1933 ACT FILE NO.: 333-209193
1940 ACT FILE NO.: 811-21056
CIK NO.: 1655646
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust: Advisors Disciplined Trust 1640
B. Name of depositor: ADVISORS ASSET MANAGEMENT, INC.
C. Complete address of depositor's principal executive offices:
18925 Base Camp Road
Monument, Colorado 80132
D. Name and complete address of agent for service:
WITH A COPY TO:
Scott Colyer Scott R. Anderson
ADVISORS ASSET MANAGEMENT, INC. CHAPMAN AND CUTLER LLP
18925 Base Camp Road 111 West Monroe Street
Monument, Colorado 80132 Chicago, Illinois 60603-4080
E. Title of securities being registered: Units of undivided beneficial
interest in the trust
F. Approximate date of proposed public offering:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
[X] Check box if it is proposed that this filing will become effective on
April 15, 2016 at 10:00 a.m. pursuant to Rule 487.
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BEST IDEAS STRATEGY PORTFOLIO, SERIES 2016-2Q - A HARTFORD INVESTMENT
MANAGEMENT COMPANY ("HIMCO") PORTFOLIO
(ADVISORS DISCIPLINED TRUST 1640)
A unit investment trust holding an
unmanaged portfolio of stocks
seeking above average total return
through capital appreciation
and dividend income
PROSPECTUS
APRIL 15, 2016
[LOGO] As with any investment, the Securities
and Exchange Commission has not approved
AAM or disapproved of these securities or
passed upon the adequacy or accuracy of
ADVISORS this prospectus. Any contrary
ASSET MANAGEMENT representation is a criminal offense.
------------------
INVESTMENT SUMMARY
------------------
INVESTMENT OBJECTIVE
The trust seeks to provide above average total return through capital
appreciation and dividend income. There is no assurance the trust will achieve
its objective.
PRINCIPAL INVESTMENT STRATEGY
The trust seeks to achieve its objective by investing in a portfolio of
common stocks selected from the Russell 3000(R) Index. The portfolio was
selected by Hartford Investment Management Company ("HIMCO").
HIMCO used a structured quantitative approach combined with fundamental
oversight. The process began with sector-relative quantitative screening and
input on security selection gathered from HIMCO's fundamental equity and fixed
income credit analysts.
The sector-relative quantitative screening sought to identify companies
within HIMCO's custom industry sector classifications with the strongest
fundamentals relative to peers, focusing on solid balance sheets, high quality
earnings, and attractive growth prospects. This screening process also
considered the impact of potential corporate events that HIMCO believes may
alter a company's future fundamentals. The process produced a ranking of each
sector's top securities. To select the final portfolio, the top securities from
these rankings were then reviewed for the strongest investment theses by HIMCO's
fundamental equity analysts and for an additional assessment of downside risks
by HIMCO's fixed income credit analysts. This multi-layer approach sought to
generate a portfolio of HIMCO's "best ideas" as of the trust's inception for
high quality stocks of U.S. companies with attractive total return potential.
PRINCIPAL RISKS
As with all investments, you can lose money by investing in this trust. The
trust also might not perform as well as you expect. This can happen for reasons
such as these:
* SECURITY PRICES WILL FLUCTUATE. The value of your investment may fall over
time.
* THE ISSUER OF A SECURITY MAY BE UNWILLING OR UNABLE TO MAKE DIVIDEND PAYMENTS
IN THE FUTURE. This may reduce the level of dividends the trust receives
which would reduce your income and cause the value of your units to fall.
* THE FINANCIAL CONDITION OF AN ISSUER MAY WORSEN OR ITS CREDIT RATINGS MAY
DROP, RESULTING IN A REDUCTION IN THE VALUE OF YOUR UNITS. This may occur
at any point in time, including during the primary offering period of the
trust.
* THE TRUST INVESTS SIGNIFICANTLY IN SECURITIES OF SMALL AND MID-SIZE
COMPANIES. These stocks are often more volatile and have lower trading
volumes than stocks of larger companies. Small and mid-size companies may
have limited products or financial resources, management inexperience and
less publicly available information.
* WE* DO NOT ACTIVELY MANAGE THE PORTFOLIO. Except in limited
circumstances, the trust will generally hold, and continue to buy, shares
of the same securities even if their market value declines.
--------------------
* "AAM," "we" and related terms mean Advisors Asset Management, Inc., the
trust sponsor, unless the context clearly suggests otherwise.
2 Investment Summary
WHO SHOULD INVEST
You should consider this investment if you want:
* to own a portfolio primarily consisting of stocks.
* the potential for above average total return through capital appreciation
and dividend income.
You should not consider this investment if you:
* are uncomfortable with the risks of an unmanaged investment in stocks.
* seek capital preservation.
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ESSENTIAL INFORMATION
---------------------
UNIT PRICE AT INCEPTION $10.0000
INCEPTION DATE April 15, 2016
TERMINATION DATE July 17, 2017
ESTIMATED NET ANNUAL
DISTRIBUTIONS* $0.1144 per unit
DISTRIBUTION DATES 25th day of each month
RECORD DATES 10th day of each month
CUSIP NUMBERS
Standard Accounts
Cash distributions 00774G181
Reinvest distributions 00774G199
Fee Based Accounts
Cash distributions 00774G207
Reinvest distributions 00774G215
TICKER SYMBOL BIDEGX
MINIMUM INVESTMENT $1,000/100 units
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*As of April 14, 2016 and may vary thereafter.
FEES AND EXPENSES
The amounts below are estimates of the direct and indirect expenses that you
may incur based on a $10 unit price. Actual expenses may vary.
AS A % AMOUNT
OF $1,000 PER 100
SALES FEE INVESTED UNITS
------------------------
Initial sales fee 1.00% $10.00
Deferred sales fee 1.45 14.50
Creation & development fee 0.50 5.00
------- -------
Maximum sales fee 2.95% $29.50
======= =======
ORGANIZATION COSTS 0.30% $3.00
======= =======
AS A % AMOUNT
ANNUAL OF NET PER 100
OPERATING EXPENSES ASSETS UNITS
------------------------
Trustee fee & expenses 0.17% $1.67
Supervisory, evaluation
and administration fees 0.10 1.00
------- -------
Total 0.27% $2.67
======= =======
The initial sales fee is the difference between the total sales fee (maximum
of 2.95% of the unit offering price) and the sum of the remaining deferred sales
fee and the total creation and development fee. The deferred sales fee is fixed
at $0.145 per unit and is paid in three monthly installments beginning
July 20, 2016. The creation and development fee is fixed at $0.05 per unit
and is paid at the end of the initial offering period (anticipated to be
approximately three months).
EXAMPLE
This example helps you compare the cost of this trust with other unit trusts
and mutual funds. In the example we assume that the expenses do not change and
that the trust's annual return is 5%. Your actual returns and expenses will
vary. Based on these assumptions, you would pay these expenses for every
$10,000 you invest in the trust:
1 year $354
3 years $882
5 years $1,436
10 years $2,949
This example assumes that you continue to follow the trust strategy and roll
your investment, including all distributions, into a new series of the trust
each year subject to a reduced rollover sales charge of 1.95%.
Investment Summary 3
BEST IDEAS STRATEGY PORTFOLIO,
SERIES 2016-2Q - A HARTFORD INVESTMENT MANAGEMENT COMPANY ("HIMCO") PORTFOLIO
(ADVISORS DISCIPLINED TRUST 1640)
PORTFOLIO
AS OF THE TRUST INCEPTION DATE, APRIL 15, 2016
PERCENTAGE OF MARKET COST OF
NUMBER TICKER AGGREGATE OFFERING VALUE PER SECURITIES
OF SHARES SYMBOL ISSUER(1) PRICE SHARE(1) TO TRUST(2)
--------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 100.00%
CONSUMER DISCRETIONARY - 11.99%
37 AAP Advance Auto Parts, Inc. 4.01% $160.94 $5,955
639 ELY Callaway Golf Company 3.99 9.26 5,917
421 TAST Carrols Restaurant Group, Inc. (4) 3.99 14.07 5,923
CONSUMER STAPLES - 7.98%
67 DPS Dr. Pepper Snapple Group, Inc. 3.98 88.25 5,913
160 KR The Kroger Company 4.00 37.07 5,931
ENERGY - 4.03%
70 XOM Exxon Mobil Corporation 4.03 85.43 5,980
FINANCIALS - 15.99%
92 CBOE CBOE Holdings, Inc. 3.99 64.34 5,919
705 GPT Gramercy Property Trust 4.00 8.41 5,929
285 NBHC National Bank Holdings Corporation 4.00 20.82 5,934
163 XL XL Group PLC (3) 4.00 36.41 5,935
HEALTH CARE - 11.98%
37 AMGN Amgen, Inc. 3.99 160.12 5,924
199 CTLT Catalent, Inc. (4) 3.99 29.75 5,920
80 DVA DaVita HealthCare Partners, Inc. (4) 4.00 74.20 5,936
INDUSTRIALS - 19.98%
104 HURN Huron Consulting Group, Inc. (4) 3.99 56.99 5,927
57 ITW Illinois Tool Works, Inc. 4.03 104.93 5,981
109 LABL Multi-Color Corporation 3.99 54.29 5,918
47 RTN Raytheon Company 3.97 125.15 5,882
72 UNP Union Pacific Corporation 4.00 82.32 5,927
(Continued)
4 Investment Summary
BEST IDEAS STRATEGY PORTFOLIO,
SERIES 2016-2Q - A HARTFORD INVESTMENT MANAGEMENT COMPANY ("HIMCO") PORTFOLIO
(ADVISORS DISCIPLINED TRUST 1640)
PORTFOLIO (CONTINUED)
AS OF THE TRUST INCEPTION DATE, APRIL 15, 2016
PERCENTAGE OF MARKET COST OF
NUMBER TICKER AGGREGATE OFFERING VALUE PER SECURITIES
OF SHARES SYMBOL ISSUER(1) PRICE SHARE(1) TO TRUST(2)
--------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 16.02%
101 APH Amphenol Corporation 4.00% $58.77 $5,936
54 FB Facebook, Inc. (4) 4.03 110.84 5,985
187 INTC Intel Corporation 4.01 31.80 5,947
166 VRNT Verint Systems, Inc. (4) 3.98 35.58 5,906
MATERIALS - 8.02%
594 AA Alcoa, Inc. 4.01 10.01 5,946
189 POL PolyOne Corporation 4.01 31.48 5,950
UTILITIES - 4.01%
144 CMS CMS Energy Corporation 4.01 41.29 5,946
--------- ----------
100.00% $148,367
========= ==========
Notes to Portfolio
(1) Securities are represented by contracts to purchase securities. The value
of each security is based on the most recent closing sale price of each
security as of the close of regular trading on the New York Stock Exchange
on the business day prior to the trust's inception date. In accordance
with Accounting Standards Codification 820, "Fair Value Measurements", the
trust's investments are classified as Level 1, which refers to security
prices determined using quoted prices in active markets for identical
securities.
(2) The cost of the securities to the sponsor and the sponsor's profit or
(loss) (which is the difference between the cost of the securities to the
sponsor and the cost of the securities to the trust) are $148,367 and $0,
respectively.
(3) This is a security issued by a foreign company.
Common stocks comprise approximately 100.00% of the investments in the
trust, broken down by country of organization as set forth below:
Ireland 4.00%
United States 96.00%
(4) This is a non-income producing security.
Investment Summary 5
-----------------------------
UNDERSTANDING YOUR INVESTMENT
-----------------------------
HOW TO BUY UNITS
You can buy units of the trust on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMLIVE.COM. The public offering price
of units includes:
* the net asset value per unit plus
* organization costs plus
* the sales fee.
The "net asset value per unit" is the value of the securities, cash and other
assets in the trust reduced by the liabilities of the trust divided by the total
units outstanding. We often refer to the public offering price of units as the
"offer price" or "purchase price." The offer price will be effective for all
orders received prior to the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern time). If we receive your order prior to
the close of regular trading on the New York Stock Exchange or authorized
financial professionals receive your order prior to that time and properly
transmit the order to us by the time that we designate, then you will receive
the price computed on the date of receipt. If we receive your order after the
close of regular trading on the New York Stock Exchange, if authorized financial
professionals receive your order after that time or if orders are received by
such persons and are not transmitted to us by the time that we designate, then
you will receive the price computed on the date of the next determined offer
price provided that your order is received in a timely manner on that date. It
is the responsibility of the authorized financial professional to transmit the
orders that they receive to us in a timely manner. Certain broker-dealers may
charge a transaction or other fee for processing unit purchase orders.
VALUE OF THE SECURITIES. We determine the value of the securities as of the
close of regular trading on the New York Stock Exchange on each day that
exchange is open. We generally determine the value of securities using the last
sale price for securities traded on a national securities exchange. For this
purpose, the trustee provides us closing prices from a reporting service
approved by us. In some cases we will price a security based on the last asked
or bid price in the over-the-counter market or by using other recognized pricing
methods. We will only do this if a security is not principally traded on a
national securities exchange or if the market quotes are unavailable or
inappropriate.
We determined the initial prices of the securities shown under "Portfolio" in
this prospectus as described above at the close of regular trading on the New
York Stock Exchange on the business day before the date of this prospectus. On
the first day we sell units we will compute the unit price as of the close of
regular trading on the New York Stock Exchange or the time the registration
statement filed with the Securities and Exchange Commission becomes effective,
if later.
ORGANIZATION COSTS. During the initial offering period, part of the value of
the securities represents an amount that will pay the costs of creating your
trust. These costs include the costs of preparing the registration statement
and legal documents, federal and state registration fees, HIMCO's security
selection fee, the initial fees and expenses of the trustee and the initial
audit. Your trust will sell securities to reimburse us for these costs at the
end of the initial offering period or after six months, if earlier. The value
of your units will decline when the trust pays these costs.
6 Understanding Your Investment
TRANSACTIONAL SALES FEE. You pay a fee in connection with purchasing units.
We refer to this fee as the "transactional sales fee." The transactional sales
fee has both an initial and a deferred component and equals 2.45% of the public
offering price per unit based on a $10 public offering price per unit. This
percentage amount of the transactional sales fee is based on the unit price on
the trust's inception date. The transactional sales fee equals the difference
between the total sales fee and the creation and development fee. As a result,
the percentage and dollar amount of the transactional sales fee will vary as the
public offering price per unit varies. The transactional sales fee does not
include the creation and development fee which is described under "Fees and
Expenses."
The maximum sales fee equals 2.95% of the public offering price per unit at
the time of purchase. You pay the initial sales fee at the time you buy units.
The initial sales fee is the difference between the total sales fee percentage
(maximum of 2.95% of the public offering price per unit) and the sum of the
remaining fixed dollar deferred sales fee and the total fixed dollar creation
and development fee. The initial sales fee will be approximately 1.00% of the
public offering price per unit depending on the public offering price per unit.
The deferred sales fee is fixed at $0.145 per unit. Your trust pays the
deferred sales fee in equal monthly installments as described on page 3. If you
redeem or sell your units prior to collection of the total deferred sales fee,
you will pay any remaining deferred sales fee upon redemption or sale of your
units.
If you purchase units after the last deferred sales fee payment has been
assessed, the secondary market sales fee is equal to 2.95% of the public
offering price and does not include deferred payments (i.e., unitholders who buy
in the secondary market after collection of the deferred sales fees are not
charged deferred sales fees).
MINIMUM PURCHASE. The minimum amount you can purchase of the trust appears
on page 3 under "Essential Information", but such amounts may vary depending on
your selling firm.
REDUCING YOUR SALES FEE. We offer a variety of ways for you to reduce the
fee you pay. It is your financial professional's responsibility to alert us of
any discount when you order units. Except as expressly provided herein, you may
not combine discounts. Since the deferred sales fee and the creation and
development fee are fixed dollar amounts per unit, your trust must charge these
fees per unit regardless of any discounts. However, if you are eligible to
receive a discount such that your total sales fee is less than the fixed dollar
amounts of the deferred sales fee and the creation and development fee, we will
credit you the difference between your total sales fee and these fixed dollar
fees at the time you buy units.
Large Purchases. You can reduce your sales fee by increasing the size of
your investment:
IF YOU PURCHASE: YOUR FEE WILL BE:
------------------------------------------
Less than $50,000 2.95%
$50,000 - $99,999 2.70
$100,000 - $249,999 2.45
$250,000 - $499,999 2.20
$500,000 - $999,999 1.95
$1,000,000 or more 1.40
We apply these fees as a percent of the public offering price per unit at the
time of purchase. The breakpoints will be adjusted to take into consideration
purchase orders stated in dollars which cannot be completely fulfilled due to
the requirements that only whole units be issued.
You aggregate initial offering period unit orders submitted by the same
person for units of any of the trusts we sponsor on any single day
Understanding Your Investment 7
from any one broker-dealer to qualify for a purchase level. If you purchase
initial offering period units that qualify for the fee account or
rollover/exchange discount described below and also purchase additional initial
offering period units on a single day from the same broker-dealer that do not
qualify for the fee account or rollover/exchange discount, you aggregate all
initial offering period units purchased for purposes of determining the
applicable breakpoint level in the table above on the additional units, but such
additional units will not qualify for the fee account or rollover/exchange
discount described below. Secondary market unit purchases are not aggregated
with initial offering period unit purchases for purposes of determining the
applicable breakpoint level. You can also include these orders as your own for
purposes of this aggregation:
* orders submitted by your spouse or children (including step-children)
under 21 years of age living in the same household and
* orders submitted by your trust estate or fiduciary accounts.
The discounts described above apply only to initial offering period
purchases.
