|
||||||||||||||||||||||||||
| SEC Info℠ | | | Home | | | Search | | | My Interests | | | Help | | | Sign In | | | Please Sign In | |||||||
|
||||||||||||||||||||||||||
As Of Filer Filing For·On·As Docs:Size Issuer Agent 7/07/15 Smart Tr CEFA Select BDC Tr Se… 4 487 7/07/15 6:609K Doremus Fin… Printing/FA |
Document/Exhibit Description Pages Size
1: 487 Pre-Effective Pricing Amendment HTML 332K
2: EX-1.1 Reference Trust Agreement HTML 58K
3: EX-3.1 Opinion and Consent of Counsel HTML 11K
4: EX-3.3 Opinion of Counsel HTML 11K
5: EX-4.1 Consent of Initial Evaluator HTML 7K
6: EX-4.3 Consent of Independent Registered Public HTML 6K
Accounting Firm
1933 Act File No.: 333-204232
1940 Act File No.: 811-21429
CIK No.: 1641714
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: | Smart Trust, CEFA Select BDC Trust, Series 4 |
| B. | Name of depositor: | Hennion & Walsh, Inc. |
| C. | Complete address of depositor’s principal executive offices: | |
Hennion & Walsh, Inc.
2001 Route 46, Waterview Plaza
| D. | Name and complete address of agent for service: |
| With a copy to: | |
| Kevin D. Mahn | Scott R. Anderson |
| Hennion & Walsh, Inc. | Chapman and Cutler LLP |
| 2001 Route 46, Waterview Plaza | 111 West Monroe Street |
| Parsippany, New Jersey 07054 | 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
| ☒ | Check box if it is proposed that this filing will become effective on July 7, 2015 at 10:00 a.m. pursuant to Rule 487. |
|
CEFA SELECT BDC TRUST,
SERIES 4
The Trust is a unit investment trust designated Smart Trust, CEFA Select BDC Trust, Series 4. The Sponsor is Hennion & Walsh, Inc. The Trust
seeks to provide investors with total return potential through a combination of current income and capital appreciation through investment in an
unmanaged, diversified portfolio of common stock of closed-end investment companies that have elected to be treated as business development companies
(“BDCs”). The portfolio was selected by Closed-End Fund Advisors, Inc. (CEFA). The Sponsor cannot assure that the Trust will
achieve its objective. The minimum purchase is generally 100 Units for individual purchasers and for purchases by certain custodial accounts or
Individual Retirement Accounts, self-employed retirement plans, pension funds and other tax-deferred retirement plans (may vary by selling firm). This Prospectus consists of two parts. Part A contains the Summary of Essential Information including descriptive material relating to the Trust and the Statement of Financial Condition of the Trust. Part B contains general information about the Trust. Part A may not be distributed unless accompanied by Part B. Please read and retain both parts of this Prospectus for future reference. An investment can be made in the underlying BDCs directly rather than through the Trust and these direct investments can be made without paying the sales charge, operating expenses and organizational charges of the Trust. |
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal
offense.
PROSPECTUS DATED JULY 7, 2015
|
| Title |
Page |
|||||
PART A |
||||||
| A-3 | ||||||
| A-7 | ||||||
| A-9 | ||||||
| A-10 | ||||||
| A-11 | ||||||
| A-12 | ||||||
PART B |
||||||
| B-1 | ||||||
| B-3 | ||||||
| B-12 | ||||||
| B-18 | ||||||
| B-20 | ||||||
| B-24 | ||||||
| B-29 | ||||||
| B-31 | ||||||
| B-31 | ||||||
| B-35 | ||||||
No person is authorized to give any
information or to make any representations with respect to this Trust not contained in Parts A and B of this Prospectus. The Trust is registered as a
unit investment trust under the Investment Company Act of 1940. Such registration does not imply that the Trust or any of its Units have been
guaranteed, sponsored, recommended or approved by the United States or any state or any agency or officer thereof.
This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state to any person to whom it is not lawful to make such offer in such
state.
A-2
INVESTMENT
OBJECTIVE. The Trust seeks to provide investors with total return potential through a combination of current income and
capital appreciation. There is no guarantee that the investment objective of the Trust will be achieved.
STRATEGY OF PORTFOLIO
SELECTION. The Trust seeks to achieve its objective through investment in the publicly traded common stock of closed-end
investment companies (the “Funds”) that have elected to be treated as business development companies under the Investment Company Act of 1940
(“BDCs”). The election to be treated as a BDC provides an exemption from certain provisions of the Investment Company Act of 1940. BDCs are
designed to facilitate capital formation for small and middle-market companies. BDCs are required to have at least 70% of their investments in eligible
assets, which may include: (i) securities of eligible portfolio companies (generally, domestic companies that are not investment companies and that
cannot have a class of securities listed on a national securities exchange or have securities that are marginable that are purchased from that company
in a private transaction); (ii) securities received by BDCs in connection with their ownership of securities of eligible portfolio companies; or (iii)
cash, cash items, government securities, or high-quality debt securities maturing one year or less from the time of investment. BDCs are required to
make available significant managerial assistance to the issuers of these portfolio companies. Significant managerial assistance refers to any
arrangement whereby a BDC provides significant guidance and counsel concerning the management, operations, or business objectives and policies of a
portfolio company. Examples of such activities include arranging financing, managing relationships with financing sources, recruiting management
personnel, and evaluating acquisition and divestiture opportunities. BDCs are frequently externally managed by an investment adviser which may also
provide this external managerial assistance to portfolio companies.
The portfolio of the Trust was selected
by Closed-End Fund Advisors, Inc. (CEFA), the “Portfolio Consultant”. To select the portfolio, the Portfolio Consultant followed a
disciplined process that included both quantitative screening and qualitative analysis. The Portfolio Consultant considered only publicly traded BDCs
for inclusion in the portfolio. The Portfolio Consultant then selected the portfolio after an analysis of the following factors, among others, for each
Fund: market capitalization; liquidity; frequency of dividends; current dividend yields; current dividend coverage; leverage; returns of capital;
statistical analysis, including analysis of trailing total returns as well as a form of standard deviation analysis generally referred to as
Z-statistics; and analyst coverage and outlooks.
As used herein, the term
“Securities” means the shares of the Funds initially deposited in the Trust and contracts and funds for the purchase of such securities, and
any additional securities acquired and held by the Trust pursuant to the provisions of the Trust Agreement. Under normal circumstances, at least 80% of
the Trust’s net assets will be invested in common stock of BDCs. Certain BDCs held by the Trust may invest in companies with smaller market
capitalizations and in high-yield debt obligations (“junk bonds”).
DESCRIPTION OF
PORTFOLIO. The portfolio of the Trust contains 12 issues of common stock of BDCs. 100% of the issues are
represented by the Sponsor’s contracts to purchase.
A-3
PRINCIPAL RISK
CONSIDERATIONS. Unitholders can lose money by investing in this Trust. The value of the Units, the Securities and the
securities held by the Funds included in the portfolio can each decline in value. An investment in Units of the Trust should be made with an
understanding of the following risks:
• |
The Securities are shares of BDCs which frequently trade at a discount from their net asset value in the secondary market. The amount of such discount is subject to change from time to time in response to various factors. |
• |
The Trust invests in common stock of BDCs. The share prices of common stock of BDCs are often more volatile than other investments. BDCs generally employ leverage, which magnifies gains and losses on amounts invested but reduces aggregate returns. Leverage limits applicable to BDCs under the Investment Company Act of 1940 are higher than the leverage limits applicable to other investment companies. BDCs also typically charge higher fees than other investment companies. BDCs generally depend on the ability to access capital markets, acquire suitable investments and monitor and administer those investments in order to maintain their status as BDCs and ultimately achieve their investment objectives. Negative developments in the capital markets may adversely affect BDCs’ ability to finance investments. BDCs often invest in securities that are not publicly traded, which may adversely affect the valuation and liquidity of those securities. |
• |
Unitholders will pay both Trust expenses and will also indirectly bear a share of each Fund’s expenses. |
• |
The risk that the financial condition of the issuers of the securities comprising the portfolios of the Funds may become impaired or that the general condition of the securities market may worsen (both of which may contribute directly to a decrease in the value of the securities and thus in the value of the Units). |
• |
Certain Funds invest significantly in companies with smaller market capitalizations, which may have less liquid stock and more volatile prices than larger capitalized companies. Such companies also tend to have unproven track records and, to a certain extent, are more likely to perform less well or fail than companies with larger market capitalizations. |
• |
Since the portfolio of the Trust is unmanaged, in general, the Sponsor can only sell Securities under certain extraordinary circumstances, at the Trust’s termination or in order to meet redemptions. As a result, the price at which each Security is sold may not be the highest price it attained during the life of the Trust. |
• |
Certain Funds may invest in high-yield debt obligations (“junk bonds”) and senior loans, which consist of lower grade securities (“Baa” or lower by Moody’s and “BBB” or lower by Standard & Poor’s), or in comparable non-rated securities. While these lower rated securities offer a higher return potential than higher rated securities, they also involve greater price volatility and greater risk of loss of income and principal. |
• |
Price fluctuations of particular Securities will change the portfolio’s composition throughout the life of the Trust. When cash or a letter of credit is deposited with instructions to purchase Securities in order to create additional Units, an increase in the price of a particular Security between the time of deposit and the time that |
A-4
| Securities are purchased will cause the Units to be comprised of less of that Security and more of the remaining Securities. In addition, brokerage fees incurred in purchasing the Securities will be an expense of the Trust and such fees will dilute the existing Unitholders’ interests. |
• |
There is no assurance that any dividends will be declared or paid in the future on the Securities. |
PUBLIC OFFERING
PRICE. The Public Offering Price per Unit of the Trust is equal to:
• |
net asset value per Unit; |
• |
plus organization costs; and |
• |
a sales charge of 3.95% of the Public Offering Price per Unit. |
The Public Offering Price per Unit will
vary on a daily basis in accordance with fluctuations in the aggregate value of the underlying Securities and each investor’s purchase price will
be computed as of the date the Units are purchased.
DISTRIBUTIONS. The Trust will distribute dividends received, less expenses, monthly. The first dividend
distribution, if any, will be made on August 25, 2015, for Unitholders of record on August 10, 2015, and thereafter distributions will be made on the
twenty-fifth day (or next business day) of every month. The final distribution will be made within a reasonable period of time after the Trust
terminates.
MARKET FOR
UNITS. Unitholders may sell their Units to the Sponsor or the Trustee at any time. The Sponsor intends to repurchase Units
from Unitholders throughout the life of the Trust at prices based upon the market value of the underlying Securities. However, the Sponsor is not
obligated to maintain a market and may stop doing so without prior notice for any business reason. If a market is not maintained, a Unitholder will be
able to redeem his or her Units with the Trustee at the same price as the Sponsor’s repurchase price. Unitholders who sell or redeem Units prior
to such time as the entire deferred sales charge on such Units has been collected will be assessed the amount of the remaining deferred sales charge at
the time of such sale or redemption. The existence of a liquid trading market for these Securities may depend on whether dealers will make a market in
these Securities. There can be no assurance of the making or the maintenance of a market for any of the Securities contained in the portfolio of the
Trust or of the liquidity of the Securities in any markets made. The price at which the Securities may be sold to meet redemptions, and the value of
the Units, will be adversely affected if trading markets for the Securities are limited or absent.
TERMINATION. The Trust will terminate in approximately 2 years. At that time investors may choose one of the
following two options with respect to their terminating distribution:
• |
receive cash upon the liquidation of their pro rata share of the Securities; or |
• |
reinvest in a subsequent series of the Trust (if one is offered) at a reduced sales charge. |
ROLLOVER
OPTION. Unitholders may elect to rollover their terminating distributions into the next available series of the Trust (if
one is offered), at a reduced sales charge. When a Unitholder makes this election, his or her Units will be redeemed
A-5
and the proceeds will be reinvested
in units of the next available series of the Trust. An election to rollover terminating distributions will generally be a taxable event. See
“Trust Administration—Trust Termination” in Part B for details concerning this election.
REINVESTMENT
PLAN. Unitholders may elect to automatically reinvest their distributions, if any (other than the final distribution in
connection with the termination of the Trust), into additional Units of the Trust, without a sales charge. See “Reinvestment Plan” in Part B
for details on how to enroll in the Reinvestment Plan. This sales charge discount applies during the initial offering period and in the secondary
market. Since the deferred sales charge 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 charge 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.
UNDERWRITING. Hennion & Walsh, Inc., with principal offices at 2001 Route 46, Waterview Plaza,
Parsippany, New Jersey 07054, will act as Underwriter for all of the Units of the Trust.
A-6
This Fee Table is intended to help you
to understand the costs and expenses that you will bear directly or indirectly. See “Public Offering” and “Trust Expenses and
Charges.” Although the Trust has a term of only 2 years, and is a unit investment trust rather than a mutual fund, this information is presented
to permit a comparison of fees.
| Unitholder Transaction Expenses (as a percentage of offering price)* (fees paid directly from your investment) |
As a %
of Initial Offering Price |
Amounts Per 100 Units |
|||||||||||||||||
Initial Sales Charge |
1.00 | % | $ | 10.00 | |||||||||||||||
Deferred Sales Charge |
2.45 | 24.50 | |||||||||||||||||
Creation & Development Fee |
0.50 | 5.00 | |||||||||||||||||
Maximum Sales Charge |
3.95 | % | $ | 39.50 | |||||||||||||||
Reimbursement to Sponsor for Estimated Organization Costs** |
0.332 | % | $ | 3.32 | |||||||||||||||
| Estimated Annual Operating
Expenses (expenses that are deducted from Trust assets) |
As a % of Net Assets |
Amounts Per 100 Units |
|||||||||||||||||
Trustee’s Fee |
0.110 | % | $ | 1.05 | |||||||||||||||
Other Operating Expenses |
0.062 | 0.59 | |||||||||||||||||
Portfolio Supervision, Bookkeeping and Administrative Fees |
0.037 | 0.35 | |||||||||||||||||
Acquired Fund Fees and Expenses*** |
9.865 | 94.43 | |||||||||||||||||
Total |
10.037 | % | $ | 96.07 | |||||||||||||||
| Example | Cumulative Expenses Paid for
Period: |
||||||||||||||||||
| 1 year |
3 years |
5 years |
10 years |
||||||||||||||||
An investor would pay the following expenses on a $10,000 investment assuming the Trust operating expense ratio of 9.607% and a 5%
annual return on the investment throughout the periods |
$1,389 |
$3,364 |
$5,078 |
$8,352 |
|||||||||||||||
The Example assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return. The Example also assumes that you roll your investment into the next available
series of the Trust every two years (if one is offered) when the current Trust terminates, subject to a reduced rollover sales charge of
2.95%.
