Form 487 Advisors Disciplined

[ad_1]

1933 Act File No.: 333-273989

1940 Act File No.: 811-21056

CIK No.: 1981000

 

Securities
and Exchange Commission

Washington,
D.C. 20549

 

Amendment
No. 1

to

REGISTRATION STATEMENT

ON

Form
S-6

 

For
Registration under the Securities Act

of
1933 of Securities of Unit Investment

Trusts
Registered on Form N-8B-2

 

A. Exact name of trust: Advisors Disciplined Trust 2197

 

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

 

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

18925 Base Camp Road

Monument, Colorado 80132

 

D. Name and complete address
of agent for service:

 

  With
a copy to:
Scott Colyer Scott R. Anderson
Advisors
Asset Management, Inc.
Chapman
and Cutler LLP
18925 Base Camp Road 320 South Canal Street,
27th Floor
Monument, Colorado 80132 Chicago, Illinois  60606

 

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

 

F. Approximate date of proposed
public offering:

 

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

 

 ☒   Check
box if it is proposed that this filing will become effective on November 20, 2023 at 10:00 a.m.
pursuant to Rule 487.

Ubiquitous Strategy Portfolio — 15 Month, CDA
Series 2023-4Q

(Advisors Disciplined Trust 2197)

A portfolio seeking
above average total return primarily through capital appreciation

Prospectus

November 20, 2023

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

Security prices will fluctuate. The value of your investment may fall over time. Market values of securities held by the trust may fluctuate in response to various factors. These can include changes in interest rates, inflation, the financial condition of a security’s issuer, perceptions of the issuer, adverse events impacting a particular industry or sector and/or significant events impacting the entire securities market. The complete economic impacts of the novel form of coronavirus disease first detected in 2019 (“COVID-19”) are not fully known. Although vaccines have been developed and approved for use by various governments, there is no guarantee that vaccines will be effective against emerging variants of the disease. The COVID-19 pandemic, or any future public health crisis, is impossible to predict and could result in adverse market conditions which may negatively impact the performance of the securities in the portfolio and the trust.

The financial condition of an issuer may worsen or its credit ratings may drop, resulting in a reduction in the value of your units. This may occur at any point in time, including during the primary offering period.

An issuer may be unwilling or unable to declare dividends in the future or may reduce the level of dividends declared. This may reduce the level of income the trust receives which would reduce your income and cause the value of your units to fall. The COVID-19 pandemic, or any future public health crisis, may adversely impact a company’s willingness or ability to pay dividends in the future or may reduce the level of dividends declared.

The trust is concentrated in securities issued by companies in the communication services sector. Negative developments impacting companies in this sector will affect the value of your investment more than would be the case in a more diversified investment.

Investment Summary

HInvestment Objective

The trust seeks to provide above average total return primarily through capital appreciation. There is no assurance the trust will achieve its objective.

Principal Investment Strategy

The trust seeks to achieve its objective by investing in a portfolio of stocks of companies deriving a substantial portion of their revenues worldwide that Pence Capital Management, LLC (the “Portfolio Consultant”) believes are involved in aspects of the transformation of consumer behavior and a shift in how people transact purchases. Today, shopping has become easier as innovations in electronics and information technology provide consumers access to a wide range of products from the convenience of almost anywhere and the ease of using their smart phones and tablets. Consumers can fulfill desires spontaneously without going to brick and mortar stores. Consumers shop online using smart phones and tablets, connect wirelessly from almost anywhere, are able to purchase almost any product online, pay by credit cards and have products delivered to their doorsteps.

From these companies involved in aspects of this shift in how people transact purchases, securities were selected for the trust’s portfolio by analyzing factors including expected market dominance over the next three to five years, relative size within industry sectors based on market capitalization, steadiness of past earnings growth rates and revenue growth, strength of earnings and revenue projects, balance sheet strength, valuation and levels of cash holdings.

Principal Risks

As with all investments, you can lose money by investing in this trust. The trust also might not perform as well as you expect. This can happen for reasons such as these:

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

redemptions or liquidation of the securities. The Portfolio Consultant and/or its affiliates also may issue reports and 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.

We* do not actively manage the portfolio. Except in limited circumstances, the trust will generally hold, and continue to buy, shares of the same securities even if their market value declines.

Portfolio Consultant

The Portfolio Consultant, Pence Capital Management, LLC, is a registered investment adviser registered with the state of California.

Pence Capital Management, LLC is a registered investment advisory firm based in Newport Beach, California. The firm uses its proprietary research to identify and deliver actionable investment insights. The firm is led by Colonel (ret) E. Dryden Pence III, a Harvard-educated economist with thirty years of experience in the financial industry. His formal training and knowledge in economics combined with his career of more than twenty-two years in Army Intelligence, Special Operations and Psychological Warfare, gives the firm a unique understanding of human behavior and its effects on the economy and the markets. The Ubiquitous Strategy Portfolio is based on the firm’s expertise in portfolio construction.

The Portfolio Consultant is not an affiliate of the sponsor. The Portfolio Consultant makes no representations that the portfolio will achieve the investment objectives or will be profitable or suitable for any particular potential investor.

The Portfolio Consultant and/or its affiliates 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 and/or its affiliates 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

Fees and Expenses

The amounts below are estimates of the direct and indirect expenses that you may incur. Actual expenses may vary.

Sales Fee

As a %
of $1,000
Invested

 

Amount
per 100
Units

Initial sales fee

0.00

%

$0.00

Deferred sales fee

1.35

13.50

Creation & development fee

0.50

 

5.00

Maximum sales fee

1.85

%

$18.50

Organization Costs

0.49

%

$4.90

Annual
operating expenses

As a %
of Net
Assets

 

Amount
per 100
Units

Trustee fee & expenses

0.15

%

$1.49

Supervisory, evaluation and
administration fees

0.10

 

1.00

Total

0.25

%

$2.49

The initial sales fee is the difference between the total sales fee (maximum of 1.85% of the unit offering price) and the sum of the remaining deferred sales fee and the total creation and development fee. The deferred sales fee is fixed at $0.135 per unit with the first installment commencing on February 20, 2024, the second on March 20, 2024 and the final installment on April 20, 2024. The creation and development fee is fixed at $0.05 per unit and accrues daily from the day after the end of the initial offering period (anticipated to be approximately three months) through the trust’s termination date. If you sell or redeem your units prior to the trust’s termination date, you will not pay any unaccrued amounts of the creation and development fee upon redemption or sale of your units. When the public offering price per unit is less than or equal to $10, you will not pay an initial sales fee. When the public offering price per unit is greater than $10 per unit, you will pay an initial sales fee.

Example

This example helps you compare the cost of this trust with other unit trusts and mutual funds. In the example we assume that the expenses do not change and that the trust’s annual return is 5%. Your actual returns and expenses will vary. Based on these assumptions, you would pay these expenses for every $10,000 you invest in the trust:

1 year

$261

3 years

$802

5 years

$1,369

10 years

$2,910

This example assumes that you continue to follow the trust strategy and roll your investment, including all distributions, into a new series of the trust each year subject to a sales fee of 1.85%.

Number
of Shares

Ticker
Symbol

Issuer(1)

Percentage of
Aggregate Offering
Price

Market
Value per
Share(1)

Cost of
Securities
to Trust(2)

COMMON STOCKS — 100.00%

 

Communication Services — 27.15%

107

GOOGL

Alphabet, Inc. (3)

9.04

%

$135.31

$14,478

201

T

AT&T, Inc.

1.99

15.90

3,196

8

CHTR

Charter Communications, Inc. (3)

2.04

407.70

3,262

75

CMCSA

Comcast Corporation

1.99

42.42

3,181

29

META

Meta Platforms, Inc. (3)

6.07

335.04

9,716

102

PINS

Pinterest, Inc. (3)

2.00

31.49

3,212

22

TMUS

T-Mobile US, Inc.

2.03

147.71

3,250

88

VZ

Verizon Communications, Inc.

1.99

36.23

3,188

 

Consumer Discretionary — 17.04%

166

AMZN

Amazon.com, Inc. (3)

15.05

145.18

24,100

44

ETSY

Etsy, Inc. (3)

1.99

72.53

3,191

 

Consumer Staples — 3.98%

41

WMT

Walmart, Inc.

3.98

155.35

6,369

 

Financials — 18.97%

30

AXP

American Express Company

3.04

162.56

4,877

55

SQ

Block, Inc. (3)

2.00

58.19

3,200

24

MA

Mastercard, Inc.

6.00

400.30

9,607

57

PYPL

PayPal Holdings, Inc. (3)

2.01

56.54

3,223

38

V

Visa, Inc.

5.92

249.56

9,483

 

Industrials — 6.00%

19

FDX

FedEx Corporation

3.04

255.95

4,863

32

UPS

United Parcel Service, Inc.

2.96

147.98

4,735

 

Information Technology — 22.87%

84

AAPL

Apple, Inc.

9.95

189.69

15,934

43

MSFT

Microsoft Corporation

9.93

369.85

15,904

70

SHOP

Shopify, Inc. (3) (4)

2.99

68.34

4,784

 

Real Estate — 3.99%

16

AMT

American Tower Corporation

1.98

197.74

3,164

31

CCI

Crown Castle, Inc.

2.01

103.92

3,222

 

 

 

 

 

100.00

%

$160,139

Notes to Portfolio

(1)Securities are represented by contracts to purchase such securities. The value of each security is based on the most recent closing sale price of each security as of the close of regular trading on the New York Stock Exchange on the business day prior to the trust’s inception date. In accordance with Accounting Standards Codification 820, “Fair Value Measurements”, the trust’s investments are classified as Level 1, which refers to security prices determined using quoted prices in active markets for identical securities.

(2)The cost of the securities to the sponsor and the sponsor’s profit or (loss) (which is the difference between the cost of the securities to the sponsor and the cost of the securities to the trust) are $160,139 and $0, respectively.

(3)This is a non-income producing security.

(4)This is a security issued by a foreign company.

Common stocks comprise 100.00% of the investments in the trust, broken down by country of organization of the issuer as set forth below:

Canada

2.99%

United States

97.01%

Understanding Your Investment

7

each day that exchange is open. We generally determine the value of securities using the last sale price for securities traded on a national secu­rities exchange. For this purpose, the trustee provides us closing prices from a reporting service approved by us. In some cases we will price a security based on the last asked or bid price in the over-the-counter market or by using other recognized pricing methods. We will only do this if a security is not principally traded on a national securities exchange or if the market quotes are unavailable or inappropriate.

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

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

Sales Fee. The maximum sales fee is shown under “Fees and Expenses” for your trust and is 1.85% of the public offering price per unit at the time of purchase.

You pay a fee in connection with purchasing units. We refer to this fee as the “transactional sales fee”. The transactional sales fee has both an initial and a deferred component. The transactional sales fee equals 1.35% of the public offering price per unit based on a $10 public

Understanding Your Investment 

HOW tO BUY UNITS

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

the net asset value per unit plus

organization costs plus

the sales fee.

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

Value of the Securities. We determine the value of the securities as of the close of regular trading on the New York Stock Exchange on

8

Understanding Your Investment

fees exceed the sales fee 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 fee 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 fee credit is paid by the sponsor and is not paid by the trust. The fees and expenses table for the trust shows the sales fee calculation at a $10 public offering price per unit and the following examples illustrate the sales fee at prices below and above $10. If the public offering price per unit fell to $9, the maximum sales fee would be $0.1665 (1.85% of the public offering price per unit), which consists of an initial sales fee of -$0.0185, a deferred sales fee of $0.135 and a creation and development fee of $0.05. If the public offering price per unit rose to $11, the maximum sales fee would be $0.2035 (1.85% of the public offering price per unit), consisting of an initial sales fee of $0.0185, a deferred sales fee of $0.135 and a creation and development fee of $0.05. The actual sales fee that may be paid by an investor may differ slightly from the sales fees 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 fee payment has been assessed, the secondary market sales fee is equal to 1.85% of the public offering price less the total fixed dollar creation and development fee. If you purchase units after the last deferred sales fee payment has been assessed, the secondary market sales fee includes an initial sales fee (equal to the maximum sales fee of 1.85% of the public offering price minus the total creation and development fee) and unitholders will also pay remaining creation and development fee amounts (i.e. unitholders who buy in the secondary market after collection of the deferred sales fees are not charged deferred sales fee but will pay an initial sales fee and the remaining creation and development fee).

offering price per unit. The percentage amount of the transactional sales fee is based on the unit price on your trust’s inception date. The transactional sales fee equals the difference between the total sales fee and the total creation and development fee. As a result, the percentage and dollar amount of the transactional sales fee will vary as the public offering price per unit varies. The transactional sales fee does not include the creation and development fee which is described under “Fees and Expenses” for your trust.

You pay the initial sales fee, if any, at the time you buy units. The initial sales fee is the difference between the total sales fee percentage (maximum of 1.85% of the public offering price per unit) and the sum of the remaining fixed dollar deferred sales fee and the total fixed dollar creation and development fee. The initial sales fee will be 0.00% of the public offering price per unit at a public offering price per unit of $10. If the public offering price per unit exceeds $10, you will be charged an initial sales fee equal to the difference between the total sales fee percentage (maximum of 1.85% of the public offering price per unit) and the sum of the remaining fixed dollar deferred sales fee and total fixed dollar creation and development fee. The deferred sales fee is fixed at $0.135 per unit. Your trust pays the deferred sales fee in equal monthly installments as described under “Fees and Expenses” for your trust. If you redeem or sell your units prior to collection of the total deferred sales fee, you will pay any remaining deferred sales fee upon redemption or sale of your units.

Since the deferred sales fee and creation and development fee are fixed dollar amounts per unit, your trust must charge these amounts per unit regardless of any decrease in net asset value. As a result, if the public offering price per unit falls to less than $10 (resulting in the maximum sales fee percentage being a dollar amount that is less than the combined fixed dollar amounts of the deferred sales fee and creation and development fee) your initial sales fee will be a credit equal to the amount by which these fixed dollar

Understanding Your Investment

9

offering price per unit if you hold units for the entire life of the trust (the percentage will vary with the unit price).

Initial sales fee

0.00

%      

Deferred sales fee

0.00

%      

Transactional sales fee

0.00

%      

Creation and development fee

0.50

%      

Total sales fee

0.50

%      

This discount applies only during the initial offering period. Certain Fee Account investors may be assessed transaction or other fees on the purchase and/or redemption of units by their broker-dealer or other processing organizations for providing certain transaction or account activities. We reserve the right to limit or deny purchases of units in Fee Accounts by investors or selling firms whose frequent trading activity is determined to be detrimental to the trust.

Employees. We waive the transactional sales fee for purchases made by officers, directors and employees (and immediate family members) of the sponsor and its affiliates. These purchases are not subject to the transactional sales fee but will be subject to the creation and development fee. We also waive a portion of the sales fee for purchases made by officers, directors and employees (and immediate family members) of selling firms except as otherwise provided herein. These purchases are made at the public offering price per unit less the applicable regular dealer concession. Immediate family members for the purposes of this paragraph include your spouse, children (including step-children) under the age of 21 living in the same household, and parents (including step-parents). These discounts apply to initial offering period and secondary market purchases. All employee discounts are subject to the policies of the related selling firm, including but not limited to, householding policies or limitations. Only officers, directors and employees (and their immediate family members) of selling firms that allow such persons to participate in this employee discount program are eligible for the discount.

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

Reducing Your Sales Fee. We offer a variety of ways for you to reduce the fee you pay. It is your financial professional’s responsibility to alert us of any discount when you order units. Except as expressly provided herein, you may not combine discounts. Since the deferred sales fee and the creation and development fee are fixed dollar amounts per unit, your trust must charge these fees per unit regardless of any discounts. However, if you are eligible to receive a discount such that your total sales fee is less than the fixed dollar amounts of the deferred sales fee and the creation and development fee, we will credit you the difference between your total sales fee and these fixed dollar fees at the time you buy units.

Fee Accounts. Investors may purchase units through registered investment advisers, certified financial planners or registered broker-dealers who in each case either charge investor accounts (“Fee Accounts”) periodic fees for brokerage services, financial planning, investment advisory or asset management services, or provide such services in connection with an investment account for which a comprehensive “wrap fee” charge (“Wrap Fee”) is imposed. You should consult your financial advisor to determine whether you can benefit from these accounts. To purchase units in these Fee Accounts, your financial advisor must purchase units designated with one of the Fee Account CUSIP numbers, if available. Please contact your financial advisor for more information. If units of the trust are purchased for a Fee Account and the units are subject to a Wrap Fee in such Fee Account (i.e., the trust is “Wrap Fee Eligible”) then investors may be eligible to purchase units of the trust in these Fee Accounts that are not subject to the transactional sales fee but will be subject to the creation and development fee that is retained by the sponsor. For example, this table illustrates the sales fee you will pay as a percentage of the initial $10 public

10

Understanding Your Investment

prices are available daily on the Internet at www.AAMlive.com or through your financial professional. The sale and redemption price of units is equal to the net asset value per unit, provided that you will not pay any remaining creation and development fee or organization costs if you sell or redeem units during the initial offering period. If you sell or redeem units after the initial offering period you will not pay any unaccrued amounts of the creation and development fee upon sale or redemption of your units. The sale and redemption price is sometimes referred to as the “liquidation price.” You pay any remaining deferred sales fee when you sell or redeem your units. Certain broker-dealers may charge a transaction or other fee for processing unit redemption or sale requests.