Fee Accounts. Investors may purchase units through registered investment
advisers, certified financial planners or registered broker-dealers who in each
case either charge investor accounts ("Fee Accounts") periodic fees for
brokerage services, financial planning, investment advisory or asset management
services, or provide such services in connection with an investment account for
which a comprehensive "wrap fee" charge ("Wrap Fee") is imposed. You should
consult your financial advisor to determine whether you can benefit from these
accounts. To purchase units in these Fee Accounts, your financial advisor must
purchase units designated with one of the Fee Account CUSIP numbers, if
available. Please contact your financial advisor for more information. If
units of the trust are purchased for a Fee Account and the units are subject to
a Wrap Fee in such Fee Account (i.e., the trust is "Wrap Fee Eligible") then
investors may be eligible to purchase units of the trust in these Fee Accounts
that are not subject to the transactional sales fee but will be subject to the
creation and development fee that is retained by the sponsor. For example, this
table illustrates the sales fee you will pay as a percentage of the initial $10
public offering price per unit (the percentage will vary with the unit price).
Initial sales fee 0.00%
Deferred sales fee 0.00%
-------
Transactional sales fee 0.00%
=======
Creation and development fee 0.50%
-------
Total sales fee 0.50%
=======
This discount applies only during the initial offering period. Certain Fee
Account investors may be assessed transaction or other fees on the purchase
and/or redemption of units by their broker-dealer or other processing
organizations for providing certain transaction or account activities. We
reserve the right to limit or deny purchases of units in Fee Accounts by
investors or selling firms whose frequent trading activity is determined to be
detrimental to the trust.
Employees. We waive the transactional sales fee for purchases made by
officers, directors and employees (and immediate family members) of the sponsor
and its affiliates. These purchases are not subject to the transactional sales
fee but will be subject to the creation and development fee. We also waive a
portion of the sales fee for purchases made by officers, directors and employees
(and immediate family members) of selling firms. These purchases are made at the
public offering
8 Understanding Your Investment
price per unit less the applicable regular dealer concession. Immediate family
members for the purposes of this section include your spouse, children
(including step-children) under the age of 21 living in the same household, and
parents (including step-parents). These discounts apply to initial offering
period and secondary market purchases. All employee discounts are subject to the
policies of the related selling firm, including but not limited to, householding
policies or limitations. Only officers, directors and employees (and their
immediate family members) of selling firms that allow such persons to
participate in this employee discount program are eligible for the discount.
Rollover/Exchange Option. We waive a portion of the sales fee on units of
the trust offered in this prospectus if you buy your units with redemption or
termination proceeds from any unit investment trusts (regardless of sponsor).
The discounted public offering price per unit for these transactions is equal to
the regular public offering price per unit less 1.00%. However, if you invest
redemption or termination proceeds of $500,000 or more in units of the trust,
the maximum sales fee on your units will be limited to the maximum sales fee for
the applicable amount invested in the table under "Large Purchases" above. To
qualify for this discount, the termination or redemption proceeds used to
purchase units of the trust offered in this prospectus must be derived from a
transaction that occurred within 30 calendar days of your purchase of units of
the trust offered in this prospectus. In addition, the discount will only be
available for investors that utilize the same broker-dealer (or a different
broker-dealer with appropriate notification) for both the unit purchase and the
transaction resulting in the receipt of the termination or redemption proceeds
used for the unit purchase. You may be required to provide appropriate
documentation or other information to your broker-dealer to evidence your
eligibility for this sales fee discount.
Please note that if you purchase units of the trust in this manner using
redemption proceeds from trusts which assess the amount of any remaining
deferred sales fee at redemption, you should be aware that any deferred sales
fee remaining on these units will be deducted from those redemption proceeds.
These discounts apply only to initial offering period purchases.
Dividend Reinvestment Plan. We do not charge any sales fee when you reinvest
distributions from your trust into additional units of the trust. This sales
fee discount applies to initial offering period and secondary market purchases.
Since the deferred sales fee and the creation and development fee are fixed
dollar amounts per unit, your trust must charge these fees per unit regardless
of this discount. If you elect the distribution reinvestment plan, we will
credit you with additional units with a dollar value sufficient to cover the
amount of any remaining deferred sales fee or creation and development fee that
will be collected on such units at the time of reinvestment. The dollar value
of these units will fluctuate over time.
RETIREMENT ACCOUNTS. The portfolio may be suitable for purchase in tax-
advantaged retirement accounts. You should contact your financial professional
about the accounts offered and any additional fees imposed.
HOW TO SELL YOUR UNITS
You can sell or redeem your units on any business day the New York Stock
Exchange is open by contacting your financial professional. Unit prices are
available daily on the Internet at WWW.AAMLIVE.COM or through your financial
professional. The sale and redemption price of units is equal to the net asset
value per unit, provided that you will not pay any remaining creation and
Understanding Your Investment 9
development fee or organization costs if you sell or redeem units during the
initial offering period. The sale and redemption price is sometimes referred to
as the "liquidation price." You pay any remaining deferred sales fee when you
sell or redeem your units. Certain broker-dealers may charge a transaction or
other fee for processing unit redemption or sale requests.
SELLING UNITS. We may maintain a secondary market for units. This means
that if you want to sell your units, we may buy them at the current net asset
value, provided that you will not pay any remaining creation and development fee
or organization costs if you sell units during the initial offering period. We
may then resell the units to other investors at the public offering price or
redeem them for the redemption price. Our secondary market repurchase price is
the same as the redemption price. Certain broker-dealers might also maintain a
secondary market in units. You should contact your financial professional for
current repurchase prices to determine the best price available. We may
discontinue our secondary market at any time without notice. Even if we do not
make a market, you will be able to redeem your units with the trustee on any
business day for the current redemption price.
REDEEMING UNITS. You may also redeem your units directly with the trustee,
The Bank of New York Mellon, on any day the New York Stock Exchange is open.
The redemption price that you will receive for units is equal to the net asset
value per unit, provided that you will not pay any remaining creation and
development fee or organization costs if you redeem units during the initial
offering period. You will pay any remaining deferred sales fee at the time you
redeem units. You will receive the net asset value for a particular day if the
trustee receives your completed redemption request prior to the close of regular
trading on the New York Stock Exchange. Redemption requests received by
authorized financial professionals prior to the close of regular trading on the
New York Stock Exchange that are properly transmitted to the trustee by the time
designated by the trustee, are priced based on the date of receipt. Redemption
requests received by the trustee after the close of regular trading on the New
York Stock Exchange, redemption requests received by authorized financial
professionals after that time or redemption requests received by such persons
that are not transmitted to the trustee until after the time designated by the
trustee, are priced based on the date of the next determined redemption price
provided they are received in a timely manner by the trustee on such date. It
is the responsibility of authorized financial professionals to transmit
redemption requests received by them to the trustee so they will be received in
a timely manner. If your request is received after that time or is incomplete
in any way, you will receive the next net asset value computed after the trustee
receives your completed request.
If you redeem your units, the trustee will generally send you a payment for
your units no later than seven days after it receives all necessary
documentation (this will usually only take three business days). The only time
the trustee can delay your payment is if the New York Stock Exchange is closed
(other than weekends or holidays), the Securities and Exchange Commission
determines that trading on that exchange is restricted or an emergency exists
making sale or evaluation of the securities not reasonably practicable, and for
any other period that the Securities and Exchange Commission permits.
You can request an in-kind distribution of the securities underlying your
units if you tender at least 2,500 units for redemption (or such other amount as
required by your financial professional's
10 Understanding Your Investment
firm). This option is generally available only for securities traded and held
in the United States. The trustee will make any in-kind distribution of
securities by distributing applicable securities in book entry form to the
account of your financial professional at Depository Trust Company. You will
receive whole shares of the applicable securities and cash equal to any
fractional shares. You may not request this option in the last 30 days of your
trust's life. We may discontinue this option at any time without notice.
EXCHANGE OPTION. You may be able to exchange your units for units of our
other unit trusts at a reduced sales fee. You can contact your financial
professional for more information about trusts currently available for
exchanges. Before you exchange units, you should read the prospectus carefully
and understand the risks and fees. You should then discuss this option with
your financial professional to determine whether your investment goals have
changed, whether current trusts suit you and to discuss tax consequences. We
may discontinue this option upon sixty days notice.
DISTRIBUTIONS
MONTHLY DISTRIBUTIONS. Your trust generally pays distributions of its net
investment income (pro-rated on an annual basis) along with any excess capital
on each monthly distribution date to unitholders of record on the preceding
record date. The record and distribution dates are shown under "Essential
Information" in the "Investment Summary" section of this prospectus. In some
cases, your trust might pay a special distribution if it holds an excessive
amount of cash pending distribution. For example, this could happen as a result
of a merger or similar transaction involving a company whose stock is in your
portfolio. The trust will also generally make required distributions or
distributions to avoid imposition of tax at the end of each year because it is
structured as a "regulated investment company" for federal tax purposes. The
amount of your distributions will vary from time to time as companies change
their dividends or trust expenses change.
When the trust receives dividends or other income payments from a portfolio
security, the trustee credits the dividends or other income payments to the
trust's accounts. In an effort to make relatively regular income distributions,
the trust's monthly income distribution is equal to one-twelfth of the estimated
net annual income to be received by the trust after deduction of trust operating
expenses. Because the trust does not receive dividends from the portfolio
securities at a constant rate throughout the year, the trust's income
distributions to unitholders may be more or less than the amount credited to the
trust accounts as of the record date. For the purpose of minimizing fluctuation
in income distributions, the trustee is authorized to advance such amounts as
may be necessary to provide income distributions of approximately equal amounts.
The trustee will be reimbursed, without interest, for any such advances from
available income received by the trust on the ensuing record date.
ESTIMATED ANNUAL DISTRIBUTIONS. The estimated net annual distributions are
shown under "Essential Information" in the "Investment Summary" section of this
prospectus. We generally base the estimate of the income the trust may receive
on annualizing the most recent ordinary dividend declared by an issuer (or
adding the most recent interim and final dividends declared for certain foreign
issuers) or on scheduled income payments. However, dividend conventions for
certain companies and/or certain countries differ from those typically used in
the
Understanding Your Investment 11
United States and in certain instances, dividends paid or declared over several
years or other periods were used to estimate annual distributions. Due to this
and various other factors, actual income payments received by the trust will
most likely differ from the most recent annualized dividends or scheduled income
payments. The actual net annual distributions you will receive will vary with
changes in the trust's fees and expenses, in income payments received and with
the sale of securities.
REPORTS. The trustee or your financial professional will make available to
you a statement showing income and other receipts of your trust for each
distribution. Each year the trustee will also provide an annual report on your
trust's activity and certain tax information. You can request copies of
security evaluations to enable you to complete your tax forms and audited
financial statements for your trust, if available.
INVESTMENT RISKS
All investments involve risk. This section describes the main risks that can
impact the value of the securities in your portfolio. You should understand
these risks before you invest. If the value of the securities falls, the value
of your units will also fall. We cannot guarantee that your trust will achieve
its objective or that your investment return will be positive over any period.
MARKET RISK is the risk that the value of the securities in your trust will
fluctuate. This could cause the value of your units to fall below your original
purchase price. Market value fluctuates in response to various factors. These
can include changes in interest rates, inflation, the financial condition of a
security's issuer, perceptions of the issuer, or ratings on a security. Even
though we supervise your portfolio, you should remember that we do not manage
your portfolio. Your trust will not sell a security solely because the market
value falls as is possible in a managed fund.
DIVIDEND PAYMENT RISK is the risk that an issuer of a security is unwilling
or unable to pay income on a security. Stocks represent ownership interests in
the issuers and are not obligations of the issuers. Common stockholders have a
right to receive dividends only after the company has provided for payment of
its creditors, bondholders and preferred stockholders. Common stocks do not
assure dividend payments. Dividends are paid only when declared by an issuer's
board of directors and the amount of any dividend may vary over time.
FOREIGN ISSUER RISK. An investment in securities of foreign issuers involves
certain risks that are different in some respects from an investment in
securities of domestic issuers. These include risks associated with future
political and economic developments, international trade conditions, foreign
withholding taxes, liquidity concerns, currency fluctuations, volatility,
restrictions on foreign investments and exchange of securities, potential for
expropriation of assets, confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, potential inability to collect when a company goes
bankrupt and economic, political or social instability. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy for
reasons including differences in growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments positions. There may be less publicly available information about a
foreign issuer than is available from a domestic issuer as a result of different
accounting, auditing and financial reporting standards. Some foreign markets
are less liquid than U.S. markets which could cause securities to be bought at a
12 Understanding Your Investment
higher price or sold at a lower price than would be the case in a highly liquid
market.
Securities of certain foreign issuers may be denominated or quoted in
currencies other than the U.S. dollar. Foreign issuers also make payments and
conduct business in foreign currencies. Many foreign currencies have fluctuated
widely in value against the U.S. dollar for various economic and political
reasons. Changes in foreign currency exchange rates may affect the value of
foreign securities and dividend payments. Generally, when the U.S. dollar rises
in value against a foreign currency, a security denominated in that currency
loses value because the currency is worth fewer U.S. dollars. Conversely, when
the U.S. dollar decreases in value against a foreign currency, a security
denominated in that currency gains value because the currency is worth more U.S.
dollars. The U.S. dollar value of income payments on foreign securities will
fluctuate similarly with changes in foreign currency values.
Certain foreign securities may be held in the form of American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), or other similar
receipts. Depositary receipts represent receipts for foreign securities
deposited with a custodian (which may include the trustee of the trust).
Depository receipts may not be denominated in the same currency as the
securities into which they may be converted. ADRs typically trade in the U.S.
in U.S. dollars and are registered with the Securities and Exchange Commission.
GDRs are similar to ADRs, but GDRs typically trade outside of the U.S. and
outside of the country of the issuer in the currency of the country where the
GDR trades. Depositary receipts generally involve most of the same types of
risks as foreign securities held directly but typically also involve additional
expenses associated with the cost of the custodian's services. Some depositary
receipts may experience less liquidity than the underlying securities traded in
their home market. Certain depositary receipts are unsponsored (i.e. issued
without the participation or involvement of the issuer of the underlying
security). The issuers of unsponsored depositary receipts are not obligated to
disclose information that may be considered material in the U.S. Therefore,
there may be less information available regarding these issuers which can impact
the relationship between certain information impacting a security and the market
value of the depositary receipts.
CONCENTRATION RISK is the risk that the value of your trust is more
susceptible to fluctuations based on factors that impact a particular sector
because the portfolio concentrates in securities issued by companies within that
sector. A portfolio "concentrates" in a sector when securities in a particular
sector make up 25% or more of the portfolio.
SMALL AND MID-SIZE COMPANIES. The trust invests significantly in securities
issued by small and mid-size companies. The share prices of these companies are
often more volatile than those of larger companies as a result of several
factors common to many such issuers, including limited trading volumes, products
or financial resources, management inexperience and less publicly available
information.
LEGISLATION/LITIGATION. From time to time, various legislative initiatives
are proposed in the United States and abroad which may have a negative impact on
certain of the companies represented in the trust. In addition, litigation
regarding any of the issuers of the securities or of the industries represented
by these issuers may negatively impact the share prices of these securities. No
one can predict what impact any pending or threatened litigation will have on
the share prices of the securities.
Understanding Your Investment 13
LIQUIDITY RISK is the risk that the value of a security will fall if trading
in the security is limited or absent. No one can guarantee that a liquid
trading market will exist for any security.
NO FDIC GUARANTEE. An investment in the trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
HOW THE TRUST WORKS
YOUR TRUST. Your trust is a unit investment trust registered under the
Investment Company Act of 1940. We created the trust under a trust agreement
between Advisors Asset Management, Inc. (as depositor/sponsor, evaluator and
supervisor) and The Bank of New York Mellon (as trustee). To create your trust,
we deposited securities with the trustee (or contracts to purchase securities
along with an irrevocable letter of credit or other consideration to pay for the
securities). In exchange, the trustee delivered units of your trust to us.
Each unit represents an undivided interest in the assets of your trust. These
units remain outstanding until redeemed or until your trust terminates. At the
close of the New York Stock Exchange on the trust's inception date, the number
of units may be adjusted so that the public offering price per unit equals $10.
The number of units and fractional interest of each unit in the trust will
increase or decrease to the extent of any adjustment.
CHANGING YOUR PORTFOLIO. Your trust is not a managed fund. Unlike a managed
fund, we designed your portfolio to remain relatively fixed. Your trust will
generally buy and sell securities:
* to pay expenses,
* to issue additional units or redeem units,
* in limited circumstances to protect the trust,
* to make required distributions or avoid imposition of taxes on the trust,
or
* as permitted by the trust agreement.
When your trust sells securities, the composition and diversification of the
securities in the portfolio may be altered. If a public tender offer has been
made for a security or a merger, acquisition or similar transaction has been
announced affecting a security, the trustee may either sell the security or
accept a tender offer if the supervisor determines that the action is in the
best interest of unitholders. The trustee will distribute any cash proceeds to
unitholders. If an offer by the issuer of any of the portfolio securities or
any other party is made to issue new securities, or to exchange securities, for
trust portfolio securities, the trustee will at the direction of the sponsor,
vote for or against, or accept or reject, any offer for new or exchanged
securities or property in exchange for a trust portfolio security. If any such
issuance, exchange or substitution occurs (regardless of any action or rejection
by a trust), any securities and/or property received will be deposited into the
trust and will be promptly sold by the trustee pursuant to the sponsor's
direction, unless the sponsor advises the trustee to keep such securities or
property. If any contract for the purchase of securities fails, the sponsor
will refund the cash and sales fee attributable to the failed contract to
unitholders on or before the next distribution date unless substantially all of
the moneys held to cover the purchase are reinvested in substitute securities in
accordance with the trust agreement. The sponsor may direct the reinvestment of
security sale proceeds if the sale is the direct result of serious adverse
credit factors which, in the opinion of the sponsor, would make retention of the
securities detrimental to the trust.
14 Understanding Your Investment
In such a case, the sponsor may, but is not obligated to, direct the
reinvestment of sale proceeds in any other securities that meet the criteria for
inclusion in the trust on the trust's inception date. The sponsor may also
instruct the trustee to take action necessary to ensure that the portfolio
continues to satisfy the qualifications of a regulated investment company.