The Example should not be considered
a representation of past or future expenses or annual rate of return; the actual expenses and annual rate of return may be more or less than those
assumed for purposes of the Example.
* |
The sales charge has both an initial and a deferred component. The initial sales charge is paid at the time of purchase and is the difference between the total sales charge (maximum of 3.95% of the Public Offering Price) and the sum of the remaining deferred sales charge and the total creation and development fee. The initial sales charge will be approximately 1% of the Public Offering Price per Unit depending on |
A-7
| the Public Offering Price per Unit. The deferred sales charge is fixed at $0.245 per Unit and is paid in three monthly installments beginning on November 20, 2015. The creation and development fee is fixed at $0.05 per Unit and is paid at the end of the initial offering period. If you redeem or sell your Units prior to collection of the total deferred sales charge, you will pay any remaining deferred sales charge upon redemption or sale of your Units. If you purchase Units after the last deferred sales charge payment has been assessed, the secondary market sales charge is equal to 3.95% of the Public Offering Price per Unit and does not include deferred payments. |
** |
Estimated organization costs include the Portfolio Consultant’s security selection fee of 0.15%. |
*** |
Although not an actual Trust operating expense, the Trust, and therefore the Unitholders, will indirectly bear similar operating expenses of the Funds in which the Trust invests in the estimated amount set forth in the table. These expenses are based on the actual expenses charged in the Funds’ most recent fiscal year but are subject to change in the future. An investor in the Trust will therefore indirectly pay higher expenses than if the underlying Funds were held directly. |
A-8
INITIAL DATE OF DEPOSIT: July 7, 2015 |
||||||
AGGREGATE VALUE OF SECURITIES |
$ | 110,072 | ||||
NUMBER OF UNITS |
11,118 | |||||
FRACTIONAL UNDIVIDED INTEREST IN TRUST SECURITIES |
1/11,118 | |||||
PUBLIC OFFERING PRICE PER 100 UNITS |
||||||
Public Offering Price per 100 Units† |
$ | 1,000.00 | ||||
Less Initial Sales Charge |
10.00 | |||||
Aggregate Value of Securities |
990.00 | |||||
Less Deferred Sales Charge |
24.50 | |||||
Redemption Price |
965.50 | |||||
Less Creation & Development Fee |
5.00 | |||||
Less Organization Costs |
3.32 | |||||
Net Asset Value |
$ | 957.18 |
EVALUATION TIME: 4:00 p.m. Eastern Time (or earlier close
of the New York Stock Exchange).
MINIMUM VALUE OF TRUST: The Trust may be terminated if the
value of the Trust is less than 40% of the aggregate value of the Securities at the completion of the Deposit Period.
MANDATORY TERMINATION DATE: July 11, 2017, or
the disposition of the last Security in the Trust.
STANDARD CUSIP NUMBERS: |
Cash: 83180D109 Reinvestment: 83180D117 |
FEE BASED CUSIP NUMBERS: |
Cash: 83180D125 Reinvestment: 83180D133 |
TRUSTEE: The Bank of New York Mellon
TRUSTEE’S FEE: $1.05 per 100 Units
outstanding.
OTHER FEES AND EXPENSES: $0.59 per 100 Units
outstanding.
SPONSOR: Hennion & Walsh, Inc.
PORTFOLIO SUPERVISOR: Hennion & Walsh Asset Management,
Inc.
PORTFOLIO SUPERVISORY, BOOKKEEPING AND ADMINISTRATIVE FEE:
Maximum of $0.35 per 100 Units outstanding (see “Trust Expenses and Charges” in Part B).
RECORD DATES: The tenth day (or next business day) of each
month, commencing August 2015.
DISTRIBUTION DATES: The twenty-fifth day (or next business
day) of each month, commencing August 2015.
* |
The business day prior to the Initial Date of Deposit. The Initial Date of Deposit is the date on which the Trust Agreement was signed and the deposit of Securities with the Trustee made. |
† |
On the Initial Date of Deposit there will be no cash in the Income or Principal Accounts. Anyone purchasing Units after such date will have included in the Public Offering Price a pro rata share of any cash in such Accounts. |
A-9
Investment in securities |
||||||
Contracts to purchase underlying Securities (1)(2) |
$ | 110,072 | ||||
Total |
$ | 110,072 | ||||
Liabilities and interest of investors |
||||||
Liabilities: |
||||||
Organization costs (3) |
$ | 369 | ||||
Deferred sales charge (4)(5) |
2,724 | |||||
Creation & development fee (4)(5) |
556 | |||||
Total Liabilities |
3,649 | |||||
Interest of investors: |
||||||
Cost to investors (5) |
111,180 | |||||
Less: initial sales charge (4)(5) |
1,108 | |||||
Less: deferred sales charge and creation & development fee (4)(5) |
3,280 | |||||
Less: organization costs (3) |
369 | |||||
Net interest of investors |
106,423 | |||||
Total |
$ | 110,072 | ||||
Number of Units |
11,118 | |||||
Net
asset value per Unit |
$ | 9.572 |
(1) |
Aggregated cost of the Securities is based on the evaluations determined by the Trustee at the Evaluation Time on the last Business Day prior to the Initial Date of Deposit. |
(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 the Trust. These costs have been estimated at $3.32 per 100 Units 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 charge consists of an initial sales charge, a deferred sales charge and a creation and development fee. The initial sales charge is equal to the difference between the maximum sales charge and the sum of the remaining deferred sales charge and the total creation and development fee. The maximum total sales charge is 3.95% of the Public Offering Price per Unit. |
(5) |
The aggregate cost to investors includes the applicable sales charge assuming no reduction of sales charges. |
A-10
| Portfolio No. |
Number of Shares |
Name of
Issuer(1)(4) |
Ticker Symbol |
Percentage of the Trust(2) |
Market Value Per Share(3) |
Cost of Securities to the Trust(3) |
|||||||||||||||||||||||||
Closed-End Funds—100.00% |
|||||||||||||||||||||||||||||||
1 |
1,299 |
Apollo Investment Corporation |
AINV |
8.53 | % | $ | 7.23 | $ | 9,391.77 | ||||||||||||||||||||||
2 |
631 |
Ares Capital Corporation |
ARCC |
9.48 | 16.54 | 10,436.74 | |||||||||||||||||||||||||
3 |
1,245 |
BlackRock Capital Investment Corporation |
BKCC |
10.47 | 9.26 | 11,528.70 | |||||||||||||||||||||||||
4 |
1,105 |
Fifth Street Finance Corp. |
FSC |
6.49 | 6.46 | 7,138.30 | |||||||||||||||||||||||||
5 |
920 |
FS Investment Corporation |
FSIC |
8.54 | 10.21 | 9,393.20 | |||||||||||||||||||||||||
6 |
789 |
Medley Capital Corporation |
MCC |
6.48 | 9.04 | 7,132.56 | |||||||||||||||||||||||||
7 |
556 |
Monroe Capital Corporation |
MRCC |
7.53 | 14.90 | 8,284.40 | |||||||||||||||||||||||||
8 |
647 |
New Mountain Finance Corporation |
NMFC |
8.49 | 14.45 | 9,349.15 | |||||||||||||||||||||||||
9 |
978 |
Prospect Capital Corporation |
PSEC |
6.51 | 7.33 | 7,168.74 | |||||||||||||||||||||||||
10 |
667 |
TCP Capital Corp. |
TCPC |
9.49 | 15.66 | 10,445.22 | |||||||||||||||||||||||||
11 |
1,012 |
THL Credit, Inc. |
TCRD |
10.50 | 11.42 | 11,557.04 | |||||||||||||||||||||||||
12 |
1,240 |
TICC Capital Corp. |
TICC |
7.49 | 6.65 | 8,246.00 | |||||||||||||||||||||||||
| 100.00 | % | $ | 110,071.82 | ||||||||||||||||||||||||||||
FOOTNOTES TO PORTFOLIO OF INVESTMENTS
(1) |
All Securities are represented by contracts to purchase such Securities. Forward contracts to purchase the Securities were entered into on July 6, 2015. All such contracts are expected to be settled on or about the First Settlement Date of the Trust, which is expected to be July 10, 2015. |
(2) |
Based on the cost of the Securities to the Trust. |
(3) |
Evaluation of Securities by the Trustee was made on the basis of the closing sales price at the Evaluation Time on the day prior to the Initial Date of Deposit. In accordance with Accounting Standards Codification 820, “Fair Value Measurements”, the Securities are classified as Level 1, which refers to security prices determined using quoted prices in active markets for identical securities. The Sponsor’s purchase price is $110,072. 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) is $0. |
(4) |
These are Securities of closed-end funds that have elected to be treated as business development companies under the Investment Company Act of 1940. |
A-11
THE UNITHOLDERS, SPONSOR AND TRUSTEE
SMART TRUST, CEFA SELECT
BDC TRUST,
SERIES 4
We have audited the accompanying
statement of financial condition, including the portfolio of investments on page A-11, of Smart Trust, CEFA Select BDC Trust, Series 4 as of July
7, 2015. 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 the 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 financial statement 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, and 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 July 7, 2015. We believe that our audit of the statement of financial condition provides a reasonable basis for
our opinion.
GRANT THORNTON LLP
Chicago, Illinois
July 7, 2015
A-12
|
|
PROSPECTUS PART B
PART B OF THIS PROSPECTUS MAY NOT BE
DISTRIBUTED UNLESS
ACCOMPANIED BY
PART A
THE TRUST
ORGANIZATION. Smart Trust, CEFA Select BDC Trust, Series 4 consists of a “unit investment trust”
designated as set forth in Part A. The Trust was created under the laws of the State of New York pursuant to a Trust Indenture and Agreement and
related Reference Trust Agreement (collectively, the “Trust Agreement”), dated the Initial Date of Deposit, among Hennion & Walsh, Inc.,
as Sponsor, The Bank of New York Mellon, as Trustee and Hennion & Walsh Asset Management, Inc., as Portfolio Supervisor.
On the Initial Date of Deposit, the
Sponsor deposited with the Trustee shares of common stock of closed-end investment companies (the “Funds”) that have elected to be treated as
business development companies under the Investment Company Act of 1940 (“BDCs”), including funds and delivery statements relating to
contracts for the purchase of certain such securities, with an aggregate value as set forth in Part A, and cash or an irrevocable letter of credit
issued by a major commercial bank in the amount required for such purchases. As used herein, the term “Securities” means the shares of common
stocks of Funds initially deposited in the Trust and described in “Portfolio of Investments” in Part A and any additional stock acquired and
held by the Trust pursuant to the provisions of the Indenture. Thereafter the Trustee, in exchange for the Securities so deposited, has registered on
the registration books of the Trust evidence of the Sponsor’s ownership of all Units of the Trust. The Sponsor has a limited right to substitute
other securities in the Trust portfolio in the event of a failed contract. See “The Trust—Substitution of Securities.” The Sponsor may
also, in certain very limited circumstances, direct the Trustee to dispose of certain Securities if the Sponsor believes that, because of market or
credit conditions, or for certain other reasons, retention of the Security would be detrimental to Unitholders. See “Trust
Administration—Portfolio Supervision.”
As of the Initial Date of Deposit, a
“Unit” represents an undivided fractional interest in the Securities and cash of the Trust as is set forth in the “Summary of Essential
Information.” As additional Units are issued by the Trust as a result of the deposit of Additional Securities, as described below, 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.
To the extent that any Units are redeemed by the Trustee, the fractional undivided interest or pro rata share in such Trust represented by each
unredeemed Unit will increase, although the actual interest in such Trust represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon
B-1
tender to the Trustee by
Unitholders, which may include the Sponsor, or until the termination of the Trust Agreement.
DEPOSIT OF ADDITIONAL
SECURITIES. With the deposit of the Securities in the Trust on the Initial Date of Deposit, the Sponsor established a
proportionate relationship among the initial aggregate value of specified Securities in the Trust. Subsequent to the Initial Date of Deposit (the
“Deposit Period”), the Sponsor may deposit additional Securities in the Trust that are identical to the Securities already deposited in the
Trust (“Additional Securities”), contracts to purchase Additional Securities or cash (or a bank letter of credit in lieu of cash) with
instructions to purchase Additional Securities, in order to create additional Units, maintaining to the extent practicable the original proportionate
relationship among the number of shares of each Fund in the Trust portfolio on the Initial Date of Deposit. These additional Units, which will result
in an increase in the number of Units outstanding, will each represent, to the extent practicable, an undivided interest in the same number and type of
securities of identical issuers as are represented by Units issued on the Initial Date of Deposit. It may not be possible to maintain the exact
original proportionate relationship among the Securities deposited on the Initial Date of Deposit because of, among other reasons, purchase
requirements, changes in prices, unavailability of Securities or the fact that the Trust may be prohibited from acquiring more than 3% of the
outstanding voting stock of any Fund. The composition of the Trust’s portfolio may change slightly based on certain adjustments made to reflect
the disposition of Securities and/or the receipt of a stock dividend, a stock split or other distribution with respect to such Securities, including
Securities received in exchange for shares or the reinvestment of the proceeds distributed to Unitholders. Substitute Securities may only be acquired
under specified conditions when Securities originally deposited in the Trust are unavailable. (See “The Trust—Substitution of
Securities” below).
OBJECTIVE. The Trust seeks to provide investors with total return potential through a combination of current
income and capital appreciation. The Trust seeks to achieve this objective by investing primarily in a portfolio of common stock of
BDCs.
The Trust will terminate on the
Mandatory Termination Date, at which time investors may choose to either receive the distributions in cash or reinvest in a subsequent series of the
Trust (if offered) at a reduced sales charge. The Trust is intended to be an investment that should be held by investors for its full term and not be
used as a trading vehicle. Since the Sponsor may deposit Additional Securities in connection with the sale of additional Units, the yields on these
Securities may change subsequent to the Initial Date of Deposit. Further, the Securities may appreciate or depreciate in value, dependent upon the full
range of economic and market influences affecting corporate profitability, the financial condition of issuers and the prices of equity securities in
general and the Securities in particular. Therefore, there is no guarantee that the objectives of the Trust will be achieved.