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

Redeeming Units. You may also redeem your units directly with the trustee, The Bank of New York Mellon, on any day the New York Stock Exchange is open. The redemption price that you will receive for units is equal to the net asset value per unit, provided that you will not pay any

Notwithstanding the above, we also waive a portion of the sales fee for purchases made by employees (including employee-related accounts according to Morgan Stanley’s account linking rules) of Morgan Stanley and its affiliates who purchase units through a Morgan Stanley Wealth Management brokerage account. These purchases are made at the public offering price per unit less the applicable regular dealer concession. These discounts apply to initial offering period and secondary market purchases. This employee discount is subject to the policies of Morgan Stanley.

Dividend Reinvestment Plan. We do not charge any sales fee when you reinvest distributions from your trust into additional units of the trust. This sales fee discount applies to initial offering period and secondary market purchases. Since the deferred sales fee and the creation and development fee are fixed dollar amounts per unit, your trust must charge these fees per unit regardless of this discount. If you elect the distribution reinvestment plan, we will credit you with additional units with a dollar value sufficient to cover the amount of any remaining deferred sales fee or creation and development fee that will be collected on such units at the time of reinvestment. The dollar value of these units will fluctuate over time.

Certain Self-Directed Brokerage Platforms. Purchases of units through E*TRADE and/or any other Morgan Stanley self-directed brokerage platform will be executed at the public offering price per unit less the applicable dealer concession. This discount applies during the initial offering period and in the secondary market.

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

How to Sell Your Units

You can sell or redeem your units on any business day the New York Stock Exchange is open by contacting your financial professional. Unit

Understanding Your Investment

11

You can request an in-kind distribution of the securities underlying your units if you tender at least 2,500 units for redemption (or such other amount as required by your financial pro­fessional’s firm). This option is generally available only for securities traded and held in the United States. The trustee will make any in-kind distri­bution of securities by distributing applicable securities in book entry form to the account of your financial professional at Depository Trust Company. You will receive whole shares of the applicable securities and cash equal to any fractional shares. You may not request this option in the last 30 days of your trust’s life. We may discontinue this option upon sixty days notice.

Rollover Option. Your trust’s strategy may be a long-term investment strategy designed to be followed on an annual basis. You may achieve more consistent long-term investment results by following the strategy. As part of the strategy, we currently intend to offer a subsequent series of your trust for a rollover when the current trust terminates. When your trust terminates you will have the option to (1) participate in a rollover and have your units reinvested into a subsequent trust series through a cash rollover as described in this section, (2) receive an in-kind distribution of securities or (3) receive a cash distribution.

If you elect to participate in a rollover, your units will be redeemed on your trust’s termination date. As the redemption proceeds become available, the proceeds (including dividends) will be invested in a new trust series, if available, at the public offering price for the new trust. The trustee will attempt to sell securities to satisfy the redemption as quickly as practicable on the termination date. We do not anticipate that the sale period will be longer than one day, however, certain factors could affect the ability to sell the securities and could impact the length of the sale period. The liquidity of any security depends on the daily trading volume of the security and the amount available for redemption and reinvestment on any day.

remaining creation and development fee or organization costs if you redeem units during the initial offering period. If you sell or redeem units after the initial offering period you will not pay any unaccrued amounts of the creation and development fee upon sale or redemption of your units. You will pay any remaining deferred sales fee at the time you redeem units. You will receive the net asset value for a particular day if the trustee receives your completed redemption request prior to the close of regular trading on the New York Stock Exchange. Redemption requests received by authorized financial professionals prior to the close of regular trading on the New York Stock Exchange that are properly transmitted to the trustee by the time designated by the trustee, are priced based on the date of receipt. Redemption requests received by the trustee after the close of regular trading on the New York Stock Exchange, redemption requests received by authorized financial professionals after that time or redemption requests received by such persons that are not transmitted to the trustee until after the time designated by the trustee, are priced based on the date of the next determined redemption price provided they are received in a timely manner by the trustee on such date. It is the responsibility of authorized financial professionals to transmit redemption requests received by them to the trustee so they will be received in a timely manner. If your request is not received in a timely manner or is incomplete in any way, you will receive the next net asset value computed after the trustee receives your completed request.

If you redeem your units, the trustee will generally send you a payment for your units no later than seven days after it receives all necessary documentation (this will usually only take two business days). The only time the trustee can delay your payment is if the New York Stock Exchange is closed (other than weekends or holidays), the Securities and Exchange Commission determines that trading on that exchange is restricted or an emergency exists making sale or evaluation of the securities not reasonably practicable, and for any other period that the Securities and Exchange Commission permits.

12

Understanding Your Investment

amount of cash pending distribution. For example, this could happen as a result of a merger or similar transaction involving a company whose stock is in your portfolio. The amount of your distributions will vary from time to time as companies change their dividends or trust expenses change.

The issuers in the trust’s portfolio make dividend payments at various times during the year. When the trust receives dividends from issuers, the trustee credits the dividends to the trust’s accounts. Because the trust does not necessarily receive dividends from the underlying issuers at a constant rate throughout the year, the trust’s income distributions to unitholders will fluctuate.

Reports. The trustee or your financial profes­sional will make available to you a statement showing income and other receipts of your trust for each distribution. Each year the trustee will also provide an annual report on your trust’s activity and certain tax information at the sponsor’s website at AAMLive.com in the UIT Tax Center area and retrievable by CUSIP. You may also request a copy of the annual report to be sent to you by calling the sponsor at 1-877-858-1773. You can request copies of security evaluations to enable you to complete your tax forms and audited financial statements for your trust, if available.

INVESTMENT RISKS

All investments involve risk. This section describes the main risks that can impact the value of the securities in your portfolio. You should understand these risks before you invest. If the value of the securities falls, the value of your units will also fall. We cannot guarantee that the trust will achieve its objective or that your investment return will be positive over any period.

Market Risk. Market risk is the risk that the value of the securities in the trust will fluctuate. This could cause the value of your units to fall below your original purchase price. Market value fluctuates in response to various factors. These can

Units of a subsequent trust series purchased with rollover proceeds would be subject to the sales fees and applicable expenses set forth in the prospectus for such trust. Such fees and expenses will reduce the returns you experience over time.

We intend to make subsequent trust series available for sale at various times during the year. Of course, we cannot guarantee that a subsequent trust or sufficient units will be available or that any subsequent trusts will offer the same investment strategies or objectives as current trusts. We cannot guarantee that a rollover will avoid any negative market price consequences resulting from trading large volumes of securities. Market price trends may make it advantageous to sell or buy securities more quickly or more slowly than permitted by the trust procedures. We may, in our sole discretion, modify a rollover or stop creating units of any future trust at any time regardless of whether all proceeds of unitholders have been reinvested in a rollover. We may decide not to offer a rollover option upon sixty days notice. Cash which has not been reinvested in a rollover will be distributed to unitholders shortly after the termination date. Rollover participants may receive taxable dividends or realize taxable capital gains which are reinvested in connection with a rollover but may not be entitled to a deduction for capital losses due to the “wash sale” tax rules. Due to the reinvestment in a subsequent trust, no cash will be distributed to pay any taxes. See “Understanding Your Investment—Taxes”.

DISTRIBUTIONS

Distributions. Your trust generally pays distributions of its net investment income along with any excess capital on each distribution date to unitholders of record on the preceding record date, provided that the total cash held for distribution equals at least 0.1% of the trust’s net asset value as determined under the trust agreement. The record and distribution dates are shown under “Essential Information” in the “Investment Summary” section of this prospectus. In some cases, your trust might pay a special distribution if it holds an excessive

Understanding Your Investment

13

nage, which may negatively impact the countries and companies in which the trust may invest. Accordingly, there may be a heightened risk of cyberattacks by Russia in response to the sanctions. The extent and duration of the military action or future escalation of such hostilities; the extent and impact of existing and any future sanctions, market disruptions and volatility; and the result of any diplomatic negotiations cannot be predicted. These and any related events could have a significant negative impact on certain trust’s investments as well as the trust’s performance, and the value or liquidity of certain securities held by the trust may decline significantly.

Dividend Payment Risk. Dividend payment risk is the risk that an issuer of a security is unwilling or unable to pay income on a security. Stocks represent ownership interests in the issuers and are not obligations of the issuers. Common stockholders have a right to receive dividends only after the company has provided for payment of its creditors, bondholders and preferred stockholders. Common stocks do not assure dividend payments. Dividends are paid only when declared by an issuer’s board of directors and the amount of any dividend may vary over time. The COVID-19 pandemic, or any future public health crisis, may adversely impact a company’s willingness or ability to pay dividends in the future or may reduce the level of dividends declared.

Sector Concentration Risk. Sector concentration risk is the risk that the value of the trust is more susceptible to fluctuations based on factors that impact a particular sector because the exposure to such sectors through the securities held by the trust are concentrated within a particular sector. A portfolio “concentrates” in a sector when securities in a particular sector make up 25% or more of the portfolio. Refer to the “Principal Risks” in the “Investment Summary” section of this prospectus for the trust for sector concentrations.

The trust invests significantly in securities of companies in the communication services sector. General risks of communication services companies include rapidly changing technology, rapid

include changes in interest rates, inflation, the financial condition of a security’s issuer, perceptions of the issuer, or ratings on a security. Even though we supervise your portfolio, you should remember that we do not manage your portfolio. The trust will not sell a security solely because the market value falls as is possible in a managed fund. Public health crises, such as the COVID-19 pandemic, may adversely affect commercial activities, disrupt supply chains, increase market volatility, decrease consumer demand, disrupt healthcare services, and result in prolonged quarantines, travel restrictions and business closures. Although COVID-19 vaccines have been developed and approved for use by various governments, there is no guarantee that vaccines will be effective against emerging variants of the disease. The potential economic impact of the COVID-19 pandemic, or any future public health crisis, is impossible to predict and could result in adverse market conditions which may negatively impact the performance of the securities in the portfolio and the trust.

Additional Market Disruption Risk. In February 2022, Russia commenced a military attack on Ukraine. In response, various countries, including the U.S., issued broad-ranging sanctions on Russia and certain Russian companies and individuals. The hostilities between the two countries may escalate and any existing or future sanctions could have a severe adverse effect on Russia’s economy, currency, companies and region as well as negatively impact other regional and global economic markets of the world (including Europe and the United States), companies in such countries and various sectors, industries and markets for securities and commodities globally, such as oil and natural gas. Accordingly, the hostilities and sanctions may have a negative effect on the trust’s investments and performance beyond any direct exposure to Russian companies or those of adjoining geographic regions. The sanctions and compliance with these sanctions may impair the ability of the trust to buy, sell, hold or deliver securities of Russian companies and/or other assets. Russia may also take retaliatory actions or countermeasures, such as cyberattacks and espio-

14

Understanding Your Investment

instability. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy for reasons including differences in growth of gross domestic product, rates of inflation, capital reinvestment, resources, self-sufficiency and balance of payments positions. There may be less publicly available information about a foreign issuer than is available from a domestic issuer as a result of different accounting, auditing and financial reporting standards. Some foreign markets are less liquid than U.S. markets which could cause securities to be bought at a higher price or sold at a lower price than would be the case in a highly liquid market.

Securities of certain foreign issuers may be denominated or quoted in currencies other than the U.S. dollar. Foreign issuers also make payments and conduct business in foreign currencies. Many foreign currencies have fluctuated widely in value against the U.S. dollar for various economic and political reasons. Changes in foreign currency exchange rates may affect the value of foreign securities and income payments. Generally, when the U.S. dollar rises in value against a foreign currency, a security denominated in that currency loses value because the currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against a foreign currency, a security denominated in that currency gains value because the currency is worth more U.S. dollars. The U.S. dollar value of income payments on foreign securities will fluctuate similarly with changes in foreign currency values.

Certain foreign securities may be held in the form of American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), or other similar receipts. Depositary receipts represent receipts for foreign securities deposited with a custodian (which may include the trustee of the trust). Depository receipts may not be denominated in the same currency as the securities into which they may be converted. ADRs typically trade in the U.S. in U.S. dollars and are registered with the Securities and Exchange Commission. GDRs are similar to ADRs, but GDRs typically trade outside

product obsolescence, loss of patent protection, cyclical market patterns, evolving industry standards and frequent new product introductions. Certain communication companies are subject to substantial governmental regulation, which among other things, regulates permitted rates of return and the kinds of services that a company may offer. Media and entertainment companies are subject to changing demographics, consumer preferences and changes in the way people communicate and access information and entertainment content. Certain of these companies may be particularly susceptible to cybersecurity threats, which could have an adverse effect on their business. Companies in this sector are subject to fierce competition for market share from existing competitors and new market entrants. Such competitive pressures are intense and communication stocks can experience extreme volatility.

Companies in the communication sector may encounter distressed cash flows and heavy debt burdens due to the need to commit substantial capital to meet increasing competition and research and development costs. Technological innovations may also make the existing products and services of communication companies obsolete. In addition, companies in this sector can be impacted by a lack of investor or consumer acceptance of new products, changing consumer preferences and lack of standardization or compatibility with existing technologies making implementation of new products more difficult.

Foreign Issuer Risk. An investment in securities of foreign issuers involves certain risks that are different in some respects from an investment in securities of domestic issuers. These include risks associated with future political and economic developments, international trade conditions, foreign withholding taxes, liquidity concerns, currency fluctuations, volatility, restrictions on foreign investments and exchange of securities, potential for expropriation of assets, confiscatory taxation, difficulty in obtaining or enforcing a court judgment, potential inability to collect when a company goes bankrupt and economic, political or social

Understanding Your Investment

15

raise rents on those properties. Economic recession, overbuilding, tax law changes, higher interest rates or excessive speculation can all negatively impact REITs, their future earnings and share prices. Variations in rental income and space availability and vacancy rates in terms of supply and demand are additional factors affecting real estate generally and REITs in particular. Properties owned by a REIT may not be adequately insured against certain losses and may be subject to significant environmental liabilities, including remediation costs. You should also be aware that REITs may not be diversified and are subject to the risks of financing projects. The real estate industry may be cyclical, and, if REIT securities are acquired at or near the top of the cycle, there is increased risk of a decline in value of the REIT securities. At various points in time, demand for certain types of real estate may inflate the value of real estate. This may increase the risk of a substantial decline in the value of such real estate and increase the risk of a decline in the value of the securities. REITs are also subject to defaults by borrowers and the market’s perception of the REIT industry generally. Because of their structure, and a current legal requirement that they distribute at least 90% of their taxable income to shareholders annually, REITs require frequent amounts of new funding, through both borrowing money and issuing stock. Thus, REITs historically have frequently issued substantial amounts of new equity shares (or equivalents) to purchase or build new properties. This may adversely affect REIT equity share market prices. Both existing and new share issuances may have an adverse effect on these prices in the future, especially if REITs issue stock when real estate prices are relatively high and stock prices are relatively low.

Mortgage REITs engage in financing real estate, purchasing or originating mortgages and mortgage-backed securities and earning income from the interest on these investments. Such REITs face risks similar to those of other financial firms, such as changes in interest rates, general market conditions and credit risk, in addition to risks associated with an investment in real estate.

of the U.S. and outside of the country of the issuer in the currency of the country where the GDR trades. Depositary receipts generally involve most of the same types of risks as foreign securities held directly but typically also involve additional expenses associated with the cost of the custodian’s services. Some depositary receipts may experience less liquidity than the underlying securities traded in their home market. Certain depositary receipts are unsponsored (i.e. issued without the participation or involvement of the issuer of the underlying security). The issuers of unsponsored depositary receipts are not obligated to disclose information that may be considered material in the U.S. Therefore, there may be less information available regarding these issuers which can impact the relationship between certain information impacting a security and the market value of the depositary receipts.

Small and Mid-Size Companies. The trust invests in securities issued by small and mid-size companies. The share prices of these companies are often more volatile than those of larger companies as a result of several factors common to many such issuers, including limited trading volumes, products or financial resources, management inexperience and less publicly available information. In particular, companies with smaller capitalizations may be less financially secure, depend on a smaller number of key personnel and generally be subject to more unpredictable price changes than larger, more established companies and the markets as a whole. Smaller capitalization and emerging growth companies may be particularly sensitive to changes in interest rates, borrowing costs and earnings.

Real Estate Investment Trusts. The trust invests in securities issued by real estate investment trusts (“REITs”). Many factors can have an adverse impact on the performance of a REIT, including its cash available for distribution, the credit quality of the REIT or the real estate industry generally. The success of a REIT depends on various factors, including the occupancy and rent levels, appreciation of the underlying property and the ability to

16

Understanding Your Investment

securities with the trustee (or contracts to purchase securities along with an irrevocable letter of credit or other consideration to pay for the securities). In exchange, the trustee delivered units of your trust to us. Each unit represents an undivided interest in the assets of your trust. These units remain outstanding until redeemed or until your trust terminates. At the close of the New York Stock Exchange on the trust’s inception date, the number of units may be adjusted so that the public offering price per unit equals $10. The number of units and fractional interest of each unit in the trust will increase or decrease to the extent of any adjustment.

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

to pay expenses,

to issue additional units or redeem units,

to take actions in response to certain corporate actions and other events impacting portfolio securities,

in limited circumstances to protect the trust,

to make required distributions or avoid imposition of taxes on the trust, or

as permitted by the trust agreement.