We will increase the size of your trust as we sell units. When we create
additional units, we will seek to replicate the existing portfolio. When your
trust buys securities, it may pay brokerage or other acquisition fees. You
could experience a dilution of your investment because of these fees and
fluctuations in security prices between the time we create units and the time
your trust buys the securities. When your trust buys or sells securities, we
may direct that it place orders with and pay brokerage commissions to brokers
that sell units or are affiliated with us, your trust or the trustee.
Pursuant to an exemptive order, your trust may be able to purchase securities
from other trusts that we sponsor when we create additional units. Your trust
may also be able to sell securities to other trusts that we sponsor to satisfy
unit redemption, pay deferred sales charges or expenses, in connection with
periodic tax compliance or in connection with the termination of your trust.
The exemption may enable each trust to eliminate commission costs on these
transactions. The price for those securities will be the closing price on the
sale date on the exchange where the securities are principally traded as
certified by us to the trustee.
AMENDING THE TRUST AGREEMENT. The sponsor and the trustee can change the
trust agreement without your consent to correct any provision that may be
defective or to make other provisions that will not materially adversely affect
your interest (as determined by the sponsor and the trustee). We cannot change
this agreement to reduce your interest in your trust without your consent.
Investors owning two-thirds of the units in your trust may vote to change this
agreement.
TERMINATION OF YOUR TRUST. Your trust will terminate on the termination date
set forth under "Essential Information" in the "Investment Summary" section of
this prospectus. The trustee may terminate your trust early if the value of the
trust is less than 40% of the original value of the securities in the trust at
the time of deposit. At this size, the expenses of your trust may create an
undue burden on your investment. Investors owning two-thirds of the units in
your trust may also vote to terminate the trust early. The trustee will
liquidate the trust in the event that a sufficient number of units not yet sold
to the public are tendered for redemption so that the net worth of the trust
would be reduced to less than 40% of the value of the securities at the time
they were deposited in the trust. If this happens, we will refund any sales
charge that you paid.
The trustee will notify you of any termination and sell any remaining
securities. The trustee will send your final distribution to you within a
reasonable time following liquidation of all the securities after deducting
final expenses. Your termination distribution may be less than the price you
originally paid for your units.
THE SPONSOR. The sponsor of the trust is Advisors Asset Management, Inc. We
are a broker-dealer specializing in providing trading and support services to
broker-dealers, registered representatives, investment advisers and other
financial professionals. Our headquarters are located at 18925 Base Camp Road,
Monument, Colorado 80132. You can contact our unit investment
Understanding Your Investment 15
trust division at 8100 East 22nd Street North, Building 800, Suite 102, Wichita,
Kansas 67226 or by using the contacts listed on the back cover of this
prospectus. AAM is a registered broker-dealer and investment adviser, a member
of the Financial Industry Regulatory Authority, Inc. (FINRA) and Securities
Investor Protection Corporation (SIPC) and a registrant of the Municipal
Securities Rulemaking Board (MSRB). If we fail to or cannot perform our duties
as sponsor or become bankrupt, the trustee may replace us, continue to operate
your trust without a sponsor, or terminate your trust.
We and your trust have adopted a code of ethics requiring our employees who
have access to information on trust transactions to report personal securities
transactions. The purpose of the code is to avoid potential conflicts of
interest and to prevent fraud, deception or misconduct with respect to your
trust.
The sponsor or an affiliate may use the list of securities in the trust in
its independent capacity (which may include acting as an investment adviser or
broker-dealer) and distribute this information to various individuals and
entities. The sponsor or an affiliate may recommend or effect transactions in
the securities. This may also have an impact on the price your trust pays for
the securities and the price received upon unit redemption or trust termination.
The sponsor may act as agent or principal in connection with the purchase and
sale of securities, including those held by the trust, and may act as a
specialist market maker in the securities. The sponsor may also issue reports
and make recommendations on the securities in the trust. The sponsor or an
affiliate may have participated in a public offering of one or more of the
securities in the trust. The sponsor, an affiliate or their employees may have
a long or short position in these securities or related securities. An officer,
director or employee of the sponsor or an affiliate may be an officer or
director for the issuers of the securities.
THE TRUSTEE. The Bank of New York Mellon is the trustee of your trust. Its
principal unit investment trust division office is located at 2 Hanson Place,
12th Floor, Brooklyn, New York 11217. You can contact the trustee by calling
the telephone number on the back cover of this prospectus or by writing to its
unit investment trust office. We may remove and replace the trustee in some
cases without your consent. The trustee may also resign by notifying us and
investors.
PORTFOLIO CONSULTANT. HIMCO, Hartford Investment Management Company, is a
registered investment adviser.
HIMCO is not an affiliate of the sponsor. HIMCO selected a list of
securities to be included in the portfolio based on the criteria provided by the
sponsor. HIMCO makes no representations that the portfolio will achieve the
investment objectives or will be profitable or suitable for any particular
potential investor. The sponsor did not select the securities for the trust.
HIMCO may use the list of securities in its independent capacity as an
investment adviser and distribute this information to various individuals and
entities. HIMCO may recommend to other clients or otherwise effect transactions
in the securities held by the trust. This may have an adverse effect on the
prices of the securities. This also may have an impact on the price the trust
pays for the securities and the price received upon unit redemptions or
liquidation of the securities. HIMCO also issues reports and makes
recommendations on securities, which may include the securities in the trust.
16 Understanding Your Investment
Neither HIMCO nor the sponsor manages the trust. Opinions expressed by HIMCO
are not necessarily those of the sponsor, and may not actually prove correct.
HIMCO is being compensated for its portfolio consulting services, including
selection of the trust portfolio.
HOW WE DISTRIBUTE UNITS. We sell units to the public through broker-dealers
and other firms. These distribution firms each pay part of the sales fee when
they sell units. During the initial offering period, the broker-dealer
concession or agency commission for broker-dealers and other firms is as
follows:
TRANSACTION CONCESSION OR
AMOUNT: AGENCY COMMISSION:
------------------------------------------
Less than $50,000 2.25%
$50,000 - $99,999 2.00
$100,000 - $249,999 1.75
$250,000 - $499,999 1.50
$500,000 - $999,999 1.25
$1,000,000 or more 0.70
We apply these concessions or agency commissions as a percent of the public
offering price per unit at the time of the transaction. The broker-dealer
concession or agency commission is 65% of the sales fee for secondary market
sales. For transactions involving unitholders of other unit investment trusts
who use their redemption or termination proceeds to purchase units of the trust,
the broker-dealer concession or agency commission is 1.30% of the public
offering price per unit. No broker-dealer concession or agency commission is
paid to broker-dealers, investment advisers or other selling firms in connection
with unit sales in Fee Accounts subject to a Wrap Fee.
Broker-dealers and other firms that sell units of certain unit investment
trusts for which AAM acts as sponsor are eligible to receive additional
compensation for volume sales. The sponsor offers two separate volume
concession structures for certain trusts that are referred to as "Volume
Concession A" and "Volume Concession B." The trust offered in this prospectus
is a Volume Concession A trust. Broker-dealers and other firms that sell units
of any Volume Concession A trust are eligible to receive the additional
compensation described below. Such payments will be in addition to the regular
concessions paid to firms as set forth in the applicable trust's prospectus.
The additional concession is based on total initial offering period sales of all
Volume Concession A trusts during a calendar quarter as set forth in the
following table:
INITIAL OFFERING PERIOD SALES VOLUME
DURING CALENDAR QUARTER CONCESSION
---------------------------------------------------------
Less than $10,000,000 0.000%
$10,000,000 but less than $25,000,000 0.050
$25,000,000 but less than $50,000,000 0.100
$50,000,000 but less than $75,000,000 0.110
$75,000,000 but less than $100,000,000 0.120
$100,000,000 but less than $250,000,000 0.125
$250,000,000 but less than $500,000,000 0.135
$500,000,000 or more 0.150
This volume concession will be paid on units of all Volume Concession A
trusts sold in the initial offering period, except as described below. For a
trust to be eligible for this additional Volume Concession A compensation for
calendar quarter sales, the trust's prospectus must include disclosure related
to this additional Volume Concession A compensation; a trust is not eligible for
this additional Volume Concession A compensation if the prospectus for such
trust does not include disclosure related to this additional Volume Concession A
compensation. Broker-dealer firms will not receive additional compensation
unless they sell at least $10.0 million of units of Volume Concession A trusts
during a calendar quarter. For example, if a firm sells $9.5 million
Understanding Your Investment 17
of units of Volume Concession A trusts in the initial offering period during a
calendar quarter, the firm will not receive any additional compensation with
respect to such trusts. Once a firm reaches a particular breakpoint during a
quarter, the firm will receive the stated volume concession on all initial
offering period sales of Volume Concession A trusts during the applicable
quarter. For example, if a firm sells $12.5 million of units of Volume
Concession A trusts in the initial offering period during a calendar quarter,
the firm will receive additional compensation of 0.05% of $12.5 million and if a
firm sells $27.0 million of units of Volume Concession A trusts in the initial
offering period during a calendar quarter, the firm will receive additional
compensation of 0.100% of $27.0 million.
In addition, dealer firms will not receive volume concessions on the sale of
units which are not subject to a transactional sales charge. However, such
sales will be included in determining whether a firm has met the sales level
breakpoints for volume concessions subject to the policies of the related
selling firm. Secondary market sales of all unit trusts are excluded for
purposes of these volume concessions. We will pay these amounts out of our own
assets within a reasonable time following each calendar quarter.
Any sales fee discount is borne by the broker-dealer or selling firm out of
the broker-dealer concession or agency commission. We reserve the right to
change the amount of concessions or agency commissions from time to time.
We currently provide, at our own expense and out of our own profits,
additional compensation and benefits to broker-dealers who sell units of this
trust and our other products. This compensation is intended to result in
additional sales of our products and/or compensate broker-dealers and financial
advisors for past sales. A number of factors are considered in determining
whether to pay these additional amounts. Such factors may include, but are not
limited to, the level or type of services provided by the intermediary, the
level or expected level of sales of our products by the intermediary or its
agents, the placing of our products on a preferred or recommended product list
and access to an intermediary's personnel. We may make these payments for
marketing, promotional or related expenses, including, but not limited to,
expenses of entertaining retail customers and financial advisors, advertising,
sponsorship of events or seminars, obtaining information about the breakdown of
unit sales among an intermediary's representatives or offices, obtaining shelf
space in broker-dealer firms and similar activities designed to promote the sale
of our products. We make such payments to a substantial majority of
intermediaries that sell our products. We may also make certain payments to, or
on behalf of, intermediaries to defray a portion of their costs incurred for the
purpose of facilitating unit sales, such as the costs of developing or
purchasing trading systems to process unit trades. Payments of such additional
compensation described in this paragraph and the volume concessions described
above, some of which may be characterized as "revenue sharing," may create an
incentive for financial intermediaries and their agents to sell or recommend our
products, including this trust, over other products. These arrangements will
not change the price you pay for your units.
We generally register units for sale in various states in the U.S. We do not
register units for sale in any foreign country. This prospectus does not
constitute an offer of units in any state or country where units cannot be
offered or sold lawfully. We may reject any order for units in whole or in
part.
We may gain or lose money when we hold units in the primary or secondary
market due to
18 Understanding Your Investment
fluctuations in unit prices. The gain or loss is equal to the difference
between the price we pay for units and the price at which we sell or redeem
them. We may also gain or lose money when we deposit securities to create
units. The amount of our profit or loss on the initial deposit of securities
into the trust is shown in the "Notes to Portfolio."
TAXES
This section summarizes some of the main U.S. federal income tax consequences
of owning units of the trust. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example,
these summaries generally do not describe your situation if you are a
corporation, a non-U.S. person, a broker/dealer, or other investor with special
circumstances. In addition, this section does not describe your state, local or
foreign tax consequences.
This federal income tax summary is based in part on the advice of counsel to
the sponsor. The Internal Revenue Service could disagree with any conclusions
set forth in this section. In addition, our counsel was not asked to review,
and has not reached a conclusion with respect to the federal income tax
treatment of the assets to be deposited in the trust. This may not be
sufficient for you to use for the purpose of avoiding penalties under federal
tax law.
As with any investment, you should seek advice based on your individual
circumstances from your own tax advisor.
TRUST STATUS. The trust intends to qualify as a "regulated investment
company" under the federal tax laws. If the trust qualifies as a regulated
investment company and distributes its income as required by the tax law, the
trust generally will not pay federal income taxes. An adverse federal income
tax audit of a partnership that the trust invests in could result in the trust
being required to pay federal income tax or pay a deficiency dividend (without
having received additional cash).
DISTRIBUTIONS. Trust distributions are generally taxable. After the end of
each year, you will receive a tax statement that separates your trust's
distributions into three categories, ordinary income distributions, capital gain
dividends and return of capital. Ordinary income distributions are generally
taxed at your ordinary tax rate, however, as further discussed below, certain
ordinary income distributions received from the trust may be taxed at the
capital gains tax rates. Generally, you will treat all capital gain dividends
as long-term capital gains regardless of how long you have owned your units. To
determine your actual tax liability for your capital gain dividends, you must
calculate your total net capital gain or loss for the tax year after considering
all of your other taxable transactions, as described below. In addition, the
trust may make distributions that represent a return of capital for tax purposes
and thus will generally not be taxable to you. A return of capital, although
not initially taxable to you, will result in a reduction in the basis in your
units and subsequently result in higher levels of taxable capital gains in the
future. In addition, if the non-dividend distribution exceeds your basis in your
units, you will have long-term or short-term gain depending upon your holding
period. The tax status of your distributions from your trust is not affected by
whether you reinvest your distributions in additional units or receive them in
cash. The income from your trust that you must take into account for federal
income tax purposes is not reduced by amounts used to pay a deferred sales fee,
if any. The tax laws may require
Understanding Your Investment 19
you to treat distributions made to you in January as if you had received them
on December 31 of the previous year. Income from the trust may also be subject
to a 3.8 percent "medicare tax". This tax generally applies to your net
investment income if your adjusted gross income exceeds certain threshold
amounts, which are $250,000 in the case of married couples filing joint returns
and $200,000 in the case of single individuals.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns units generally will
not be entitled to the dividends received deduction with respect to many
dividends received from the trust because the dividends received deduction is
generally not available for distributions from regulated investment companies.
However, certain ordinary income dividends on units that are attributable to
qualifying dividends received by the trust from certain corporations may be
reported by the trust as being eligible for the dividends received deduction.
SALE OR REDEMPTION OF UNITS. If you sell or redeem your units, you will
generally recognize a taxable gain or loss. To determine the amount of this
gain or loss, you must subtract your tax basis in your units from the amount you
receive in the transaction. Your tax basis in your units is generally equal to
the cost of your units, generally including sales charges. In some cases,
however, you may have to adjust your tax basis after you purchase your units.
CAPITAL GAINS AND LOSSES AND CERTAIN ORDINARY INCOME DIVIDENDS. If you are
an individual, the maximum marginal stated federal tax rate for net capital gain
is generally 20% for taxpayers in the 39.6% tax bracket, 15% for taxpayers in
the 25%, 28%, 33% and 35% tax brackets and 0% for taxpayers in the 10% and 15%
tax brackets. Some portion of your capital gain dividends may be subject to
higher maximum marginal stated federal income tax rates. Capital gains may also
be subject to the "medicare tax" described above. Capital gain received from
assets held for more than one year that is considered "unrecaptured section 1250
gain" (which may be the case, for example, with some capital gains attributable
to equity interests in real estate investment trusts that constitute interests
in entities treated as real estate investment trusts for federal income tax
purposes) is taxed at a maximum stated tax rate of 25%. In the case of capital
gain dividends, the determination of which portion of the capital gain dividend,
if any, is subject to the 25% tax rate, will be made based on rules prescribed
by the United States Treasury.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the date you
purchase your units to determine your holding period. However, if you receive a
capital gain dividend from your trust and sell your unit at a loss after holding
it for six months or less, the loss will be recharacterized as long-term capital
loss to the extent of the capital gain dividend received. The tax rates for
capital gains realized from assets held for one year or less are generally the
same as for ordinary income. The Internal Revenue Code treats certain capital
gains as ordinary income in special situations.
Ordinary income dividends received by an individual unitholder from a
regulated investment company such as the trust are generally taxed at the same
rates that apply to net capital gain (as discussed above), provided certain
holding period requirements are satisfied and provided the dividends are
attributable to qualifying dividends received by the trust itself.
Distributions with
20 Understanding Your Investment
respect to shares in real estate investment trusts are qualifying dividends
only in limited circumstances. The trust will provide notice to its unitholders
of the amount of any distribution which may be taken into account as a dividend
which is eligible for the capital gains tax rates.
IN-KIND DISTRIBUTIONS. Under certain circumstances, as described in this
prospectus, you may receive an in-kind distribution of trust securities when you
redeem units or when your trust terminates. This distribution will be treated
as a sale for federal income tax purposes and you will generally recognize gain
or loss, generally based on the value at that time of the securities and the
amount of cash received. The Internal Revenue Service could however assert that
a loss could not be currently deducted.
EXCHANGES. If you elect to have your proceeds from your trust rolled over
into a future trust, the exchange would generally be considered a sale for
federal income tax purposes.
DEDUCTIBILITY OF TRUST EXPENSES. Expenses incurred and deducted by your
trust will generally not be treated as income taxable to you. In some cases,
however, you may be required to treat your portion of these trust expenses as
income. In these cases you may be able to take a deduction for these expenses.
However, certain miscellaneous itemized deductions, such as investment expenses,
may be deducted by individuals only to the extent that all of these deductions
exceed 2% of the individual's adjusted gross income. Some individuals may also
be subject to further limitations on the amount of their itemized deductions,
depending on their income.
FOREIGN TAX CREDIT. If your trust invests in any foreign securities, the tax
statement that you receive may include an item showing foreign taxes your trust
paid to other countries. In this case, dividends taxed to you will include your
share of the taxes your trust paid to other countries. You may be able to
deduct or receive a tax credit for your share of these taxes.