PORTFOLIO
SELECTION. The Portfolio Consultant selected the common stock of BDCs that it believes are well positioned to provide for
total return potential over the term of the Trust within a well-diversified dividend-paying portfolio. To select the portfolio of the Trust the
Portfolio Consultant followed a disciplined process which included both quantitative screening and qualitative analysis. The Portfolio Consultant
considered only publicly traded BDCs for inclusion in the portfolio. In selecting the Fund shares for deposit in the Trust, the following factors,
among others, were
B-2
considered by the Portfolio
Consultant with respect to each Fund: market capitalization; liquidity; frequency of dividends; current dividend yields; current dividend coverage;
leverage; returns of capital; statistical analysis, including analysis of trailing total returns as well as a form of standard deviation analysis
generally referred to as Z-statistics; and analyst coverage and outlooks.
THE
SECURITIES. The Trust consists of such Securities listed under “Portfolio of Investments” herein as may continue
to be held from time to time in the Trust, newly deposited Securities meeting requirements for creation of additional Units, undistributed cash
receipts from the Securities and proceeds realized from the disposition of Securities.
The Funds have elected to be treated as
business development companies under the Investment Company Act of 1940 and filed a notice with the Securities and Exchange Commission to that effect.
The contracts to purchase Securities deposited initially in the Trust are expected to settle in three business days, in the ordinary manner for such
Securities. Settlement of the contracts for Securities is thus expected to take place prior to the settlement of purchase of Units on the Initial Date
of Deposit.
SUBSTITUTION OF
SECURITIES. In the event of a failure to deliver any security that has been purchased for the Trust under a contract
(“Failed Securities”), the Sponsor is authorized under the Trust Agreement to direct the Trustee to acquire other securities
(“Substitute Securities”) to make up the original corpus of the Trust.
The Substitute Securities must be
purchased within 20 days after the delivery of the notice of the failed contract. Where the Sponsor purchases Substitute Securities in order to replace
Failed Securities, the purchase price may not exceed the purchase price of the Failed Securities and the Substitute Securities must be of the same type
of security and be substantially similar with regard to the investment characteristics which led to the Failed Securities’ inclusion in the Trust.
Such selection may include or be limited to Securities previously included in the portfolio of the Trust. No assurance can be given that the Trust will
retain its present size and composition for any length of time.
Whenever a Substitute Security has been
acquired for the Trust, the Trustee shall, within five days thereafter, notify all Unitholders of the acquisition of the Substitute Security and the
Trustee shall, on the next 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 Substitute Security.
In the event no substitution is made,
the proceeds of the sale of Securities will be distributed to Unitholders as set forth under “Rights of Unitholders—Distributions.” In
addition, if the right of substitution shall not be utilized to acquire Substitute Securities in the event of a failed contract, the Sponsor will cause
to be refunded the sales charge attributable to such Failed Securities to all Unitholders, and distribute the principal and dividends, if any,
attributable to such Failed Securities on the next Distribution Date.
BDCs. BDCs
are closed-end investment companies that have elected to be treated as business development companies under the Investment Company Act of 1940. BDCs
are required to have at least 70% of their investments in eligible assets, which may include: (i) securities of eligible portfolio companies
(generally, domestic companies that are not investment companies and that cannot have a class of securities listed on a
B-3
national securities exchange or have
securities that are marginable that are purchased from that company in a private transaction); (ii) securities received by BDCs in connection with
their ownership of securities of eligible portfolio companies; or (iii) cash, cash items, government securities, or high-quality debt securities
maturing one year or less from the time of investment. BDCs are required to make available significant managerial assistance to these portfolio
companies. Significant managerial assistance refers to any arrangement whereby a BDC provides significant guidance and counsel concerning the
management, operations, or business objectives and policies of a portfolio company. Examples of such activities include arranging financing, managing
relationships with financing sources, recruiting management personnel, and evaluating acquisition and divestiture opportunities. BDCs are frequently
externally managed by an investment adviser which may also provide this external managerial assistance to portfolio companies. Such investment
adviser’s liability may be limited under their investment advisory agreement which may lead such investment adviser to act in a riskier manner
than it would were it investing for its own account. Such investment advisers may be entitled to incentive compensation which may cause such adviser to
make more speculative and riskier investments than it would if investing for its own account. Such compensation may be due even in the case of declines
to the value of a BDC’s investments.
The overall financial condition of BDCs
and the ability of BDCs to grow are affected significantly by BDCs’ ability to raise capital. In addition to raising capital through the issuance
of common stock, BDCs may engage in borrowing. This may involve using revolving credit facilities, the securitization of loans through separate
wholly-owned subsidiaries and the issuance of debt and preferred securities. BDCs are less restricted than other closed-end funds as to the amount of
debt they can have outstanding. These borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested and, accordingly,
the risks associated with investing in BDC securities. While the value of a BDC’s assets increases, leveraging would cause the net value per share
of BDC common stock to increase more sharply than it would have had such BDC not leveraged. However, if the value of a BDC’s assets decreases,
leveraging would cause net asset value to decline more sharply than it otherwise would have had such BDC not leveraged. In addition to decreasing the
value of a BDC’s common stock, it could also adversely impact a BDC’s ability to make dividend payments.
BDCs compete with other investors and
investment funds, such as private equity funds and venture capital funds, for investment opportunities. BDC investments are frequently not publicly
traded and, as a result, there is uncertainty as to the value and liquidity of those investments. BDCs may use independent valuation firms to value
their investments and such valuations may be uncertain, based on estimates and/or differ materially from that which would have been used if a ready
market for those investments existed. The value of a BDC could be adversely affected if its determinations regarding the fair value of investments was
materially higher than the value realized upon sale of such investments. Due to the relative illiquidity of certain BDC investments, if a BDC is
required to liquidate all or a portion of its portfolio quickly, it may realize significantly less than the value at which such investments are
recorded. Further restrictions may exist on the ability to liquidate certain assets to the extent that subsidiaries or related parties have material
nonpublic information regarding such assets.
B-4
BDCs may enter into hedging transactions
and utilize derivative instruments such as forward contracts, options and swaps. Unanticipated movements and improper correlation of hedging
instruments may prevent a BDC from hedging against exposure to risk of loss.
BDCs may issue options, warrants, and
rights to convert to voting securities to its officers, employees and board members. Any issuance of derivative securities requires the approval of the
company’s board of directors and authorization by the company’s shareholders.
BDCs frequently have high expenses which
may include, but are not limited to, the payment of management fees, administration expenses, taxes, interest payable on debt, governmental charges,
independent director fees and expenses, valuation expenses, and fees payable to third parties relating to or associated with making investments. The
Trust will indirectly bear these expenses and estimated BDC expenses are shown in the Trust’s annual operating expenses under “Fee
Table” to illustrate their impact. These expenses may fluctuate significantly over time.
If a BDC fails to maintain its status as
a BDC it may be regulated as a closed-end fund, which would subject such BDC to additional regulatory restrictions and significantly decrease its
operating flexibility. In addition, such failure could trigger an event of default under certain outstanding indebtedness, which could have a material
adverse effect on its business.
CLOSED-END
FUNDS. All of the Funds held by the Trust are closed-end investment companies. The value of the Units may increase or
decrease depending on the value of the underlying shares of the Funds in the Trust’s portfolio. The Funds are closed-end investment companies with
managed portfolios. Closed-end funds issue shares of common stock that are traded on a securities exchange. Closed-end funds are subject to various
risks, including management’s ability to meet the closed-end fund’s investment objective, and to manage the closed-end fund’s portfolio
when the underlying securities are redeemed or sold, during periods of market turmoil and as investors’ perceptions regarding closed-end funds or
their underlying investments change. Shares of closed-end funds frequently trade at a discount from net asset value. However, a Fund’s charter
documents may contain certain anti-takeover provisions that may have the effect of inhibiting the Fund’s possible conversion to open-end status
and limiting the ability of other persons to acquire control of the Fund. In certain circumstances, these provisions might also inhibit the ability of
stockholders (including the Trust) to sell their shares at a premium over prevailing market prices. This characteristic is a risk separate and distinct
from the risk that the Fund’s net asset value will decrease. In particular, this characteristic would increase the loss or reduce the return on
the sale of those Funds whose shares were purchased by the Trust at a premium. Should any of the Funds convert to open-end status, the Trust will
retain such shares unless a determination is made that the retention of such shares would be detrimental to the Trust. In the unlikely event that a
Fund converts to open-end status at a time when its shares are trading at a premium there would be an immediate loss in value to the Trust since shares
of open-end funds trade at net asset value. In addition, to the extent that the converted Fund creates additional shares when interest rates have
declined and invests in lower yielding securities, the Trust may experience a reduction of the average yield of its retained shares in that Fund caused
by the acquisition of lower coupon investments. Certain of the Funds may have in place or may put in place in the future plans pursuant to which the
Fund may repurchase its own shares in the marketplace. Typically, these plans are put in place
B-5
in an attempt by the Fund’s
board to reduce a discount on its share price. To the extent such a plan was implemented and shares owned by the Trust are repurchased by the Fund, the
Trust position in that Fund would be reduced and the cash would be deposited in the Trust’s Principal Account and distributed to Unitholders at
the next applicable Distribution Date. Similarly, in the event that the Trust does not retain shares of a Fund which converted to open-end status, the
Trust position in that Fund would be eliminated and the cash distributed to Unitholders.
Shares of many Funds are thinly traded,
and therefore may be more volatile and subject to greater price fluctuations because of the Sponsor’s buying and selling securities than shares
with greater liquidity. Investors should be aware that there can be no assurance that the value of the Securities in the Trust’s portfolio will
increase or that the issuers of those Securities will pay dividends on outstanding shares. Any distributions of income to Unitholders will generally
depend on the declaration of dividends by the issuers of the underlying stocks, and the declaration of dividends depends on several factors including
the financial condition of the issuers included in the portfolios of those Securities and general economic conditions.
LEVERAGE. The use of leverage by the Funds creates an opportunity for increased net income and capital
growth for their shares, but also creates special risks. There can be no assurance that a leveraging strategy will be successful during any period in
which it is employed. A Fund may use leverage to provide its shareholders with a potentially higher return. Leverage creates risks for shareholders
including the likelihood of greater volatility of net asset value and market price of the shares and the risk that fluctuations in interest rates on
borrowing and debt or in the dividend rates on any preferred shares may affect the return to shareholders.
To the extent the income or capital
growth derived from securities purchased with funds received from leverage exceeds the cost of leverage, a Fund’s return will be greater than if
leverage had not been used. Conversely, if the income or capital growth from the securities purchased with such funds is not sufficient to cover the
cost of leverage, the return to a Fund will be less than if leverage had not been used, and therefore the amount available for distribution to
shareholders as dividends and other distributions will be reduced. This would, in turn, reduce the amount available for distribution to you as a
Unitholder.
DILUTION. The Trust is prohibited from subscribing to a rights offering for shares of any of the Funds. In
the event of a rights offering for additional shares of a Fund, Unitholders should expect that the Trust will, at the completion of the offer, own a
smaller proportional interest in such Fund than would otherwise be the case. It is not possible to determine the extent of this dilution in share
ownership without knowing what proportion of the shares in a rights offering will be subscribed.
This may be particularly serious when
the subscription price per share for the offer is less than a Fund’s net asset value per share. Assuming that all rights are exercised and there
is no change in the net asset value per share, the aggregate net asset value of each shareholder’s shares of common stock should decrease as a
result of the offer. If a Fund’s subscription price per share is below that Fund’s net asset value per share at the expiration of the offer,
shareholders would experience an immediate dilution of the aggregate net asset value of their shares of common stock as a result of the offer, which
could be substantial.
B-6
The Trust may transfer or sell its
rights to purchase additional shares of a Fund to the extent permitted by the terms of that Fund’s rights offering. The cash the Trust receives
from transferring a Unitholder’s rights might serve as partial compensation for any possible dilution of the Trust’s interest in such Fund.
There can be no assurance, however, that the rights will be transferable or that a market for the rights will develop or the value, if any, that such
rights will have.
VOTING. In
regard to the voting of all proxies with respect to a Fund, the Sponsor has instructed the Trustee to vote the shares held by the Trust in the same
proportion as the vote of all other holders of the shares of such Fund.
COMMON
STOCK. Since the Trust invests in common stock of BDCs and the Funds may invest in common stock of companies, an investment
in Units of the Trust should be made with an understanding of the risks inherent in any investment in common stocks, including the risk that the
financial condition of the issuers of the Securities may become impaired or that the general condition of the stock market may worsen.
Additional risks include those
associated with the right to receive payments from the issuer which is generally inferior to the rights of creditors of, or holders of debt obligations
or preferred stock issued by, the issuer. Holders of common stocks have a right to receive dividends only when, if, and in the amounts declared by the
issuer’s board of directors and to participate in amounts available for distribution by the issuer only after all other claims on the issuer have
been paid or provided for. By contrast, holders of preferred stocks usually have the right to receive dividends at a fixed rate when and as declared by
the issuer’s board of directors, normally on a cumulative basis. Dividends on cumulative preferred stock must be paid before any dividends are
paid on common stock and any cumulative preferred stock dividend which has been omitted is added to future dividends payable to the holders of such
cumulative preferred stock. Preferred stocks are also usually entitled to rights on liquidation which are senior to those of common stocks. For these
reasons, preferred stocks generally entail less risk than common stocks.
Moreover, common stocks do not represent
an obligation of the issuer and therefore do not offer any assurance of income or provide the degree of protection of debt securities. The issuance of
debt securities or even preferred stock by an issuer will create prior claims for payment of principal, interest and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends on its common stock or the economic interest of holders of common stock
with respect to assets of the issuer upon liquidation or bankruptcy. Further, unlike debt securities which typically have a stated principal amount
payable at maturity (which value will be subject to market fluctuations prior thereto), common stocks have neither fixed principal amount nor a
maturity and have values which are subject to market fluctuations for as long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or regional political, economic or banking crises. The value of the common
stocks in the Funds held by the Trust thus may be expected to fluctuate over the life of the Trust to values higher or lower than those prevailing on
the Initial Date of Deposit.
B-7
LOWER GRADE
SECURITIES. Certain of the Funds in the Trust may invest in high-yield corporate debt obligations (“junk bonds”)
and senior loans, which consist of lower grade securities. There are certain risks associated with such Funds’ investments in such securities that
could cause the value of these Funds to decrease. This, in turn, could cause the value of your Units to decrease. The risks are outlined
below.
Lower grade securities (below
“BBB” by Standard & Poor’s or “Baa” by Moody’s) are regarded as being predominately speculative as to the
issuer’s ability to make payments of principal and interest. Investment in such securities involves substantial risk. Lower grade securities are
commonly referred to as “high yield securities” or “junk bonds.” Issuers of lower grade securities may be highly leveraged and may
not have available to them more traditional methods of financing. Therefore, the risks associated with acquiring the securities of such issuers
generally are greater than is the case with higher-rated securities. For example, during an economic downturn or a sustained period of rising interest
rates, issuers of lower grade securities may be more likely to experience financial stress, especially if such issuers are highly leveraged. During
periods of economic downturn, such issuers may not have sufficient revenues to meet their interest payment obligations.