When your trust sells securities, the composition and diversification of the securities in the portfolio may be altered. If a public tender offer has been made for a security or a merger, acquisition or similar transaction has been announced affecting a security, the trustee may either sell the security or accept a tender offer if the supervisor determines that the action is in the best interest of unitholders. The trustee will distribute any cash proceeds to unitholders. If an offer by the issuer of any of the portfolio securities or any other party is made to issue new securities, or to exchange securities, for trust portfolio securities, the trustee will at the direction of the sponsor, vote for or

REITs may be negatively impacted by conditions caused by the spread of COVID-19, or any future public health crisis. The COVID-19 pandemic adversely impacted many individuals and businesses resulting in an inability to pay all or a portion of their contracted rent on retail and commercial space, which created cashflow difficulties for many landlords and adversely impacted the value of some real estate and related businesses. The COVID-19 pandemic and governmental responses also adversely impacted the demand for some categories of commercial and retail space. As many businesses shifted to operating via remote-working programs, the need for office space has been reduced. This may have an adverse impact on REITs that invest in real estate which provide space to these businesses.

Liquidity Risk. Liquidity risk is the risk that the value of a security will fall if trading in the security is limited or absent. No one can guarantee that a liquid trading market will exist for any security.

Legislation/Litigation. From time to time, various legislative initiatives are proposed in the United States and abroad which may have a negative impact on certain of the securities held by the trust. In addition, litigation regarding any of the issuers of the securities or of the industries represented by these issuers may negatively impact the share prices of these securities. No one can predict what impact any pending or threatened litigation will have on the share prices of the securities.

No FDIC Guarantee. An investment in the trust is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

How the Trust Works

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

Understanding Your Investment

17

time your trust buys the securities. When your trust buys or sells securities, we may direct that it place orders with and pay brokerage commissions to brokers that sell units or are affiliated with us, your trust or the trustee.

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

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

Termination of Your Trust. Your trust will terminate on the termination date set forth under “Essential Information” in the “Investment Summary” section of this prospectus. The trustee may terminate your trust early if the value of the trust is less than 40% of the original value of the securities in the trust at the time of deposit. At this size, the expenses of your trust may create an undue burden on your investment. Investors owning two-thirds of the units in your trust may also vote to terminate the trust early. The trustee will liquidate the trust in the event that a sufficient number of units not yet sold to the public are tendered for redemption so that the net worth of the trust would be reduced to less than 40% of the value of the securities at the time they were deposited in the trust. If this happens, we will refund any sales fee that you paid.

against, or accept or reject, any offer for new or exchanged securities or property in exchange for a trust portfolio security. If any such issuance, exchange or substitution occurs (regardless of any action or rejection by a trust), any securities and/or property received will be deposited into the trust and will be promptly sold by the trustee pursuant to the sponsor’s direction, unless the sponsor advises the trustee to keep such securities or property. If any contract for the purchase of securities fails, the sponsor will refund the cash and sales fee attributable to the failed contract to unitholders on or before the next distribution date unless substantially all of the moneys held to cover the purchase are reinvested in substitute securities in accordance with the trust agreement. The sponsor may direct the reinvestment of security sale proceeds if the sale is the direct result of serious adverse credit factors which, in the opinion of the sponsor, would make retention of the securities detrimental to the trust. In such a case, the sponsor may, but is not obligated to, direct the reinvestment of sale proceeds in any other securities that meet the criteria for inclusion in the trust on the trust’s inception date. The trust intends to qualify as a regulated investment company under federal tax laws. The trust must satisfy certain conditions including diversification tests based on the value of its investments in order to continue to qualify as a regulated investment company and have special tax treatment. The sponsor may instruct the trustee to take action to the extent necessary to ensure that the portfolio continues to satisfy the qualifications of a regulated investment company and avoid the tax consequences of failure to continue to qualify as a regulated investment company.

We will increase the size of your trust as we sell units. When we create additional units, we will seek to replicate the existing portfolio to the extent practicable. When your trust buys securities, it may pay brokerage or other acquisition fees. You could experience a dilution of your investment because of these fees and fluctuations in security prices between the time we create units and the

18

Understanding Your Investment

The sponsor or an affiliate may recommend or effect transactions in the securities. This may also have an impact on the price your trust pays for the securities and the price received upon unit redemption or trust termination. The sponsor may act as agent or principal in connection with the purchase and sale of securities, including those held by the trust, and may act as a specialist market maker in the securities. The sponsor may also issue reports and make recommendations on the securities in the trust. The sponsor or an affiliate may have participated in a public offering of one or more of the securities in the trust. The sponsor, an affiliate or their employees may have a long or short position in these securities or related securities. An officer, director or employee of the sponsor or an affiliate may be an officer or director for the issuers of the securities.

The Trustee. The Bank of New York Mellon is the trustee of your trust with its principal unit investment trust division offices located at 240 Greenwich Street, 22W Floor, New York, NY 10286. You can contact the trustee by calling the telephone number on the back cover of this prospectus or by writing to its unit investment trust office. We may remove and replace the trustee in some cases without your consent. The trustee may also resign by notifying us and investors.

How We Distribute Units. We sell units to the public through broker-dealers and other firms. These distribution firms each receive part of the sales fee when they sell units. During the initial offering period, the broker-dealer concession or agency commission for broker-dealers and other firms is 1.25% of the public offering price per unit at the time of the transaction. The broker-dealer concession or agency commission is 65% of the transactional sales fee for secondary market sales (1.85% of the public offering price minus the total creation and development fee). No broker-dealer concession or agency commission is paid to broker-dealers, investment advisers or other selling firms in connection with unit sales in Fee Accounts subject to a Wrap Fee.

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

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

Sun Life Financial Inc. holds an indirect majority interest in the sponsor’s parent company, AAM Holdings, Inc. Sun Life Financial Inc. is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional clients.

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

The sponsor or an affiliate may use the list of securities in the trust in its independent capacity (which may include acting as an investment adviser or broker-dealer) and distribute this information to various individuals and entities.

Understanding Your Investment

19

transactional sales fee. However, such sales will be included in determining whether a firm has met the sales level breakpoints for volume concessions subject to the policies of the related selling firm. Secondary market sales of all unit trusts are excluded for purposes of these volume concessions.

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

We currently may provide, at our own expense and out of our own profits, additional compensation and benefits to broker-dealers and other firms who sell units of this trust and our other products. This compensation is intended to result in additional sales of our products and/or compensate broker-dealers and financial advisors for past sales. A number of factors are considered in determining whether to pay these additional amounts. Such factors may include, but are not limited to, the level or type of services provided by the intermediary, the level or expected level of sales of our products by the intermediary or its agents, the placing of our products on a preferred or recommended product list and access to an intermediary’s personnel. We may make these payments for marketing, promotional or related expenses, including, but not limited to, expenses of entertaining retail customers and financial advisors, advertising, sponsorship of events or seminars, obtaining information about the breakdown of unit sales among an intermediary’s representatives or offices, obtaining shelf space in broker-dealer firms and similar activities designed to promote the sale of our products. We make

Broker-dealers and other firms that sell units of certain unit investment trusts for which AAM acts as sponsor are eligible to receive additional compensation for volume sales. The sponsor offers two separate volume concession structures for certain trusts that are referred to as “Volume Concession A” and “Volume Concession B.” The trust offered in this prospectus is a Volume Concession A trust. Broker-dealers and other firms that sell units of any Volume Concession A trust are eligible to receive the additional compensation described below. Such payments will be in addition to the regular concessions paid to firms as set forth in the applicable trust’s prospectus.

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

Initial Offering Period Sales
In Preceding 12 Months

Volume
Concession

$25,000,000 but less than $100,000,000

0.035%

$100,000,000 but less than $150,000,000

0.050

$150,000,000 but less than $250,000,000

0.075

$250,000,000 but less than $1,000,000,000

0.100

$1,000,000,000 but less than $5,000,000,000

0.125

$5,000,000,000 but less than $7,500,000,000

0.150

$7,500,000,000 or more

0.175

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

The volume concessions will be paid on units of all Volume Concession A trusts sold in the initial offering period, except as described below. For a trust to be eligible for this additional Volume Concession A compensation, the trust’s prospectus must include disclosure related to the additional Volume Concession A compensation; a trust is not eligible for additional Volume Concession A compensation if the prospectus for such trust does not include disclosure related to the additional Volume Concession A compensation. In addition, dealer firms will not receive volume concessions on the sale of units which are not subject to a

20

Understanding Your Investment

This federal income tax summary is based in part on the advice and opinion 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 your 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.

Assets of the Trust. Your trust is expected to hold one or more of the following: (i) shares of stock in corporations (the “Stocks”) that are treated as equity for federal income tax purposes, (ii) equity interests (the “REIT Shares”) in real estate investment trusts (“REITs”) that constitute interests in entities treated as real estate investment trusts for federal income tax purposes, and (iii) shares (the “RIC Shares”) in funds qualifying as regulated investment companies (“RICs”) that are treated as interests in regulated investment companies for federal income tax purposes. It is possible that your trust will also hold other assets, including assets that are treated differently for federal income tax purposes from those described above, in which case you will have federal income tax consequences different from or in addition to those described in this section. All of the assets held by your trust constitute the “Trust Assets.” Neither our counsel nor we have analyzed the proper federal income tax treatment of the Trust Assets and thus neither our counsel nor we have reached a conclusion regarding the federal income tax treatment of the Trust Assets.

Trust Status. The trust is considered a grantor trust under federal income tax laws. In grantor trusts, investors are deemed for federal income tax purposes, to own the underlying assets of the trust directly. All taxability issues are taken into account at the unit owner level. Income passes through to unit owners as realized by the trust.

such payments to a substantial majority of intermediaries that sell our products. We may also make certain payments to, or on behalf of, intermediaries to defray a portion of their costs incurred for the purpose of facilitating unit sales, such as the costs of developing or purchasing trading systems to process unit trades. Payments of such additional compensation described in this paragraph and the volume concessions described above, some of which may be characterized as “revenue sharing,” may create an incentive for financial intermediaries and their agents to sell or recommend our products, including this trust, over other products. These arrangements will not change the price you pay for your units.

We generally register units for sale in various states in the U.S. We do not register units for sale in any foreign country. This prospectus does not constitute an offer of units in any state or country where units cannot be offered or sold lawfully. We may reject any order for units in whole or in part.

We may gain or lose money when we hold units in the primary or secondary market due to fluctuations in unit prices. The gain or loss is equal to the difference between the price we pay for units and the price at which we sell or redeem them. We may also gain or lose money when we deposit securities to create units. The amount of our profit or loss on the initial deposit of securities into the trust is shown in the “Notes to Portfolio.”

TAXES

This section summarizes some of the main U.S. federal income tax consequences of owning units of the trust. This section is current as of the date of this prospectus. Tax laws and interpretations change frequently, and these summaries do not describe all of the tax consequences to all taxpayers. For example, these summaries generally do not describe your situation if you are a corporation, a non-U.S. person, a broker/dealer, or other investor with special circumstances. In addition, this section does not describe your state, local or foreign tax consequences.

Understanding Your Investment

21

received in the transaction. You can generally determine your initial tax basis in each Trust Asset by apportioning the cost of your units, including sales fees, among the Trust Assets ratably according to their values on the date you acquire your units. In certain circumstances, however, you may have to adjust your tax basis after you acquire your units (for example, in the case of certain dividends that exceed a corporation’s accumulated earnings and profits, or in the case of certain distributions with respect to any REIT Shares that represent a return of capital, as discussed below).

If you are an individual, the maximum marginal stated federal tax rate for net capital gain is generally 20% (15% or 0% for taxpayers with taxable incomes below certain thresholds). Some capital gains, including some portion of the capital gain dividends from the RIC Shares, may be taxed at a higher stated federal tax rate. Some portion of any capital gain dividends you receive might be attributable to a RIC’s interest in a master limited partnership which 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 stated tax rate of 25%. In the case of capital gain dividends, the determination of which portion of the capital gain dividend, if any, is subject to the 28% tax rate or the 25% tax rate, will be made based on rules prescribed by the United States Treasury. Capital gains may also be subject to the “medicare tax” described above.

An election may be available to you to defer recognition of capital gain if you make certain qualifying investments within a limited time. You should talk to your tax advisor about the availability of this deferral election and its requirements.

Income is reported gross of expenses. Expenses are separately reported based on a percentage of distributions. Generally, the cash received by unit owners is the net of income and expenses reported.

The grantor trust structure is a widely held fixed investment trust (“WHFIT”), and falls under what is commonly referred to as the WHFIT regulations.

If your trust is at all times operated in accordance with the documents establishing your trust and certain requirements of federal income tax law are met, your trust will not be taxed as a corporation for federal income tax purposes. As a unit owner, you will be treated as the owner of a pro rata portion of each of the Trust Assets, and as such you will be considered to have received a pro rata share of income (e.g., dividends and capital gains, if any) from each Trust Asset when such income would be considered to be received by you if you directly owned the Trust Assets. This is true even if you elect to have your distributions reinvested into additional units. In addition, the income from Trust Assets that you must take into account for federal income tax purposes is not reduced by amounts used to pay sales fees or trust expenses. 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. Interest that is excluded from gross income, including exempt-interest dividends from any RIC Shares held by the trust, are generally not included in your net investment income for purposes of this tax.

Your Tax Basis and Income or Loss upon Disposition. If your trust disposes of Trust Assets, you will generally recognize gain or loss. If you dispose of your units or redeem your units for cash, you will also generally recognize gain or loss. To determine the amount of this gain or loss, you must subtract your tax basis in the related Trust Assets from your share of the total amount

22

Understanding Your Investment

itself. Regulated investment companies are required to provide notice to their shareholders of the amount of any distribution that may be taken into account as a dividend that is eligible for the capital gains tax rates. In limited circumstances, some of the ordinary income dividends from a REIT may also qualify to be taxed at the same rates that apply to net capital gains. If you hold a unit for six months or less or if your trust holds a RIC Share or REIT Share for six months or less, any loss incurred by you related to the disposition of such RIC Share or REIT Share will be disallowed to the extent of the exempt-interest dividends you received. To the extent, if any, it is not disallowed, it will be treated as a long-term capital loss to the extent of any long-term capital gain distributions received (or deemed to have been received) with respect to such RIC Share or REIT Share. Distributions of income or capital gains declared on the REIT Shares or the RIC Shares in October, November or December will be deemed to have been paid to you on December 31 of the year they are declared, even when paid by the REIT or the RIC during the following January. Some dividends on the REIT Shares or RIC Shares may be eligible for a deduction for qualified business income provided certain holding period requirements are satisfied.

An election may be available to you to defer recognition of the gain attributable to a capital gain dividend if you make certain qualifying investments within a limited time. You should talk to your tax advisor about the availability of this deferral election and its requirements.

Dividends Received Deduction. Generally, a domestic corporation owning units may be entitled to the dividends received deduction with respect to many dividends received by a trust if certain holding period and other technical requirements are met.

In-Kind Distributions. Under certain circumstances as described in this prospectus, you may request an In-Kind Distribution of Trust Assets when you redeem your units or at your trust’s termination. By electing to receive an In-Kind

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. 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, however, treats certain capital gains as ordinary income in special situations.

Dividends from Stocks. Certain dividends received with respect to the Stocks held by the trust, if any, may qualify to be taxed at the same rates that apply to net capital gain (as discussed above), provided certain holding period requirements are satisfied.

Dividends from RIC Shares and REIT Shares. Some dividends on REIT Shares or RIC Shares, if any, held by the trust, may be reported by the REIT or RIC as “capital gain dividends,” generally taxable to you as long-term capital gains. Some dividends on RIC Shares may qualify as “exempt-interest dividends,” which generally are excluded from your gross income for federal income tax purposes. Some or all of the exempt-interest dividends, however may be taken into account in determining the alternative minimum tax on individuals, and may have other tax consequences (e.g., they may affect the amount of your social security benefits that are taxed). For tax years beginning after December 31, 2022, tax exempt interest dividends may affect the corporate alternative minimum tax for certain corporations that are considered “applicable corporations” as defined under the Internal Revenue Code. Other dividends on the REIT Shares or the RIC Shares will generally be taxable to you as ordinary income. Certain ordinary income dividends from a RIC may qualify to be 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 RIC

Understanding Your Investment

23

case of units held by nonresident alien individuals, foreign corporations or other non- U.S. persons, subject to any applicable treaty. 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 may not be subject to U.S. federal income taxes, including withholding taxes, on some or all of the income from your trust or on any gain from the sale or redemption of your units, provided that certain conditions are met. You should consult your tax advisor with respect to the conditions you must meet in order to be exempt for U.S. tax purposes. In addition, distributions to, and the gross proceeds from dispositions of units by, (i) certain non-U.S. financial institutions that have not entered into an agreement with the U.S. Treasury to collect and disclose certain information and are not resident in a jurisdiction that has entered into such an agreement with the U.S. Treasury and (ii) certain other non-U.S. entities that do not provide certain certifications and information about the entity’s U.S. owners, may be subject to a U.S. withholding tax of 30%. However, proposed regulations may eliminate the requirement to withhold on payments of gross proceeds from dispositions. You should also consult your tax advisor with respect to other U.S. tax withholding and reporting requirements.

Some distributions by your trust may be subject to foreign withholding taxes. Any income withheld will still be treated as income to you. Under the grantor trust rules, you are considered to have paid directly your share of any foreign taxes that are paid. Therefore, for U.S. tax purposes, you may be entitled to a foreign tax credit or deduction for those foreign taxes.

Under certain circumstances, a RIC may elect to pass through to its shareholders certain foreign taxes paid by the RIC. If a RIC makes this election with respect to RIC Shares, you must include in your income for federal income tax purposes your portion of such taxes and you may be entitled to a credit or deduction for such taxes.

