations under equitable
principles governing the availability of equitable remedies.
The opinions expressed herein are limited to the laws of the State of New York. No opinion is expressed as to the effect that the law of any other jurisdiction might have upon the subject matter of the opinions expressed herein under applicable conflicts of law principles, rules or regulations or otherwise.
Based upon and subject to the foregoing, we are of the opinion that:
1. The execution and delivery of the Indenture and the execution and issuance of the Units in the Trust have been duly authorized; and
2. The Units in the Trust, when duly executed and delivered by the Depositor and the Trustee in accordance with the aforementioned Indenture, will constitute valid and binding obligations of such Trust and the Depositor and such Units, when issued and delivered in accordance with the Indenture against payment of the consideration set forth in the Fund prospectus, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the registration statement relating to the Units referred to above and to the use of our name and to the reference to our firm in said registration statement and in the related prospectus. This opinion is intended solely for the benefit of the addressee in connection with the issuance of Units of the Trust and may not be relied upon in any other manner or by any other person without our express written consent.
Very truly yours,
/s/ CHAPMAN AND CUTLER LLP
Chapman and Cutler LLP
SRA/lew
Exhibit 3.3
September 26, 2019
The Bank of New York Mellon as Trustee of Advisors Disciplined Trust 1682 2 Hanson Place Brooklyn, NY 11217
|
Re: Advisors Disciplined Trust 1682 (the “Trust”)
Ladies and Gentlemen:
We are acting as your counsel in connection with the execution and delivery by you of a certain Reference Trust Agreement (the “Trust Agreement”), dated as of today’s date, between Advisors Asset Management, Inc., as Depositor, Evaluator and Supervisor (the “Depositor”, “Evaluator” and “Supervisor”), and you, as Trustee, establishing the Trust, and the execution by you, as Trustee under the Trust Agreement, of receipts for units evidencing ownership of all of the units of fractional undivided interest (such receipts for units and such aggregate units being herein respectively called “Receipts for Units” and “Units”) in the Trust, as set forth in the prospectus, (the “Prospectus”) included in the registration statement on Form S-6, as amended to the date hereof (the “Registration Statement”), relating to the Trust. The Trust consist of the securities listed under “Portfolio” in the Prospectus, including delivery statements relating to contracts for the purchase of certain securities not yet delivered and cash, cash equivalents or an irrevocable letter or letters of credit, or a combination thereof, in the amount required to pay for such purchases upon the receipt of such securities (such securities, delivery statements and cash, cash equivalents, letter or letters of credit being herein called the “Portfolio Assets”).
We have examined the Trust Agreement, and originals (or copies certified or otherwise identified to our satisfaction) of such other
instruments, certificates and documents as we have deemed necessary or appropriate for the purpose of rendering this opinion. In
such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals
and the conformity to the original documents of all documents submitted to us as copies. As to any facts material to our opinion,
we have, when relevant facts were not independently established, relied upon the aforesaid instruments, certificates and documents.
Based on the foregoing, we are of the opinion that:
1. The
Bank of New York Mellon is a corporation organized under the laws of the State of New York with the powers of a trust company under
the Banking Law of the State of New York.
51 West 52nd Street | New York, NY | 10019-6119 | T 212.415.9200 | F 212.953.7201 | dorsey.com
2. The Trust Agreement and the Standard Terms are in proper form for execution and delivery by you, as Trustee, and each has been duly executed and delivered by you, as Trustee, and assuming due authorization, execution and delivery by the Depositor, the Trust Agreement and the Standard Terms are valid and legally binding obligations of The Bank of New York Mellon.
3. The Receipts for Units are in proper form for execution by you, as Trustee, and have been duly executed by you, as Trustee, and pursuant to the Depositor’s instructions, the Trustee has registered on the registration books of the Trust the ownership of the Units by Cede & Co., as nominee of the Depository Trust Company where it has caused the Units to be credited to the account of the Depositor.
In rendering the foregoing opinion we have not considered, among other things, the merchantability of the Portfolio Assets, whether the Portfolio Assets have been duly authorized and delivered or the tax status of the Portfolio Assets under any federal, state or local laws.
The foregoing opinions are limited to the laws of the State of New York and the federal laws of the United States of America. This opinion is for your benefit and may not be disclosed to or relied upon by any other person without our prior written consent.
We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement relating to the Units and to the use of our name and the reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
/s/ Dorsey & Whitney LLP
Exhibit 4.1
CAPELOGIC INCORPORATED Providing Technology Solutions for Financial Services |
1 Windhaven Court, Monroe Twp, NJ 08831
Telephone: (609) 448-7930 Fax: (973) 206-9430
Web: www.capelogic.com
September 26, 2019
Advisors Asset Management, Inc.
8100 E. 22nd St. North, Building 800
Suite 102
Wichita, KS 67226
Re: Advisors Disciplined Trust 1682 (the “Fund”)
Ladies and Gentlemen:
We have examined the Registration Statement File No. 333-210905 for the above captioned Fund and acknowledge that Capelogic, Inc. is currently acting as the independent pricing agent for the Fund. Subsequently, we hereby consent to the reference of Capelogic, Inc. as independent pricing agent.
You are hereby authorized to file a copy of this letter with the Securities and Exchange Commission.
Sincerely,
Capelogic, Inc.
By /s/ SALMAN AHMAD
Salman Ahmad
Treasurer
Exhibit 4.2
Consent of Independent Registered Public Accounting Firm
We have issued our report dated September 26, 2019, with respect to the financial statement of Advisors Disciplined Trust 1682 contained in Amendment No. 7 to the Registration Statement on Form S-6 (File No. 333-210905) and related Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts”.
/s/ Grant Thornton LLP
Chicago, Illinois
September 26, 2019
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