The issuer’s ability to make
payments on its debt obligations also may be adversely affected by specific issuer developments, the issuer’s inability to meet specific projected
business forecasts or the unavailability of additional financing. Therefore, there can be no assurance that in the future there will not exist a higher
default rate relative to the rates currently existing in the market for lower grade securities.
The risk of loss due to default by the
issuer is significantly greater for the holders of lower grade securities because such securities may be unsecured and may be subordinate to other
creditors of the issuer. Other than with respect to distressed securities, discussed below, the lower grade securities in which the Funds may invest do
not include instruments which, at the time of investment, are in default or the issuers of which are in bankruptcy. However, there can be no assurance
that such events will not occur after a Fund purchases a particular security, in which case the Fund and the Trust may experience losses and incur
costs.
Lower grade securities frequently have
call or redemption features that would permit an issuer to repurchase the security from one of the Funds which holds it. If a call were exercised by
the issuer during a period of declining interest rates, the particular Fund is likely to have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Fund and the Trust and dividends to Unitholders.
Lower grade securities tend to be more
volatile than higher-rated securities, so that adverse economic events may have a greater impact on the prices of lower grade securities than on
higher-rated securities. Factors adversely affecting the market value of such securities are likely to adversely affect a Fund’s net asset value
which, in turn, may adversely affect the value of your Units. Recently, demand for lower grade securities has increased significantly and the
difference between the yields paid by lower grade securities and higher-grade securities (i.e., the “spread”) has narrowed. To the extent
this differential increases, the value of lower grade securities in a Fund’s portfolio could be adversely affected along with the value of your
Units.
B-8
Like higher-rated securities, lower
grade securities generally are purchased and sold through dealers who make a market in such securities for their own accounts. However, there are fewer
dealers in the lower grade securities market, which may be less liquid than the market for higher-rated securities, even under normal economic
conditions. Also, there may be significant disparities in the prices quoted for lower grade securities by various dealers. As a result, during periods
of high demand in the lower grade securities market, it may be difficult to acquire lower grade securities appropriate for investment by a Fund.
Adverse economic conditions and investor perceptions thereof (whether or not based on economic reality) may impair liquidity in the lower grade
securities market and may cause the prices a Fund receives for its lower grade securities to be reduced. In addition, a Fund may experience difficulty
in liquidating a portion of its portfolio when necessary to meet its liquidity needs or in response to a specific economic event such as deterioration
in the creditworthiness of the issuers. Under such conditions, judgment may play a greater role in valuing certain of a Fund’s portfolio
instruments than in the case of instruments trading in a more liquid market. Moreover, a Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default on a portfolio holding or to participate in the restructuring of the obligation.
DERIVATIVES. Certain of the Funds in the Trust may invest in a variety of derivative instruments for hedging
or risk management purposes or as part of a leveraging strategy. Derivatives can be illiquid, may disproportionately increase losses and have a
potentially large negative impact on a Fund’s performance. Derivative transactions, including options on securities and securities indices and
other transactions in which certain Funds may engage (such as futures contracts and options thereon, swaps and short sales), may subject such Funds to
increased risk of principal loss due to unexpected movements in stock prices, changes in stock volatility levels and interest rates, and imperfect
correlations between a Fund’s securities holdings and indices upon which the derivative transactions are based.
PREFERRED
STOCKS. Certain of the Funds in the Trust may invest in preferred securities including preferred stocks, trust preferred
securities or other similar securities. Preferred stocks are unique securities that combine some of the characteristics of both common stocks and
bonds. Preferred stocks generally pay a fixed rate of return and are sold on the basis of current yield, like bonds. However, because they are equity
securities, preferred stocks provide equity ownership of a company and the income is paid in the form of dividends. Preferred stocks typically have a
yield advantage over common stocks as well as comparably-rated fixed income investments. Preferred stocks are typically subordinated to bonds and other
debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore will be subject to greater credit risk
than those debt instruments.
SMALLER CAPITALIZATION
COMPANIES. Certain of the Funds in the Trust may invest in smaller capitalization companies which may involve greater risk
than investing in larger capitalization companies, since they can be subject to more abrupt or erratic price movements. Smaller capitalization
companies may have had their securities publicly traded, if at all, for only a short period of time and may not have had the opportunity to establish a
reliable trading pattern through economic cycles. The price volatility of smaller capitalization companies is relatively higher than larger, older and
more mature companies. The greater price volatility of smaller capitalization companies may result from the fact that there may be less market
liquidity, less information publicly
B-9
available or fewer investors who
monitor the activities of these companies. In addition, the market prices of these securities may exhibit more sensitivity to changes in industry or
general economic conditions. Some smaller capitalization companies will not have been in existence long enough to experience economic cycles or to
demonstrate whether they are sufficiently well managed to survive downturns or inflationary periods.
CONVERTIBLE
SECURITIES. Certain of the Funds in the Trust may invest in convertible securities. Convertible securities generally offer
lower interest or dividend yields than non-convertible fixed-income securities of similar credit quality because the potential for capital
appreciation. The market value of convertible securities tend to decline as interest rates increase, and conversely, to increase as interest rates
decline. However, a convertible security’s market value also tends to reflect the market price of the common stock of the issuing company,
particularly when that stock price is greater than the convertible security’s “conversion price.” Convertible securities fall below debt
obligations of the same issuer in order of preference or priority in the event of a liquidation and are typically unrated or lower rated than such debt
obligations.
UNMANAGED
PORTFOLIO. The value of the Units will fluctuate depending on all of the factors that have an impact on the economy and the
equity markets. These factors similarly impact the ability of an issuer to distribute dividends. Unlike a managed investment company in which there may
be frequent changes in the portfolio of securities based upon economic, financial and market analyses, securities of a unit investment trust, such as
the Trust, are not subject to such frequent changes based upon continuous analysis. All the Securities in the Trust are liquidated or distributed in
connection with Trust termination. Since the Trust will not sell Securities in response to ordinary market fluctuation, but only at the Trust’s
termination or upon the occurrence of certain events (see “Trust Administration—Portfolio Supervision”) the amount realized upon the
sale of the Securities may not be the highest price attained by an individual Security during the life of the Trust.
Some of the Securities in the Trust may
also be owned by other clients of the Sponsor and its affiliates. However, because these clients may have differing investment objectives, the Sponsor
may sell certain Securities from those accounts in instances where a sale by the Trust would be impermissible, such as to maximize return by taking
advantage of market fluctuations. Investors should consult with their own financial advisers prior to investing in the Trust to determine its
suitability. (See “Trust Administration—Portfolio Supervision”.)
ADDITIONAL
SECURITIES. Investors should be aware that in connection with the creation of additional Units subsequent to the Initial
Date of Deposit, the Sponsor will deposit Additional Securities, contracts to purchase Additional Securities or cash (or letter of credit in lieu of
cash) with instructions to purchase Additional Securities, in each instance maintaining the original proportionate relationship to the extent
practicable, subject to adjustment under certain circumstances, of the numbers of shares of each Security in the Trust. To the extent the price of a
Security increases or decreases between the time cash is deposited with instructions to purchase the Security and the time the cash is used to purchase
the Security, Units may represent less or more of that Security and more or less of the other Securities in the Trust. In addition, brokerage fees (if
any) incurred in purchasing Securities with cash deposited with instructions to purchase the Securities will be an expense of the
Trust.
B-10
Price fluctuations between the time of
deposit and the time the Securities are purchased, and payment of brokerage fees, will affect the value of every Unitholder’s Units and the income
per Unit received by the Trust. In particular, Unitholders who purchase Units during the initial offering period would experience a dilution of their
investment as a result of any brokerage fees paid by the Trust during subsequent deposits of Additional Securities purchased with cash deposited. In
order to minimize these effects, the Trust will try to purchase Securities as near as possible to the Evaluation Time or at prices as close as possible
to the prices used to evaluate Trust Units at the Evaluation Time.
In addition, subsequent deposits to
create additional Units will not be fully covered by the deposit of a bank letter of credit. In the event that the Sponsor does not deliver cash in
consideration for the additional Units delivered, the Trust may be unable to satisfy its contracts to purchase the Additional Securities without the
Trustee selling underlying Securities. Therefore, to the extent that the subsequent deposits are not covered by a bank letter of credit, the failure of
the Sponsor to deliver cash to the Trust, or any delays in the Trust receiving such cash, would have significant adverse consequences for the
Trust.
LEGISLATION. At any time after the Initial Date of Deposit, legislation may be enacted affecting the
Securities in the Trust or the issuers of the Securities. Changing approaches to regulation, particularly with respect to the environment, or with
respect to the petroleum or tobacco industries, may have a negative impact on certain companies. There can be no assurance that future legislation,
regulation or deregulation will not have a material adverse effect on the Trust or will not impair the ability of the issuers of the Securities to
achieve their business goals.
LEGAL PROCEEDINGS AND
LITIGATION. At any time after the Initial Date of Deposit, legal proceedings may be initiated on various grounds, or
legislation may be enacted, with respect to the Securities in the Trust or to matters involving the business of the issuer of the Securities. There can
be no assurance that future legal proceedings or legislation will not have a material adverse impact on the Trust or will not impair the ability of the
issuers of the Securities to achieve their business and investment goals.
SECURITIES
SELECTION. The Portfolio Consultant may use the list of Securities in its independent capacity as an investment adviser and
distribute this information to various individuals and entities. The Portfolio Consultant 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. The Portfolio Consultant also
may issue reports or make recommendations on securities, which may include the Securities in the Trust. Neither the Portfolio Consultant nor the
Sponsor manages the Trust. Opinions expressed by the Portfolio Consultant are not necessarily those of the Sponsor, and may not actually come to pass.
The Portfolio Consultant is being compensated for its portfolio consulting services, including selection of the Trust portfolio.
B-11
GENERALLY. There is no assurance that any dividends will be declared or paid in the future on the
Securities. Investors should be aware that there is no assurance that the Trust’s objectives will be achieved.
OFFERING
PRICE. In calculating the Public Offering Price, the aggregate value of the Securities is determined in good faith by the
Trustee on each “Business Day” as defined in the Indenture in the following manner: if the Securities are listed on a national or foreign
securities exchange, this evaluation is based on the closing sales prices on that exchange as of the Evaluation Time (unless the Trustee deems these
prices inappropriate as a basis for valuation). If the Trustee deems these prices inappropriate as a basis for evaluation, or if there are no such
closing prices for the Securities, the Trustee shall use any of the following methods, or a combination thereof, which it deems appropriate: (a) on the
basis of current offering prices for such Securities as obtained from investment dealers or brokers who customarily deal in comparable securities, (b)
if offering prices are not available for any such Securities, on the basis of current offering prices for comparable securities, (c) by appraising the
value of the Securities on the offering side of the market or by such other appraisal deemed appropriate by the Trustee or (d) by any combination of
the above, each as of the Evaluation Time.
Units of the 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 charge referred to in this Prospectus. The initial sales charge is equal to the difference between the maximum sales charge and the sum of the
remaining deferred sales charge and the total creation and development fee. The maximum total sales charge is 3.95% of the Public Offering Price. The
deferred sales charge is a fixed dollar amount and will be collected in installments as described in this Prospectus. Units purchased after the initial
deferred sales charge payment will be subject to the remaining deferred sales charge payments. Units sold or redeemed prior to such time as the entire
applicable deferred sales charge has been collected will be assessed the remaining deferred sales charge at the time of such sale or
redemption.
During the initial offering period, part
of the value of the Securities represents an amount that will pay the costs of creating the Trust. These costs include the costs of preparing the
registration statement and legal documents, federal and state registration fees, the Portfolio Consultant’s security selection fee, the initial
fees and expenses of the Trustee and the initial audit. The Trust will sell Securities to reimburse the Sponsor for these costs at the end of the
initial offering period or after six months, if earlier. The value of the Units will decline when the Trust pays these costs.
You pay a fee in connection with
purchasing Units. This is referred to as the “transactional sales charge.” The transactional sales charge has both an initial and a deferred
component and equals 3.45% of the Public Offering Price per Unit based on a $10 Public Offering Price per Unit. This percentage amount of the
transactional sales charge is based on the Unit price on the Trust’s inception date. The transactional sales charge equals the difference between
the total sales charge and the creation and development fee. As a result, the percentage and dollar amount of the transactional sales charge will vary
as the Public Offering Price per Unit varies. The transactional sales
B-12
charge does not include the creation
and development fee which is described under “Trust Expenses and Charges.”
The maximum total sales charge equals
3.95% of the Public Offering Price per Unit at the time of purchase. You pay the initial sales charge at the time you buy Units. The initial sales
charge is the difference between the total sales charge percentage (maximum of 3.95% of the Public Offering Price per Unit) and the sum of the
remaining fixed dollar deferred sales charge and the total fixed dollar creation and development fee. The initial sales charge will be approximately
1.00% of the Public Offering Price per Unit depending on the Public Offering Price per Unit. The deferred sales charge is fixed at $0.245 per Unit. The
Trust pays the deferred sales charge in equal monthly installments as described in Part A of this Prospectus. If you redeem or sell your Units prior to
collection of the total deferred sales charge, you will pay any remaining deferred sales charge upon redemption or sale of your Units. Because the
deferred sales charge and creation and development fee are fixed dollar amounts per Unit, the actual charges will exceed the percentages shown in the
“Fee Table” if the Public Offering Price per Unit falls below $10 and will be less than the percentages shown in the “Fee Table” if
the Public Offering Price per Unit exceeds $10. In no event will the total sales charge exceed 3.95% of the Public Offering Price per
Unit.
Since the deferred sales charge and
creation and development fee are fixed dollar amounts per Unit, the Trust must charge these amounts per Unit regardless of any decrease in net asset
value. However, if the Public Offering Price per Unit falls to the extent that the maximum sales charge percentage results in a dollar amount that is
less than the combined fixed dollar amounts of the deferred sales charge and creation and development fee, your initial sales charge will be a credit
equal to the amount by which these fixed dollar charges exceed the sales charge at the time you buy Units. In such a situation, the value of Securities
per Unit would exceed the Public Offering Price per Unit by the amount of the initial sales charge credit and the value of those Securities will
fluctuate, which could result in a benefit or detriment to Unitholders that purchase Units at that price. The initial sales charge credit is paid by
the Sponsor and is not paid by the Trust. The “Fee Table” shows the sales charge calculation at a $10 Public Offering Price per Unit and the
following examples illustrate the sales charge at prices below and above $10. If the Public Offering Price per Unit fell to $7, the maximum sales
charge would be $0.2765 (3.95% of the Public Offering Price per Unit), which consists of an initial sales charge of -$0.0185, a deferred sales charge
of $0.245 and a creation and development fee of $0.05. If the Public Offering Price per Unit rose to $13, the maximum sales charge would be $0.5135
(3.95% of the Public Offering Price per Unit), consisting of an initial sales charge of $0.2185, a deferred sales charge of $0.245 and the creation and
development fee of $0.05. The actual sales charge that may be paid by an investor may differ slightly from the sales charges shown herein due to
rounding that occurs in the calculation of the Public Offering Price and in the number of Units purchased.