Distribution, you will receive Trust Assets plus, possibly, cash. You will not recognize gain or loss if you only receive whole Trust Assets in exchange for the identical amount of your pro rata portion of the same Trust Assets held by your trust. However, if you also receive cash in exchange for a Trust Asset or a fractional portion of a Trust Asset, you will generally recognize gain or loss based on the difference between the amount of cash you receive and your tax basis in such Trust Asset or fractional portion.

Rollovers and Exchanges. If you elect to have your proceeds from your trust rolled over into a future trust, it is considered a sale for federal income tax purposes and any gain on the sale will be treated as a capital gain, and any loss will be treated as a capital loss. However, any loss you incur in connection with the exchange of your units of your trust for units of the next series will generally be disallowed with respect to this deemed sale and subsequent deemed repurchase, to the extent the two trusts have substantially identical Trust Assets under the wash sale provisions of the Internal Revenue Code.

Treatment of Trust Expenses. Generally, for federal income tax purposes, you must take into account your full pro rata share of your trust’s income, even if some of that income is used to pay trust expenses. You may deduct your pro rata share of each expense paid by your trust to the same extent as if you directly paid the expense. You may not be able to deduct some or all of these expenses.

If any of the RICs pay exempt-interest dividends, which are treated as tax-exempt interest for federal income tax purposes, you will not be able to deduct some of your share of the trust expenses. In addition, you will not be able to deduct some of your interest expense for debt that you incur or continue to purchase or carry your units.

Foreign Investors, Taxes and Investments. Distributions by your trust that are treated as U.S. source income (e.g., dividends received on Stocks of domestic corporations) will generally be subject to U.S. income taxation and withholding in the

24

Understanding Your Investment

New York City general corporation tax. You should consult your tax advisor regarding potential foreign, state or local taxation with respect to your units.

Expenses

Your trust will pay various expenses to conduct its operations. The “Fees and Expenses” section of the “Investment Summary” in this prospectus shows the estimated amount of these expenses.

The sponsor will receive a fee from the 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 trust will accrue the fixed dollar creation and development fee daily from the day after the end of the initial offering period through the trust’s termination date. On each of these days the trust will accrue a fixed dollar amount creation and development fee equal to $0.05 per unit divided by the total number of days from the day after the end of the initial offering period through the trust’s termination date. If you redeem or sell your units prior to the trust’s termination date, you will not pay any unaccrued remaining creation and development fee upon redemption or sale of your units. The trust will pay amounts of accrued creation and development fee to the sponsor on a monthly basis. No portion of this fee is applied to the payment of distribution expenses or as compensation for sales efforts.

Your trust will pay a fee to the trustee for its services. The trustee also benefits when it holds cash for your trust in non-interest bearing accounts. Your trust will reimburse us as supervisor, evaluator and sponsor for providing portfolio supervisory services, for evaluating your portfolio and for providing bookkeeping and administrative services. Our reimbursements may exceed the costs of the services we provide to your trust but will not exceed the costs of services provided to all of

If any U.S. investor is treated as owning directly or indirectly 10 percent or more of the combined voting power of the stock of a foreign corporation, and all U.S. shareholders of that corporation collectively own more than 50 percent of the vote or value of the stock of that corporation, the foreign corporation may be treated as a controlled foreign corporation (CFC). If you own 10 percent or more of a CFC (through your trust and in combination with your other investments) or possibly if your trust owns 10 percent or more of a CFC, you will be required to include certain types of the CFC’s income in your taxable income for federal income tax purposes whether or not such income is distributed to your trust or to you.

A foreign corporation will generally be treated as a passive foreign investment company (“PFIC”) if 75 percent or more of its income is passive income or if 50 percent or more of its assets are held to produce passive income. If your trust purchases shares in a PFIC, you may be subject to U.S. federal income tax on a portion of certain distributions or on gains from the disposition of such shares at rates that were applicable in prior years and any gain may be recharacterized as ordinary income that is not eligible for the lower net capital gains tax rate. Additional charges in the nature of interest may also be imposed on you. Certain elections may be available with respect to PFICs that would limit these consequences. However, these elections would require you to include certain income of the PFIC in your taxable income even if not distributed to the trust or to you, or require you to annually recognize as ordinary income any increase in the value of the shares of the PFIC, thus requiring you to recognize income for federal income tax purposes in excess of your actual distributions from PFICs and proceeds from dispositions of PFIC stock during a particular year. Dividends paid by PFICs are not eligible to be taxed at the net capital gains tax rate.

New York Tax Status. Under the existing income tax laws of the State and City of New York, your trust will not be taxed as a corporation subject to the New York state franchise tax or the

Understanding Your Investment

25

our unit investment trusts in any calendar year. All of these fees may adjust for inflation without your approval.

Your trust will also pay its general operating expenses. Your trust may pay expenses such as trustee expenses (including legal and auditing expenses), various governmental charges, fees for extraordinary trustee services, costs of taking action to protect your trust, costs of indemnifying the trustee and the sponsor, legal fees and expenses, expenses incurred in contacting you and any applicable license fee for the use of certain service marks, trademarks and/or trade names. Your trust may pay the costs of updating its registration statement each year. The trustee will generally pay trust expenses from distributions received on the securities but in some cases may sell securities to pay trust expenses.

Experts

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

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

Additional Information

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

26

Understanding Your Investment

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Sponsor and Unitholders
Advisors Disciplined Trust 2197

Opinion on the financial statements

We have audited the accompanying statement of financial condition, including the trust portfolio on pages 5 through 6 of Advisors Disciplined Trust 2197 (the “Trust”) as of November 20, 2023 the initial date of deposit, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as of November 20, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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

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

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of cash or irrevocable letter of credit deposited for the purchase of securities as shown in the statement of financial condition as of November 20, 2023 by correspondence with The Bank of New York Mellon, Trustee. We believe that our audit provides a reasonable basis for our opinion.

/s/ Grant Thornton LLP

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

Chicago, Illinois
November 20, 2023

Understanding Your Investment

27

Advisors Disciplined Trust 2197

Statement of Financial Condition as of November 20, 2023

 

Investment in securities

Contracts to purchase underlying securities (1)(2)

$

160,139

 

Total

$

160,139

 

 

Liabilities and interest of investors

Liabilities:

Organization costs (3)

$

785

Deferred sales fee (4)

2,162

Creation and development fee (4)

801

 

 

3,748

 

Interest of investors:

Cost to investors (5)

160,139

Less: initial sales fee (4)(5)

Less: deferred sales fee, creation and development fee and organization costs (3)(4)(5)

3,748

 

Net interest of investors

156,391

 

Total

$

160,139

 

 

Number of units

16,014

 

 

Net asset value per unit

$

9.766

 

(1)Aggregate cost of the securities is based on the closing sale price evaluations as determined by the evaluator.

(2)Cash or an irrevocable letter of credit has been deposited with the trustee covering the funds 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 $0.049 per unit for the trust. A distribution will be made as of the earlier of the close of the initial offering period or six months following the trust’s inception date to an account maintained by the trustee from which this obligation of the investors will be satisfied. To the extent the actual organization costs are greater than the estimated amount, only the estimated organization costs added to the public offering price will be reimbursed to the sponsor and deducted from the assets of the trust.

(4)The total sales fee consists of an initial sales fee, a deferred sales fee and a creation and development fee. The initial sales fee is equal to the difference between the maximum sales fee and the sum of the remaining deferred sales fee and the total creation and development fee. The maximum sales fee is 1.85% of the public offering price per unit. The deferred sales fee is equal to $0.135 per unit and the creation and development fee is equal to $0.05 per unit.

(5)The aggregate cost to investors includes the applicable sales fee assuming no reduction of sales fees.

Contents

Where to Learn More

You can contact us for free
information about this and
other investments, including
the Information Supplement

Visit us on the Internet
http://www.AAMlive.com

Call Advisors Asset
Management, Inc.
(877) 858-1773

Call The Bank of New York Mellon (800) 848-6468

Additional Information

This prospectus does not contain all information filed with the Securities and Exchange Commission. To obtain or copy this information including the Information Supplement (a duplication fee may be required):

E-mail:

[email protected]

Write:

Public Reference Section
Washington, D.C. 20549

Visit:

http://www.sec.gov
(EDGAR Database)

Call:

1-202-551-8090
(only for information on the operation
of the Public Reference Section)

Refer to:

Advisors Disciplined Trust 2197

Securities Act file number:   333-273989

Investment Company Act file number:   811-21056

Ubiquitous Strategy
Portfolio —
15 Month, CDA
Series 2023-4Q

Prospectus

November 20, 2023

 

Advisors Disciplined Trust

 

Information Supplement for
Trusts
Investing in Equity and/or Preferred Securities
January 2023

 

This Information Supplement
provides additional information concerning Advisors Disciplined Trust unit investment trusts that have prospectuses dated on and
after the date set forth above investing in equity and/or preferred securities. This Information Supplement should be read in conjunction
with the prospectus for a trust. It is not a prospectus. It does not include all of the information that an investor should consider
before investing in a trust. It may not be used to offer or sell units of a trust without the prospectus. This Information Supplement
is incorporated into the prospectus by reference and has been filed as part of the registration statement with the Securities and
Exchange Commission for each applicable trust. Investors should obtain and read the prospectus prior to purchasing units of a trust.
You can obtain the prospectus without charge at www.aamlive.com or by contacting your financial professional or Advisors Asset
Management, Inc. at 18925 Base Camp Road, Suite 203, Monument, Colorado 80132, or at 8100 East 22nd
Street North, Building 800, Suite 102, Wichita, Kansas 67226 or by calling (877) 858-1773. This Information Supplement is
dated as of the date set forth above.

 

Contents

 

 

 

General Information

 

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

 

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

 

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

 

Investment Policies

 

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

 

 

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

 

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

 

 

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

 

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

 

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

 

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

 

The Replacement Securities
must be securities as originally selected for deposit in a trust or, in the case of a trust that is a RIC for tax purposes, securities
which the sponsor determines to be similar in character as the securities originally selected for deposit in the trust and the
purchase of the Replacement Securities may not adversely affect the federal income tax status of the trust. The Replacement Securities
must be purchased within thirty days after the deposit of the Failed Security. Whenever a Replacement Security is acquired
for a trust, the trustee shall notify all unitholders of the trust of the acquisition of the Replacement Security and shall, on
the next distribution date which is more than thirty days thereafter, make a pro rata distribution of

 

 

the amount, if any, by which
the cost to the trust of the Failed Security exceeded the cost of the Replacement Security. The trustee will not be liable or responsible
in any way for depreciation or loss incurred by reason of any purchase made pursuant to, or any failure to make any purchase of
Replacement Securities. The sponsor will not be liable for any failure to instruct the trustee to purchase any Replacement Securities,
nor shall the trustee or sponsor be liable for errors of judgment in connection with Failed Securities or Replacement Securities.

 

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

 

Risk Factors

 

An investment in units
of a trust, and/or shares of other registered investment companies (“funds”) held by a trust, if any, may be
subject to some or all of the risks described below. In addition, you should carefully review the objective, strategy and risk
of the trust as described in the prospectus and consider your ability to assume the risks involved before making an investment
in a trust.

 

Market Risk.
You should understand the risks of investing in securities before purchasing units. These risks include the risk that the financial
condition of the company or the general condition of the stock market may worsen and the value of the securities (and therefore
units) will fall. Securities are especially susceptible to general stock market movements. The value of securities often rises
or falls rapidly and unpredictably as market confidence and perceptions of companies change. These perceptions are based on factors
including expectations regarding government economic policies, inflation, interest rates, economic expansion or contraction, political
climates and economic or banking crises. The value of units of a trust will fluctuate with the value of the securities in the trust
and may be more or less than the price you originally paid for your units. As with any investment, no one can guarantee that the
performance of a trust will be positive over any period of time. Because each trust is unmanaged, the trustee will not sell securities
in response to market fluctuations as is common in managed investments. In addition, because some trusts hold a relatively small
number of securities, you may encounter greater market risk than in a more diversified investment. First detected in late 2019,
a novel form of coronavirus disease (“COVID-19”) spread rapidly around the globe and led the World Health Organization
to declare the COVID-19 outbreak a pandemic in March 2020. The COVID-19 pandemic disrupted supply chains, adversely affected commercial
activities and resulted in increased market volatility, and may further impact supply chains, commercial activities and market
volatility in the future. Many countries reacted to the COVID-19 pandemic through prevention measures, such as quarantines, and
government intervention, including placing restrictions on travel and business operations. These measures, along with the general

 

 

uncertainty caused by this pandemic, including emerging variants, has resulted in a decline in consumer demand across many industries
and imposed significant costs on governmental and business entities. The potential economic impact of the COVID-19 pandemic, or
any future public health crisis, is impossible to predict and could result in adverse market conditions.

 

Equity Securities.
Investments in securities representing equity ownership of a company are exposed to risks associated with the companies issuing
the securities, the sectors and geographic locations they are involved in and the markets that such securities are traded on among
other risks as described in greater detail below.

 

Fixed Income
Securities
. Investments in fixed income and similar securities involve certain unique risks such as credit risk
and interest rate risk among other things as described in greater detail below.

 

Dividends. Stocks
represent ownership interests in a company and are not obligations of the company. Common stockholders have a right to receive
payments from the company that is subordinate to the rights of creditors, bondholders or preferred stockholders of the company.
This means that common stockholders have a right to receive dividends only if a company’s board of directors declares a dividend
and the company has provided for payment of all of its creditors, bondholders and preferred stockholders. If a company issues additional
debt securities or preferred stock, the owners of these securities will have a claim against the company’s assets before
common stockholders if the company declares bankruptcy or liquidates its assets even though the common stock was issued first.
As a result, the company may be less willing or able to declare or pay dividends on its common stock. The COVID-19 pandemic resulted
in a decline in economic activity which caused many companies to reduce the level of dividends declared or suspend their dividends
and may cause a reduction of the level of dividends declared in the future.

 

Credit Risk.
Credit risk is the risk that a borrower is unable to meet its obligation to pay principal or interest on a security. This
could cause the value of an investment to fall and may reduce the level of dividends an investment pays which would reduce income.
The COVID-19 pandemic may adversely impact the credit rating of a borrower, and may impact the ability of such borrower to make
principal or interest payments on securities, when due.

 

Interest Rate
Risk.
Interest rate risk is the risk that the value of fixed income securities and similar securities will fall if interest
rates increase. Bonds and other fixed income securities typically fall in value when interest rates rise and rise in value when
interest rates fall. Securities with longer periods before maturity are often more sensitive to interest rate changes. The Federal
Reserve began raising interest rates in 2022 and signaled an expectation to continue to do so in response to inflation. The risks
associated with rising interest rates are heightened for bonds and other fixed income securities.

 

Liquidity Risk.
Liquidity risk is the risk that the value of a security will fall if trading in the security is limited or absent. No one
can guarantee that a liquid trading market will exist for any security.

 

 

Investment in
Other Investment Companies
. As with other investments, investments in other investment companies are subject to
market and selection risk. In addition, when a trust acquires shares of investment companies, unitholders bear both their proportionate
share of fees and expenses in the trust and, indirectly, the expenses of the underlying investment companies. Investment companies’
expenses are subject to the risk of fluctuation including in response to fluctuation in a fund’s assets. Accordingly, a fund’s
actual expenses may vary from what is indicated at the time of investment by a trust. There are certain regulatory limitations
on the ability of a trust to hold other investment companies which may impact the trust’s ability to invest in certain funds,
the weighting of the fund in a trust’s portfolio and the trust’s ability to issue additional units in the future.

 

Closed-end Funds.
Closed-end investment companies (“closed-end funds”) are actively managed investment companies registered under
the Investment Company Act that invest in various types of securities. Closed-end funds issue shares of common stock that are generally
traded on a securities exchange (although some closed-end fund shares are not listed 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 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. If a trust invests in closed-end
funds, you will bear not only your share of the trust’s expenses, but also the expenses of the underlying funds. By investing
in the other funds, a trust may incur greater expenses than you would incur if you invested directly in the closed-end funds.

 

The net asset value
of closed-end fund shares will fluctuate with changes in the value of the underlying securities that the closed-end fund owns.
In addition, shares of closed-end funds trade on exchanges at market prices rather than at the net asset value of such closed-end
fund. Accordingly, closed-end fund shares may trade at a price greater than net asset value (premium) or less than net asset value
(discount). For various reasons closed-end fund shares frequently trade at a discount from their net asset value in the secondary
market. This risk is separate and distinct from the risk that the net asset value of closed-end fund shares may decrease. The amount
of such discount from net asset value is subject to change from time to time in response to various factors and there can be no
assurance that a discount on shares of closed-end funds purchased by a trust will not decrease. Similarly, there can be no assurance
that shares of closed-end funds purchased at a premium will stay at the same premium or will not decrease relative to the closed-end
fund’s net asset value, which may result in a loss to the trust.

 

Certain closed-end
funds employ the use of leverage in their portfolios through the issuance of preferred stock, debt or other borrowings. While leverage
often serves to increase the yield of a closed-end fund, this leverage also subjects the closed-end fund to increased risks. These
risks may include the likelihood of increased volatility and the possibility that the closed-end fund’s common share income
will fall if the dividend rate on the preferred shares or the interest rate on any borrowings rises.