INVESTMENTS IN CERTAIN FOREIGN CORPORATIONS. If the trust holds an equity
interest in any "passive foreign investment companies" ("PFICs"), which are
generally certain foreign corporations that receive at least 75% of their annual
gross income from passive sources (such as interest, dividends, certain rents
and royalties or capital gains) or that hold at least 50% of their assets in
investments producing such passive income, the trust could be subject to U.S.
federal income tax and additional interest charges on gains and certain
distributions with respect to those equity interests, even if all the income or
gain is timely distributed to its unitholders. The trust will not be able to
pass through to its unitholders any credit or deduction for such taxes. The
trust may be able to make an election that could ameliorate these adverse tax
consequences. In this case, the trust would recognize as ordinary income any
increase in the value of such PFIC shares, and as ordinary loss any decrease in
such value to the extent it did not exceed prior increases included in income.
Under this election, the trust might be required to recognize in a year income
in excess of its distributions from PFICs and its proceeds from dispositions of
PFIC stock during that year, and such income would nevertheless be subject to
the distribution requirement and would be taken into account for purposes of the
4% excise tax. Dividends paid by PFICs are not treated as qualified dividend
income.
FOREIGN INVESTORS. If you are a foreign investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that,
Understanding Your Investment 21
generally, subject to applicable tax treaties, distributions from the trust
will be characterized as dividends for federal income tax purposes (other than
dividends which the trust properly reports as capital gain dividends) and will
be subject to U.S. income taxes, including withholding taxes, subject to certain
exceptions described below. However, distributions received by a foreign
investor from the trust that are properly reported by the trust as capital gain
dividends may not be subject to U.S. federal income taxes, including withholding
taxes, provided that the trust makes certain elections and certain other
conditions are met. In addition, distributions in respect of shares may be
subject to a U.S. withholding tax of 30% in the case of distributions to
(i) certain non-U.S. financial institutions that have not entered into an
agreement with the U.S. Treasury to collect and disclose certain information and
are not resident in a jurisdiction that has entered into such an agreement with
the U.S. Treasury and (ii) certain other non-U.S. entities that do not provide
certain certifications and information about the entity's U.S. owners.
Dispositions of units by such persons may be subject to such withholding after
December 31, 2018. You should also consult your tax advisor with respect to
other U.S. tax withholding and reporting requirements.
EXPENSES
Your trust will pay various expenses to conduct its operations. The "Fees
and Expenses" section of the "Investment Summary" in this prospectus shows the
estimated amount of these expenses.
The sponsor will receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. This "creation and
development fee" is a charge of $0.05 per unit. The trustee will deduct this
amount from your trust's assets as of the close of the initial offering period.
No portion of this fee is applied to the payment of distribution expenses or as
compensation for sales efforts. This fee will not be deducted from proceeds
received upon a repurchase, redemption or exchange of units before the close of
the initial public offering period.
Your trust will pay a fee to the trustee for its services. The trustee also
benefits when it holds cash for your trust in non-interest bearing accounts.
Your trust will reimburse us as supervisor, evaluator and sponsor for providing
portfolio supervisory services, for evaluating your portfolio and for providing
bookkeeping and administrative services. Our reimbursements may exceed the
costs of the services we provide to your trust but will not exceed the costs of
services provided to all of our unit investment trusts in any calendar year.
All of these fees may adjust for inflation without your approval.
Your trust will also pay its general operating expenses. Your trust may pay
expenses such as trustee expenses (including legal and auditing expenses),
various governmental charges, fees for extraordinary trustee services, costs of
taking action to protect your trust, costs of indemnifying the trustee and the
sponsor, legal fees and expenses and expenses incurred in contacting you.
Your trust may pay the costs of updating its registration statement each year.
Your trust will pay a license fee for the use of certain service marks,
trademarks, trade names and/or other property of Hartford Investment Management
Company. The trustee will generally pay trust expenses from distributions
received on the securities but in some cases may sell securities to pay trust
expenses.
22 Understanding Your Investment
EXPERTS
LEGAL MATTERS. Chapman and Cutler, LLP acts as counsel for the trust and has
given an opinion that the units are validly issued. Dorsey & Whitney LLP acts
as counsel for the trustee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Grant Thornton LLP,
independent registered public accounting firm, audited the statement of
financial condition and the portfolio included in this prospectus.
ADDITIONAL INFORMATION
This prospectus does not contain all the information in the registration
statement that your trust filed with the Securities and Exchange Commission.
The Information Supplement, which was filed with the Securities and Exchange
Commission, includes more detailed information about the securities in your
portfolio, investment risks and general information about your trust. You can
obtain the Information Supplement by contacting us or the Securities and
Exchange Commission as indicated on the back cover of this prospectus. This
prospectus incorporates the Information Supplement by reference (it is legally
considered part of this prospectus).
Understanding Your Investment 23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNITHOLDERS
ADVISORS DISCIPLINED TRUST 1640
We have audited the accompanying statement of financial condition, including the
trust portfolio on pages 4 and 5, of Advisors Disciplined Trust 1640, as of
April 15, 2016, the initial date of deposit. The statement of financial
condition is the responsibility of the trust's sponsor. Our responsibility is
to express an opinion on this statement of financial condition based on our
audit.
We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the statement of financial condition is free of material misstatement. We were
not engaged to perform an audit of the trust's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the trust's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
financial condition, assessing the accounting principles used and significant
estimates made by the sponsor, as well as evaluating the overall statement of
financial condition presentation. Our procedures included confirmation with The
Bank of New York Mellon, trustee, of cash or an irrevocable letter of credit
deposited for the purchase of securities as shown in the statement of financial
condition as of April 15, 2016. We believe that our audit of the statement
of financial condition provides a reasonable basis for our opinion.
In our opinion, the statement of financial condition referred to above presents
fairly, in all material respects, the financial position of Advisors Disciplined
Trust 1640 as of April 15, 2016, in conformity with accounting principles
generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
April 15, 2016
ADVISORS DISCIPLINED TRUST 1640
STATEMENT OF FINANCIAL CONDITION AS OF APRIL 15, 2016
-----------------------------------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase underlying securities (1)(2) . . . . . . . . . . . . . . . . . . . . . . $ 148,367
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,367
==========
LIABILITIES AND INTEREST OF INVESTORS
Liabilities:
Organization costs (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 450
Deferred sales fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,173
Creation and development fee (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749
----------
3,372
----------
Interest of investors:
Cost to investors (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,870
Less: initial sales fee (4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,503
Less: deferred sales fee, creation and development fee and organization costs (3)(4)(5) . . 3,372
----------
Net interest of investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,995
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,367
==========
Number of units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,987
==========
Net asset value per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.675
==========
(1) Aggregate cost of the securities is based on the closing sale price
evaluations as determined by the evaluator.
(2) Cash or an irrevocable letter of credit has been deposited with the trustee
covering the funds (aggregating $200,000) necessary for the purchase of
securities in the trust represented by purchase contracts.
(3) A portion of the public offering price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing and offering
the trust. These costs have been estimated at $0.030 per unit for the
trust. A distribution will be made as of the earlier of the close of the
initial offering period or six months following the trust's inception date
to an account maintained by the trustee from which this obligation of the
investors will be satisfied. To the extent the actual organization costs
are greater than the estimated amount, only the estimated organization
costs added to the public offering price will be reimbursed to the sponsor
and deducted from the assets of the trust.
(4) The total sales fee consists of an initial sales fee, a deferred sales fee
and a creation and development fee. The initial sales fee is equal to the
difference between the maximum sales fee and the sum of the remaining
deferred sales fee and the total creation and development fee. On the
inception date, the total sales fee is 2.95% of the public offering price
per unit. The deferred sales fee is equal to $0.145 per unit and the
creation and development fee is equal to $0.05 per unit.
(5) The aggregate cost to investors includes the applicable sales fee assuming
no reduction of sales fees.
24 Understanding Your Investment
CONTENTS
INVESTMENT SUMMARY
-----------------------------------------------------------------------
A concise description 2 Investment Objective
of essential information 2 Principal Investment Strategy
about the portfolio 2 Principal Risks
3 Who Should Invest
3 Essential Information
3 Fees and Expenses
4 Portfolio
UNDERSTANDING YOUR INVESTMENT
-----------------------------------------------------------------------
Detailed information to 6 How to Buy Units
help you understand 9 How to Sell Your Units
your investment 11 Distributions
12 Investment Risks
14 How the Trust Works
19 Taxes
22 Expenses
23 Experts
23 Additional Information
24 Report of Independent Registered
Public Accounting Firm
24 Statement of Financial Condition
WHERE TO LEARN MORE
-----------------------------------------------------------------------
You can contact us for VISIT US ON THE INTERNET
free information about http://www.AAMlive.com
this and other investments, CALL ADVISORS ASSET
including the Information MANAGEMENT, INC.
Supplement (877) 858-1773
CALL THE BANK OF NEW YORK MELLON
(800) 848-6468
ADDITIONAL INFORMATION
-----------------------------------------------------------------------
This prospectus does not contain all information filed with the
Securities and Exchange Commission. To obtain or copy this
information including the Information Supplement (a duplication
fee may be required):
E-MAIL: [email protected]
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 1640
Securities Act file number: 333-209193
Investment Company Act file number: 811-21056
BEST IDEAS
STRATEGY PORTFOLIO,
SERIES 2016-2Q -
A HARTFORD INVESTMENT
MANAGEMENT COMPANY
("HIMCO") PORTFOLIO
PROSPECTUS
APRIL 15, 2016
[LOGO]
AAM
ADVISORS
ASSET MANAGEMENT
ADVISORS DISCIPLINED TRUST 1640
BEST IDEAS STRATEGY PORTFOLIO, SERIES 2016-2Q - A HARTFORD INVESTMENT
MANAGEMENT COMPANY ("HIMCO") PORTFOLIO
INFORMATION SUPPLEMENT
This Information Supplement provides additional information concerning each
trust described in the prospectus for the Advisors Disciplined Trust series
identified above. This Information Supplement should be read in conjunction
with the prospectus. It is not a prospectus. It does not include all of the
information that an investor should consider before investing in a trust. It
may not be used to offer or sell units of a trust without the prospectus. This
Information Supplement is incorporated into the prospectus by reference and has
been filed as part of the registration statement with the Securities and
Exchange Commission. Investors should obtain and read the prospectus prior to
purchasing units of a trust. You can obtain the prospectus without charge by
contacting your financial professional or by contacting the unit investment
trust division of Advisors Asset Management, Inc. at 18925 Base Camp Road, Suite
203, Monument, Colorado 80132, at 8100 East 22nd Street North, Building 800,
Suite 102, Wichita, Kansas 67226 or by calling (877) 858-1773. This Information
Supplement is dated as of the date of the prospectus.
CONTENTS
General Information 2
Investment Objective and Policies 3
Risk Factors 5
Administration of the Trust 7
Portfolio Transactions and Brokerage Allocation 16
Purchase, Redemption and Pricing of Units 17
Performance Information 22
GENERAL INFORMATION
Each trust is one of a series of separate unit investment trusts created
under the name Advisors Disciplined Trust and registered under the Investment
Company Act of 1940. Each trust was created as a common law trust on the
inception date described in the prospectus under the laws of the state of
New York. Each trust was created under a trust agreement among Advisors Asset
Management, Inc. (as sponsor, evaluator and supervisor) and The Bank of New York
Mellon (as trustee).
When your trust was created, the sponsor delivered to the trustee
securities or contracts for the purchase thereof for deposit in the trust and
the trustee delivered to the sponsor documentation evidencing the ownership of
units of the trust. At the close of the New York Stock Exchange on the trust's
inception date, the number of units may be adjusted so that the public offering
price per unit equals $10. The number of units, fractional interest of each
unit in the trust and estimated income distributions per unit will increase or
decrease to the extent of any adjustment. Additional units of each trust may be
issued from time to time by depositing in the trust additional securities (or
contracts for the purchase thereof together with cash or irrevocable letters of
credit) or cash (including a letter of credit or the equivalent) with
instructions to purchase additional securities. As additional units are issued
by a trust as a result of the deposit of additional securities by the sponsor,
the aggregate value of the securities in the trust will be increased and the
fractional undivided interest in the trust represented by each unit will be
decreased. The sponsor may continue to make additional deposits of securities
into a trust, provided that such additional deposits will be in amounts, which
will generally maintain the existing relationship among the shares of the
securities in such trust. Thus, although additional units will be issued, each
unit will generally continue to represent the same number of shares of each
security. If the sponsor deposits cash to purchase additional securities,
existing and new investors may experience a dilution of their investments and a
reduction in their anticipated income because of fluctuations in the prices of
the securities between the time of the deposit and the purchase of the
securities and because the trust will pay any associated brokerage fees.
The trustee has not participated in the selection of the securities
deposited in the trust and has no responsibility for the composition of the
trust portfolio.
Each unit initially offered represents an undivided interest in the related
trust. To the extent that any units are redeemed by the trustee or additional
units are issued as a result of additional securities being deposited by the
sponsor, the fractional undivided interest in a trust represented by each
unredeemed unit will increase or decrease accordingly, although the actual
interest in such trust represented by such fraction will remain unchanged.
Units will remain outstanding until redeemed upon tender to the trustee by
unitholders, which may include the sponsor, or until the termination of the
trust agreement.
A trust consists of (a) the securities listed under "Portfolio" in the
prospectus as may continue to be held from time to time in the trust, (b) any
additional securities acquired and held by the trust pursuant to the provisions
of the trust agreement and (c) any cash held in the accounts of the trust.
Neither the sponsor nor the trustee shall be liable in any way for any failure
in any of the securities. However, should any contract for the purchase of any
of the securities initially
-2-
deposited in a trust fail, the sponsor will, unless substantially all of the
moneys held in the trust to cover such purchase are reinvested in substitute
securities in accordance with the trust agreement, refund the cash and sales fee
attributable to such failed contract to all unitholders on the next distribution
date.
INVESTMENT OBJECTIVE AND POLICIES
The trust seeks to provide above average total return through capital
appreciation and dividend income by investing in a portfolio of stocks selected
from the Russell 3000(R) Index. The prospectus provides additional information
regarding the trust's objective and investment strategy.
The trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analysis. The portfolio of a trust, however, will not be
actively managed and therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from a portfolio.
The sponsor may not alter the portfolio of a trust by the purchase, sale or
substitution of securities, except in special circumstances as provided in the
trust agreement. Thus, the assets of a trust will generally remain unchanged
under normal circumstances. The trust agreement provides that the sponsor may
(but need not) direct the trustee to dispose of a security in certain events
such as the issuer having defaulted on the payment on any of its outstanding
obligations or the price of a security has declined to such an extent or other
such credit factors exist so that in the opinion of the supervisor the retention
of such securities would be detrimental to the trust.
If a public tender offer has been made for a security or a merger,
acquisition or similar transaction has been announced affecting a security, the
trustee may either sell the security or accept a tender offer if the supervisor
determines that the action is in the best interest of unitholders. The trustee
will distribute any cash proceeds to unitholders. If an offer by the issuer of
any of the portfolio securities or any other party is made to issue new
securities, or to exchange securities, for trust portfolio securities, the
trustee will at the direction of the sponsor, vote for or against, or accept or
reject, any offer for new or exchanged securities or property in exchange for a
trust portfolio security. If any such issuance, exchange or substitution occurs
(regardless of any action or rejection by a trust), any securities and/or
property received will be deposited into the trust and will be promptly sold by
the trustee pursuant to the sponsor's direction, unless the sponsor advises the
trustee to keep such securities or property. If any contract for the purchase
of securities fails, the sponsor will refund the cash and sales fee attributable
to the failed contract to unitholders on or before the next distribution date
unless substantially all of the moneys held to cover the purchase are reinvested
in substitute securities in accordance with the trust agreement. The sponsor may
direct the reinvestment of security sale proceeds if the sale is the direct
result of serious adverse credit factors which, in the opinion of the sponsor,
would make retention of the securities detrimental to the trust. In such a case,
the sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities that meet the criteria for inclusion in the
trust on the trust's inception date. The sponsor
-3-
may also instruct the trustee to take action necessary to ensure that the
portfolio continues to satisfy the qualifications of a regulated investment
company.
The trustee may sell securities, designated by the supervisor, from a trust
for the purpose of redeeming units of such trust tendered for redemption and the
payment of expenses.
In addition, if a trust has elected to be taxed as a regulated investment
company, the trustee may dispose of certain securities and take such further
action as may be needed from time to time to ensure that a trust continues to
satisfy the qualifications of a regulated investment company, including the
requirements with respect to diversification under Section 851 of the Internal
Revenue Code, and as may be needed from time to time to avoid the imposition of
any tax on a trust or undistributed income of a trust as a regulated investment
company.
Proceeds from the sale of securities (or any securities or other property
received by a trust in exchange for securities) are credited to the Capital
Account of a trust for distribution to unitholders or to meet redemptions.
Except for failed securities and as provided herein, in the prospectus or in the
trust agreement, the acquisition by a trust of any securities other than the
portfolio securities is prohibited.
Because certain of the securities in certain of the trusts may from time to
time under certain circumstances be sold or otherwise liquidated and because the
proceeds from such events will be distributed to unitholders and will not be
reinvested, no assurance can be given that a trust will retain for any length of
time its present size and composition. Neither the sponsor nor the trustee
shall be liable in any way for any default, failure or defect in any security.
In the event of a failure to deliver any security that has been purchased for a
trust under a contract ("Failed Securities"), the sponsor is authorized under
the trust agreement to direct the trustee to acquire other securities
("Replacement Securities") to make up the original corpus of such trust.