If you purchase Units after the last
deferred sales charge payment has been assessed, the secondary market sales charge is equal to 3.95% of the Public Offering Price and does not include
deferred payments.
VOLUME AND OTHER
DISCOUNTS. The minimum purchase is generally 100 Units for individual purchasers and for purchases by certain custodial
accounts or Individual Retirement Accounts, self-employed retirement plans, pension funds and other tax-deferred retirement plans. The minimum purchase
requirements are subject to waiver
B-13
and may vary by selling firm. Units
are available at a volume discount from the Public Offering Price during the initial public offering based upon the dollar amount of Units purchased.
It is your financial professional’s responsibility to alert us of any discount when you order Units. This volume discount will result in a
reduction of the sales charge applicable to such purchases. Since the deferred sales charge and creation and development fee are fixed dollar amounts
per Unit, the Trust must charge these amounts per Unit regardless of any discounts. However, if you are eligible to receive a discount such that your
total sales charge is less than the fixed dollar amount of the deferred sales charge and creation and development fee, the Sponsor will credit you the
difference between your total sales charge and these fixed dollar charges at the time you buy Units. The reduced sales charge on the Public Offering
Price applicable to such purchases is as follows:
| Amount of Purchase* |
Reduced Sales Charge |
|||||
Less than $50,000 |
3.95% |
|||||
$50,000 but less than $100,000 |
3.70% |
|||||
$100,000 but less than $250,000 |
3.45% |
|||||
$250,000 but less than $500,000 |
3.10% |
|||||
$500,000 but less than $1,000,000 |
2.95% |
|||||
$1,000,000 or greater |
2.45% |
|||||
* |
The volume discount is also applied on a Unit basis utilizing a breakpoint equivalent in the above table of one Unit per $10, etc. For example, the purchase of either Units with a value of $250,000 or 25,000 Units would be entitled to the reduced sales charge of 3.10% even if at the time of purchase the value of 25,000 Units was less than $250,000. |
Except as described in this paragraph,
these discounts will apply only to purchases of Units by the same purchaser on a single day from a single broker-dealer. Units purchased by the same
purchaser in separate transactions on a single day will be aggregated for purposes of determining if such purchaser is entitled to a discount provided
that such purchaser must own at least the required dollar amount of Units at the time such determination is made. Units purchased in the name of a
purchaser’s spouse or children under 21 living in the same household as the purchaser will be deemed to be additional purchases by the purchaser
for the purposes of calculating the applicable quantity discount level. Purchases of Units of the Trust may be combined with purchases of units of any
other unit investment trusts sponsored by the Sponsor in the initial offering period which are not already subject to a reduced sales charge, if such
purchases are made by the same person on a single day from a single broker-dealer. The reduced sales charge levels will also be applicable to a trustee
or other fiduciary purchasing Units for a single trust, estate (including multiple trusts created under a single estate) or fiduciary account. To be
eligible for aggregation as described in this paragraph, all purchases must be made on the same day through a single broker-dealer or selling agent. A
purchaser must inform his/her broker-dealer of any combined purchases before the purchase to be eligible for a reduced sales charge. If you purchase
Units that qualify for the rollover/exchange discount described below and also purchase additional Units on the same day from the same broker-dealer
that do not qualify for the rollover/exchange discount described below, you may aggregate all Units purchased for purposes of
B-14
qualifying for the volume discount
described above on the additional Units, but such additional Units will not qualify for the rollover/exchange discount described
below.
We waive a portion of the sales charge
on Units of the Trust offered in this Prospectus if you buy your Units with redemption or termination proceeds from any unit investment trust
(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 $500,000 or more in Units of the Trust, the maximum sales charge on your Units will be limited to the maximum sales
charge for the applicable amount invested in the table 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 charge discount. If you purchase Units that qualify for the rollover/exchange discount described in this paragraph and
also purchase additional Units on the same day from the same broker-dealer that do not qualify for the rollover/exchange discount described in this
paragraph, you may aggregate all Units purchased for purposes of qualifying for the volume discount described above on the additional Units, but such
additional Units will not qualify for the rollover/exchange discount described in this paragraph. 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 charge at redemption, you should be aware
that any deferred sales charges remaining on these units will be deducted from those redemption proceeds. These discounts apply only to initial
offering period purchases.
We waive a portion of the sales charge
for purchases by officers, directors and employees (including their spouses and children under 21 living in the same household, and trustees,
custodians or fiduciaries for the benefit of such persons) of the Sponsor and its affiliates and dealers and their affiliates. These purchases may be
made at the Public Offering Price per Unit less the applicable dealer concession. These discounts apply during the initial offering period and in the
secondary market. All employee discounts are subject to the policies of the related selling firm. Only officers, directors and employees of companies
that allow their employees to participate in this employee discount program are eligible for the discounts.
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 Based CUSIP Numbers set forth under “Summary of Essential Information,” 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
B-15
“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 charge but will be subject to the creation and development fee that is retained by the Sponsor. For example, this table illustrates the sales charge 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 charge |
0.00 | % | ||||
Deferred sales charge |
0.00 | % | ||||
Transactional sales charge |
0.00 | % | ||||
Creation and development fee |
0.50 | % | ||||
Total sales charge |
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.
DISTRIBUTION OF
UNITS. During the initial offering period and thereafter to the extent additional Units continue to be offered by means of
this Prospectus, Units will be distributed by the Sponsor at the Public Offering Price. The Sponsor intends to qualify the Units for sale in certain
States through dealers who are members of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Sponsor does 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. The Sponsor may reject any order for Units in whole or in part. The concessions with respect to Units sold by dealers are as
follows:
| Amount of Purchase |
Dealer Concession |
|||||
Less than $50,000 |
3.15% |
|||||
$50,000 but less than $100,000 |
2.90% |
|||||
$100,000 but less than $250,000 |
2.65% |
|||||
$250,000 but less than $500,000 |
2.35% |
|||||
$500,000 but less than $1,000,000 |
2.25% |
|||||
$1,000,000 or greater |
1.80% |
|||||
The Sponsor applies these concessions or
agency commissions as a percent of the Public Offering Price per Unit at the time of the transaction. The Sponsor also applies the different levels on
a Unit basis using a $10 Unit equivalent. For example, the purchases of Units with a value of $250,000 or 25,000 Units would be entitled to a dealer
concession of 2.35%, even if at the time of purchase the value of 25,000 Units was less than $250,000.
Any sales charge discount is borne by
the broker-dealer or selling firm out of the dealer concession. The Sponsor reserves the right to change the amount of concessions or agency
commissions from time to time.
For transactions involving unitholders
of other unit investment trusts who use their termination or redemption proceeds to purchase Units of the Trust, the dealer concession is 2.20%. No
dealer concession is paid to broker-dealers or other selling firms in
B-16
connection with Unit sales in
investment accounts that charge a “wrap fee” or periodic fees for investment advisor, financial planning or asset management services in lieu
of commissions.
The Sponsor may provide, at its own
expense and out of its own profits, additional compensation and benefits to broker-dealers who sell Units of this Trust and the Sponsor’s other
products. This compensation is intended to result in additional sales of the Sponsor’s products and/or compensate broker-dealers and financial
advisors for past sales. The Sponsor may make these payments for marketing, promotional or related expenses, including, but not limited to expenses of
entertaining retail customers and financial advisors, advertising, sponsorship of events or seminars, obtaining shelf space in broker-dealer firms and
similar activities designed to promote the sale of the Sponsor’s products. These arrangements will not change the price Unitholders pay for their
Units.
The Sponsor may enter into wholesaling
arrangements with certain broker-dealers that market and promote the Sponsor’s unit investment trusts to other broker-dealers and selling agents.
The Sponsor compensates these wholesaling firms out of its own assets. The amount of compensation paid to a particular firm may vary and will generally
comprise an amount up to 0.20% of the price of units of Hennion & Walsh-sponsored unit investment trusts sold in the region(s) covered by the
particular firm pursuant to its agreement with the Sponsor.
In addition to the concessions set forth
in the table above, broker-dealers and other selling firms will be eligible to receive additional compensation for volume sales of eligible units of
certain of the unit investment trusts sponsored by the Sponsor. This additional volume concession is based on total initial offering period sales of
eligible trusts during a calendar quarter as set forth in the following table:
| Initial Offering Period Sales During
Calendar Quarter |
Volume 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 |
0.075% |
|||||
$50,000,000 but less than $100,000,000 |
0.100% |
|||||
$100,000,000 but less than $250,000,000 |
0.110% |
|||||
$250,000,000 or greater |
0.120% |
|||||
For a trust to be eligible for this
additional volume concession for calendar quarter sales, the trust’s prospectus must include disclosure related to this additional concession; a
trust is not eligible for this additional volume concession if the prospectus for such trust does not include disclosure related to this additional
volume concession. Broker-dealers and other selling firms will not receive additional volume compensation unless it sells at least $10.0 million of
units of eligible trusts during a calendar quarter. For example, if a firm sells $9.5 million of units of eligible trusts in the initial offering
period during a calendar quarter, the firm will not receive any additional compensation with respect to such trusts. Except as described below, 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
eligible trusts during the applicable quarter. For example, if the firm sells $17.5 million of units of eligible trusts in the initial offering period
during a calendar quarter, the firm will receive additional compensation of 0.05% of $17.5 million. There will be no additional 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
B-17
firm has met the sales level
breakpoints for volume concessions. Eligible broker-dealers and other selling firms include clearing firms that place orders with the Sponsor and
provide the Sponsor with information with respect to the representatives who initiated such transactions. Eligible broker-dealers and other selling
firms will not include firms that solely provide clearing services to other broker-dealer firms or firms who place orders through clearing firms that
are eligible dealers. Redemptions of units during the initial offering period will reduce the amount of units used to calculate the additional volume
concessions. Secondary market sales of all units are excluded for purposes of these additional volume concessions. The Sponsor will pay these amounts
out of its own assets within a reasonable time following each calendar quarter.
SPONSOR’S
PROFITS. The Sponsor will receive a combined gross underwriting commission equal to up to 3.95% of the Public Offering Price
per Unit. Additionally, the Sponsor may realize a profit on the deposit of the Securities in the Trust representing the difference between the cost of
the Securities to the Sponsor and the cost of the Securities to the Trust. (See “Portfolio of Investments.”) All or a portion of the
Securities initially deposited in the Trust may have been acquired through the Sponsor.
During the initial offering period and
thereafter, to the extent additional Units continue to be offered by means of this Prospectus, the Sponsor may also realize profits or sustain losses
as a result of fluctuations after the Initial Date of Deposit in the aggregate value of the Securities and hence in the Public Offering Price received
by the Sponsor for the Units. Cash, if any, made available to the Sponsor prior to settlement date for the purchase of Units may be used in the
Sponsor’s business subject to the limitations of 17 CFR 240.15c3-3 under the Securities Exchange Act of 1934 and may be of benefit to the
Sponsor.
Both upon acquisition of Securities and
termination of the Trust, the Trustee may utilize the services of the Sponsor for the purchase or sale of all or a portion of the Securities in the
Trust. The Sponsor may receive brokerage commissions from the Trust in connection with such purchases and sales in accordance with applicable
law.
In maintaining a market for the Units
(see “Sponsor’s Repurchase”) the Sponsor will realize profits or sustain losses in the amount of any difference between the price at
which it buys Units and the price at which it resells such Units.
BOOK-ENTRY
UNITS. Ownership of Units of the Trust will not be evidenced by certificates. All evidence of ownership of the Units will be
recorded in book-entry form at The Depository Trust Company (“DTC”) through an investor’s brokerage account. Units held through DTC will
be deposited by the Sponsor with DTC in the Sponsor’s DTC account and registered in the nominee name CEDE & COMPANY. Individual purchases of
beneficial ownership interest in the Trust will be made in book-entry form through DTC. Ownership and transfer of Units will be evidenced and
accomplished directly and indirectly only by book-entries made by DTC and its participants. DTC will record ownership and transfer of the Units among
DTC participants and forward all notices and credit all payments received in respect of the Units held by the DTC participants. Beneficial owners of
Units will receive written confirmation of their purchases and sales from the broker-dealer or bank from whom their purchase was made. Units are
transferable by making a written request properly
B-18
accompanied by a written instrument
or instruments of transfer which should be sent by registered or certified mail for the protection of the Unitholder. Holders must sign such written
request exactly as their names appear on the records of the Trust. Such signatures must be guaranteed by a commercial bank or trust company, savings
and loan association or by a member firm of a national securities exchange.
DISTRIBUTIONS. Dividends received by the Trust are credited by the Trustee to an Income Account for the
Trust. Other receipts, including the proceeds of Securities disposed of, are credited to a Principal Account for the Trust.
Distributions to each Unitholder from
the Income Account are computed as of the close of business on each Record Date for the following Distribution Date and consist of an amount
substantially equal to such Unitholder’s pro rata share of the income credited to the Income Account, less expenses. Distributions from the
Principal Account of the Trust (other than amounts representing failed contracts, as previously discussed) will be computed as of each Record Date, and
will be made to the Unitholders of the Trust on or shortly after the Distribution Date. Proceeds representing principal received from the disposition
of any of the Securities between a Record Date and a Distribution Date which are not used for redemptions of Units will be held in the Principal
Account and not distributed until the next Distribution Date. Persons who purchase Units between a Record Date and a Distribution Date will receive
their first distribution on the second Distribution Date after such purchase.
As of each Record Date, the Trustee will
deduct from the Income Account of the Trust, and, to the extent funds are not sufficient therein, from the Principal Account of the Trust, amounts
necessary to pay the expenses of the Trust (as determined on the basis set forth under “Trust Expenses and Charges”). The Trustee also may
withdraw from said accounts such amounts, if any, as it deems necessary to establish a reserve for any applicable taxes or other governmental charges
that may be payable out of the Trust. Amounts so withdrawn shall not be considered a part of such 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 Principal Accounts
such amounts as may be necessary to cover redemptions of Units by the Trustee. Since the deferred sales charge and the creation and development fee are
fixed dollar amounts per Unit, the Trust must charge these amounts per Unit regardless of any discount.