 

Closed-end funds’
governing documents may contain certain anti-takeover provisions that may have the effect of inhibiting a fund’s possible
conversion to open-end status and limiting the ability of other persons to acquire control of a fund. In certain circumstances,
these

 

 

provisions might also inhibit the ability of stockholders (including a trust) to sell their shares at a premium over prevailing
market prices. This characteristic is a risk separate and distinct from the risk that a fund’s net asset value will decrease.
In particular, this characteristic would increase the loss or reduce the return on the sale of those closed-end fund shares that
were purchased by a trust at a premium. In the unlikely event that a closed-end 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 a trust since shares of open-end funds trade at
net asset value. Certain closed-end 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 in an attempt by a fund’s board
of directors to reduce a discount on its share price. To the extent that such a plan is implemented and shares owned by a trust
are repurchased by a fund, the trust’s position in that fund will be reduced and the cash will be distributed.

 

A trust may be prohibited
from subscribing to a rights offering for shares of any of the closed-end funds in which it invests. In the event of a rights offering
for additional shares of a fund, unitholders should expect that a trust holding shares of the fund will, at the completion of the
offer, own a smaller proportional interest in such fund that 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 the 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.

 

Rule 12d1-4 under the
Investment Company Act allows, subject to certain conditions, a registered investment company to invest in other registered investment
companies beyond the limits contained in Section 12(d)(1) of the Investment Company Act, pursuant to certain conditions. All exemptive
relief related to Section 12(d)(1) was rescinded on January 19, 2022 and therefore the trust and the sponsor are required to comply
with the conditions of Rule 12d1-4.

 

Business Development
Companies.
Business development companies (“BDCs”) are closed-end investment companies that have elected
to be treated as business development companies under the Investment Company Act. BDCs are required to hold at least 70% of their
investments in eligible assets which include, among other things, (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 the BDC in connection with its 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’ ability
to grow and their overall financial condition is impacted significantly by their 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 issuing of debt and preferred securities. BDCs are less
restricted than other closed-end funds as to the amount of debt they can have outstanding. Generally, a BDC may not issue any class
of senior security representing an indebtedness unless, immediately after such issuance or sale, it will have asset coverage of
at least 200%. (Thus, for example, if a BDC has $5 million in assets, it can borrow up to $5 million, which would result in assets
of $10 million and debt of $5 million.) 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. A BDC’s credit rating may change over time which
could adversely affect its ability to obtain additional credit and/or increase the cost of such borrowing. Agreements governing
a BDC’s credit facilities and related funding and service agreements may contain various covenants that limit the BDC’s
discretion in operating its business along with other limitations. Any defaults may restrict the BDC’s ability to manage
assets securing related assets, which may adversely impact the BDC’s liquidity and operations.

 

BDCs compete with other
BDCs along with a large number of investment funds, investment banks and other sources of financing to make their investments.
Competitors may have lower costs or access to funding sources that cause BDCs to lose prospective investments if they do not match
competitors’ pricing, terms and structure. As a result of this competition, there is no assurance that a BDC will be able
to identify and take advantage of attractive investment opportunities or that they will fully be able to invest available capital.

 

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, be 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 non-public information regarding such assets.

 

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 are required
to make available significant managerial assistance to their 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 its 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.

 

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. A BDC may
operate a profit-sharing plan for its employees, subject to certain restrictions. 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. 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 impact on its business.

 

Exchange-Traded
Funds.
Exchange-traded funds (“ETFs”) are typically investment companies registered under the Investment
Company Act with shares that trade on a securities exchange. Shares of ETFs may trade at a discount or premium from their net asset
value. If shares of an ETF are sold at a discount, then the trust will receive less than their net asset value. Alternatively,
if shares of an ETF are purchased at a premium, then the trust will pay more than their net asset value. This risk is separate
and distinct from the risk that the net asset value of ETFs may decrease. The amount of such discount from net asset value is subject
to change from time to time in response to various factors. ETFs are subject to various risks, including management’s ability
to meet the ETF’s investment objective, and to manage the ETF portfolio when the underlying securities are redeemed or sold
during periods of market turmoil and as investors’ perceptions regarding ETFs or their underlying investments change. A trust
and any underlying ETFs have operating expenses. If a trust invests in ETFs, you will bear not only your share of the trust’s
expenses, but also the expenses of the underlying funds. By investing in the other funds, a trust may incur greater expenses than
you would incur if you invested directly in the funds.

 

Most ETFs replicate
the composition or returns of a securities index. These ETFs face index correlation risk which is the risk that the performance
of an ETF will vary from the actual performance of the fund’s target index, known as “tracking error.” This can
happen due to

 

 

transaction costs, market impact, corporate actions (such as mergers and spin-offs) and timing variances. Some funds
use a technique called “representative sampling,” which means that the fund invests in a representative sample of securities
in its target index rather than all of the index securities. This could increase the risk of tracking error.

 

Some ETFs are open-end
funds. Open-end funds of this type can be actively-managed or passively-managed investment companies that are registered under
the Investment Company Act. These open-end funds have received orders from the SEC exempting them from various provisions of the
Investment Company Act. Regular open-end funds generally issue redeemable securities that are issued and redeemed at a price based
on the fund’s current net asset value and are not traded on a securities exchange. Exchange-traded open-end funds, however,
issue shares of common stock that are traded on a securities exchange based on negotiated prices rather than the fund’s current
net asset value. These funds only issue new shares and redeem outstanding shares in very large blocks, often called “creation
units,” in exchange for an in-kind distribution of the fund’s portfolio securities. Due to a variety of cost and administrative
factors, a trust that invests in ETFs will generally buy and sell shares of its underlying open-end fund ETFs on securities exchanges
rather than engaging in transactions in creation units.

 

Some ETFs are UITs.
UITs of this type are passively-managed investment companies that are registered under the Investment Company Act. ETFs that
are UITs differ significantly from your trust in certain respects, even though the UITs that may be held in the trust’s portfolio
and the trust itself are registered UITs.
UITs that are ETFs have received orders from the SEC exempting them from various
provisions of the Investment Company Act. Regular UITs, such as your trust, generally issue redeemable securities that are issued
and redeemed at a price based on the UIT’s current net asset value and are not traded on a securities exchange. ETFs that
are UITs, however, issue units that are traded on a securities exchange based on negotiated prices rather than the UIT’s
current net asset value. These UITs only issue new shares and redeem outstanding shares in very large blocks, often called “creation
units,” in exchange for an in-kind distribution of the UIT’s portfolio securities. Due to a variety of cost and administrative
factors, a trust that invests in ETFs will generally buy and sell shares of its underlying ETFs on securities exchanges rather
than engaging in transactions in creation units. Units of exchange-traded UITs frequently trade at a discount from their net asset
value in the secondary market. This risk is separate and distinct from the risk that the net asset value of UIT units may decrease.
The amount of such discount from net asset value is subject to change from time to time in response to various factors.

 

Rule 12d1-4 under the
Investment Company Act allows, subject to certain conditions, a registered investment company to invest in other registered investment
companies beyond the limits contained in Section 12(d)(1) of the Investment Company Act, pursuant to certain conditions. All exemptive
relief related to Section 12(d)(1) was rescinded on January 19, 2022 and therefore the trust and the sponsor are required to comply
with the conditions of Rule 12d1-4.

 

Inverse ETFs.
Certain ETFs may be “inverse” ETFs. An inverse ETF, sometimes referred to as a “bear ETF” or “short
ETF,” is a special type of index ETF that is designed to provide investment results that move in the opposite direction of
the daily price movement of the

 

 

index to which it is benchmarked. Put another way, an inverse ETF is designed to go up in value
when its benchmark index goes down in value, and go down in value when its benchmark index goes up in value. Inverse ETFs can be
used to establish a hedge position within an investment portfolio to attempt to protect its value during market declines. Though
inverse ETFs may reduce downside risk and volatility in a down market, they are not suitable for all investors. The value of an
inverse investment may tend to increase on a daily basis by the amount of any decrease in the index, but the converse is also true
that the value of the investment will also tend to decrease on a daily basis by the amount of any increase in the index.

 

Investing in inverse
ETFs involves certain risks, which may include increased volatility due to the ETFs’ possible use of short sales of securities
and derivatives such as options and futures. Inverse ETFs are subject to active trading risks that may increase volatility and
impact the ETFs’ ability to achieve their investment objectives. The use of leverage by an ETF increases the risk to the
ETF. The more an ETF invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.
Most inverse ETFs “reset” daily, meaning that they are designed to achieve their stated objectives on a daily basis
only and not over any longer time period. Due to the effect of compounding, the performance of these ETFs over longer periods of
time can differ significantly from the inverse of the performance of the ETF’s underlying index or benchmark during the same
period of time. This effect can be magnified in volatile markets. Inverse ETFs typically are not suitable for retail investors
who plan to hold them for more than one trading session, particularly in volatile markets.

 

Leveraged ETFs.
Certain ETFs may be “leveraged” ETFs. These ETFs seek to match a multiple or multiples of the performance, or the inverse
of the performance, of a benchmark index on a given day and not for greater periods of time. This means that the return of a leveraged
ETF for a period longer than a single day will be the result of each day’s returns compounded over the period and not the
point-to-point return of the index over the entire time period. As a result, the use of leverage will very likely cause the performance
of such an ETF to be either greater than, or less than, the index performance times the stated multiple in an ETF’s investment
objective. Investors should recognize that the degree of volatility of the underlying index can have a dramatic effect on an ETF’s
longer-term performance. The greater the volatility, given a particular index return, the greater the downside deviation will be
of the ETF’s longer-term performance from a simple multiple of its index’s longer-term return. Leveraged ETFs use investment
techniques that may be considered aggressive, including the use of futures contracts, options on futures contracts, securities
and indexes, forward contracts, swap agreements and similar instruments. Leveraged ETFs are typically unsuitable for investors
who plan to hold them for longer than one trading session, particularly in volatile markets.

 

Non-Diversification
Risk
. Certain funds held by a trust may be classified as “non-diversified.” Such funds may be more exposed
to the risks associated with and developments affecting an individual issuer, industry and/or asset class than a fund that invests
more widely.

 

Foreign Issuers.
An investment in securities of non-U.S. issuers involves certain investment risks that are different in some respects from an investment
in the securities of domestic issuers. These investment risks include future political or governmental restrictions

 

 

which might
adversely affect the payment or receipt of payment of dividends on the relevant securities, potential trading halts or government
bans on buying or selling foreign securities, the possibility that the financial condition of the issuers of the securities may
become impaired or that the general condition of the relevant stock market may worsen (both of which would contribute directly
to a decrease in the value of foreign securities), the limited liquidity and relatively small market capitalization of the relevant
securities market, expropriation or confiscatory taxation, economic uncertainties and foreign currency devaluations and fluctuations.
In addition, for foreign issuers that are not subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Securities Exchange Act”), there may be less publicly available information than is available
from a domestic issuer. In addition, foreign issuers are not necessarily subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable to domestic issuers. The securities of many foreign
issuers are less liquid and their prices more volatile than securities of comparable domestic issuers. In addition, fixed brokerage
commissions and other transaction costs in foreign securities markets are generally higher than in the United States and there
is generally less government supervision and regulation of exchanges, brokers and issuers in foreign countries than there is in
the United States.

 

Securities issued by
non-U.S. issuers generally pay income in foreign currencies and principally trade in foreign currencies. Therefore, there is a
risk that the U.S. dollar value of these securities will vary with fluctuations in the U.S. dollar foreign exchange rates for the
various securities.

 

There can be no assurance
that exchange control regulations might not be adopted in the future which might adversely affect payment to a trust or a fund
held by a trust. The adoption of exchange control regulations and other legal restrictions could have an adverse impact on the
marketability of foreign securities and on the ability to liquidate securities. In addition, restrictions on the settlement of
transactions on either the purchase or sale side, or both, could cause delays or increase the costs associated with the purchase
and sale of the foreign securities and correspondingly could affect the price of trust units.

 

Investors should be
aware that it may not be possible to buy all securities at the same time because of the unavailability of any security, and restrictions
applicable to a trust relating to the purchase of a security by reason of the federal securities laws or otherwise.

 

Foreign securities
generally have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and may
not be exempt from the registration requirements of such Act. Sales of non-exempt securities in the United States securities markets
are subject to severe restrictions and may not be practicable. Accordingly, sales of these securities will generally be affected
only in foreign securities markets. Investors should realize that the securities might be traded in foreign countries where the
securities markets are not as developed or efficient and may not be as liquid as those in the United States. The value of securities
will be adversely affected if trading markets for the securities are limited or absent.

 

Emerging Markets.
Compared to more mature markets, some emerging markets may have a low level of regulation, enforcement of regulations and
monitoring of investors’ activities.

 

 

Those activities may include practices such as trading on material non-public information.
The securities markets of developing countries are not as large as the more established securities markets and have substantially
less trading volume, resulting in a lack of liquidity and high price volatility. There may be a high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number of industries as well as a high concentration of
investors and financial intermediaries. These factors may adversely affect the timing and pricing of the acquisition or disposal
of securities. In certain emerging markets, registrars are not subject to effective government supervision nor are they always
independent from issuers. The possibility of fraud, negligence, undue influence being exerted by the issuer or refusal to recognize
ownership exists, which, along with other factors, could result in the registration of a shareholding being completely lost. Investors
could suffer loss arising from these registration problems. The rights and remedies associated with emerging market investment
securities may differ and be more limited than those available in more developed countries, and the legal remedies in emerging
markets are often more limited than the remedies available in the United States. Emerging market companies are also subject to
a greater risk of market closure or manipulation, less liquidity, limited reliable access to capital and exchange delistings. Emerging
market companies may have lower quality or less information publicly available due to differences in regulatory, accounting, audit,
and financial recordkeeping standards. Information that is available may be unreliable or outdated. The limitations associated
with investments in emerging market companies could impact the trust’s ability to achieve its investment objective.

 

Practices pertaining
to the settlement of securities transactions in emerging markets involve higher risks than those in developed markets, in large
part because of the need to use brokers and counterparties who are less well capitalized, and custody and registration of assets
in some countries may be unreliable. As a result, brokerage commissions and other fees are generally higher in emerging markets
and the procedures and rules governing foreign transactions and custody may involve delays in payment, delivery or recovery of
money or investments. Delays in settlement could result in investment opportunities being missed if a trust or a fund held by a
trust is unable to acquire or dispose of a security. Certain foreign investments may also be less liquid and more volatile than
U.S. investments, which may mean at times that such investments are unable to be sold at desirable prices.

 

Political and economic
structures in emerging markets often change rapidly, which may cause instability. In adverse social and political circumstances,
governments have been involved in policies of expropriation, confiscatory taxation, nationalization, intervention in the securities
market and trade settlement, and imposition of foreign investment restrictions and exchange controls, and these could be repeated
in the future. In addition to withholding taxes on investment income, some governments in emerging markets may impose different
capital gains taxes on foreign investors. Foreign investments may also be subject to the risks of seizure by a foreign government
and the imposition of restrictions on the exchange or export of foreign currency. Additionally, some governments exercise substantial
influence over the private economic sector and the political and social uncertainties that exist for many developing countries
are considerable.

 

 

Another risk common
to most developing countries is that the economy is heavily export oriented and, accordingly, is dependent upon international trade.
The existence of overburdened infrastructures and obsolete financial systems also presents risks in certain countries, as do environmental
problems. Certain economies also depend to a large degree upon exports of primary commodities and, therefore, are vulnerable to
changes in commodity prices which, in turn, may be affected by a variety of factors. Further, companies in emerging markets may
have less reliable access to capital.

 

Depositary Receipts.
Certain securities in a trust may be in depositary receipt form, including American Depositary Receipts (“ADRs”)
or Global Depositary Receipts (“GDRs”). Depositary receipts represent stock deposited with a custodian in a
depositary. Depositary receipts are issued by a bank or trust company to evidence ownership of underlying securities issued by
a foreign corporation. These instruments may not necessarily be denominated in the same currency as the securities into which they
may be converted.

 

Depositary receipts
may be sponsored or unsponsored. In an unsponsored facility, the depositary initiates and arranges the facility at the request
of market makers and acts as agent for the depositary receipts holder, while the company itself is not involved in the transaction.
In a sponsored facility, the issuing company initiates the facility and agrees to pay certain administrative and shareholder-related
expenses. Sponsored facilities use a single depositary and entail a contractual relationship between the issuer, the shareholder
and the depositary; unsponsored facilities involve several depositaries with no contractual relationship to the company. The depositary
bank that issues depositary receipts generally charges a fee, based on the price of the depositary receipts, upon issuance and
cancellation of the depositary receipts. This fee would be in addition to the brokerage commissions paid upon the acquisition or
surrender of the security. In addition, the depositary bank incurs expenses in connection with the conversion of dividends or other
cash distributions paid in local currency into U.S. dollars and such expenses are deducted from the amount of the dividend or distribution
paid to holders, resulting in a lower payout per underlying shares represented by the depositary receipts than would be the case
if the underlying share were held directly. Certain tax considerations, including tax rate differentials and withholding requirements,
arising from the application of the tax laws of one nation to nationals of another and from certain practices in the depositary
receipts market may also exist with respect to certain depositary receipts. In varying degrees, any or all of these factors may
affect the value of the depositary receipts compared with the value of the underlying shares in the local market. In addition,
the rights of holders of depositary receipts may be different than those of holders of the underlying shares, and the market for
depositary receipts may be less liquid than that for the underlying shares. Depositary receipts are registered securities pursuant
to the Securities Act and may be subject to the reporting requirements of the Securities Exchange Act.