The Replacement Securities must be purchased within 20 days after delivery
of the notice that a contract to deliver a security will not be honored and the
purchase price may not exceed the amount of funds reserved for the purchase of
the Failed Securities. The Replacement Securities must be equity securities of
the type selected for the trust and must not adversely affect the federal income
tax status of the trust. Whenever a Replacement Security is acquired for a
trust, the trustee shall notify all unitholders of the trust of the acquisition
of the Replacement Security and shall, on the next monthly distribution date
which is more than 30 days thereafter, make a pro rata distribution of the
amount, if any, by which the cost to the trust of the Failed Security exceeded
the cost of the Replacement Security. Once all of the securities in a trust are
acquired, the trustee will have no power to vary the investments of the trust,
i.e., the trustee will have no managerial power to take advantage of market
variations to improve a unitholder's investment.
If the right of limited substitution described in the preceding paragraphs
is not utilized to acquire Replacement Securities in the event of a failed
contract, the sponsor will refund the sales fee attributable to such Failed
Securities to all unitholders of the trust and the trustee will distribute the
cash attributable to such Failed Securities not more than 30 days after the date
on which the trustee would have been required to purchase a Replacement
Security. In addition, unitholders should be aware that, at the time of receipt
of such cash, they may not be able to
-4-
reinvest such proceeds in other securities at a return equal to or in excess of
the return which such proceeds would have earned for unitholders of such trust.
In the event that a Replacement Security is not acquired by a trust, the
income for such trust may be reduced.
To the best of the sponsor's knowledge, there is no litigation pending as
of the trust's inception in respect of any security that might reasonably be
expected to have a material adverse effect on the trust. At any time after the
trust's inception, litigation may be instituted on a variety of grounds with
respect to the securities. The sponsor is unable to predict whether any such
litigation may be instituted, or if instituted, whether such litigation might
have a material adverse effect on the trust. The sponsor and the trustee shall
not be liable in any way for any default, failure or defect in any security.
RISK FACTORS
MARKET RISK. Because the trust invests in stocks, you should understand the
risks of investing in stocks before purchasing units. These risks include the
risk that the financial condition of the company or the general condition of the
stock market may worsen and the value of the stocks (and therefore units) will
fall. Stocks are especially susceptible to general stock market movements. The
value of stocks often rises or falls rapidly and unpredictably as market
confidence and perceptions of companies change. These perceptions are based on
factors including expectations regarding government economic policies,
inflation, interest rates, economic expansion or contraction, political climates
and economic or banking crises. The value of units will fluctuate with the value
of the stocks in the trust and may be more or less than the price you originally
paid for your units. As with any investment, we cannot guarantee that the
performance of the trust will be positive over any period of time. Because the
trust is unmanaged, the Trustee will not sell stocks in response to market
fluctuations as is common in managed investments. In addition, because some
trusts hold a relatively small number of stocks, you may encounter greater
market risk than in a more diversified investment.
DIVIDENDS. Stocks represent ownership interests in a company and are not
obligations of the company. Common stockholders have a right to receive payments
from the company that is subordinate to the rights of creditors, bondholders or
preferred stockholders of the company. This means that common stockholders have
a right to receive dividends only if a company's board of directors declares a
dividend and the company has provided for payment of all of its creditors,
bondholders and preferred stockholders. If a company issues additional debt
securities or preferred stock, the owners of these securities will have a claim
against the company's assets before common stockholders if the company declares
bankruptcy or liquidates its assets even though the common stock was issued
first. As a result, the company may be less willing or able to declare or pay
dividends on its common stock.
FOREIGN ISSUERS. Because a trust may invest in foreign stocks, they involve
additional risks that differ from an investment in domestic stocks. Investments
in foreign securities may involve a greater degree of risk than those in
domestic securities. There is generally less publicly available information
about foreign companies in the form of reports and ratings similar to those
-5-
that are published about issuers in the United States. Also, foreign issuers are
generally not subject to uniform accounting, auditing and financial reporting
requirements comparable to those applicable to United States issuers. With
respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of the trust, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, industrial foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Foreign securities markets are generally not as developed or
efficient as those in the United States. While growing in volume, they usually
have substantially less volume than the New York Stock Exchange, and securities
of some foreign issuers are less liquid and more volatile than securities of
comparable United States issuers. Fixed commissions on foreign exchanges are
generally higher than negotiated commissions on United States exchanges. There
is generally less government supervision and regulation of securities exchanges,
brokers and listed issuers than in the United States.
A trust may also involve the risk that fluctuations in exchange rates
between the U.S. dollar and foreign currencies may negatively affect the value
of the stocks. For example, if a foreign stock rose 10% in price but the U.S.
dollar gained 5% against the related foreign currency, a U.S. investor's return
would be reduced to about 5%. This is because the foreign currency would "buy"
fewer dollars or, conversely, a dollar would buy more of the foreign currency.
Many foreign currencies have fluctuated widely against the U.S. dollar for a
variety of reasons such as supply and demand of the currency, investor
perceptions of world or country economies, political instability, currency
speculation by institutional investors, changes in government policies, buying
and selling of currencies by central banks of countries, trade balances and
changes in interest rates. A trust's foreign currency transactions will be
conducted with foreign exchange dealers acting as principals on a spot (i.e.,
cash) buying basis. These dealers realize a profit based on the difference
between the price at which they buy the currency (bid price) and the price at
which they sell the currency (offer price). The evaluator will estimate the
currency exchange rates based on current activity in the related currency
exchange markets, however, due to the volatility of the markets and other
factors, the estimated rates may not be indicative of the rate a trust might
obtain had the trustee sold the currency in the market at that time.
SMALL-CAP AND MID-CAP COMPANIES. Small and mid-size company stocks have
customarily involved more investment risk than large company stocks. Small and
mid-size companies may have limited product lines, markets or financial
resources; may lack management depth or experience; and may be more vulnerable
to adverse general market or economic developments than large companies. Some of
these companies may distribute, sell or produce products which have recently
been brought to market and may be dependent on key personnel.
The prices of small and mid-size company securities are often more volatile
than prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less publicly
available information. Also, because small and mid-size companies normally have
fewer shares outstanding and these shares trade less frequently
-6-
than large companies, it may be more difficult for a trust which contains these
securities to buy and sell significant amounts of such shares without an
unfavorable impact on prevailing market prices.
ADDITIONAL DEPOSITS. The trust agreement authorizes the sponsor to
increase the size of a trust and the number of units thereof by the deposit of
additional securities, or cash (including a letter of credit or the equivalent)
with instructions to purchase additional securities, in such trust and the
issuance of a corresponding number of additional units. In connection with
these deposits, existing and new investors may experience a dilution of their
investments and a reduction in their anticipated income because of fluctuations
in the prices of the securities between the time of the deposit and the purchase
of the securities and because a trust will pay the associated brokerage fees and
other acquisition costs.
ADMINISTRATION OF THE TRUST
DISTRIBUTIONS TO UNITHOLDERS. Income received by a trust is credited by
the trustee to the Income Account for the trust. All other receipts are
credited by the trustee to a separate Capital Account for the trust. The
trustee will normally distribute income received by a trust on each distribution
date or shortly thereafter to unitholders of record on the preceding record
date. The trust generally pays distributions from its Income Account (pro-rated
on an annual basis) along with any excess balance from the Capital Account on
each monthly distribution date to unitholders of record on the preceding record
date as described in greater detail below. All distributions will be net of
applicable expenses. The amount of your distributions will vary from time to
time as companies change their dividends or trust expenses change. The trust
will also generally make required distributions or distributions to avoid
imposition of tax at the end of each year if it has elected to be taxed as a
"regulated investment company" for federal tax purposes. Excess amounts from
the Capital Account of a trust, if any, will be distributed at least annually to
the unitholders then of record. Proceeds received from the disposition of any
of the securities after a record date and prior to the following distribution
date will be held in the Capital Account and not distributed until the next
distribution date applicable to the Capital Account. The trustee shall not be
required to make a distribution from the Capital Account unless the cash balance
on deposit therein available for distribution shall be sufficient to distribute
at least $1.00 per 100 units. The trustee is not required to pay interest on
funds held in the Capital or Income Accounts (but may itself earn interest
thereon and therefore benefits from the use of such funds).
The distribution to the unitholders as of each record date will be made on
the following distribution date or shortly thereafter. When the trust receives
dividends from a portfolio security, the trustee credits the dividends to the
trust's accounts. In an effort to make relatively regular income distributions,
the trust's distribution from the Income Account on each distribution date to
each unitholder is equal to such unitholder's pro rata share of the cash balance
in the Income Account calculated on the basis of a fraction (the numerator of
which is one and the denominator of which is the total number of distribution
dates per year) of the estimated annual income to the trust for the ensuing
twelve months computed as of the close of business on the record date
immediately preceding such distribution after deduction of (1) the fees and
expenses then deductible pursuant to the trust agreement and (2) the trustee's
estimate of
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other expenses properly chargeable to the Income Account pursuant to the trust
agreement which have accrued as of such record date or are otherwise properly
attributable to the period to which such distribution relates. Because the
trust does not receive dividends from the portfolio securities at a constant
rate throughout the year, the trust's income distributions to unitholders may be
more or less than the amount credited to the trust accounts as of the record
date. In the event that the amount on deposit in the Income Account is not
sufficient for the payment of the amount intended to be distributed to
unitholders on the basis of the computation described above, the trustee is
authorized to advance its own funds and cause to be deposited in and credited to
the Income Account such amounts as may be required to permit payment of the
related distribution to be made as described above. In such an event, the
trustee shall be entitled to be reimbursed, without interest, out of income
payments received by the trust subsequent to the date of such advance. Any such
advance shall be reflected in the Income Account until repaid. A person will
become the owner of units, and thereby a unitholder of record, on the date of
settlement provided payment has been received. Persons who purchase units will
commence receiving distributions only after such person becomes a record owner.
Notification to the trustee of the transfer of units is the responsibility of
the purchaser, but in the normal course of business the selling broker-dealer
provides such notice.
The trustee will periodically deduct from the Income Account of a trust
and, to the extent funds are not sufficient therein, from the Capital Account of
a trust amounts necessary to pay the expenses of the trust. The trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of a trust.
Amounts so withdrawn shall not be considered a part of a trust's assets until
such time as the trustee shall return all or any part of such amounts to the
appropriate accounts. In addition, the trustee may withdraw from the Income and
Capital Accounts of a trust such amounts as may be necessary to cover
redemptions of units.
DISTRIBUTION REINVESTMENT. Unitholders may reinvest distributions into
additional units of their trust without a sales fee. Your trust will pay any
deferred sales fee and creation and development fee per unit regardless of any
sales fee discounts. However, if you are eligible to receive a discount such
that the sales fee you must pay is less than the applicable deferred sales fee
and creation and development fee, you will be credited the difference between
your sales fee and the deferred sales fee and the creation and development fee
at the time you buy your units. Accordingly, if you reinvest distributions into
additional units of your trust, you will be credited the amount of any remaining
deferred sales fee and creation and development fee on such units at the time of
reinvestment.
STATEMENTS TO UNITHOLDERS. With each distribution, the trustee will
furnish to each unitholder a statement of the amount of income and the amount of
other receipts, if any, which are being distributed, expressed in each case as a
dollar amount per unit.
The accounts of a trust are required to be audited annually, at the related
trust's expense, by independent public accountants designated by the sponsor,
unless the sponsor determines that such an audit would not be in the best
interest of the unitholders of the trust. The accountants' report will be
furnished by the trustee to any unitholder upon written request. Within a
reasonable period of time after the end of each calendar year, the trustee shall
furnish to each
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person who at any time during the calendar year was a unitholder of a trust a
statement, covering the calendar year, setting forth for the trust:
(A) As to the 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 trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Income Account for payment into
the Reserve Account;
(4) the deductions for applicable taxes and fees and expenses of the
trustee, the depositor, the evaluator, the supervisor, counsel,
auditors and any other expenses paid by the trust;
(5) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(6) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(7) the aggregate distributions to unitholders; and
(8) the balance remaining after such deductions and distributions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year;
(B) As to the Capital Account:
(1) the net proceeds received due to sale, maturity, redemption,
liquidation or disposition of any of the securities, excluding
any portion thereof credited to the Income Account;
(2) the amount paid for purchases of replacement securities or for
purchases of securities otherwise pursuant to the trust
agreement, if any, and for redemptions;
(3) the deductions, if any, from the Capital Account for payments
into the Reserve Account;
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(4) the deductions for payment of applicable taxes and fees and
expenses of the trustee, the depositor, the evaluator, the
supervisor, counsel, auditors and any other expenses paid by the
trust;
(5) the deductions for payment of the depositor's expenses of
organizing the trust;
(6) the amounts reserved for purchases of contract securities, for
purchases made pursuant to replace failed contract securities or
for purchases of securities otherwise pursuant to the trust
agreement, if any;
(7) the deductions for payment of deferred sales fee and creation and
development fee, if any;
(8) the deductions for payment of the depositor's expenses of
maintaining the registration of the trust units, if any;
(9) the aggregate distributions to unitholders; and
(10) the balance remaining after such distributions and deductions,
expressed both as a total dollar amount and as a dollar amount
per unit outstanding on the last business day of such calendar
year; and
(C) the following information:
(1) a list of the securities held as of the last business day of such
calendar year and a list which identifies all securities sold or
other securities acquired during such calendar year, if any;
(2) the number of units outstanding on the last business day of such
calendar year;
(3) the unit value based on the last trust evaluation of such trust
made during such calendar year; and
(4) the amounts actually distributed during such calendar year from
the Income and Capital Accounts, separately stated, expressed
both as total dollar amounts and as dollar amounts per unit
outstanding on the record dates for such distributions.
RIGHTS OF UNITHOLDERS. A unitholder may at any time tender units to the
trustee for redemption. The death or incapacity of any unitholder will not
operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or
winding up of a trust. No unitholder shall have the right to control the
operation and management of a trust in any manner, except to vote with respect
to the amendment of the trust agreement or termination of a trust.
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AMENDMENT AND TERMINATION. The trust agreement may be amended from time to
time by the sponsor and trustee or their respective successors, without the
consent of any of the unitholders, (i) to cure any ambiguity or to correct or
supplement any provision which may be defective or inconsistent with any other
provision contained in the trust agreement, (ii) to make such other provision in
regard to matters or questions arising under the trust agreement as shall not
materially adversely affect the interests of the unitholders or (iii) to make
such amendments as may be necessary (a) for the trust to continue to qualify as
a regulated investment company for federal income tax purposes if the trust has
elected to be taxed as such under the United States Internal Revenue Code of
1986, as amended, or (b) to prevent the trust from being deemed an association
taxable as a corporation for federal income tax purposes if the trust has not
elected to be taxed as a regulated investment company under the United States
Internal Revenue Code of 1986, as amended. The trust agreement may not be
amended, however, without the consent of all unitholders then outstanding, so as
(1) to permit, except in accordance with the terms and conditions thereof, the
acquisition hereunder of any securities other than those specified in the
schedules to the trust agreement or (2) to reduce the percentage of units the
holders of which are required to consent to certain of such amendments. The
trust agreement may not be amended so as to reduce the interest in a trust
represented by units without the consent of all affected unitholders.
Except for the amendments, changes or modifications described above, neither the
sponsor nor the trustee may consent to any other amendment, change or
modification of the trust agreement without the giving of notice and the
obtaining of the approval or consent of unitholders representing at least 66
2/3% of the units then outstanding of the affected trust. No amendment may
reduce the aggregate percentage of units the holders of which are required to
consent to any amendment, change or modification of the trust agreement without
the consent of the unitholders of all of the units then outstanding of the
affected trust and in no event may any amendment be made which would (1) alter
the rights to the unitholders as against each other, (2) provide the trustee
with the power to engage in business or investment activities other than as
specifically provided in the trust agreement, (3) adversely affect the tax
status of the trust for federal income tax purposes or result in the units being
deemed to be sold or exchanged for federal income tax purposes or (4) unless the
trust has elected to be taxed as a regulated investment company for federal
income tax purposes, result in a variation of the investment of unitholders in
the trust. The trustee will notify unitholders of the substance of any such
amendment.
The trust agreement provides that a trust shall terminate upon the
liquidation, redemption or other disposition of the last of the securities held
in the trust but in no event is it to continue beyond the mandatory termination
date. If the value of a trust shall be less than the applicable minimum value
stated in the prospectus (generally 40% of the total value of securities
deposited in the trust during the initial offering period), the trustee may, in
its discretion, and shall, when so directed by the sponsor, terminate the trust.
A trust may be terminated at any time by the holders of units representing 66
2/3% of the units thereof then outstanding. In addition, the sponsor may
terminate a trust if it is based on a security index and the index is no longer
maintained. A trust will be liquidated by the trustee in the event that a
sufficient number of units of the trust not yet sold are tendered for redemption
by the sponsor, so that the net worth of the trust would be reduced to less than
40% of the value of the securities at the time they were deposited in the trust.
If a trust is liquidated because of the redemption of unsold units by the
sponsor, the sponsor will refund to each purchaser of units the entire sales fee
paid by such purchaser.
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Beginning nine business days prior to, but no later than, the scheduled
termination date described in the prospectus, the trustee may begin to sell all
of the remaining underlying securities on behalf of unitholders in connection
with the termination of the trust. The sponsor may assist the trustee in these
sales and receive compensation to the extent permitted by applicable law. The
sale proceeds will be net of any incidental expenses involved in the sales.
The sponsor will generally instruct the trustee to sell the securities as
quickly as practicable during the termination proceedings without in its
judgment materially adversely affecting the market price of the securities, but
it is expected that all of the securities will in any event be disposed of
within a reasonable time after a trust's termination. The sponsor does not
anticipate that the period will be longer than one month, and it could be as
short as one day, depending on the liquidity of the securities being sold. The
liquidity of any security depends on the daily trading volume of the security
and the amount that the sponsor has available for sale on any particular day.
Of course, no assurances can be given that the market value of the securities
will not be adversely affected during the termination proceedings.