The amount of the dividend distribution,
if any, cannot be anticipated and may fluctuate as Securities are redeemed, exchanged or sold, or as expenses of the Trust fluctuate. In addition, the
Trust will generally make required distributions at the end of each year because it is structured as a “regulated investment company” for
federal tax purposes.
RECORDS. The Trustee shall furnish Unitholders in connection with each distribution a statement of the
amount being distributed from the Income and Principal Account, respectively, expressed in each case as a dollar amount per Unit. Within a reasonable
time after the end of each calendar year, the Trustee will furnish to each person who at any time during the calendar year was a Unitholder of record a
statement showing (a) as to the Income Account: dividends, interest and other cash amounts received, amounts paid for redemptions of Units, if any,
deductions for applicable taxes and fees and expenses of the Trust, the amount distributed from the Income Account, and the balance remaining after
such distributions and deductions, expressed both as a total
B-19
dollar amount and as a dollar amount
per Unit outstanding on the last business day of such calendar year; (b) as to the Principal Account: the Securities disposed of and the net proceeds
received therefrom, deductions for payments of applicable taxes and fees and expenses of the Trust, the deductions for payment of deferred sales charge
and creation and development fee, if any, amounts paid for redemptions of Units, if any, and 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; (c) a
list of the Securities held, a list of Securities purchased, sold or otherwise disposed of during the calendar year and the number of Units outstanding
on the last business day of such calendar year; (d) the Redemption Price per Unit based upon the last computation thereof made during such calendar
year; and (e) amounts actually distributed to Unitholders during such calendar year from the Income and Principal Accounts, separately stated, of the
Trust, expressed both as total dollar amounts and as dollar amounts per Unit outstanding on the last business day of such calendar year and the status
of such distributions for income tax purposes.
The Trustee shall keep available for
inspection by Unitholders at all reasonable times during usual business hours books of record and accounts of its transactions as Trustee, including
records of the names and addresses of Unitholders, Units held, a current list of Securities in the portfolio and a copy of the Trust
Agreement.
SPONSOR
REPURCHASE. Unitholders who wish to dispose of their Units should inquire of the Sponsor as to current market prices prior
to making a tender for redemption. The aggregate value of the Securities will be determined by the Trustee on a daily basis and computed on the basis
set forth under “Trustee Redemption.” The Sponsor does not guarantee the enforceability, marketability or price of any Securities in the
portfolio or of the Units. The Sponsor may discontinue purchase of Units in the secondary market if the supply of Units exceeds demand, or for other
business reasons. The date of repurchase is deemed to be the date on which repurchase requests are received in proper form by Hennion & Walsh,
Inc., 2001 Route 46, Waterview Plaza, Parsippany, New Jersey 07054, except for repurchase requests received after the Evaluation Time when Units will
be deemed to have been repurchased on the next business day. In the event a market is not maintained for the Units, a Unitholder may be able to dispose
of Units only by tendering them to the Trustee for redemption.
Units purchased in the secondary market
may be reoffered for sale by the Sponsor at a price based on the aggregate value of the Securities in the Trust plus the applicable sales charge plus a
pro rata portion of amounts, if any, in the Income and Principal Accounts. Any Units that are purchased by the Sponsor in the secondary market also may
be redeemed by the Sponsor if it determines such redemption to be in its best interest.
The Sponsor may, under certain
circumstances, as a service to Unitholders, elect to purchase any Units tendered to the Trustee for redemption. (See “Trustee Redemption”).
Factors which the Sponsor will consider in making a determination will include the number of units of all trusts which it has in inventory, its
estimate of the salability and the time required to sell such units and general market conditions. For example, if in order to meet redemptions of
Units the Trustee must dispose of Securities, and if such disposition cannot be made by the redemption date, the Sponsor may elect to
purchase
B-20
such Units. Such purchase shall be
made by payment to the Unitholder’s brokerage account not later than the close of business on the redemption date of an amount equal to the
Redemption Price on the date of tender. The repurchase price will not be reduced by any remaining creation and development fee or organization costs
during the initial offering period. Unitholders who sell or redeem Units prior to such time as the entire deferred sales charge on such Units has been
collected will be assessed the amount of the remaining deferred sales charge at the time of such sale or redemption.
TRUSTEE
REDEMPTION. At any time prior to the Evaluation Time on the business day preceding the Mandatory Termination Date, or on the
date of any earlier termination of the Trust, Units may also be tendered to the Trustee for redemption upon payment of any relevant tax by contacting
the Sponsor, broker, dealer or financial institution holding such Units in street name. In certain instances, additional documents may be required,
such as a trust instrument, certificate of corporate authority, certificate of death or appointment as executor, administrator or guardian. At the
present time there are no specific taxes related to the redemption of Units. No redemption fee will be charged by the Sponsor or the Trustee, however,
you will pay any remaining deferred sales charge at the time you redeem Units. Units redeemed by the Trustee will be canceled.
Within three business days following a
tender for redemption, the Unitholder will be entitled to receive an amount for each Unit tendered equal to the Redemption Price per Unit computed as
of the Evaluation Time set forth under “Summary of Essential Information” in Part A on the date of tender. The “date of tender” is
deemed to be the date on which Units are received by the Trustee, except that with respect to Units received after the Evaluation Time, the date of
tender is the next day on which such exchange is open for trading, and such Units will be deemed to have been tendered to the Trustee on such day for
redemption at the Redemption Price computed on that day.
The Redemption Price per Unit is
determined by the Trustee on the basis of (i) the cash on hand in the Trust or moneys in the process of being collected (during the initial offering
period a portion of the cash on hand may include an amount sufficient to pay the per Unit portion of all or a part of the costs incurred in organizing
and offering the Trust, see “Trust Expenses and Charges”), (ii) the value of the Securities in the Trust as determined by the Trustee and
(iii) the value of all other assets of the Trust, less (a) amounts representing taxes or other governmental charges payable out of the Trust, (b) the
accrued expenses of the Trust, (c) any remaining deferred sales charge, and (d) cash allocated for the distribution to Unitholders of record as of a
Record Date prior to the evaluation being made. As of the close of the initial offering period the Redemption Price per Unit will be reduced to reflect
the payment of the organization costs and creation and development fee to the Sponsor. Therefore, the amount of the Redemption Price per Unit received
by a Unitholder will include the portion representing organization costs and creation and development fee only when such Units are tendered for
redemption prior to the close of the initial offering period. If the Securities are listed on a national or foreign securities exchange, the Trustee
may determine the value of the Securities in the Trust based on the closing sale prices on that exchange. Unless the Trustee deems these prices
inappropriate as a basis for evaluation, or if there are no such closing prices for the Securities, then the Trustee may utilize, at the Trust’s
expense, an independent evaluation service or services to ascertain the value of the Securities. The independent evaluation service shall use any of
the following methods, or a combination
B-21
thereof, which it deems appropriate:
(a) on the basis of current bid prices for such Securities as obtained from investment dealers or brokers who customarily deal in comparable
securities, (b) if bid prices are not available for any such Securities, on the basis of current bid prices for comparable securities, (c) by
appraising the value of the Securities on the bid side of the market or (d) by any combination of the above.
In connection with each redemption, the
Sponsor will direct the Trustee to redeem Units in accordance with the procedures set forth in either (a) or (b) below.
(a) A
Unitholder will receive his redemption proceeds in cash. Amounts paid on redemption allocable to the Unitholder’s interest in the Income Account
shall be withdrawn from the Income Account, or, if the balance therein is insufficient, from the Principal Account. All other amounts paid on
redemption shall be withdrawn from the Principal Account. The Trustee is empowered to sell Securities in order to make funds available for redemptions.
Such sales, if required, could result in a sale of Securities by the Trustee at a loss. To the extent Securities are sold, the size and diversity of
the Trust will be reduced. The Securities to be sold will be selected by the Sponsor in order to maintain, to the extent practicable, the proportionate
relationship among the Securities. Provision is made in the Indenture under which the Sponsor may, but need not, specify minimum amounts in which
blocks of Securities are to be sold in order to obtain the best price for the Trust. While these minimum amounts may vary from time to time in
accordance with market conditions, the Sponsor believes that the minimum amounts which would be specified would be approximately 100 shares for readily
marketable Securities, subject to obtaining the Sponsor’s exception to that minimum.
Any Unitholder
tendering 2,500 Units or more of the Trust for redemption may request by written notice submitted at the time of tender from the Trustee in lieu of a
cash redemption a distribution of whole shares of the Securities in an amount and value equal to the Redemption Price per Unit as determined as of the
evaluation next following tender, provided that this option is not available in the last thirty days of the Trust’s life. To the extent possible,
in kind distributions (“In Kind Distributions”) shall be made by the Trustee through the distribution of each of the Securities in book-entry
form to the Unitholder’s broker-dealer account at DTC. An In Kind Distribution will be reduced by customary transfer and registration charges. The
tendering Unitholder will receive his pro rata number of whole shares of each of the Securities comprising the Trust portfolio and cash from the Income
and Principal Accounts equal to the balance of the Redemption Price to which the tendering Unitholder is entitled. A Unitholder who elects to receive
In Kind Distributions may incur brokerage or other transaction costs in converting the Securities so distributed into cash subsequent to their receipt
of the Securities from the Trust. If funds in the Principal Account are insufficient to cover the required cash distribution to the tendering
Unitholder, the Trustee may sell Securities in the manner described above. We may discontinue this option at any time without notice.
The Trustee is
irrevocably authorized in its discretion, if the Sponsor does not elect to purchase a Unit tendered for redemption or if the Sponsor tenders a Unit for
redemption, in lieu of redeeming such Unit, to sell such Unit in the over-the-counter market for the account of the tendering Unitholder at prices
which will return to the Unitholder an amount in cash, net after deducting brokerage commissions, transfer taxes and other charges, equal to or in
excess of the Redemption Price for such Unit.
B-22
The Trustee will
pay the net proceeds of any such sale to the Unitholder on the day he would otherwise be entitled to receive payment of the Redemption
Price.
(b) The
Trustee will redeem Units in kind by an In Kind Distribution to The Bank of New York Mellon as the Distribution Agent. A Unitholder will be able to
receive in kind an amount per Unit equal to the Redemption Price per Unit as determined as of the day of tender. In Kind Distributions to Unitholders
will take the form of whole shares of the Securities. Cash will also be distributed by the Distribution Agent in lieu of fractional shares. The whole
shares, fractional shares and cash distributed to the Distribution Agent will aggregate an amount equal to the Redemption Price per
Unit.
Distributions in kind
on redemption of Units shall be held by the Distribution Agent, whom each Unitholder shall be deemed to have designated as his agent upon purchase of a
Unit, for the account, and for disposition in accordance with the instructions of, the tendering Unitholder as follows:
(i) The
Distribution Agent shall sell the In Kind Distribution as of the close of business on the date of tender or as soon thereafter as possible and remit to
the Unitholder not later than three business days thereafter the net proceeds of sale, after deducting brokerage commissions and transfer taxes, if
any, on the sale unless the tendering Unitholder requests a distribution of the Securities as set forth in paragraph (ii) below. The Distribution Agent
may sell the Securities through the Sponsor, and the Sponsor may charge brokerage commissions on those sales.
(ii) If
the tendering Unitholder requests distribution in kind and tenders in excess of 2,500 Units, the Distribution Agent shall sell any portion of the In
Kind Distribution represented by the fractional interests in shares of the Securities in accordance with the foregoing and distribute the net cash
proceeds plus any other distributable cash to the tendering Unitholder together with book-entry credit to the account of the Unitholder’s bank or
broker-dealer at DTC representing whole shares of each of the Securities comprising the In Kind Distribution.
The portion of the
Redemption Price which represents the Unitholder’s interest in the Income Account shall be withdrawn from the Income Account to the extent
available. The balance paid on any redemption, including dividends receivable on stocks trading ex-dividend, if any, shall be drawn from the Principal
Account to the extent that funds are available for such purpose. To the extent Securities are distributed in kind to the Distribution Agent, the size
of the Trust will be reduced. Sales by the Distribution Agent may be required at a time when Securities would not otherwise be sold and might result in
lower prices than might otherwise be realized. The Redemption Price received by a tendering Unitholder may be more or less than the purchase price
originally paid by such Unitholder, depending on the value of the Securities in the Trust at the time of redemption.
The Trustee reserves the right to
suspend the right of redemption and to postpone the date of payment of the Redemption Price per Unit for any period during which the New York Stock
Exchange is closed, other than customary weekend and holiday closings, or trading on that Exchange is restricted or during which (as determined by the
Securities and Exchange Commission) an emergency exists as a result of which disposal
B-23
or evaluation of the Securities is
not reasonably practicable, or for such other periods as the Securities and Exchange Commission may by order permit. The Trustee and the Sponsor are
not liable to any person in any way for any loss or damage which may result from any such suspension or postponement.
A Unitholder who wishes to dispose of
his Units should inquire of his broker in order to determine if there is a current secondary market price in excess of the Redemption
Price.
The secondary market repurchase price
will not be reduced by any remaining creation and development fee or organization costs during the initial offering period. Unitholders who sell or
redeem Units prior to such time as the entire deferred sales charge on such Units has been collected will be assessed the amount of the remaining
deferred sales charge at the time of such sale or redemption.
PORTFOLIO
SUPERVISION. The Trust is a unit investment trust and is not a 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 analyses. The
portfolio of the Trust, however, will not be managed and therefore the adverse financial condition of an issuer will not necessarily require the sale
of its Securities from the portfolio. Although the portfolio of the Trust is regularly reviewed, it is unlikely that the Trust will sell any of the
Securities other than to satisfy redemptions of Units, to pay expenses or sales charges or cease buying Additional Securities in connection with the
issuance of additional Units. However, the Trust Agreement provides that the Sponsor may direct the disposition of Securities upon the occurrence of
certain events including: (1) default in payment of amounts due on any of the Securities; (2) institution of certain legal proceedings; (3) default
under certain documents materially and adversely affecting future declaration or payment of amounts due or expected; (4) determination of the Sponsor
that the tax treatment of the Trust would otherwise be jeopardized or that the disposition is necessary to make required distributions or avoid
imposition of taxes on the Trust; (5) decline in price as a direct result of serious adverse credit factors affecting the issuer of a Security which,
in the opinion of the Sponsor, would make the retention of the Security detrimental to the Trust or the Unitholders; or (6) that there has been a
public tender offer made for a Security or a merger or acquisition is announced affecting a Security, and that in the opinion of the Sponsor the sale
or tender of the Security is in the best interest of the Unitholders.