 

For the securities
that are depositary receipts, currency fluctuations will affect the United States dollar equivalent of the local currency price
of the underlying domestic share and, as a result, are likely to affect the value of the depositary receipts and consequently the
value of the securities. The foreign issuers of securities that are depositary receipts may pay dividends in foreign currencies
which must be converted into dollars. Most foreign currencies have fluctuated widely in value against the United States dollar
for many reasons, including supply and demand

 

 

of the respective currency, the soundness of the world economy and the strength of
the respective economy as compared to the economies of the United States and other countries. Therefore, for any securities of
issuers (whether or not they are in depositary receipt form) whose earnings are stated in foreign currencies, or which pay dividends
in foreign currencies or which are traded in foreign currencies, there is a risk that their United States dollar value will vary
with fluctuations in the United States dollar foreign exchange rates for the relevant currencies.

 

Currency Risk.
A trust that invests in securities of non-U.S. issuers will be subject to currency risk, which is the risk that an increase in
the U.S. dollar relative to the non-U.S. currency will reduce returns or portfolio value. Generally, when the U.S. dollar rises
in value relative to a non-U.S. currency, a trust’s investment in securities denominated in that currency will lose value
because its currency is worth fewer U.S. dollars. On the other hand, when the value of the U.S. dollar falls relative to a non-U.S.
currency, a trust’s investments denominated in that currency will tend to increase in value because that currency is worth
more U.S. dollars. The exchange rates between the U.S. dollar and non-U.S. currencies depend upon such factors as supply and demand
in the currency exchange markets, international balance of payments, governmental intervention, speculation and other economic
and political conditions. A trust may incur conversion costs when it converts its holdings to another currency. Non-U.S. exchange
dealers may realize a profit on the difference between the price at which a trust buys and sells currencies. A trust may engage
in non-U.S. currency exchange transactions in connection with its portfolio investments. A trust may also be subject to currency
risk through investments in ADRs, GDRs and other non-U.S. securities denominated in U.S. dollars.

 

Alternative Minimum
Tax Risk.
While certain of the distributions from the trust may be exempt from certain taxes, a portion of such distributions
may be taken into account in computing the alternative minimum tax on individuals. For tax years beginning after December 31, 2022,
tax exempt interest dividends may affect the corporate alternative minimum tax for certain corporations.

 

Foreign Government
Securities Risk.
The ability of a government issuer, especially in an emerging market country, to make timely and complete
payments on its debt obligations will be strongly influenced by the government issuer’s balance of payments, including export
performance, its access to international credits and investments, fluctuations of interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could
be vulnerable to fluctuations in international prices of these commodities or imports. If a government issuer cannot generate sufficient
earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments,
commercial banks and multinational organizations. There are no bankruptcy proceedings similar to those in the United States by
which defaulted government debt may be collected. Additional factors that may influence a government issuer’s ability or
willingness to service debt include, but are not limited to, a country’s cash flow situation, the ability of sufficient foreign
exchange on the date a payment is due (where applicable), the relative size of its debt burden to the economy as a whole, and the
issuer’s policy towards the International Monetary Fund, the International Bank for Reconstruction and Development and other
international agencies to which a government debtor may be subject.

 

 

Supranational
Entities’ Securities
. Certain securities are obligations issued by supranational entities such as the International
Bank for Reconstruction and Development (the “World Bank”). The government members, or “stockholders,”
usually make initial capital contributions to supranational entities and in many cases are committed to make additional capital
contributions if a supranational entity is unable to repay its borrowings. There is no guarantee that one or more stockholders
of a supranational entity will continue to make any necessary additional capital contributions. If such contributions are not made,
the entity may be unable to pay interest or repay principal on its debt securities, and an investor in such securities may lose
money on such investments.

 

Small-Cap and
Mid-Cap Companies.
Smaller company stocks customarily involve more investment risk than larger company stocks. Small-capitalization
and mid-capitalization companies may have limited product lines, markets or financial resources; may lack management depth or experience;
and may be more vulnerable to adverse general market or economic developments than large companies. Some of these companies may
distribute, sell or produce products which have recently been brought to market and may be dependent on key personnel.

 

The prices of small
or mid-size company securities are often more volatile than prices associated with large company issues, and can display abrupt
or erratic movements at times, due to limited trading volumes and less publicly available information. Also, because small-cap
and mid-cap companies normally have fewer shares outstanding and these shares trade less frequently than large companies, it may
be more difficult for a trust which contains these securities to buy and sell significant amounts of such shares without an unfavorable
impact on prevailing market prices.

 

Real Estate Investment
Trusts.
Real estate investment trusts (“REITs”) may be exposed to the risks associated with the ownership
of real estate which include, among other factors, changes in general U.S., global and local economic conditions, declines in real
estate values, changes in the financial health of tenants, overbuilding and increased competition for tenants, oversupply of properties
for sale, changing demographics, changes in interest rates, tax rates and other operating expenses, changes in government regulations,
faulty construction and the ongoing need for capital improvements, regulatory and judicial requirements including relating to liability
for environmental hazards, changes in neighborhood values and buyer demand and the unavailability of construction financing or
mortgage loans at rates acceptable to developers.

 

Many factors can have
an adverse impact on the performance of a REIT, including its cash available for distribution, the credit quality of the REIT or
the real estate industry generally. The success of a REIT depends on various factors, including the occupancy and rent levels,
appreciation of the underlying property and the ability to raise rents on those properties. Economic recession, overbuilding, tax
law changes, higher interest rates or excessive speculation can all negatively impact REITs, their future earnings and share prices.
Variations in rental income and space availability and vacancy rates in terms of supply and demand are additional factors affecting
real estate generally and REITs in particular. Properties owned by a REIT may not be adequately insured against certain losses
and may be subject to significant environmental liabilities, including remediation costs. You should also be aware that REITs may
not be diversified and are subject to the risks of financing projects. The real estate industry may be

 

 

cyclical, and, if REIT securities
are acquired at or near the top of the cycle, there is increased risk of a decline in value of the REIT securities. At various
points in time, demand for certain types of real estate may inflate the value of real estate. This may increase the risk of a substantial
decline in the value of such real estate and increase the risk of a decline in the value of the securities. REITs are also subject
to defaults by borrowers and the market’s perception of the REIT industry generally. Because of their structure, and a current
legal requirement that they distribute at least 90% of their taxable income to shareholders annually, REITs require frequent amounts
of new funding, through both borrowing money and issuing stock. Thus, REITs historically have frequently issued substantial amounts
of new equity shares (or equivalents) to purchase or build new properties. This may adversely affect REIT equity share market prices.
Both existing and new share issuances may have an adverse effect on these prices in the future, especially if REITs issue stock
when real estate prices are relatively high and stock prices are relatively low.

 

Mortgage REITs engage
in financing real estate, purchasing or originating mortgages and mortgage-backed securities and earning income from the interest
on these investments. Such REITs face risks similar to those of other financial firms, such as changes in interest rates, general
market conditions and credit risk, in addition to risks associated with an investment in real estate. The Federal Reserve began
raising interest rates in 2022 and signaled an expectation to continue to do so in response to inflation. The risks associated
with rising interest rates are heightened for bonds and other fixed income securities.

 

REITs have been and
may continue to be negatively impacted by conditions caused by the spread of COVID-19 due to many individuals and businesses being
unable to pay all or a portion of their contracted rent. This has had, and may continue to have, an adverse impact on REITs that
invest in real estate which provide space to these individuals and businesses.

 

Master Limited
Partnerships.
Master limited partnerships (“MLPs”) are limited partnerships or limited liability companies
that are generally taxed as partnerships whose interests are traded on securities exchanges. MLP ownership generally consists of
a general partner and limited partners. The general partner manages the partnership, has an ownership stake in the partnership
and is eligible to receive an incentive distribution. The limited partners provide capital to the partnership, have a limited (if
any) role in the operation and management of the partnership and receive cash distributions. Most MLPs generally operate in the
energy, natural resources or real estate sectors and are subject to the risks generally applicable to companies in those sectors.
MLPs are also subject to the risk that authorities could challenge the tax treatment of MLPs for federal income tax purposes which
could have a negative impact on the after-tax income available for distribution by the MLPs.

 

Bond Quality
Risk.
Bond quality risk is the risk that a bond will fall in value if a rating agency decreases or withdraws the bond’s
rating.

 

Prepayment Risk.
When interest rates fall, among other factors, the issuer of a fixed income security may prepay its obligations earlier than
expected. Such amounts will result in early distributions to an investor who may be unable to reinvest such amounts at the yields
originally invested which could adversely impact the value of your investment. Certain bonds

 

 

include call provisions which expose
such an investor to call risk. Call risk is the risk that the issuer prepays or “calls” a bond before its stated maturity.
An issuer might call a bond if interest rates, in general, fall and the bond pays a higher interest rate or if it no longer needs
the money for the original purpose. If an issuer calls a bond, the holder of such bond will receive principal but will not receive
any future interest distributions on the bond. Such investor might not be able to reinvest this principal at as high a yield. A
bond’s call price could be less than the price paid for the bond and could be below the bond’s par value. Certain bonds
may also be subject to extraordinary optional or mandatory redemptions if certain events occur, such as certain changes in tax
laws, the substantial damage or destruction by fire or other casualty of the project for which the proceeds of the bonds were used
and various other events.

 

Extension Risk.
When interest rates rise, among other factors, issuers of a security may pay off obligations more slowly than expected causing
the value of such obligations to fall.

 

“When Issued”
and “Delayed Delivery” Bonds.
Certain debt obligations may have been purchased on a “when, as and if
issued” or “delayed delivery” basis. The delivery of any such bonds may be delayed or may not occur. Interest
on these bonds begins accruing to the benefit of investors on their respective dates of delivery. Investors will be “at risk”
with respect to all “when, as and if issued” and “delayed delivery” bonds (i.e., may derive either gain
or loss from fluctuations in the values of such bonds) from the date they purchase their investment.

 

Premium Securities.
Certain securities may have been acquired at a market premium from par value at maturity. The coupon interest rates on
the premium securities at the time they were purchased by the fund were higher than the current market interest rates for newly
issued securities of comparable rating and type. If such interest rates for newly issued and otherwise comparable securities decrease,
the market premium of previously issued securities will be increased, and if such interest rates for newly issued comparable securities
increase, the market premium of previously issued securities will be reduced, other things being equal. The current returns of
securities trading at a market premium are initially higher than the current returns of comparable securities of a similar type
issued at currently prevailing interest rates because premium securities tend to decrease in market value as they approach maturity
when the face amount becomes payable. Because part of the purchase price is thus returned not at maturity but through current income
payments, early redemption of a premium security at par or early prepayments of principal will result in a reduction in yield.
Redemption pursuant to call provisions generally will, and redemption pursuant to sinking fund provisions may, occur at times when
the redeemed securities have an offering side valuation which represents a premium over par or for original issue discount securities
a premium over the accreted value.

 

Market Discount.
Certain fixed income securities may have been acquired at a market discount from par value at maturity. The coupon interest
rates on discount securities at the time of purchase are lower than the current market interest rates for newly issued securities
of comparable rating and type. If such interest rates for newly issued comparable securities increase, the market discount of previously
issued securities will become greater, and if such interest rates for newly issued comparable securities decline, the market discount
of previously issued securities will be reduced, other things being equal. Investors should also note that the value of securities
purchased at a market discount will increase in value faster than securities

 

 

purchased at a market premium if interest rates decrease.
Conversely, if interest rates increase, the value of securities purchased at a market discount will decrease faster than securities
purchased at a market premium. In addition, if interest rates rise, the prepayment risk of higher yielding, premium securities
and the prepayment benefit for lower yielding, discount securities will be reduced.

 

Original Issue
Discount Bonds.
Original issue discount bonds were initially issued at a price below their face (or par) value. These bonds
typically pay a lower interest rate than comparable bonds that were issued at or above their par value. In a stable interest rate
environment, the market value of these bonds tends to increase more slowly in early years and in greater increments as the bonds
approach maturity. The issuers of these bonds may be able to call or redeem a bond before its stated maturity date and at a price
less than the bond’s par value. Under current law, the original issue discount, which is the difference between the stated
redemption price at maturity and the issue price of the bonds, is deemed to accrue on a daily basis and the accrued portion is
treated as taxable interest income for U.S. federal income tax purposes.

 

Zero Coupon Bonds.
Certain bonds may be “zero coupon” bonds. Zero coupon bonds are purchased at a deep discount because the buyer receives
only the right to receive a final payment at the maturity of the bond and does not receive any periodic interest payments. The
effect of owning deep discount bonds which do not make current interest payments (such as the zero coupon bonds) is that a fixed
yield is earned not only on the original investment but also, in effect, on all discount earned during the life of such obligation.
This implicit reinvestment of earnings at the same rate eliminates the risk of being unable to reinvest the income on such obligation
at a rate as high as the implicit yield on the discount obligation, but at the same time eliminates the holder’s ability
to reinvest at higher rates in the future. For this reason, zero coupon bonds are subject to substantially greater price fluctuations
during periods of changing market interest rates than are securities of comparable quality which pay interest.

 

Restricted Securities.
Certain securities may only be resold pursuant to Rule 144A under the Securities Act. Such securities may not be readily
marketable. Restricted securities may be sold only to purchasers meeting certain eligibility requirements in privately negotiated
transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act. Where
registration of such securities under the Securities Act is required, an owner may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision to sell and the time an owner may be permitted to
sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop,
an owner might obtain a less favorable price than that which prevailed when it decided to sell.

 

Preferred Security
Risks.
Preferred securities include preferred stocks, trust preferred securities, subordinated or junior notes and debentures
and other similarly structured securities. Preferred securities combine some of the characteristics of common stocks and bonds.
Preferred securities generally pay fixed or adjustable rate income in the form of dividends or interest to investors. Preferred
securities generally have preference over common stock in the payment of income and the liquidation of a company’s assets.
However, preferred securities are typically

 

 

subordinated to bonds and other debt instruments in a company’s capital structure
and therefore will be subject to greater credit risk than those debt instruments. Because of their subordinated position in the
capital structure of an issuer, the ability to defer dividend or interest payments for extended periods of time without triggering
an event of default for the issuer, and certain other features, preferred securities are often treated as equity-like instruments
by both issuers and investors, as their quality and value are heavily dependent on the profitability and cash flows of the issuer
rather than on any legal claims to specific assets. Preferred securities are often callable at their par value at some point in
time after their original issuance date. Income payments on preferred securities are generally stated as a percentage of these
par values although certain preferred securities provide for variable or additional participation payments.

 

While some preferred
securities are issued with a final maturity date, others are perpetual in nature. In certain instances, a final maturity date may
be extended and/or the final payment of principal may be deferred at the issuer’s option for a specified time without triggering
an event of default for the issuer. Preferred securities generally may be subject to provisions that allow an issuer, under certain
conditions, to skip (“non-cumulative” preferred securities) or defer (“cumulative” preferred securities)
distributions. The issuer of a non-cumulative preferred security does not have an obligation to make up any arrearages to holders
of such securities and non-cumulative preferred securities can defer distributions indefinitely. Cumulative preferred securities
typically contain provisions that allow an issuer, at its discretion, to defer distributions payments for up to 10 years. If a
preferred security is deferring its distribution, investors may be required to recognize income for tax purposes while they are
not receiving any income. In certain circumstances, an issuer of preferred securities may redeem the securities during their life.
For certain types of preferred securities, a redemption may be triggered by a change in federal income tax or securities laws.
As with call provisions, a redemption by the issuer may negatively impact the return of the security. Preferred security holders
generally have no voting rights with respect to the issuing company except in very limited situations, such as if the issuer fails
to make income payments for a specified period of time or if a declaration of default occurs and is continuing. Preferred securities
may be substantially less liquid than many other securities, such as U.S. government securities or common stock. The federal income
tax treatment of preferred securities may not be clear or may be subject to recharacterization by the Internal Revenue Service.
Issuers of preferred securities may be in industries that are heavily regulated and that may receive government funding. The value
of preferred securities issued by these companies may be affected by changes in government policy, such as increased regulation,
ownership restrictions, deregulation or reduced government funding.

 

Preferred stocks are
a category of preferred securities that are typically considered equity securities and make income payments from an issuer’s
after-tax profits that are treated as dividends for tax purposes. While they generally provide for specified income payments as
a percentage of their par value, these payments generally do not carry the same set of guarantees afforded to bondholders and have
higher risks of non-payment or deferral.

 

Certain preferred securities
may be issued by trusts or other special purpose entities established by operating companies, and are therefore not direct obligations
of operating companies. At the time a trust or special purpose entity sells its preferred securities to investors, the trust or
special purpose entity generally purchases debt of the operating company with terms

 

 

comparable to those of the trust or special
purpose entity securities. The trust or special purpose entity, as the holder of the operating company’s debt, has priority
with respect to the operating company’s earnings and profits over the operating company’s common shareholders, but
is typically subordinated to other classes of the operating company’s debt. Distribution payments of trust preferred securities
generally coincide with interest payments on the underlying obligations. Distributions from trust preferred securities are typically
treated as interest rather than dividends for federal income tax purposes and therefore, are not eligible for the dividends-received
deduction or the lower federal tax rates applicable to qualified dividends. Trust preferred securities generally involve the same
risks as traditional preferred stocks but are also subject to unique risks, including risks associated with income payments only
being made if payments on the underlying obligations are made. Typically, a trust preferred security will have a rating that is
below that of its corresponding operating company’s senior debt securities due to its subordinated nature.