Approximately thirty days prior to termination of a trust, the trustee will
notify unitholders of the termination and provide a form allowing qualifying
unitholders to elect an in-kind distribution. A unitholder who owns the minimum
number of units described in the prospectus may request an in-kind distribution
from the trustee instead of cash. The trustee will make an in-kind distribution
through the distribution of each of the securities of the trust in book entry
form to the account of the unitholder's bank or broker-dealer at Depository
Trust Company. The unitholder will be entitled to receive whole shares of each
of the securities comprising the portfolio of a trust and cash from the Capital
Account equal to the fractional shares to which the unitholder is entitled. The
trustee may adjust the number of shares of any security included in a
unitholder's in-kind distribution to facilitate the distribution of whole
shares. The sponsor may terminate the in-kind distribution option at any time
upon notice to the unitholders. Special federal income tax consequences will
result if a unitholder requests an in-kind distribution.
Within a reasonable period after termination, the trustee will sell any
securities remaining in a trust and, after paying all expenses and charges
incurred by the trust, will distribute to unitholders thereof their pro rata
share of the balances remaining in the Income and Capital Accounts of the trust.
The sponsor may, but is not obligated to, offer for sale units of a
subsequent series of a trust at approximately the time of the mandatory
termination date. If the sponsor does offer such units for sale, unitholders
may be given the opportunity to purchase such units at a public offering price
that includes a reduced sales fee. There is, however, no assurance that units
of any new series of a trust will be offered for sale at that time, or if
offered, that there will be sufficient units available for sale to meet the
requests of any or all unitholders.
THE TRUSTEE. The trustee is The Bank of New York Mellon, a trust company
organized under the laws of New York. The Bank of New York Mellon has its
principal unit investment trust division offices at 2 Hanson Place, 12th Floor,
Brooklyn, New York 11217, (800) 848-6468. The Bank of New York Mellon is subject
to supervision and examination by the Superintendent of Banks of the State of
New York and the Board of Governors of the Federal Reserve System,
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and its deposits are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law.
The trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of any trust. In accordance with the trust
agreement, the trustee shall keep records of all transactions at its office.
Such records shall include the name and address of, and the number of units held
by, every unitholder of a trust. Such books and records shall be open to
inspection by any unitholder at all reasonable times during usual business
hours. The trustee shall make such annual or other reports as may from time to
time be required under any applicable state or federal statute, rule or
regulation. The trustee shall keep a certified copy or duplicate original of
the trust agreement on file in its office available for inspection at all
reasonable times during usual business hours by any unitholder, together with a
current list of the securities held in each trust. Pursuant to the trust
agreement, the trustee may employ one or more agents for the purpose of custody
and safeguarding of securities comprising a trust.
Under the trust agreement, the trustee or any successor trustee may resign
and be discharged of a trust created by the trust agreement by executing an
instrument in writing and filing the same with the sponsor.
The trustee or successor trustee must mail a copy of the notice of
resignation to all unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring trustee may apply to a court of competent
jurisdiction for the appointment of a successor. In case at any time the trustee
shall not meet the requirements set forth in the trust agreement, or shall
become incapable of acting, or if a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the trustee in an
involuntary case, or the trustee shall commence a voluntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the trustee or for any substantial part of its
property shall be appointed, or the trustee shall generally fail to pay its
debts as they become due, or shall fail to meet such written standards for the
trustee's performance as shall be established from time to time by the sponsor,
or if the sponsor determines in good faith that there has occurred either (1) a
material deterioration in the creditworthiness of the trustee or (2) one or more
grossly negligent acts on the part of the trustee with respect to a trust, the
sponsor, upon sixty days' prior written notice, may remove the trustee and
appoint a successor trustee, as hereinafter provided, by written instrument, in
duplicate, one copy of which shall be delivered to the trustee so removed and
one copy to the successor trustee. Notice of such removal and appointment shall
be mailed to each unitholder by the sponsor. Upon execution of a written
acceptance of such appointment by such successor trustee, all the rights,
powers, duties and obligations of the original trustee shall vest in the
successor. The trustee must be a corporation organized under the laws of the
United States, or any state thereof, be authorized under such laws to exercise
trust powers and have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
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THE SPONSOR. The sponsor of the trust is Advisors Asset Management, Inc.
acting through its unit investment trust division. The sponsor is a broker-
dealer specializing in providing services to broker-dealers, registered
representatives, investment advisers and other financial professionals. The
sponsor's headquarters are located at 18925 Base Camp Road, Monument, Colorado
80132. You can contact the unit investment trust division at 8100 East 22nd
Street North, Building 800, Suite 102, Wichita, Kansas 67226 or by using the
contacts listed on the back cover of the prospectus. The sponsor is a registered
broker-dealer and investment adviser and a member of the Financial Industry
Regulatory Authority, Inc. (FINRA) and the Securities Investor Protection
Corporation (SIPC), and a registrant of the Municipal Securities Rulemaking
Board (MSRB).
If at any time the sponsor shall fail to perform any of its duties under
the trust agreement or shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the Securities and Exchange
Commission, (b) terminate the trust agreement and liquidate any trust as
provided therein, or (c) continue to act as trustee without terminating the
trust agreement.
THE EVALUATOR AND SUPERVISOR. Advisors Asset Management, Inc., the
sponsor, also serves as evaluator and supervisor. The evaluator and supervisor
may resign or be removed by the sponsor and trustee in which event the sponsor
or trustee is to use its best efforts to appoint a satisfactory successor. Such
resignation or removal shall become effective upon acceptance of appointment by
the successor evaluator. If upon resignation of the evaluator no successor has
accepted appointment within thirty days after notice of resignation, the
evaluator may apply to a court of competent jurisdiction for the appointment of
a successor. Notice of such resignation or removal and appointment shall be
mailed by the trustee to each unitholder.
LIMITATIONS ON LIABILITY. The sponsor, evaluator, and supervisor are
liable for the performance of their obligations arising from their
responsibilities under the trust agreement but will be under no liability to the
unitholders for taking any action or refraining from any action in good faith
pursuant to the trust agreement or for errors in judgment, except in cases of
its own gross negligence, bad faith or willful misconduct or its reckless
disregard for its duties thereunder. The sponsor shall not be liable or
responsible in any way for depreciation or loss incurred by reason of the sale
of any securities.
The trust agreement provides that the trustee shall be under no liability
for any action taken in good faith in reliance upon prima facie properly
executed documents or for the disposition of moneys, securities or certificates
except by reason of its own gross negligence, bad faith or willful misconduct,
or its reckless disregard for its duties under the trust agreement, nor shall
the trustee be liable or responsible in any way for depreciation or loss
incurred by reason of the sale by the trustee of any securities. In the event
that the sponsor shall fail to act, the trustee may act and shall not be liable
for any such action taken by it in good faith. The trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the securities or upon the interest thereof. In addition, the trust
agreement contains other customary provisions limiting the liability of the
trustee.
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The trustee and unitholders may rely on any evaluation furnished by the
evaluator and shall have no responsibility for the accuracy thereof. The trust
agreement provides that the determinations made by the evaluator shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the evaluator shall be under no liability to the trustee or
unitholders for errors in judgment, but shall be liable for its gross
negligence, bad faith or willful misconduct or its reckless disregard for its
obligations under the trust agreement.
EXPENSES OF THE TRUST. The sponsor will not charge a trust any fees for
services performed as sponsor. The sponsor will receive a portion of the sale
commissions paid in connection with the purchase of units and will share in
profits, if any, related to the deposit of securities in the trust.
The sponsor may receive a fee from your trust for creating and developing
the trust, including determining the trust's objectives, policies, composition
and size, selecting service providers and information services and for providing
other similar administrative and ministerial functions. The amount of this
"creation and development fee" is set forth in the prospectus. The trustee will
deduct this amount from your trust's assets as of the close of the initial
offering period. No portion of this fee is applied to the payment of
distribution expenses or as compensation for sales efforts. This fee will not be
deducted from proceeds received upon a repurchase, redemption or exchange of
units before the close of the initial public offering period.
The trustee receives for its services that fee set forth in the prospectus.
The trustee's fee which is calculated and paid monthly is based on the total
number of units of the related trust outstanding as of January 1 for any annual
period, except during the initial offering period the fee will be based on the
units outstanding at the end of each month. The trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Capital and Income Accounts since these Accounts are non-interest bearing
and the amounts earned by the trustee are retained by the trustee. Part of the
trustee's compensation for its services to a trust is expected to result from
the use of these funds.
The supervisor will charge a trust a surveillance fee for services
performed for the trust in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation received from other unit investment trusts for which the sponsor
both acts as sponsor and provides portfolio surveillance, exceed the aggregate
cost to the sponsor of providing such services. Such fee shall be based on the
total number of units of the related trust outstanding as of January 1 for any
annual period, except during the initial offering period the fee will be based
on the units outstanding at the end of each month.
For evaluation of the securities in a trust, the evaluator shall receive an
evaluation fee in an amount not to exceed that amount set forth in the
prospectus but in no event will such compensation, when combined with all
compensation from other unit investment trusts for which the sponsor acts as
sponsor and provides evaluation services, exceed the aggregate cost of providing
such services. Such fee shall be based on the total number of units of the
related trust outstanding as of January 1 for any annual period, except during
the initial offering period the fee will be based on the units outstanding at
the end of each month.
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For providing bookkeeping and administrative services to a trust, the
sponsor shall receive an administration fee in an amount not to exceed that
amount set forth in the prospectus but in no event will such compensation, when
combined with all compensation from other unit investment trusts for which the
sponsor acts as sponsor and provides evaluation services, exceed the aggregate
cost of providing such services. Such fee shall be based on the total number of
units of the related trust outstanding as of January 1 for any annual period,
except during the initial offering period the fee will be based on the units
outstanding at the end of each month.
The trustee's fee, sponsor's fee for providing bookkeeping and
administrative services to the trust, supervisor's fee and evaluator's fee are
deducted from the Income Account of the related trust to the extent funds are
available and then from the Capital Account. Each such fee (other than any
creation and development fee) may be increased without approval of unitholders
by amounts not exceeding a proportionate increase in the Consumer Price Index or
any equivalent index substituted therefor.
The following additional charges are or may be incurred by the trust:
(a) fees for the trustee's extraordinary services; (b) expenses of the trustee
(including legal and auditing expenses and reimbursement of the cost of advances
to the trust for payment of expenses and distributions, but not including any
fees and expenses charged by an agent for custody and safeguarding of
securities) and of counsel, if any; (c) various governmental charges;
(d) expenses and costs of any action taken by the trustee to protect the trust
or the rights and interests of the unitholders; (e) indemnification of the
trustee for any loss, liability or expense incurred by it in the administration
of the trust not resulting from negligence, bad faith or willful misconduct on
its part or its reckless disregard of its obligations under the trust agreement;
(f) indemnification of the sponsor for any loss, liability or expense incurred
in acting in that capacity without gross negligence, bad faith or willful
misconduct or its reckless disregard for its obligations under the trust
agreement; and (g) expenditures incurred in contacting unitholders upon
termination of the trust. The fees and expenses set forth herein are payable
out of a trust and, when owing to the trustee, are secured by a lien on the
trust. If the balances in the Income and Capital Accounts are insufficient to
provide for amounts payable by the trust, the trustee has the power to sell
securities to pay such amounts. These sales may result in capital gains or
losses to unitholders. A trust may pay the costs of updating its registration
statement each year.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
When a trust sells securities, the composition and diversity of the
securities in the trust may be altered. In order to obtain the best price for a
trust, it may be necessary for the sponsor to specify minimum amounts in which
blocks of securities are to be sold. In effecting purchases and sales of a
trust's portfolio securities, the sponsor may direct that orders be placed with
and brokerage commissions be paid to brokers, including brokers which may be
affiliated with the trust, the sponsor or dealers participating in the offering
of units.
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PURCHASE, REDEMPTION AND PRICING OF UNITS
PUBLIC OFFERING PRICE. Units of a trust are offered at the public offering
price thereof. The public offering price per unit is equal to the net asset
value per unit plus organization costs plus the applicable sales fee referred to
in the prospectus. The initial sales fee is equal to the difference between the
maximum sales fee and the sum of the remaining deferred sales fee and the total
creation and development fee. The sales fee as a percentage of the public
offering price and the net amount invested is set forth in the prospectus. The
deferred sales fee is a fixed dollar amount and will be collected in
installments as described in the prospectus. The creation and development fee
is a fixed dollar amount and will be collected at the end of the initial
offering period as described in the prospectus. Units purchased after the
initial deferred sales fee payment will be subject to the remaining deferred
sales fee payments. Units sold or redeemed prior to such time as the entire
applicable deferred sales fee has been collected will be assessed the remaining
deferred sales fee at the time of such sale or redemption. Units sold or
redeemed prior to such time as the entire applicable creation and development
fee has been collected will not be assessed the remaining creation and
development fee at the time of such sale or redemption. During the initial
offering period, a portion of the public offering price includes an amount of
securities to pay for all or a portion of the costs incurred in establishing a
trust. These costs include the cost of preparing the registration statement,
the trust indenture and other closing documents, registering units with the
Securities and Exchange Commission and states, the initial audit of the trust
portfolio, legal fees and the initial fees and expenses of the trustee. These
costs will be deducted from a trust as of the end of the initial offering period
or after six months, if earlier. Certain broker-dealers may charge a transaction
fee for processing unit purchases.
As indicated above, the initial public offering price of the units was
established by dividing the aggregate underlying value of the securities by the
number of units outstanding. Such price determination as of the opening of
business on the date a trust was created was made on the basis of an evaluation
of the securities in the trust prepared by the evaluator. After the opening of
business on this date, the evaluator will appraise or cause to be appraised
daily the value of the underlying securities as of the close of regular trading
on the New York Stock Exchange on days the New York Stock Exchange is open and
will adjust the public offering price of the units commensurate with such
valuation. Such public offering price will be effective for all orders received
at or prior to the close of regular trading on the New York Stock Exchange on
each such day as discussed in the prospectus. Orders received by the trustee,
sponsor or authorized financial professional for purchases, sales or redemptions
after that time, or on a day when the New York Stock Exchange is closed, will be
held until the next determination of price as discussed in the prospectus.
Had units of a trust been available for sale at the close of business on
the business day before the inception date of the trust, the public offering
price would have been as shown under "Essential Information" in the prospectus.
The public offering price per unit of a trust on the date of the prospectus or
on any subsequent date will vary from the amount stated under "Essential
Information" in the prospectus in accordance with fluctuations in the prices of
the underlying securities. Net asset value per unit is determined by dividing
the value of a trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of units outstanding. The portfolio securities
are valued by the evaluator as follows: If the security is
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listed on a national securities exchange, the evaluation will generally be based
on the last sale price on the exchange (unless the evaluator deems the price
inappropriate as a basis for evaluation). If the security is not so listed or,
if so listed and the principal market for the security is other than on the
exchange, the evaluation will generally be made by the evaluator in good faith
based on an appraisal of the fair value of the securities using recognized
pricing methods.
The foregoing evaluations and computations shall be made as of the close of
regular trading on the New York Stock Exchange, on each business day commencing
with the trust's inception date of the securities, effective for all sales made
during the preceding 24-hour period.
Although payment is normally made three business days following the order
for purchase, payments may be made prior thereto. A person will become the
owner of units on the date of settlement provided payment has been received.
Cash, if any, made available to the sponsor prior to the date of settlement for
the purchase of units may be used in the sponsor's business and may be deemed to
be a benefit to the sponsor, subject to the limitations of the Securities
Exchange Act of 1934.
PUBLIC DISTRIBUTION OF UNITS. The sponsor intends to qualify the units for
sale in a number of states. Units will be sold through dealers who are members
of the Financial Industry Regulatory Authority, Inc. and through others. Sales
may be made to or through dealers at prices which represent discounts from the
public offering price as set forth in the prospectus. Certain commercial banks
may be making units available to their customers on an agency basis. The
sponsor reserves the right to change the discounts from time to time.
We currently provide, at our own expense and out of our own profits,
additional compensation and benefits to broker-dealers who sell units of this
trust and our other products. This compensation is intended to result in
additional sales of our products and/or compensate broker-dealers and financial
advisors for past sales. A number of factors are considered in determining
whether to pay these additional amounts. Such factors may include, but are not
limited to, the level or type of services provided by the intermediary, the
level or expected level of sales of our products by the intermediary or its
agents, the placing of our products on a preferred or recommended product list
and access to an intermediary's personnel. We may make these payments for
marketing, promotional or related expenses, including, but not limited to,
expenses of entertaining retail customers and financial advisors, advertising,
sponsorship of events or seminars, obtaining information about the breakdown of
unit sales among an intermediary's representations or offices, obtaining shelf
space in broker-dealer firms and similar activities designed to promote the sale
of our products. We make such payments to a substantial majority of
intermediaries that sell our products. We may also make certain payments to, or
on behalf of, intermediaries to defray a portion of their costs incurred for the
purpose of facilitating unit sales, such as the costs of developing or
purchasing trading systems to process unit trades. Payments of such additional
compensation described in this paragraph and the volume concessions described
above, some of which may be characterized as "revenue sharing," may create an
incentive for financial intermediaries and their agents to sell or recommend our
products, including this trust, over other products. These arrangements will not
change the price you pay for your units. The sponsor reserves the right to
reject, in whole or in part, any order for the purchase of units.
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The sponsor reserves the right to reject, in whole or in part, any order
for the purchase of units.
PROFITS OF SPONSOR. The sponsor will receive gross sales fees equal to the
percentage of the offering price of the units of such trusts stated in the
prospectus and will pay a portion of such sales fees to dealers and agents. In
addition, the sponsor may realize a profit or a loss resulting from the
difference between the purchase prices of the securities to the sponsor and the
cost of such securities to a trust. The sponsor may also realize profits or
losses with respect to securities deposited in a trust which were acquired from
underwriting syndicates of which the sponsor was a member. An underwriter or
underwriting syndicate purchases securities from the issuer on a negotiated or
competitive bid basis, as principal, with the motive of marketing such
securities to investors at a profit. The sponsor may realize additional profits
or losses during the initial offering period on unsold units as a result of
changes in the daily evaluation of the securities in a trust.