In addition, the Trust Agreement
provides as follows:
(a) If a
default in the payment of amounts due on any Security occurs pursuant to provision (1) above and if the Sponsor fails to give immediate instructions to
sell or hold that Security, the Trustee, within 30 days of that failure by the Sponsor, shall sell the Security.
(b) The
Trustee shall reject any offer made by an issuer of any of the Securities to issue new securities in exchange and substitution for any Security
pursuant to a recapitalization or reorganization. If any exchange or substitution is effected notwithstanding such rejection, any securities or other
property received shall be promptly sold unless the Sponsor directs that it be retained.
B-24
(c) Any
property received by the Trustee after the Initial Date of Deposit as a distribution on any of the Securities in a form other than cash or additional
shares of the Securities shall be promptly sold unless the Sponsor directs that it be retained by the Trustee. The proceeds of any disposition shall be
credited to the Income or Principal Account of the Trust.
(d) The
Sponsor is authorized to increase the size and number of Units of the Trust by the deposit of Additional Securities, contracts to purchase Additional
Securities or cash or a letter of credit with instructions to purchase Additional Securities in exchange for the corresponding number of additional
Units from time to time during the Deposit Period subsequent to the Initial Date of Deposit, provided that the original proportionate relationship
among the number of shares of each Security established on the Initial Date of Deposit is maintained to the extent practicable. The Sponsor may specify
the minimum numbers in which Additional Securities will be deposited or purchased. If a deposit is not sufficient to acquire minimum amounts of each
Security, Additional Securities may be acquired in the order of the Security most underrepresented immediately before the deposit when compared to the
original proportionate relationship. If Securities of an issue originally deposited are unavailable at the time of the subsequent deposit, the Sponsor
may (i) deposit cash or a letter of credit with instructions to purchase the Security when it becomes available, or (ii) deposit (or instruct the
Trustee to purchase) either Securities of one or more other issues originally deposited or a Substitute Security.
In determining whether to dispose of or
hold Securities, new securities or property, the Sponsor may be advised by the Portfolio Supervisor.
TRUST AGREEMENT AND
AMENDMENT. The Trust Agreement may be amended by the Trustee and the Sponsor without the consent of any of the Unitholders:
(1) to cure any ambiguity or to correct or supplement any provision which may be defective or inconsistent; (2) to change any provision thereof as may
be required by the Securities and Exchange Commission or any successor governmental agency; or (3) to make such other provisions in regard to matters
arising thereunder as shall not materially adversely affect the interests of the Unitholders.
The Trust Agreement may also be amended
in any respect, or performance of any of the provisions thereof may be waived, with the consent of investors holding 662/3% of the Units then outstanding for the purpose of modifying the rights of Unitholders; provided
that no such amendment or waiver shall reduce any Unitholder’s interest in the Trust without his consent or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of the holders of all Units. The Trust Agreement may not be amended, without
the consent of the holders of all Units in the Trust then outstanding, to increase the number of Units issuable or to permit the acquisition of any
Securities in addition to or in substitution for those initially deposited in such Trust, except in accordance with the provisions of the Trust
Agreement. The Trustee shall promptly notify Unitholders, in writing, of the substance of any such amendment.
TRUST
TERMINATION. The Trust Agreement provides that the Trust shall terminate as of the Mandatory Termination Date. If the value
of the Trust shall be less than the minimum amount set forth under “Summary of Essential Information” in Part A,
B-25
the Trustee may, in its discretion,
and shall, when so directed by the Sponsor, terminate the Trust. The Trust may also be terminated at any time with the consent of investors holding
100% of the Units then outstanding. The Trustee may begin to sell Securities in connection with a Trust termination nine business days before, and no
later than, the Mandatory Termination Date. When directed by the Sponsor, the Trustee shall utilize the services of the Sponsor for the sale of all or
a portion of the Securities in the Trust, and in so doing, the Sponsor will determine the manner, timing and execution of the sales of the underlying
Securities. Any brokerage commissions received by the Sponsor from the Trust in connection with such sales will be in accordance with applicable law.
In the event of termination, written notice thereof will be sent by the Trustee to all Unitholders. Such notice will provide Unitholders with the
following two options by which to receive their pro rata share of the net asset value of the Trust and requires their election of one of the two
options by notifying the Trustee by returning a properly completed election request (to be supplied to such Unitholders prior to the Mandatory
Termination Date) (see “Summary of Essential Information” in Part A for the Mandatory Termination Date):
1. To
receive in cash such Unitholder’s pro rata share of the net asset value of the Trust derived from the sale by the Sponsor as the agent of the
Trustee of the underlying Securities in connection with termination of the Trust. The Unitholder’s pro rata share of its net assets of the Trust
will be distributed to such Unitholder within three days of the settlement of the trade of the last Security to be sold; and/or
2. To
invest such Unitholder’s pro rata share of the net assets of the Trust derived from the sale by the Sponsor as agent of the Trustee of the
underlying Securities in units of a subsequent series of the Trust (the “New Series”) provided one is offered. It is expected that a special
redemption and liquidation will be made of all Units of this Trust held by Unitholders (the “Rollover Unitholder”) who affirmatively notify
the Trustee of their election to participate in this option on or prior to the rollover notification date required by the Trustee. In the event that
the Sponsor determines that such a redemption and subsequent investment in a New Series by a Rollover Unitholder may be effected under applicable law
in a manner that will not result in the recognition of either gain or loss for U.S. federal income tax purposes with respect to any Securities that are
included in the portfolio of the New Series (“Duplicated Securities”), Unitholders will be notified at least 30 days prior to the Mandatory
Termination Date of the procedures and process necessary to facilitate such tax treatment. The units of a New Series will be purchased by the
Unitholder within three business days of the settlement of the trade for the last of the Unitholder’s Securities to be sold. Such purchaser will
be entitled to a reduced sales charge (as disclosed in the prospectus for the New Series) upon the purchase of units of the New Series. It is expected
that the terms of the New Series will be substantially the same as the terms of the Trust described in this Prospectus, and that similar options with
respect to the termination of such New Series will be available. The availability of this option does not constitute a solicitation of an offer to
purchase units of a New Series or any other security. A Unitholder’s election to participate in this option will be treated as an indication of
interest only. At any time prior to the purchase by the Unitholder of units of a New Series such Unitholder may change his investment strategy and
receive, in cash, the proceeds of the sale of the Securities. An election of this option will not prevent the Unitholder from recognizing taxable gain
or loss (except in the case of a loss, if and to the extent the New Series is treated as substantially identical to the Trust) as a result of
the
B-26
liquidation, even
though no cash will be distributed to pay any taxes. Unitholders should consult their own tax adviser in this regard.
Unitholders who do not make any election
will be deemed to have elected to receive the termination distribution in cash (option number 1).
The Sponsor has agreed that, to the
extent it effects the sales of underlying Securities for the Trustee, such sales will be free of brokerage commissions. The Sponsor, on behalf of the
Trustee, will sell, unless prevented by unusual and unforeseen circumstances, such as, among other reasons, a suspension in trading of a Security, the
close of a stock exchange, outbreak of hostilities and collapse of the economy, all of the Securities within a reasonable time following the Mandatory
Termination Date. The Redemption Price per Unit upon the settlement of the last sale of Securities will be distributed to Unitholders in redemption of
such Unitholders’ interest in the Trust.
Depending on the amount of proceeds to
be invested in units of the New Series and the amount of other orders for units in the New Series, the Sponsor may purchase a large amount of
securities for the New Series in a short period of time. The Sponsor’s buying of securities may tend to raise the market prices of these
securities. The actual market impact of the Sponsor’s purchases, however, is currently unpredictable because the actual amount of securities to be
purchased and the supply and price of those securities is unknown. A similar problem may occur in connection with the sale of Securities in connection
with Trust termination; depending on the number of sales required, the prices of and demand for Securities, such sales may tend to depress the market
prices and thus reduce the proceeds of such sales. The Sponsor believes that the sale of underlying Securities, as described above, is in the best
interest of a Unitholder and may mitigate the negative market price consequences stemming from the trading of large amounts of Securities. The
Securities may be sold in fewer than seven days if, in the Sponsor’s judgment, such sales are in the best interest of Unitholders. The Sponsor, in
implementing such sales of Securities on behalf of the Trustee, will seek to maximize the sales proceeds and will act in the best interests of the
Unitholders. There can be no assurance, however, that any adverse price consequences of heavy trading will be mitigated.
The Sponsor may for any reason, in its
sole discretion, decide not to sponsor any subsequent series of the Trust, without penalty or incurring liability to any Unitholder. If the Sponsor so
decides, the Sponsor will notify the Trustee of that decision, and the Trustee will notify the Unitholders before the Mandatory Termination Date. All
Unitholders will then elect option 1.
By electing to reinvest in the New
Series, the Unitholder indicates his interest in having his terminating distribution from the Trust invested only in the New Series created following
termination of the Trust; the Sponsor expects, however, that a similar reinvestment program will be offered with respect to all subsequent series of
the Trust, thus giving Unitholders an opportunity to elect to “rollover” their terminating distributions into a New Series. The availability
of the reinvestment privilege does not constitute a solicitation of offers to purchase units of a New Series or any other security. A Unitholder’s
election to participate in the reinvestment program will be treated as an indication of interest only. The Sponsor intends to coordinate the date of
deposit of a future series so that the terminating trust will terminate contemporaneously with the creation of a New Series. The Sponsor reserves the
right to modify, suspend or terminate the reinvestment privilege at any time.
B-27
THE
SPONSOR. The Sponsor, Hennion and Walsh, Inc., a New Jersey corporation, is a full service broker-dealer, registered under
the Securities Exchange Act of 1934, which caters to individual investors. The firm was established in 1989 and is a member of the Financial Industry
Regulatory Authority, Inc. and the Securities Investor Protection Corporation. Hennion & Walsh, Inc. maintains its principal business office in
Parsippany, New Jersey.
The information included herein is only
for the purpose of informing investors as to the financial responsibility of the Sponsor and its ability to carry out its contractual obligations. The
Sponsor will be under no liability to Unitholders for taking any action, or refraining from taking any action, in good faith pursuant to the Trust
Agreement, or for errors in judgment except in cases of its own willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties.
The Sponsor may resign at any time by
delivering to the Trustee an instrument of resignation executed by the Sponsor. If at any time the Sponsor shall resign or fail to perform any of its
duties under the Trust Agreement or becomes incapable of acting or becomes bankrupt or its affairs are taken over by public authorities, then the
Trustee may either (a) appoint a successor Sponsor; (b) terminate the Trust Agreement and liquidate the Trust; or (c) continue to act as Trustee
without terminating the Trust Agreement. Any successor Sponsor appointed by the Trustee shall be satisfactory to the Trustee and, at the time of
appointment, shall have a net worth of at least $1,000,000.
THE
TRUSTEE. The Trustee is The Bank of New York Mellon, a trust company organized under the laws of New York, having its
offices at 2 Hanson Place, 12th Floor, Brooklyn, New York 11217. The Trustee is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System. In connection with the storage and
handling of certain Securities deposited in the Trust, the Trustee may use the services of DTC. These services may include safekeeping of the
Securities and coupon-clipping, computer book-entry transfer and institutional delivery services. DTC is a limited purpose trust company organized
under the Banking Law of the State of New York, a member of the Federal Reserve System and a clearing agency registered under the Securities Exchange
Act of 1934.
The Trustee shall not be liable or
responsible in any way for taking any action, or for refraining from taking any action, in good faith pursuant to the Trust Agreement, or for errors in
judgment; or for any disposition of any moneys, Securities or Units in accordance with the Trust Agreement, except in cases of its own willful
misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties; provided, however, that the Trustee shall not in any
event be liable or responsible for any evaluation made by any independent evaluation service employed by it. In addition, the Trustee shall not be
liable for any taxes or other governmental charges imposed upon or in respect of the Securities or the Trust which it may be required to pay under
current or future law of the United States or any other taxing authority having jurisdiction. The Trustee shall not be liable for depreciation or loss
incurred by reason of the sale by the Trustee of any of the Securities pursuant to the Trust Agreement.
For further information relating to the
responsibilities of the Trustee under the Trust Agreement, reference is made to the material set forth under “Rights of
Unitholders.”
B-28
The Trustee may resign by executing an
instrument in writing and filing the same with the Sponsor, and mailing a copy of a notice of resignation to all Unitholders. In such an event, the
Sponsor is obligated to appoint a successor Trustee as soon as possible. In addition, the Sponsor may remove the Trustee and appoint a successor for
any reason as provided in the Trust Agreement. Notice of such removal and appointment shall be mailed to each Unitholder by the Sponsor. If upon
resignation of the Trustee no successor 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. The resignation or removal of the Trustee becomes effective only
when the successor Trustee accepts its appointment as such or when a court of competent jurisdiction appoints a successor Trustee. Upon execution of a
written acceptance of such appointment by such successor Trustee, all the rights, powers, duties and obligations of the original Trustee shall vest in
the successor.
Any corporation into which the Trustee
may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Trustee shall be a
party, shall be the successor Trustee. The Trustee must always be a banking corporation organized under the laws of the United States or any State and
have at all times an aggregate capital surplus and undivided profits of not less than $2,500,000.
THE PORTFOLIO
CONSULTANT. Closed-End Fund Advisors, Inc. (CEFA), located at 7204 Glen Forest Drive, Suite 105, Richmond, Virginia 23226,
is a Virginia corporation that specializes in managing portfolios of closed-end funds for retail and institutional investors using a combination of
independent research and proprietary quantitative models.
EVALUATION OF THE
TRUST. The value of the Securities in the Trust portfolio is determined in good faith by the Trustee on the basis set forth
under “Public Offering—Offering Price.” The Sponsor and the Unitholders may rely on any evaluation furnished by the Trustee and shall
have no responsibility for the accuracy thereof. Determinations by the Trustee under the Trust Agreement shall be made in good faith upon the basis of
the best information available to it, provided, however, that the Trustee shall be under no liability to the Sponsor or Unitholders for errors in
judgment, except in cases of its own willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties. The Trustee,
the Sponsor and the Unitholders may rely on any evaluation furnished to the Trustee by an independent evaluation service and shall have no
responsibility for the accuracy thereof.