 

Subordinated or junior
notes or debentures are securities that generally have priority to common stock and other preferred securities in a company’s
capital structure but are subordinated to other bonds and debt instruments in a company’s capital structure. As a result,
these securities will be subject to greater credit risk than those senior debt instruments and will not receive income payments
or return of principal in the event of insolvency until all obligations on senior debt instruments have been made. Distributions
from these securities are typically treated as interest rather than dividends for federal income tax purposes and therefore, are
not eligible for the dividends-received deduction or the lower federal tax rates applicable to qualified dividends. Investments
in subordinated or junior notes or debentures also generally involve risks similar to risks of other preferred securities described
above.

 

High Yield Securities.
“High yield” or “junk” securities, the generic names for securities rated below BBB by S&P Global Ratings,
a division of S&P Global, Inc. (“S&P”) or below Baa by Moody’s Investors Service, Inc. (“Moody’s”)
(or similar ratings of other rating agencies), are frequently issued by corporations in the growth stage of their development,
by established companies whose operations or industries are depressed or by highly leveraged companies purchased in leveraged buyout
transactions. These obligations that are considered below “investment grade” and should be considered speculative as
such ratings indicate a quality of less than investment grade. High yield securities are generally not listed on a national securities
exchange. Trading of high yield securities, therefore, takes place primarily in over-the-counter markets that consist of groups
of dealer firms that are typically major securities firms. Because the high yield security market is a dealer market, rather than
an auction market, no single obtainable price for a given security prevails at any given time. Prices are determined by negotiation
between traders. The existence of a liquid trading market for the securities may depend on whether dealers will make a market in
the securities. There can be no assurance that a market will be made for any of the securities, that any market for the securities
will be maintained or of the liquidity of the securities in any markets made. Not all dealers maintain markets in all high yield
securities. Therefore, since there are fewer traders in these securities than there are in “investment grade” securities,
the bid-offer spread is usually greater for high yield securities than it is for investment grade securities. The price at which
the securities may be sold to meet redemptions and the value of a trust may be adversely affected if trading markets for the securities
are limited or absent.

 

 

An investment in “high
yield, high-risk” debt obligations or “junk” obligations may include increased credit risks and the risk that
the value of the units will decline, and may decline precipitously, with increases in interest rates. During certain periods there
have been wide fluctuations in interest rates and thus in the value of debt obligations generally. Certain high yield securities
may be subject to greater market fluctuations and risk of loss of income and principal than are investments in lower-yielding,
higher-rated securities, and their value may decline precipitously because of increases in interest rates, not only because the
increases in rates generally decrease values, but also because increased rates may indicate a slowdown in the economy and a decrease
in the value of assets generally that may adversely affect the credit of issuers of high yield, high-risk securities resulting
in a higher incidence of defaults among high yield, high-risk securities. A slowdown in the economy, or a development adversely
affecting an issuer’s creditworthiness, may result in the issuer being unable to maintain earnings or sell assets at the
rate and at the prices, respectively, that are required to produce sufficient cash flow to meet its interest and principal requirements.
For an issuer that has outstanding both senior commercial bank debt and subordinated high yield, high-risk securities, an increase
in interest rates will increase that issuer’s interest expense insofar as the interest rate on the bank debt is fluctuating.
However, many leveraged issuers enter into interest rate protection agreements to fix or cap the interest rate on a large portion
of their bank debt. This reduces exposure to increasing rates but reduces the benefit to the issuer of declining rates. The sponsor
cannot predict future economic policies or their consequences or, therefore, the course or extent of any similar market fluctuations
in the future.

 

Lower-rated securities
tend to offer higher yields than higher-rated securities with the same maturities because the creditworthiness of the issuers of
lower-rated securities may not be as strong as that of other issuers. Moreover, if a security is recharacterized as equity by the
Internal Revenue Service for federal income tax purposes, the issuer’s interest deduction with respect to the security will
be disallowed and this disallowance may adversely affect the issuer’s credit rating. Because investors generally perceive
that there are greater risks associated with the lower-rated securities, the yields and prices of these securities tend to fluctuate
more than higher- rated securities with changes in the perceived quality of the credit of their issuers. In addition, the market
value of high yield, high-risk securities may fluctuate more than the market value of higher-rated securities since these securities
tend to reflect short-term credit development to a greater extent than higher-rated securities. Lower-rated securities generally
involve greater risks of loss of income and principal than higher-rated securities. Issuers of lower-rated securities may possess
fewer creditworthiness characteristics than issuers of higher-rated securities and, especially in the case of issuers whose obligations
or credit standing have recently been downgraded, may be subject to claims by debt-holders, owners of property leased to the issuer
or others which, if sustained, would make it more difficult for the issuers to meet their payment obligations. High yield, high-risk
securities are also affected by variables such as interest rates, inflation rates and real growth in the economy.

 

Should the issuer of
any security default in the payment of principal or interest, the holders of such security may incur additional expenses seeking
payment on the defaulted security. Because the amounts (if any) recovered in payment under the defaulted security may not be reflected
in the value of a fund held by a trust or units of a trust until actually received, and depending upon when a unitholder purchases
or sells his or her units, it is possible that a

 

 

unitholder would bear a portion of the cost of recovery without receiving any
portion of the payment recovered.

 

High yield, high-risk
securities are generally subordinated obligations. The payment of principal (and premium, if any), interest and sinking fund requirements
with respect to subordinated obligations of an issuer is subordinated in right of payment to the payment of senior obligations
of the issuer. Senior obligations generally include most, if not all, significant debt obligations of an issuer, whether existing
at the time of issuance of subordinated debt or created thereafter. Upon any distribution of the assets of an issuer with subordinated
obligations upon dissolution, total or partial liquidation or reorganization of or similar proceeding relating to the issuer, the
holders of senior indebtedness will be entitled to receive payment in full before holders of subordinated indebtedness will be
entitled to receive any payment. Moreover, generally no payment with respect to subordinated indebtedness may be made while there
exists a default with respect to any senior indebtedness. Thus, in the event of insolvency, holders of senior indebtedness of an
issuer generally will recover more, ratably, than holders of subordinated indebtedness of that issuer.

 

Municipal Bonds.
Certain municipal bonds are “general obligation bonds” and are general obligations of a governmental entity that are
backed by the taxing power of such entity. Other municipal bonds are “revenue bonds” payable from the income of a specific
project or authority and are not supported by the issuer’s power to levy taxes. General obligation bonds are secured by the
issuer’s pledge of its faith, credit and taxing power for the payment of principal and interest. Revenue bonds, on the other
hand, are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source. There are, of course, variations in the security of the different
bonds, both within a particular classification and between classifications, depending on numerous factors. The COVID-19 pandemic
has adversely affected, and may further adversely affect in the future, the financial conditions of many states and political subdivisions,
and could negatively impact the value of bonds issued by states and political subdivisions, as well as the ability of such entities
to make payments when due.

 

Certain municipal bonds
may be obligations which derive their payments from mortgage loans. Certain of such housing bonds may be insured by the Federal
Housing Administration or may be single-family mortgage revenue bonds issued for the purpose of acquiring from originating financial
institutions notes secured by mortgages on residences located within the issuer’s boundaries and owned by persons of low
or moderate income. Mortgage loans are generally partially or completely prepaid prior to their final maturities as a result of
events such as sale of the mortgaged premises, default, condemnation or casualty loss. Because these bonds are subject to extraordinary
mandatory redemption in whole or in part from such prepayments of mortgage loans, a substantial portion of such bonds will probably
be redeemed prior to their scheduled maturities or even prior to their ordinary call dates. Extraordinary mandatory redemption
without premium could also result from the failure of the originating financial institutions to make mortgage loans in sufficient
amounts within a specified time period. Additionally, unusually high rates of default on the underlying mortgage loans may reduce
revenues available for the payment of principal of or interest on such mortgage revenue bonds. These bonds were issued under provisions
of the Internal Revenue Code, which include certain

 

 

requirements relating to the use of the proceeds of such bonds in order for
the interest on such bonds to retain its tax-exempt status. In each case the issuer of the bonds has covenanted to comply with
applicable requirements and bond counsel to such issuer has issued an opinion that the interest on the bonds is exempt from federal
income tax under existing laws and regulations.

 

Certain municipal bonds
may be health care revenue bonds. Ratings of bonds issued for health care facilities are often based on feasibility studies that
contain projections of occupancy levels, revenues and expenses. A facility’s gross receipts and net income available for
debt service may be affected by future events and conditions including, among other things, demand for services and the ability
of the facility to provide the services required, physicians’ confidence in the facility, management capabilities, competition
with other health care facilities, efforts by insurers and governmental agencies to limit rates, legislation establishing state
rate-setting agencies, expenses, the cost and possible unavailability of malpractice insurance, the funding of Medicare, Medicaid
and other similar third-party pay or programs, government regulation and the termination or restriction of governmental financial
assistance, including that associated with Medicare, Medicaid and other similar third-party pay or programs.

 

Certain municipal bonds
may be obligations of public utility issuers, including those selling wholesale and retail electric power and gas. General problems
of such issuers would include the difficulty in financing large construction programs, the limitations on operations and increased
costs and delays attributable to environmental considerations, the difficulty of the capital market in absorbing utility debt,
the difficulty in obtaining fuel at reasonable prices and the effect of energy conservation. In addition, federal, state and municipal
governmental authorities may from time to time review existing, and impose additional, regulations governing the licensing, construction
and operation of nuclear power plants, which may adversely affect the ability of the issuers of certain bonds to make payments
of principal and/or interest on such bonds.

 

Certain municipal bonds
may be obligations of issuers whose revenues are derived from the sale of water and/or sewerage services. Such bonds are generally
payable from user fees. The problems of such issuers include the ability to obtain timely and adequate rate increases, population
decline resulting in decreased user fees, the difficulty of financing large construction programs, the limitations on operations
and increased costs and delays attributable to environmental considerations, the increasing difficulty of obtaining or discovering
new supplies of fresh water, the effect of conservation programs and the impact of “no-growth” zoning ordinances.

 

Certain municipal bonds
may be industrial revenue bonds (“IRBs”). IRBs have generally been issued under bond resolutions pursuant to
which the revenues and receipts payable under the arrangements with the operator of a particular project have been assigned and
pledged to purchasers. In some cases, a mortgage on the underlying project may have been granted as security for the IRBs. Regardless
of the structure, payment of IRBs is solely dependent upon the creditworthiness of the corporate operator of the project or corporate
guarantor. Corporate operators or guarantors may be affected by many factors which may have an adverse impact on the credit quality
of the particular company or industry. These include cyclicality of revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents or

 

 

environmentally-caused illnesses, extensive competition and financial deterioration resulting
from a corporate restructuring pursuant to a leveraged buy-out, takeover or otherwise. Such a restructuring may result in the operator
of a project becoming highly leveraged which may impact on such operator’s creditworthiness which in turn would have an adverse
impact on the rating and/or market value of such bonds. Further, the possibility of such a restructuring may have an adverse impact
on the market for and consequently the value of such bonds, even though no actual takeover or other action is ever contemplated
or effected.

 

Certain municipal bonds
may be obligations that are secured by lease payments of a governmental entity (“lease obligations”). Lease
obligations are often in the form of certificates of participation. Although the lease obligations do not constitute general obligations
of the municipality for which the municipality’s taxing power is pledged, a lease obligation is ordinarily backed by the
municipality’s covenant to appropriate for and make the payments due under the lease obligation. However, certain lease obligations
contain “non-appropriation” clauses which provide that the municipality has no obligation to make lease payments in
future years unless money is appropriated for such purpose on a yearly basis. A governmental entity that enters into such a lease
agreement cannot obligate future governments to appropriate for and make lease payments but covenants to take such action as is
necessary to include any lease payments due in its budgets and to make the appropriations therefor. A governmental entity’s
failure to appropriate for and to make payments under its lease obligation could result in insufficient funds available for payment
of the obligations secured thereby. Although “non-appropriation” lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove difficult.

 

Certain municipal bonds
may be obligations of issuers which are, or which govern the operation of, schools, colleges and universities and whose revenues
are derived mainly from ad valorem taxes or for higher education systems, from tuition, dormitory revenues, grants and endowments.
General problems relating to school bonds include litigation contesting the state constitutionality of financing public education
in part from ad valorem taxes, thereby creating a disparity in educational funds available to schools in wealthy areas and schools
in poor areas. Litigation or legislation on this issue may affect the sources of funds available for the payment of school bonds.
General problems relating to college and university obligations include the prospect of declining student enrollment, possible
inability to raise tuitions and fees sufficiently to cover operating costs, the uncertainty of continued receipt of federal grants
and state funding and government legislation or regulations which may adversely affect the revenues or costs of such issuers.

 

Certain municipal bonds
may be obligations which are payable from and secured by revenues derived from the ownership and operation of facilities such as
airports, bridges, turnpikes, port authorities, convention centers and arenas. The major portion of an airport’s gross operating
income is generally derived from fees received from signatory airlines pursuant to use agreements which consist of annual payments
for leases, occupancy of certain terminal space and service fees. Airport operating income may therefore be affected by the ability
of the airlines to meet their obligations under the use agreements. From time to time the air transport industry has experienced
significant variations in earnings and traffic, due to increased competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines

 

 

have experienced severe financial difficulties. Similarly, payment on bonds
related to other facilities is dependent on revenues from the projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected by reduction in revenues due to such factors as increased
cost of maintenance, decreased use of a facility, lower cost of alternative modes of transportation, scarcity of fuel and reduction
or loss of rents.

 

Certain municipal bonds
may be obligations which are payable from and secured by revenues derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam and convert steam to electricity. Resource recovery bonds
may be subject to extraordinary optional redemption at par upon the occurrence of certain circumstances, including but not limited
to: destruction or condemnation of a project; contracts relating to a project becoming void, unenforceable or impossible to perform;
changes in the economic availability of raw materials, operating supplies or facilities necessary for the operation of a project;
technological or other unavoidable changes adversely affecting the operation of a project; and administrative or judicial actions
which render contracts relating to the projects void, unenforceable or impossible to perform or impose unreasonable burdens or
excessive liabilities. No one can predict the causes or likelihood of the redemption of resource recovery bonds prior to the stated
maturity of the bonds.

 

Certain municipal bonds
may have been acquired at a market discount from par value at maturity. A “tax-exempt” municipal bond purchased at
a market discount and held to maturity will have a larger portion of its total return in the form of taxable income and capital
gain and less in the form of tax-exempt interest income than a comparable bond newly issued at current market rates.

 

Certain municipal bonds
may be subject to redemption prior to their stated maturity date pursuant to sinking fund provisions, call provisions or extraordinary
optional or mandatory redemption provisions or otherwise. A sinking fund is a reserve fund accumulated over a period of time for
retirement of debt. A callable debt obligation is one which is subject to redemption or refunding prior to maturity at the option
of the issuer. A refunding is a method by which a debt obligation is redeemed, at or before maturity, by the proceeds of a new
debt obligation. In general, call provisions are more likely to be exercised when the offering side valuation is at a premium over
par than when it is at a discount from par. The exercise of redemption or call provisions will (except to the extent the proceeds
of the called bonds are used to pay for unit redemptions) result in the distribution of principal and may result in a reduction
in the amount of subsequent interest distributions. Extraordinary optional redemptions and mandatory redemptions result from the
happening of certain events. Generally, events that may permit the extraordinary optional redemption of bonds or may require the
mandatory redemption of bonds include, among others: a final determination that the interest on the bonds is taxable; the substantial
damage or destruction by fire or other casualty of the project for which the proceeds of the bonds were used; an exercise by a
local, state or federal governmental unit of its power of eminent domain to take all or substantially all of the project for which
the proceeds of the bonds were used; changes in the economic availability of raw materials, operating supplies or facilities; technological
or other changes which render the operation of the project for which the proceeds of the bonds were used uneconomic; changes in
law or an administrative or judicial decree which

 

 

renders the performance of the agreement under which the proceeds of the bonds
were made available to finance the project impossible or which creates unreasonable burdens or which imposes excessive liabilities,
such as taxes, not imposed on the date the bonds are issued on the issuer of the bonds or the user of the proceeds of the bonds;
an administrative or judicial decree which requires the cessation of a substantial part of the operations of the project financed
with the proceeds of the bonds; an overestimate of the costs of the project to be financed with the proceeds of the bonds resulting
in excess proceeds of the bonds which may be applied to redeem bonds; or an underestimate of a source of funds securing the bonds
resulting in excess funds which may be applied to redeem bonds. The issuer of certain bonds may have sold or reserved the right
to sell, upon the satisfaction of certain conditions, to third parties all or any portion of its rights to call bonds in accordance
with the stated redemption provisions of such bonds. In such a case the issuer no longer has the right to call the bonds for redemption
unless it reacquires the rights from such third party. A third party pursuant to these rights may exercise the redemption provisions
with respect to a bond at a time when the issuer of the bond might not have called a bond for redemption had it not sold such rights.
No one can predict all of the circumstances which may result in such redemption of an issue of bonds. See also the discussion of
single-family mortgage and multi-family revenue bonds above for more information on the call provisions of such bonds.