MARKET FOR UNITS. After the initial offering period, while not obligated
to do so, the sponsor may, subject to change at any time, maintain a market for
units of the trust offered hereby and to continuously offer to purchase said
units at the net asset value determined by the evaluator, provided that the
repurchase price will not be reduced by any remaining creation and development
fee or organization costs during the initial offering period. While the sponsor
may repurchase units from time to time, it does not currently intend to maintain
an active secondary market for units. Unitholders who wish to dispose of their
units should inquire of their broker as to current market prices in order to
determine whether there is in existence any price in excess of the redemption
price and, if so, the amount thereof. Unitholders who sell or redeem units
prior to such time as the entire deferred sales fee on such units has been
collected will be assessed the amount of the remaining deferred sales fee at the
time of such sale or redemption. Unitholders who sell or redeem units prior to
such time as the entire creation and development fee on such units has been
collected will not be assessed the amount of the remaining creation and
development fee at the time of such sale or redemption. The offering price of
any units resold by the sponsor will be in accord with that described in the
currently effective prospectus describing such units. Any profit or loss
resulting from the resale of such units will belong to the sponsor. If the
sponsor decides to maintain a secondary market, it may suspend or discontinue
purchases of units of the trust if the supply of units exceeds demand, or for
other business reasons.
REDEMPTION. A unitholder who does not dispose of units in the secondary
market described above may cause units to be redeemed by the trustee by making a
written request to the trustee at its unit investment trust division office.
Unitholders must sign the request exactly as their names appear on the records
of the trustee. Additional documentation may be requested, and a signature
guarantee is always required, from corporations, executors, administrators,
trustees, guardians or associations. The signatures must be guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("STAMP") or
such other signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the trustee.
Redemption shall be made by the trustee no later than the seventh day
following the day on which a tender for redemption is received (the "Redemption
Date") by payment of cash equivalent to the redemption price, determined as set
forth below under "Computation of
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Redemption Price," as of the close of regular trading on the New York Stock
Exchange next following such tender, multiplied by the number of units being
redeemed. Any units redeemed shall be canceled and any undivided fractional
interest in the related trust extinguished. The price received upon redemption
might be more or less than the amount paid by the unitholder depending on the
value of the securities in the trust at the time of redemption. Unitholders who
sell or redeem units prior to such time as the entire deferred sales fee on such
units has been collected will be assessed the amount of the remaining deferred
sales fee at the time of such sale or redemption. Unitholders who sell or
redeem units prior to such time as the entire creation and development fee on
such units has been collected will not be assessed the amount of the remaining
creation and development fee at the time of such sale or redemption. Certain
broker-dealers may charge a transaction fee for processing redemption requests.
Under regulations issued by the Internal Revenue Service, the trustee is
required to withhold a specified percentage of the principal amount of a unit
redemption if the trustee has not been furnished the redeeming unitholder's tax
identification number in the manner required by such regulations. Any amount so
withheld is transmitted to the Internal Revenue Service and may be recovered by
the unitholder only when filing a tax return. Under normal circumstances, the
trustee obtains the unitholder's tax identification number from the selling
broker. However, any time a unitholder elects to tender units for redemption,
such unitholder should make sure that the trustee has been provided a certified
tax identification number in order to avoid this possible "back-up withholding."
In the event the trustee has not been previously provided such number, one must
be provided at the time redemption is requested. Any amounts paid on redemption
representing interest shall be withdrawn from the Income Account of a trust to
the extent that funds are available for such purpose. All other amounts paid on
redemption shall be withdrawn from the Capital Account for a trust.
Unitholders tendering units for redemption may request a distribution in
kind (a "Distribution In Kind") from the trustee in lieu of cash redemption of
an amount and value of securities per unit equal to the redemption price per
unit as determined as of the evaluation time next following the tender, provided
that the tendering unitholder meets the requirements stated in the prospectus
and the unitholder has elected to redeem at least thirty days prior to the
termination of the trust. If the unitholder meets these requirements, a
Distribution In Kind will be made by the trustee through the distribution of
each of the securities of the trust in book entry form to the account of the
unitholder's bank or broker-dealer at Depository Trust Company. The tendering
unitholder shall be entitled to receive whole shares of each of the securities
comprising the portfolio of the trust and cash from the Capital Account equal to
the fractional shares to which the tendering unitholder is entitled. The
trustee shall make any adjustments necessary to reflect differences between the
redemption price of the units and the value of the securities distributed in
kind as of the date of tender. If funds in the Capital Account are insufficient
to cover the required cash distribution to the tendering unitholder, the trustee
may sell securities. The in kind redemption option may be terminated by the
sponsor at any time.
The trustee is empowered to sell securities in order to make funds
available for the redemption of units. To the extent that securities are sold
or redeemed in-kind, the size of a trust will be, and the diversity of a trust
may be, reduced but each remaining unit will continue to represent approximately
the same proportional interest in each security. Sales may be required at
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a time when securities would not otherwise be sold and may result in lower
prices than might otherwise be realized. The price received upon redemption may
be more or less than the amount paid by the unitholder depending on the value of
the securities in the portfolio at the time of redemption.
The trustee is irrevocably authorized in its discretion, if the sponsor
does not elect to purchase any unit tendered for redemption, in lieu of
redeeming such units, to sell such units in the over-the-counter market for the
account of tendering unitholders at prices which will return to the unitholders
amounts in cash, net after brokerage commissions, transfer taxes and other
charges, equal to or in excess of the redemption price for such units. In the
event of any such sale, the trustee shall pay the net proceeds thereof to the
unitholders on the day they would otherwise be entitled to receive payment of
the redemption price.
The right of redemption may be suspended and payment postponed (1) for any
period during which the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or during which (as determined by the Securities
and Exchange Commission) trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency exists as a result of which
disposal by the trustee of securities is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the underlying
securities in accordance with the trust agreement; or (3) for such other period
as the Securities and Exchange Commission may by order permit. The trustee is
not liable to any person in any way for any loss or damage which may result from
any such suspension or postponement.
COMPUTATION OF REDEMPTION PRICE. The redemption price for units of each
trust is computed by the evaluator as of the evaluation time stated in the
prospectus next occurring after the tendering of a unit for redemption and on
any other business day desired by it, by:
A. Adding: (1) the cash on hand in the trust other than cash deposited in the
trust to purchase securities not applied to the purchase of such securities
and (2) the aggregate value of each issue of the securities held in the
trust as determined by the evaluator as described above;
B. Deducting therefrom (1) amounts representing any applicable taxes or
governmental charges payable out of the trust and for which no deductions
have been previously made for the purpose of additions to the Reserve
Account; (2) an amount representing estimated accrued expenses, including
but not limited to fees and expenses of the trustee (including legal and
auditing fees), the evaluator, the sponsor and counsel, if any; (3) cash
held for distribution to unitholders of record as of the business day prior
to the evaluation being made; and (4) other liabilities incurred by the
trust, provided that the redemption price will not be reduced by any
remaining creation and development fee or organization costs during the
initial offering period; and
C. Finally dividing the results of such computation by the number of units of
the trust outstanding as of the date thereof.
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RETIREMENT PLANS. A trust may be suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received under each of the foregoing
plans are deferred from Federal taxation. All distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible for
special income averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax laws
related thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan. Such plans are offered
by brokerage firms and other financial institutions. The trust will lower the
minimum investment requirement for IRA accounts. Fees and charges with respect
to such plans may vary.
OWNERSHIP OF UNITS. Ownership of units will not be evidenced by
certificates. Units may be purchased in denomination of one unit or any
multiple thereof, subject to the minimum investment requirement. Fractions of
units, if any, will be computed to three decimal places.
PERFORMANCE INFORMATION
Information contained in this Information Supplement or in the prospectus,
as it currently exists or as further updated, may also be included from time to
time in other prospectuses or in advertising material. Information on the
performance of a trust strategy or the actual performance of a trust may be
included from time to time in other prospectuses or advertising material and may
reflect sales fees and expenses of a trust. The performance of a trust may also
be compared to the performance of money managers as reported in SEI Fund
Evaluation Survey or of mutual funds as reported by Lipper Analytical Services
Inc. (which calculates total return using actual dividends on ex-dates
accumulated for the quarter and reinvested at quarter end), Money Magazine Fund
Watch (which rates fund performance over a specified time period after sales fee
and assuming all dividends reinvested) or Wiesenberger Investment Companies
Service (which states fund performance annually on a total return basis) or of
the New York Stock Exchange Composite Index, the American Stock Exchange Index
(unmanaged indices of stocks traded on the New York and American Stock
Exchanges, respectively), the Dow Jones Industrial Average (an index of 30
widely traded industrial common stocks) or the Standard & Poor's 500 Index (an
unmanaged diversified index of 500 stocks) or similar measurement standards
during the same period of time.
-22-
CONTENTS OF REGISTRATION STATEMENT
This Amendment to the Registration Statement comprises the following:
The facing sheet
The prospectus and information supplement
The signatures
The consents of evaluator, independent auditors and legal counsel
The following exhibits:
1.1 Trust Agreement.
1.1.1 Standard Terms and Conditions of Trust. Reference is made to
Exhibit 1.1.1 to the Registration Statement on Form S-6 for Advisor's
Disciplined Trust, Series 13 (File No. 333-116816) as filed on
August 5, 2004.
1.2 Certificate of Amendment of Certificate of Incorporation and Certificate
of Merger of Advisors Asset Management, Inc. Reference is made to
Exhibit 1.2 to the Registration Statement on Form S-6 for Advisors
Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011.
1.3 Bylaws of Advisors Asset Management, Inc. Reference is made to
Exhibit 1.3 to the Registration Statement on Form S-6 for Advisors
Disciplined Trust 647 (File No. 333-171079) as filed on January 6, 2011.
1.5 Form of Dealer Agreement. Reference is made to Exhibit 1.5 to the
Registration Statement 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 Advisor's Disciplined Trust 73
(File No. 333-131959) as filed on March 16, 2006.
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 initial evaluator.
4.2 Consent of independent registered public accounting firm.
6.1 Directors and Officers of Advisors Asset Management, Inc. Reference is
made to Exhibit 6.1 to the Registration Statement on Form S-6 for
Advisors Disciplined Trust 1539 (File No. 333-206376) as filed on
November 17, 2015.
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.
S-1
SIGNATURES
The Registrant, Advisors Disciplined Trust 1640, hereby identifies Matrix
Unit Trust, Series 1, Series 2, Series 3, Series 4, Series 5 and Series 8;
Advisor's Disciplined Trust, Series 10, Series 11 and Series 13; Advisor's
Disciplined Trust 23 and 40; and Advisors Disciplined Trust 256, 318, 404, 459,
460, 518, 533, 544, 560, 588, 595, 610, 625, 677, 678, 699, 731, 782, 785, 803,
814, 820, 830, 834, 833, 839, 847, 854, 855, 862, 863, 867, 879, 880, 888, 891,
897, 901, 910, 911, 931, 932, 936, 938, 949, 952, 967, 980, 981, 982, 990, 1000,
1006, 1015, 1049, 1102, 1146, 1198, 1258, 1309, 1341, 1516 and 1609 for
purposes of the representations required by Rule 487 and represents the
following:
(1) that the portfolio securities deposited in the series as to the
securities of which this Registration Statement is being filed do not differ
materially in type or quality from those deposited in such previous series;
(2) that, except to the extent necessary to identify the specific portfolio
securities deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration Statement is
being filed, this Registration Statement does not contain disclosures that
differ in any material respect from those contained in the registration
statements for such previous series as to which the effective date was
determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Advisors Disciplined Trust 1640 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 April 15, 2016.
ADVISORS DISCIPLINED TRUST 1640
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 April 15, 2016 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. )
S-2
Christopher T. Genovese Director of Advisors Asset )
Management, Inc. )
Randy J. Pegg Director of Advisors Asset )
Management, Inc. )
R. Scott Roberg Director of Advisors Asset )
Management, Inc. )
Jack Simkin Director of Advisors Asset )
Management, Inc. )
Andrew Williams Director of Advisors Asset )
Management, Inc. )
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.
S-3
EXHIBIT 1.1
ADVISORS DISCIPLINED TRUST 1640
TRUST AGREEMENT
Dated: April 15, 2016
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 Advisor's
Disciplined Trust, Effective for Unit Investment Trusts Investing in Equity
Securities Established On and After August 5, 2004 (Including Advisor's
Disciplined Trust, Series 13 and Subsequent Series)" (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 the 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. Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, all Units will be held in uncertificated form and
Unitholders may not request a certificate representing his or her Units.
4. The aggregate number of Units described in Section 2.03(a) for the 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.
5. The term "Deferred Sales Charge Payment Dates" shall mean the dates
specified for deferred sales fee installments under "Investment Summary--Fees
and Expenses" in the Prospectus for the Trust.
6. The term "Distribution Date" shall mean the "Distribution Dates" set
forth under "Investment Summary--Essential Information" in the Prospectus for
the Trust.
7. The term "Fund Shares" shall mean any Securities issued by an investment
company registered under the Investment Company Act of 1940 or business
development company regulated under the Investment Company Act of 1940.
8. The term "Grantor Trust" shall mean a Trust other than a RIC.
9. The term "Mandatory Termination Date" shall mean the "Termination Date"
set forth under "Investment Summary--Essential Information" in the Prospectus
for the Trust.
10. The term "RIC" shall mean a Trust which has elected to be taxed as a
"regulated investment company" under the United States Internal Revenue Code of
1986, as amended.
11. The term "Record Date" shall mean the "Record Dates" set forth under
"Investment Summary--Essential Information" in the Prospectus for the Trust.
12. Section 1.01(1) of the Standard Terms and Conditions of Trust is
replaced in its entirety with the following:
"'Depositor' shall mean Advisors Asset Management, Inc. and its successors
in interest, or any successor depositor appointed as hereinafter provided."
13. Section 1.01(2) of the Standard Terms and Conditions of Trust is
replaced in its entirety with the following:
"'Trustee' shall mean The Bank of New York Mellon and its successors in
interest, or any successor trustee appointed as hereinafter provided."
14. Section 1.01(3) of the Standard Terms and Conditions of Trust is
replaced in its entirety with the following:
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"'Evaluator' shall mean Advisors Asset Management, Inc., and its successors
in interest, or any successor evaluator appointed as hereinafter provided."
15. Section 1.01(4) of the Standard Terms and Conditions of Trust is
replaced in its entirety with the following:
"'Supervisor' shall mean Advisors Asset Management, Inc., and its
successors in interest, or any successor evaluator appointed as hereinafter
provided."
16. Section 2.01(f)(iii) of the Standard Terms and Conditions of Trust is
replaced in its entirety by the following:
"(iii) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver or assign the additional Units
created pursuant to the Subscription Notice, the Depositor shall deposit
with the Trustee (a) any additional Securities specified in the
Subscription Notice (or contracts to purchase such additional Securities
together with cash or a Letter of Credit in the amount necessary to settle
such contracts) or (b) cash or a Letter of Credit in an amount equal to the
aggregate value of the additional Securities specified in the Subscription
Notice to be acquired for the account of the Trust, and adding or
subtracting the difference between such aggregate value and the product of
(x) the Unit Value computed pursuant to Section 6.01 for the Business Day
preceding the Trade Date times (y) the verified number of additional Units
to be created."
17. Section 3.05 of the Standard Terms and Conditions of Trust is amended by
adding the following subsection immediately after Section 3.05(a)(iii):
"(iv) 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 regulated investment
company 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."
18. The first paragraph of Section 3.05(b)(i) of the Standard Terms and
Conditions of Trust is replaced in its entirety with the following:
"(i) On each Distribution Date, the Trustee shall distribute to each
Unitholder of record at the close of business on the preceding Record Date an
amount per Unit equal to such Unitholder's Income Distribution (as defined
below) plus such Unitholder's pro rata share of the balance of the Capital
Account (except for monies on deposit therein required to purchase Contract
Securities or to purchase Securities contracted for pursuant to the Depositor's
purchase instructions) computed as of the close of business on the Record Date
immediately preceding such Distribution Date, provided, however, the Trustee
shall not be required to make a distribution from the Capital Account unless the
amount available for distribution shall equal at least $1.00 per 100 Units.
Notwithstanding anything to the contrary herein, in the case of a Grantor Trust,
the Trustee shall not be required to make a distribution from the Income Account
or the Capital Account unless the aggregate cash held for distribution within
the meaning of
-3-
Treas. Reg 1.671-5(b)(5) from the Income Account and the Capital Account is
equal to or greater than 0.1% of the net asset value of the Trust on the related
Record Date, provided, however, that the Trustee shall in any event distribute
the balance of the Income Account and Capital Account on the Distribution Date
occurring in December of each year (including in such distribution income
receivable by the Trust on or prior to the December Distribution Date). This
provision is intended to comply with Treas. Reg. 1.671-5(c)(2)(v)(C), and shall
be interpreted consistent therewith and with any successor regulation. Any
contrary provision of this Indenture is superseded by the provisions of this
paragraph. Notwithstanding the foregoing or any contrary provisions of this
Indenture, the Trustee shall not be required to distribute funds held in the
Income or Capital Accounts which the Depositor or the Trustee has designated as
required for the payment of Trust expenses."
19. Section 3.05(b)(ii) of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"(ii) For the purposes of this Section 3.05, the Unitholder's "Income
Distribution" shall be equal to such Unitholder's pro rata share of the cash
balance in the Income Account calculated on the basis of a fraction (the
numerator of which is one and the denominator of which is the total number of
Distribution Dates per year) of the estimated annual income to the Trust for the
ensuing twelve months computed as of the close of business on the Record Date
immediately preceding such Income Distribution after deduction of (1) the fees
and expenses then deductible pursuant to Section 3.05(a) and (2) the Trustee's
estimate of other expenses properly chargeable to the Income Account pursuant to
the Indenture which have accrued, as of such Record Date or are otherwise
properly attributable to the period to which such Income Distribution relates.