Investors will reimburse the Sponsor for
all or a portion of the estimated costs incurred in organizing the Trust (collectively, the “organization costs”), including the cost of the
initial preparation and execution of the Trust Agreement, registration of the Trust and the Units under the Investment Company Act of 1940 and the
Securities Act of 1933 and State registration fees, the initial fees and expenses of the Trustee, legal expenses, the Portfolio Consultant’s
security selection fee, and other actual out-of-pocket expenses. The estimated organization costs will be paid to the Sponsor from the assets of the
Trust as of the earlier of the close of the initial offering period or six months following the Initial Date of Deposit. To the extent that actual
organization costs are less than the estimated amount, only the actual organization costs will be deducted from the assets of
B-29
the Trust. To the extent that actual
organization costs are greater than the estimated amount, only the estimated organization costs included in the Public Offering Price will be
reimbursed to the Sponsor. All advertising and selling expenses, as well as any organizational costs not paid by the Trust, will be borne by the
Sponsor at no cost to the Trust.
Hennion & Walsh Asset Management,
Inc. will receive for portfolio supervisory, bookkeeping and administrative services to the Trust an annual fee in the amount set forth under
“Summary of Essential Information” in Part A. This fee may exceed the actual cost of providing portfolio supervisory, bookkeeping and
administrative services for the Trust, but at no time will the total amount received for portfolio supervisory, bookkeeping and administrative services
rendered to all series of the Smart Trusts in any calendar year exceed the aggregate cost to the Portfolio Supervisor of supplying such services in
such year. (See “Portfolio Supervision.”)
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 charge is applied to the payment of distribution expenses or as compensation for sales efforts. This charge 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 will receive, for its
ordinary recurring services to the Trust, an annual fee in the amount set forth under “Summary of Essential Information” in Part A. For a
discussion of the services performed by the Trustee pursuant to its obligations under the Trust Agreement, see “Trust Administration” and
“Rights of Unitholders.”
The Trustee’s fees applicable to
the Trust are payable as of each Record Date from the Income Account of the Trust to the extent funds are available and then from the Principal
Account. Both the annual fee for portfolio supervisory, bookkeeping and administrative services, and Trustee’s fees may be increased without
approval of the Unitholders by amounts not exceeding proportionate increases in consumer prices for services as measured by the United States
Department of Labor’s Consumer Price Index entitled “All Services Less Rent.”
The following additional charges are or
may be incurred by the Trust: all expenses (including counsel fees) of the Trustee incurred and advances made in connection with its activities under
the Trust Agreement, including the expenses and costs of any action undertaken by the Trustee to protect the Trust and the rights and interests of the
Unitholders; fees of the Trustee for any extraordinary services performed under the Trust Agreement; indemnification of the Trustee for any loss or
liability accruing to it without gross negligence, bad faith or willful misconduct on its part, arising out of or in connection with its acceptance or
administration of the Trust; indemnification of the Sponsor for any losses, liabilities and expenses incurred in acting as sponsor of the Trust
without gross negligence, bad faith or willful misconduct on its part; and all taxes and other governmental charges imposed upon the Securities or any
part of the Trust (no such taxes or charges are being levied, made or, to the knowledge of the Sponsor, contemplated). The above expenses, including
the Trustee’s fees, when paid by or owing
B-30
to the Trustee are secured by a
first lien on the Trust to which such expenses are charged. In addition, the Trustee is empowered to sell the Securities in order to make funds
available to pay all expenses.
The fees and expenses set forth herein
are payable out of the Trust and when paid by or owing to the Trustee are secured by a lien on the Trust. If the cash dividend and capital gains
distributions are insufficient to provide for amounts payable by the Trust, the Trustee has the power to sell shares of the Securities to pay such
amounts. To the extent shares of the Securities are sold, the size of the Trust will be reduced and the proportions of the types of Securities will
change. Such sales might be required at a time when shares of the Securities would not otherwise be sold and might result in lower prices than might
otherwise be realized. Moreover, due to the minimum amount in which shares of the Securities may be required to be sold, the proceeds of such sales may
exceed the amount necessary for the payment of such fees and expenses.
Unless the Sponsor otherwise directs,
the accounts of the Trust shall be audited only as of the business day prior to the Initial Date of Deposit by an independent registered public
accounting firm selected by the Sponsor. To the extent lawful, the expenses of any audit shall be an expense of the Trust. Unitholders covered by the
audit during the year may receive a copy of any additional audited financial statements, if any, upon request.
Income and principal distributions on
Units (other than the final distribution in connection with the termination of the Trust) may be reinvested by participating in the Trust’s
reinvestment plan. Under the plan, the Units acquired for participants will be either Units already held in inventory by the Sponsor or new Units
created by the Sponsor’s deposit of Additional Securities as described in “The Trust—Organization” in this Part B. Units acquired
by reinvestment will not be subject to a sales charge. Since the deferred sales charge and the creation and development fee are fixed dollar amounts
per Unit, the Trust must charge these amounts per Unit regardless of this discount. However, if you are eligible to receive a discount such that the
sales charge you must pay is less than the applicable deferred sales charge and the creation and development fee, you will be credited the difference
between your sales charge and these fixed dollar charges at the time you buy your Units. Accordingly, if you reinvest distributions into additional
Units of the Trust, you will be credited the amount of any remaining deferred sales charge and creation and development fee on such Units at the time
of reinvestment. In order to enable a Unitholder to participate in the reinvestment plan with respect to a particular distribution on their Units,
written notification must be received by the Trustee within 10 days prior to the Record Date for such distribution. Each subsequent distribution of
income or principal on the participant’s Units will be automatically applied by the Trustee to purchase additional Units of the Trust. The Sponsor
reserves the right to demand, modify or terminate the reinvestment plan at any time without prior notice.
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
B-31
describe your situation if you
are a corporation, a non-U.S. person, a broker/dealer, or other investor with special circumstances. In addition, this section does not describe
your state, local or foreign tax consequences.
This federal income tax summary is
based in part on the advice of counsel to the Sponsor. The Internal Revenue Service could disagree with any conclusions set forth in this
section. In addition, our counsel was not asked to review, and has not reached a conclusion with respect to the federal income tax treatment of
the assets to be deposited in the Trust. This may not be sufficient for you to use for the purpose of avoiding penalties under federal tax
law.
As with any investment, you should
seek advice based on your individual circumstances from your own tax advisor.
TRUST STATUS. The Trust
intends to qualify as a “regulated investment company” under the federal tax laws. If the Trust qualifies as a regulated investment
company and distributes its income as required by the tax law, the Trust generally will not pay federal income taxes.
DISTRIBUTIONS. Trust
distributions are generally taxable. After the end of each year, you will receive a tax statement that separates your Trust’s distributions
into three categories: ordinary income distributions, capital 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. 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 charge,
if any. The tax laws may require you to treat distributions made to you in January as if you had received them on December 31 of the
previous year. Income from 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
B-32
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. Capital gains may also be subject to the “medicare tax” described above. Some portion of your capital gain
dividends may be subject to higher maximum marginal stated federal income tax rates. For example, if some portion of your capital gain dividend
is attributable to the Trust’s interest in a master limited partnership, that portion may be subject to a maximum marginal stated federal
income tax rate of 28%, rather than the rates set forth above. In addition, capital gain received from assets held for more than one year that
is considered “unrecaptured section 1250 gain” (which may be the case, for example, with some capital gains attributable to equity
interests in real estate investment trusts that constitute interests in entities treated as real estate investment trusts for federal income
tax purposes) is taxed at a maximum marginal stated federal tax rate of 25%. In the case of capital gain dividends, the determination of which
portion of the capital gain dividend, if any, is subject to the 28% tax rate or the 25% tax rate, will be made based on rules prescribed by the
U.S. 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 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.
B-33
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, generally, subject to applicable tax treaties, distributions from the Trust will be characterized as dividends for federal income
tax purposes (other than dividends which the Trust properly reports as capital gain dividends) and will be subject to U.S. income taxes,
including withholding taxes, subject to certain exceptions described below. However, distributions received by a foreign investor from the
Trust that are properly reported by the Trust as capital gain dividends may not be subject to U.S. federal income taxes, including withholding
taxes, provided that the Trust makes certain elections and certain other conditions are met. In addition, distributions in respect of Units may
be subject to a U.S. withholding tax of 30% in the case of distributions to (i) certain non-U.S. financial institutions that have not entered
into an agreement with the U.S. Treasury to collect and disclose certain information and are not resident in a jurisdiction
B-34
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,
2016.
LEGAL
OPINIONS. The legality of the Units offered hereby and certain matters relating to federal tax law have been passed upon by
Chapman and Cutler LLP as counsel for the Sponsor. Dorsey & Whitney, LLP, has acted as counsel for the Trustee.
PORTFOLIO
SUPERVISOR. Hennion & Walsh Asset Management, Inc., a New Jersey company, is an affiliate of Hennion & Walsh,
Inc.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM. The Statement of Financial Condition, including the Portfolio of Investments, is included herein in
reliance upon the report of Grant Thornton LLP, independent registered public accounting firm, and upon the authority of said firm as experts in
accounting and auditing.
PERFORMANCE
INFORMATION. Total returns, average annualized returns or cumulative returns for various periods of the Funds, the related
index and this Trust may be included from time to time in advertisements, sales literature and reports to current or prospective investors. Total
return shows changes in Unit price during the period plus any dividends and capital gains received, divided by the Public Offering Price as of the date
of calculation. Average annualized returns show the average return for stated periods of longer than a year. From time to time, the Trust may compare
the cost of purchasing Trust shares to the cost of purchasing the individual securities which constitute the Funds. In addition, the Trust may compare
its sales charge to the sales charges assessed on unitholders by other unit investment trusts. Figures for actual portfolios will reflect all
applicable expenses and, unless otherwise stated, the maximum sales charge. No provision is made for any income taxes payable. Returns may also be
shown on a combined basis. Trust performance may be compared to performance on a total return basis of the Dow Jones Industrial Average, the S&P
500 Composite Price Stock Index, the S&P MidCap 400 Index, the Nasdaq-100 Index, or the average performance of mutual funds investing in a
diversified portfolio of U.S. stocks generally or growth stocks, or performance data from Lipper Analytical Services, Inc. and Morningstar
Publications, Inc. or from publications such as Money, The New York Times, U.S. News and World Report, Business Week, Forbes or Fortune.
As with other performance data, performance comparisons should not be considered representative of a Trust’s relative performance for any future
period.
B-35
|
CEFA SELECT BDC TRUST,
SERIES 4
(A UNIT INVESTMENT TRUST)
PROSPECTUS
DATED: JULY 7, 2015
SPONSOR:
|
TRUSTEE:
This Prospectus does not contain all of the information set
forth in the registration statement, filed with the SEC, Washington, D.C., under the Securities Act of 1933 (file no. 333-204232), and
the Investment Company Act of 1940 (file no. 811-21429), and to which reference is made. Information may be reviewed and copied at the
Commission’s Public Reference Room, and information on the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Copies may
be obtained from the SEC by:
• |
visiting the SEC Internet address: http://www.sec.gov |
• |
electronic request (after paying a duplicating fee) at the following E-mail address: publicinfo@sec.gov |
• |
writing: Public Reference Section of the Commission, 100 F Street, N.E., Washington, D.C. 20549 |
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 | Reference Trust Agreement. |
| 1.1.1 | Trust Indenture and Agreement (filed as Exhibit 1.1.1. to Amendment No. 2 to Form S-6 Registration Statement No. 333-110471 of Smart Trust, Smart Ten Trust, Series 1 on January 22, 2004, and incorporated herein by reference). |
| 1.3.5 | Certificate of Incorporation of Hennion & Walsh, Inc. dated October 23, 1989, and amended on April 6, 2001 (filed as Exhibit 1.3.8 to Amendment No. 1 to Form S-6 Registration Statement No. 333-106866 of Schwab Trusts, Schwab Ten Trust, 2003 Series B on August 26, 2003, and incorporated herein by reference). |
| 1.3.6 | By-Laws of Hennion & Walsh, Inc. (filed as Exhibit 1.3.9 to Amendment No. 1 to Form S-6 Registration Statement No. 333-106866 of Schwab Trusts, Schwab Ten Trust, 2003 Series B on August 26, 2003, and incorporated herein by reference). |
| 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. |
| 4.3 | Consent of independent registered public accounting firm. |
| 11.0 | Code of Ethics of Hennion & Walsh, Inc.’s Unit Investment Trust activities (filed as Exhibit 11.0 to Amendment No. 1 to Form S-6 Registration Statement No. 333-106866 of Schwab Trusts, Schwab Ten Trust, 2003 Series B on August 26, 2003, and incorporated herein by reference). |
Signatures
The Registrant hereby identifies Smart Trust, Smart 10 Trust, Series 1; Smart Trust, Tax Free Bond Trust, Series 1; Smart Trust, Diversified Equity Trust, Series 1; Smart Trust, Value Architects Disciplined Core Portfolio Trust, 2010 Series C and 2011 Series I; Smart Trust, Zacks Diversified Equity & Corporate Bond Trust, Series 1 and Series 3-8; Smart Trust, Rising Interest Rates Hedge Trust, Series 1-4; Smart Trust, NASDAQ International Dividend Achievers Index Trust, Series 1; Smart Trust, Zacks GARP Composite 35 Trust, Series 1; Smart Trust, Argus Select 30 Equity Total Return Trust, Series 1; Smart Trust, California Municipal Portfolio of Closed-End Funds Trust, Series 1; Smart Trust, Defensive 50 Equities Trust, Series 1; Smart Trust, Closed-End Fund Advisors Select BDC Trust, Series 1; and Smart Trust, Sustainable Impact Investing Trust, Series 1 for the purposes of the presentations 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 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 Parsippany and State of New Jersey on July 7, 2015.
| Smart Trust, CEFA Select BDC Trust, Series 4 | ||
| By Hennion & Walsh, Inc., Depositor | ||
| By | /s/ KEVIN D. MAHN | |
| Kevin D. Mahn | ||
| Authorized Signatory | ||
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below on July 7, 2015 by the following persons in the capacities indicated.
| By | /s/ WILLIAM W. WALSH | |
| William W. Walsh | ||
| President, Treasurer and Director | ||
| By | /s/ RICHARD HENNION | |
| Richard Hennion | ||
| Vice President, Secretary and Director | ||
| By | /s/ DEBBIE WILLIAMS | |
| Debbie Williams | ||
| Chief Financial Officer |
| This ‘487’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 7/11/17 | None on these Dates | |||
| 12/31/16 | ||||
| 11/20/15 | ||||
| 8/25/15 | ||||
| 8/10/15 | ||||
| 7/10/15 | ||||
| Filed on / Effective on: | 7/7/15 | |||
| 7/6/15 | ||||
| 1/22/04 | ||||
| 8/26/03 | ||||
| 4/6/01 | ||||
| List all Filings | ||||