In the event that the amount on deposit in the Income Account is not sufficient
for the payment of the amount intended to be distributed to Unitholders on the
basis of the aforesaid computation, the Trustee is authorized to advance its own
funds and cause to be deposited in and credited to the Income Account such
amounts as may be required to permit payment of the related distribution to be
made as aforesaid and shall be entitled to be reimbursed, without interest, out
of income payments received by the Trust subsequent to the date of such advance.
Any such advance shall be reflected in the Income Account until repaid."
20. Section 3.05 of the Standard Terms and Conditions of Trust is hereby
amended by adding the following immediately after Section 3.05(b)(v):
"(vi) in the case of a Grantor Trust, notwithstanding the foregoing, The
Trustee shall not be required to make a distribution from the Income Account or
the Capital Account unless the aggregate cash for distribution within the
meaning of Treas. Reg 1.671-5(b)(5) from the Income Account and the Capital
Account is equal to or greater than .1% of the net asset value of the Trust on
the related Record Date. This provision is intended to comply with Treas. Reg.
1.671-5(c)(2)(v)(C), and shall interpreted consistent therewith and with any
successor regulation."
21. Section 3.07(a)(xiii) of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
-4-
"(xii) if the Trust is a RIC, that such sale is necessary or advisable
(i) to maintain the qualification of the Trust as a regulated investment company
or (ii) 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 United States Internal
Revenue Code of 1986, as amended."
22. Section 3.10 of the Standard Terms and Conditions of Trust is hereby
amended by adding the following immediately after Section 3.10(c):
"(d) (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 being appointed by the Trustee
pursuant to Section 7.01(f). Notice of such resignation and appointment of a
successor depositor shall be mailed by the Trustee to each Unitholder then of
record.
(ii) Any successor depositor appointed hereunder shall execute,
acknowledge and deliver to the Trustee an instrument accepting such
appointment hereunder, and such successor depositor without any further
act, deed or conveyance shall become vested with all the rights, powers,
duties and obligations of its predecessor hereunder with like effect as if
originally named Depositor herein and shall be bound by all the terms and
conditions hereunder.
(iii) In case at any time the Depositor shall resign and no successor
depositor shall have been appointed and have accepted appointment within
thirty (30) days after notice of resignation has been received by the
Trustee, the Depositor may forthwith apply to a court of competent
jurisdiction for the appointment of a successor depositor. Such court may
thereupon after such notice, if any, as it may deem proper and prescribe,
appoint a successor depositor.
(iv) Any entity into which the Depositor hereunder may be merged or
with which it may be consolidated, or any entity resulting from any merger
or consolidation to which the Depositor hereunder shall be a party, shall
be the successor depositor under this Indenture without the execution or
filing of any paper, instrument or further act to be done on the part of
the parties hereto, anything herein, or in any agreement relating to such
merger or consolidation, by which the Depositor may seek to retain certain
powers, rights and privileges theretofore obtaining for any period of time
following such merger or consolidation, to the contrary notwithstanding.
-5-
(v) Any resignation of the Depositor and appointment of a successor
depositor pursuant to this Section 3.10 shall become effective upon
acceptance of appointment by the successor depositor as provided in Section
3.10(d)(ii)."
23. The first paragraph of Section 3.11 of the Standard Terms and Conditions
of Trust is amended by adding the following at the end of such paragraph:
"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 Securities), the Trustee shall promptly
notify the Depositor and shall thereupon take such action or refrain from taking
any action with respect to the Fund Shares so as to insure 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."
24. The first two sentences in the second paragraph of Section 3.11 of the
Standard Terms and Conditions of Trust shall be replaced in their entirety with
the following:
"In the event that an offer by the issuer of any of the Securities or any
other party shall be made to issue new securities, or to exchange securities,
for Trust Securities, the Trustee shall reject such offer, provided that in the
case of a Trust that is a RIC, if an offer by the issuer of any of the
Securities or any other party shall be made to issue new securities, or to
exchange securities, for Trust Securities, the Trustee shall at the direction of
the Depositor, vote for or against, or accept or reject, any offer for new or
exchanged securities or property in exchange for a Trust Security. If any
issuance, exchange or substitution is effected, any securities, cash and/or
property received shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee pursuant to the Depositor's direction,
unless the Depositor advises the Trustee to keep such securities, cash or
property."
25. Section 3.12(a) of the Standard Terms and Conditions of Trust shall be
replaced in its entirety with the following:
"(a) The Replacement Securities shall be securities as originally selected
for deposit in the Trust or, in the case of a Trust that is a RIC, securities
which the Depositor determines to be similar in character as Securities
originally selected for deposit in the Trust;"
26. The third paragraph of Section 3.13 of the Standard Terms and Conditions
of Trust is replaced in its entirety by the following:
"To the extent permitted by applicable laws, rules and regulations, any
moneys payable to the Depositor pursuant to this Section 3.13 shall be secured
by a lien on the related Trust in favor of the Depositor prior to the interest
of Unitholders, but no such lien shall be prior to any lien in favor of the
Trustee under the provisions of Section 7.04 herein. To the extent of such
lien, the Trustee shall hold the assets of the Trust for the benefit of the
Depositor, provided that
-6-
the Trustee is authorized to make dispositions, distributions and payments for
expenses in the ordinary course of the administration of the Trust without
regard to such lien."
27. The Depositor's annual compensation as set forth under Section 3.13
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.
28. Section 3.14 of the Standard Terms and Conditions of Trust is hereby
amended by adding the following immediately after the second paragraph:
"To the extent permitted by applicable laws, rules and regulations, any
moneys payable to the Depositor pursuant to this Section 3.14 shall be secured
by a lien on the related Trust in favor of the Depositor prior to the interest
of Unitholders, but no such lien shall be prior to any lien in favor of the
Trustee under the provisions of Section 7.04 herein. To the extent of such
lien, the Trustee shall hold the assets of the Trust for the benefit of the
Depositor, provided that the Trustee is authorized to make dispositions,
distributions and payments for expenses in the ordinary course of the
administration of the Trust without regard to such lien."
29. Section 3.15 of the Standard Terms and Conditions of Trust is hereby
amended by adding the following immediately after the first paragraph:
"To the extent permitted by applicable laws, rules and regulations, any
moneys payable to the Depositor pursuant to this Section 3.15 shall be secured
by a lien on the related Trust in favor of the Depositor prior to the interest
of Unitholders, but no such lien shall be prior to any lien in favor of the
Trustee under the provisions of Section 7.04 herein. To the extent of such
lien, the Trustee shall hold the assets of the Trust for the benefit of the
Depositor, provided that the Trustee is authorized to make dispositions,
distributions and payments for expenses in the ordinary course of the
administration of the Trust without regard to such lien."
30. The Standard Terms and Conditions of Trust shall be amended to include
the following section:
"Section 3.18. Regulated Investment Company Election. If the Trust is a
RIC, the Trustee is hereby directed to make such elections and take all actions,
including any appropriate election to be taxed as a corporation, as shall be
necessary to effect such qualification or to provide funds to make any
distribution for a taxable year in order to avoid imposition of any income or
excise tax on the Trust or on undistributed income in the Trust. The Trustee
shall make such reviews of each Trust portfolio as shall be necessary to
maintain qualification of a particular Trust as regulated investment company and
to avoid imposition of tax on a Trust or undistributed income in a Trust, and
the Depositor and Supervisor shall be authorized to rely conclusively upon such
reviews."
31. Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, if the Trustee sells, redeems or otherwise liquidates Fund
Shares pursuant to Section 6.02
-7-
to satisfy Unit redemptions or pursuant to Section 7.04 to pay Trust expenses,
the Trustee shall do so, as nearly as practicable, on a pro rata basis among all
Securities held by the Trust.
32. Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, if the Trust is a Grantor Trust and the Trustee sells,
redeems or otherwise liquidates Securities pursuant to Section 6.02 to satisfy
Unit redemptions, the Trustee shall do so, as nearly as practicable, on a pro
rata basis among all Securities held by the Trust.
33. Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust, no Unitholder may request a distribution of Securities in-
kind pursuant to Sections 6.02, 6.05 or 9.02 during the 30 days prior to and
including the Mandatory Termination Date of a Trust.
34. The first sentence of Section 6.02 of the Standard Terms and Conditions
of Trust is replaced in its entirety by the following:
"Any Unit tendered for redemption by a Unitholder or his duly authorized
attorney to the Trustee at its unit investment trust division office, currently
at 2 Hanson Place, 12th Floor, Brooklyn, New York 11217, tendered by means of an
appropriate request for redemption in form approved by the Trustee shall be
redeemed by the Trustee no later than the seventh calendar day following the day
on which tender for redemption is made, provided that if such day of redemption
is not a Business Day, then such Unit shall be redeemed on the first Business
Day prior thereto (being herein called the "Redemption Date")."
35. The second and third paragraph of Section 6.02 of the Standard Terms and
Conditions of Trust is hereby replaced in its entirety with the following:
"Notwithstanding the preceding paragraph, if a Unitholder electing an In
Kind Distribution is an Affiliated Redeeming Unitholder, as such term is defined
below, such In Kind Distribution shall be permitted subject to the following
conditions:
(a) The In Kind Distribution shall be consistent with the Trust's redemption
policies and undertakings, as set forth in the Trust's Prospectus;
(b) Neither the Affiliated Redeeming Unitholder, nor any other party with
the ability and the pecuniary incentive to influence the In Kind Distribution,
may select, or influence the selection of, the distributed Securities;
(c) Upon an In Kind Distribution by the Affiliated Redeeming Unitholder, the
Trustee shall distribute to the Affiliated Redeeming Unitholder its
proportionate share of every Security in the Trust's portfolio, provided that if
the Trustee is not an affiliated person (as the term "affiliated person" is
defined in the Investment Company Act of 1940, as amended) of the Affiliated
Redeeming Unitholder, the Trustee may exclude Discretionary Assets (as defined
below) from the In Kind Distribution to the extent that the Trustee cannot
practicably distribute such Discretionary Assets without undue burden or adverse
impact to the Trust or its Unitholders. If the Trustee determines that it is
impracticable to distribute the Discretionary
-8-
Assets in kind, the Trustee shall sell or liquidate the Discretionary Assets to
raise funds to satisfy the redemption, provided that if the Trustee cannot sell
or liquidate the Discretionary Assets, the Trustee may sell or liquidate other
Securities;
(d) The In Kind Distribution may not favor the Affiliated Redeeming
Unitholder to the detriment of any other Unitholder;
(e) The Trustee shall monitor each In Kind Distribution on a quarterly basis
for compliance with all provisions of this Section 6.02; and
(f) The Trustee shall maintain and preserve for a period of not less than
six years from the end of the fiscal year in which the In Kind Distribution
occurs, the first two years in an easily accessible place, records for each In
Kind Distribution setting forth the identity of the Affiliated Redeeming
Unitholder, a description of the composition of the Trust's portfolio (including
each asset's value) immediately prior to the In Kind Distribution, a description
of each Security distributed in-kind, the terms of the In Kind Distribution, the
information or materials upon which the asset valuations were made, and a
description of the composition of the Trust's portfolio (including each asset's
value) one month after the In Kind Distribution.
(g) The term "Affiliated Redeeming Unitholder" shall mean an affiliated
person or a promoter of or a principal underwriter for the Trust, or an
affiliated person of such a person, promoter or principal underwriter. The
terms "affiliated person," "promoter" and "principal underwriter" as used in the
preceding sentence shall have the meanings assigned to each such term in the
Investment Company Act of 1940, as amended.
(h) The term "Discretionary Assets" shall mean (i) securities that, if
distributed, would be required to be registered under the Securities Act of
1933, as amended; (ii) securities issued by entities in countries that (A)
restrict or prohibit the holding of securities by non-nationals other than
through qualified investment vehicles, or (B) permit transfers of ownership of
securities to be effected only by transactions conducted on a local stock
exchange; and (iii) any assets that, although they may be liquid and marketable,
must be traded through the marketplace or with the counterparty to the
transaction in order to effect a change in beneficial ownership."
36. The first sentence of Section 7.04 of the Standard Terms and Conditions
of Trust is replaced in its entirety by the following:
"For services performed under this Indenture the Trustee shall be paid an
annual fee in the amount per Unit set forth in the Trust Agreement, which fee
shall accrue daily and be computed based on the number of Units outstanding as
of January 1 of such year except for a Trust during the year or years in which
an initial offering period as determined in Section 5.01 of this Indenture
occurs, in which case the fee for a month is based on the number of Units
outstanding at the end of such month (such annual fee to be pro rated for any
calendar year in which the Trustee provides services during less than the whole
of such year)."
37. 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.
-9-
38. Section 9.01 of the Standard Terms and Conditions of Trust shall be
replaced in its entirety with the following:
"Section 9.01. Amendments. (a) This Indenture may be amended from time to
time by the Depositor 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 contained herein which may be defective or inconsistent
with any other provision contained herein, (ii) to make such other provision in
regard to matters or questions arising hereunder as shall not materially
adversely affect the interests of the Unitholders or (iii) to make such
amendments as may be necessary (a) for the Trust to continue to qualify as a
regulated investment company for federal income tax purposes if the Trust is a
RIC, or (b) to prevent the Trust from being deemed an association taxable as a
corporation for federal income tax purposes if the Trust is a Grantor Trust.
This Indenture may not be amended, however, without the consent of all
Unitholders then outstanding, so as (1) to permit, except in accordance with the
terms and conditions hereof, the acquisition hereunder of any Securities other
than those specified in the Schedules to the Trust Agreement or (2) to reduce
the aforesaid percentage of Units the holders of which are required to consent
to certain of such amendments. This Indenture may not be amended so as to
reduce the interest in a Trust represented by Units without the consent of all
affected Unitholders.
(b) Except for the amendments, changes or modifications as provided in
Section 9.01(a) hereof, neither the parties hereto nor their respective
successors shall consent to any other amendment, change or modification of this
Indenture 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. Nothing contained in this Section 9.01(b)
shall permit, or be construed as permitting, a reduction of the aggregate
percentage of Units the holders of which are required to consent to any
amendment, change or modification of this Indenture without the consent of the
Unitholders of all of the Units then outstanding of the affected Trust and in no
event may any amendment be made which would (1) alter the rights to the
Unitholders as against each other, (2) provide the Trustee with the power to
engage in business or investment activities other than as specifically provided
in this Indenture, (3) adversely affect the tax status of the Trust for federal
income tax purposes or result in the Units being deemed to be sold or exchanged
for federal income tax purposes or (4) unless the Trust is a RIC, result in a
variation of the investment of Unitholders in the Trust.
(c) Unless the Depositor directs that other notice shall be provided, the
Trustee shall include in the annual report provided pursuant to Section 3.06
notification of the substance of such amendment."
39. The first sentence of the fourth paragraph of Section 9.02 of the
Standard Terms and Conditions of Trust is replaced in its entirety by 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 Depositor shall direct."
-10-
40. The first clause of the fifth paragraph of Section 9.02 of the
Standard Terms and Conditions of Trust is replaced in its entirety by the
following:
"No later than the fifth business day following receipt of all proceeds of
sale of the Securities, the Trustee shall:"
-11-
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
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
ADVISORS DISCIPLINED TRUST 1640
Incorporated herein by this reference and made a part hereof
is the schedule set forth under "Portfolio" in the Prospectus for the Trust.
EXHIBIT 3.1
111 West Monroe Street
Chicago, IL 60603-4080
CHAPMAN AND CUTLER LLP T 312.845.3000
---------------------------------------- F 312.701.2361
Attorneys at Law - Focused on Finance(R) www.chapman.com
April 15, 2016
Advisors Asset Management, Inc.
18925 Base Camp Road
Monument, Colorado 80132
Re: Advisors Disciplined Trust 1640 (the "Fund")
(File No. 333-209193)
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 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 Trust 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
- 2 -
EXHIBIT 3.3
DORSEY
Dorsey & Whitney LLP
April 15, 2016
The Bank of New York Mellon
as Trustee of
Advisors Disciplined Trust 1640
BEST IDEAS STRATEGY PORTFOLIO, SERIES 2016-2Q -
A HARTFORD INVESTMENT MANAGEMENT COMPANY
("HIMCO") PORTFOLIO
BNY Atlantic Terminal14
2 Hanson Place, 12th Floor
Brooklyn, NY 11217
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 Advisors Disciplined Trust 1640; BEST IDEAS
STRATEGY PORTFOLIO, SERIES 2016-2Q - A HARTFORD INVESTMENT MANAGEMENT COMPANY
("HIMCO") PORTFOLIO (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
consists 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.
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,
DORSEY & WHITNEY LLP WWW.DORSEY.COM T 212 415.9200 F 212.953.7201
51 WEST 52ND STREET NEW YORK, NEW YORK 10019-6119
USA CANADA EUROPE ASIA PACIFIC
DORSEY
April 15, 2016
Page 2
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
Advisors Asset Management, Inc.
18925 Base Camp Road
Monument, Colorado 80132
April 15, 2016
Advisors Disciplined Trust 1640
c/o The Bank of New York Mellon, as Trustee
BNY Atlantic Terminal
2 Hanson Place, 12th Floor
Brooklyn, New York 11217
Re: Advisors Disciplined Trust 1640
Best Ideas Strategy Portfolio, Series 2016-2Q - A Hartford Investment
Management Company ("HIMCO") Portfolio
---------------------------------------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement File No. 333-209193 for the
above captioned fund. We hereby consent to the use in the Registration
Statement of the references to Advisors Asset Management, Inc. as evaluator.
You are hereby authorized to file a copy of this letter with the Securities
and Exchange Commission.
Very truly yours,
Advisors Asset Management, Inc.
By /s/ ALEX R. MEITZNER
------------------------------
Senior Vice President
EXHIBIT 4.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated April 15, 2016, with respect to the
financial statement of Advisors Disciplined Trust 1640, comprising Best Ideas
Strategy Portfolio, Series 2016-2Q - A Hartford Investment Management Company
("HIMCO") Portfolio, contained in Amendment No. 1 to the Registration Statement
on Form S-6 (File No. 333-209193) 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
April 15, 2016
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