 

Convertible Securities.
Convertible securities are generally debt obligations or preferred stock of a company that are convertible into another security
of the company, typically common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible
fixed-income securities of similar credit quality because of the potential for capital appreciation. The market values 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
the stock price is greater than the convertible security’s conversion price. The conversion price is defined as the predetermined
price or exchange ratio at which the convertible security can be converted or exchanged for the underlying common stock. As the
market price of the underlying common stock declines below the conversion price, the price of the convertible security tends to
be increasingly influenced more by the yield of the convertible security than by the market price of the underlying common stock.
Thus, it may not decline in price to the same extent as the underlying common stock, and convertible securities generally have
less potential for gain or loss than common stocks. However, mandatory convertible securities (as discussed below) generally do
not limit the potential for loss to the same extent as securities convertible at the option of the holder. In the event of a liquidation
of the issuing company, holders of convertible securities would be paid before that company’s common stockholders. Consequently,
an issuer’s convertible securities generally entail less risk than its common stock. However, convertible securities generally
fall below other debt obligations of the same issuer in order of preference or priority in the event of a liquidation and are typically
unrated or rated lower than such debt obligations. In addition, contingent payment, convertible securities allow the issuer to
claim deductions based on its nonconvertible cost of debt, which generally will result in deduction in excess of the actual cash
payments made on the securities (and accordingly, holders will recognize income in amounts in excess of the cash payments received).

 

 

Mandatory convertible
securities are distinguished as a subset of convertible securities because the conversion is not optional and the conversion price
at maturity is based solely upon the market price of the underlying common stock,
which may be significantly less than par or the price (above or below par) paid. For these reasons, the risks associated with investing
in mandatory convertible securities most closely resemble the risks inherent in common stocks. Mandatory convertible securities
customarily pay a higher coupon yield to compensate for the potential risk of additional price volatility and loss upon conversion.
Because the market price of a mandatory convertible security increasingly corresponds to the market price of its underlying common
stock as the convertible security approaches its conversion date, there can be no assurance that the higher coupon will compensate
for the potential loss.

 

Senior Loans.
Senior loans may be issued by banks, other financial institutions, and other investors to corporations, partnerships, limited liability
companies and other entities to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, debt refinancings
and, to a lesser extent, for general operating and other purposes. Senior loans generally are of below investment grade credit
quality and may be unrated at the time of investment. They generally are not registered with the SEC or any state securities commission
and generally are not listed on any securities exchange.

 

An investment in senior
loans involves risk that the borrowers under senior loans may default on their obligations to pay principal or interest when due.
Although senior loans may be secured by specific collateral, there can be no assurance that liquidation of collateral would satisfy
the borrower’s obligation in the event of non-payment or that such collateral could be readily liquidated. Senior loans are
typically structured as floating rate instruments in which the interest rate payable on the obligation fluctuates with interest
rate changes. As a result, the yield on an investment in senior loans will generally decline in a falling interest rate environment
and increase in a rising interest rate environment. Additionally, senior loans generally have floating interest rates that may
be tied to the London Inter-Bank Offered Rate (“LIBOR”). In 2017, the United Kingdom’s Financial Conduct Authority,
which regulated LIBOR, announced that it intended to phase out LIBOR by the end of 2021. In March 2021, the administrator of LIBOR
announced a delay in the phase out of the majority of U.S. dollar LIBOR publications until June 30, 2023. In the United States,
the Secured Overnight Financing Rate (“SOFR”) is anticipated to be the replacement rate for most floating rate
instruments. Not all instruments that contemplate LIBOR have a replacement rate, and the effectiveness of SOFR or any other replacement
rate remains uncertain. Accordingly, the potential phase out of LIBOR could adversely affect the value of investments tied to LIBOR.

 

The amount of public
information available on senior loans generally will be less extensive than that available for other types of assets. No reliable,
active trading market currently exists for many senior loans, although a secondary market for certain senior loans does exist.
Senior loans are thus relatively illiquid. If a fund held by a trust invests in senior loans, liquidity of a senior loan refers
to the ability of the fund to sell the investment in a timely manner at a price approximately equal to its value on the fund’s
books. The illiquidity of senior loans may impair a fund’s ability to realize the full value of its assets in the event of
a voluntary or involuntary liquidation of such assets. Because of the lack of an active trading market, illiquid securities are
also difficult to value and prices provided by external pricing services may not

 

 

reflect the true value of the securities. However,
many senior loans are of a large principal amount and are held by financial institutions. To the extent that a secondary market
does exist for certain senior loans, the market may be subject to irregular trading activity, wide bid/ask spreads and extended
trade settlement periods. The market for senior loans could be disrupted in the event of an economic downturn or a substantial
increase or decrease in interest rates. This could result in increased volatility in the market and in a trust’s net asset
value.

 

If legislation or state
or federal regulators impose additional requirements or restrictions on the ability of financial institutions to make loans that
are considered highly leveraged transactions, the availability of senior loans for investment may be adversely affected. In addition,
such requirements or restrictions could reduce or eliminate sources of financing for certain borrowers. This would increase the
risk of default. If legislation or federal or state regulators require financial institutions to dispose of senior loans that are
considered highly leveraged transactions or subject such senior loans to increased regulatory scrutiny, financial institutions
may determine to sell such senior loans. Such sales could result in depressed prices. The price for the senior loan may be adversely
affected if sold at a time when a financial institution is engaging in such a sale.

 

Some senior loans are
subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the senior loans to
presently existing or future indebtedness of the borrower or take other action detrimental to lenders. Such court action could
under certain circumstances include invalidation of senior loans. Any lender, which could include a fund held by a trust, is subject
to the risk that a court could find the lender liable for damages in a claim by a borrower arising under the common laws of tort
or contracts or anti-fraud provisions of certain securities laws for actions taken or omitted to be taken by the lenders under
the relevant terms of a loan agreement or in connection with actions with respect to the collateral underlying the senior loan.

 

Covenant-Lite
Loans.
Certain funds held by a trust may invest significantly in “covenant-lite” loans, which are loans made
with minimal protections for the lender. Because covenant-lite loans are less restrictive on borrowers and provide less protection
for lenders than typical corporate loans, the risk of default may be significantly higher. Covenant-lite loans contain fewer maintenance
covenants, or no maintenance covenants at all, than traditional loans and may not include terms that allow the lender to monitor
the financial performance of the borrower and declare a default if certain criteria are breached. This may hinder a fund’s
ability to reprice credit risk associated with the borrower and reduce the fund’s ability to restructure a problematic loan
and mitigate potential loss. As a result, the fund’s exposure to losses on such investments is increased, especially during
a downturn in the credit cycle.

 

Floating Rate
Instruments
. A floating rate security is an instrument in which the interest rate payable on the obligation fluctuates
on a periodic basis based upon changes in a benchmark, often related to interest rates. As a result, the yield on such a security
will generally decline with negative changes to the benchmark, causing an investor to experience a reduction in the income it receives
from such securities. A sudden and significant increase in the applicable benchmark may increase the risk of payment defaults and
cause a decline in the value of the security.

 

 

Asset-Backed
Securities
. Asset-backed securities (“ABS”) are securities backed by pools of loans or other
receivables. ABS are created from many types of assets, including auto loans, credit card receivables, home equity loans and student
loans. ABS are issued through special purpose vehicles that are bankruptcy remote from the issuer of the collateral. The credit
quality of an ABS transaction depends on the performance of the underlying assets. To protect ABS investors from the possibility
that some borrowers could miss payments or even default on their loans, ABS include various forms of credit enhancement. Some ABS,
particularly home equity loan transactions, are subject to interest rate risk and prepayment risk. A change in interest rates can
affect the pace of payments on the underlying loans, which in turn, affects total return on the securities. ABS also carry credit
or default risk. If many borrowers on the underlying loans default, losses could exceed the credit enhancement level and result
in losses to investors in an ABS transaction. Finally, ABS have structure risk due to a unique characteristic known as early amortization,
or early payout, risk. Built into the structure of most ABS are triggers for early payout, designed to protect investors from losses.
These triggers are unique to each transaction and can include: a big rise in defaults on the underlying loans, a sharp drop in
the credit enhancement level, or even the bankruptcy of the originator. Once early amortization begins, all incoming loan payments
(after expenses are paid) are used to pay investors as quickly as possible based upon a predetermined priority of payment.

 

Mortgage-Backed
Securities
. Mortgage-backed securities are a type of ABS representing direct or indirect participations in, or are
secured by and payable from, mortgage loans secured by real property and can include single- and multi-class pass-through securities
and collateralized mortgage obligations. Mortgage-backed securities are based on different types of mortgages, including those
on commercial real estate or residential properties. These securities often have stated maturities of up to thirty years when they
are issued, depending upon the length of the mortgages underlying the securities. In practice, however, unscheduled or early payments
of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this. Rising
interest rates tend to extend the duration of mortgage-backed securities, making them more sensitive to changes in interest rates,
and may reduce the market value of the securities. In addition, mortgage-backed securities are subject to prepayment risk, the
risk that borrowers may pay off their mortgages sooner than expected, particularly when interest rates decline.

 

Sovereign Debt.
Sovereign debt instruments are subject to the risk that a governmental entity may delay or refuse to pay interest or repay
principal on its sovereign debt, due, for example, to cash flow problems, insufficient foreign currency reserves, political considerations,
the relative size of the governmental entity’s debt position in relation to the economy or the failure to put in place required
economic reforms. If a governmental entity defaults, it may ask for more time in which to pay or for further loans. There is no
legal process for collecting sovereign debt that a government does not pay nor are there bankruptcy proceedings through which all
or part of the sovereign debt that a governmental entity has not repaid may be collected.

 

U.S. Government
Obligations Risk
. Obligations of U.S. government agencies, authorities, instrumentalities and sponsored enterprises
have historically involved little risk of loss of principal if held to maturity. However, not all U.S. government securities are
backed by

 

 

the full faith and credit of the United States. Obligations of certain agencies, authorities, instrumentalities and sponsored
enterprises of the U.S. government are backed by the full faith and credit of the United States (e.g., the Government National
Mortgage Association); other obligations are backed by the right of the issuer to borrow from the U.S. Treasury (e.g., the
Federal Home Loan Banks) and others are supported by the discretionary authority of the U.S. government to purchase an agency’s
obligations. Still others are backed only by the credit of the agency, authority, instrumentality or sponsored enterprise issuing
the obligation. No assurance can be given that the U.S. government would provide financial support to any of these entities if
it is not obligated to do so by law.

 

Money Market
Securities
. Certain funds held by a trust may invest in money market securities. If market conditions improve while
a fund has temporarily invested some or all of its assets in high quality money market securities, this strategy could result in
reducing the potential gain from the market upswing, thus reducing a fund’s opportunity to achieve its investment objective.

 

Derivatives Risk.
Certain funds held by a trust may engage in transactions in derivatives. Derivatives are subject to counterparty risk which is
the risk that the other party in a transaction may be unable or unwilling to meet obligations when due. Use of derivatives may
increase volatility of a fund and reduce returns. Fluctuations in the value of derivatives may not correspond with fluctuations
of underlying exposures. Unanticipated market movements could result in significant losses on derivative positions including greater
losses than amounts originally invested and potentially unlimited losses in the case of certain derivatives. There are no assurances
that there will be a secondary market available in any derivative position which could result in illiquidity and the inability
of a fund to liquidate or terminate positions as valued. Valuation of derivative positions may be difficult and increase during
times of market turmoil. Certain derivatives may be used as a hedge against other securities positions; however, hedging can be
subject to the risk of imperfect alignment and there are no assurances that a hedge will be achieved as intended which can pose
significant loss to a fund. The derivatives market is subject to the risk of changing or increased regulation which may make derivatives
more costly, limit the availability of derivatives or otherwise adversely affect the value or performance of derivatives. Examples
of increased regulation include, but are not limited to, the imposition of clearing and reporting requirements on transactions
that fall within the definition of “swap” and “security-based swap,” increased recordkeeping and reporting
requirements, changing definitional and registration requirements, and changes to the way that funds’ use of derivatives
is regulated. No one can predict the effects of any new governmental regulation that may be implemented on the ability of a fund
to use any financial derivative product, and there can be no assurance that any new governmental regulation will not adversely
affect a fund’s ability to achieve its investment objective. The federal income tax treatment of a derivative may not be
as favorable as a direct investment in the asset that a derivative provides exposure to, which may adversely impact the timing,
character and amount of income a fund realizes from its investment. The tax treatment of certain derivatives is unsettled and may
be subject to future legislation, regulation or administrative pronouncements. Additionally, the Securities and Exchange Commission
(“SEC”) adopted Rule 18f-4 which imposes certain requirements on the usage of derivatives by registered investment
companies. Rule 18f-4 imposes limits on the amount of derivatives a fund can enter into, among other requirements, and eliminates
other frameworks

 

 

utilized by funds to comply with Section 18 of the Investment Company Act. Additionally, it requires a fund to
treat derivatives as senior securities and requires funds who use more than a limited specified amount of exposure to derivatives
to establish a comprehensive derivatives risk management program and appoint a derivatives risk manager. Certain funds held by
a trust are required to comply with these requirements which could adversely impact such funds and subsequently a trust.

 

Options.
A trust may hold a fund or funds that write (sell) or purchase options as part of its investment strategy. In addition to general
risks associated with derivatives described above, options are considered speculative. When a fund purchases an option, it may
lose the premium paid for it if the price of the underlying security or other assets decreases or remains the same (in the case
of a call option) or increases or remains the same (in the case of a put option). If a put or call option purchased by a fund were
permitted to expire without being sold or exercised, its premium would represent a loss to a fund. To the extent that a fund writes
or sells an option, if the decline or increase in the underlying asset is significantly below or above the exercise price of the
written option, a fund could experience substantial and potentially unlimited losses.

 

There can be no assurance
that a liquid market for the options will exist when a fund seeks to close out an option position. Reasons for the absence of a
liquid secondary market on an exchange may include the following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen of an
exchange or The Options Clearing Corporation (“OCC”) may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue
the trading of options (or a particular class or series of options). If trading were discontinued, the secondary market on that
exchange (or in that class or series of options) would cease to exist. However, outstanding options on that exchange that had been
issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms. A fund’s
ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. If a fund were unable to close out a covered call option
that it had written (sold) on a security, it would not be able to sell the underlying security unless the option expired without
exercise.

 

The hours of trading
for options may not conform to the hours during which the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets
that cannot be reflected in the options markets. Additionally, the exercise price of an option may be adjusted downward before
the option’s expiration as a result of the occurrence of certain corporate events affecting the underlying equity security,
such as extraordinary dividends, stock splits, merger or other extraordinary distributions or events. In certain circumstances,
a reduction in the exercise price of an option could reduce a fund’s capital appreciation potential on the underlying security.

 

 

To the extent that
a fund purchases options pursuant to a hedging strategy, the fund will be subject to the following additional risks. If a put or
call option purchased by a fund is not sold when it has remaining value, and if the market price of the underlying security remains
equal to or greater than the exercise price (in the case of a put), or remains less than or equal to the exercise price (in the
case of a call), the fund will lose its entire investment in the option. Also, where a put or call option on a particular security
is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less
than the price of the related security. If restrictions on exercise were imposed, a fund might be unable to exercise an option
it had purchased. If a fund were unable to close out an option that it had purchased on a security, it would have to exercise the
option in order to realize any profit or the option may expire worthless.

 

The writing (selling)
and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The successful use of options depends in part on the ability of a fund’s
adviser to predict future price fluctuations and, for hedging transactions, the degree of correlation between the options and securities
or currency markets.

 

If a fund employs a
covered call strategy, a fund will generally write (sell) call options on a significant portion of the fund’s managed assets.
These call options will give the option holder the right, but not the obligation, to purchase a security from the fund at the strike
price on or prior to the option’s expiration date. The ability to successfully implement the fund’s investment strategy
depends on the fund adviser’s ability to predict pertinent market movements, which cannot be assured. Thus, the use of options
may require a fund to sell portfolio securities at inopportune times or for prices other than current market values, may limit
the amount of appreciation the fund can realize on an investment or may cause the fund to hold a security that it might otherwise
sell. The writer (seller) of an option has no control over the time when it may be required to fulfill its obligation as a writer
(seller) of the option. Once an option writer (seller) has received an exercise notice, it cannot affect a closing purchase transaction
in order to terminate its obligation under the option and must deliver the underlying security at the exercise price. As the writer
(seller) of a covered call option, a fund forgoes, during the option’s life, the opportunity to profit from increases in
the market value of the security underlying the call option above the sum of the premium and the strike price of the call option,
but has retained the risk of loss should the price of the underlying security decline. The value of the options written (sold)
by a fund will be affected by changes in the value and dividend rates of the underlying equity securities, an increase in interest
rates, changes in the actual or perceived volatility of securities markets and the underlying securities and the remaining time
to the options’ expirations. The value of the options may also be adversely affected if the market for the options becomes
less liquid or smaller.

 

An option is generally
considered “covered” if a fund owns the security underlying the call option or has an absolute and immediate right
to acquire that security without additional cash consideration (or, if required, liquid cash or other assets are segregated by
the fund) upon conversion or exchange of other securities held by the fund. In certain cases, a call option may also be considered
covered if a fund holds a call option on the same security as the call option written (sold) provided that certain conditions are
met. By writing (selling) covered call options,

 

 

a fund generally seeks to generate income, in the form of the premiums received
for writing (selling) the call options. Investment income paid by a fund to its shareholders (such as a trust) may be derived primarily
from the premiums it receives from writing (selling) call options and, to a lesser extent, from the dividends and interest it receives
from the equity securities or other investments held in the fund’s portfolio and short-term gains thereon. Premiums from
writing (selling) call options and dividends and interest payments made by the securities in a fund’s portfolio can vary
widely over time.

 

Swaps.
Certain funds held by a trust may invest in swaps. In addition to general risks associated with derivatives described above,
swap agreements involve the risk that the party with whom a fund has entered into the swap will default on its obligation to pay
a fund and the risk that a fund will not be able to meet its obligations to pay the other party to the agreement. Swaps entered
into by a fund may include, but are not limited to, interest rate swaps, total return swaps and/or credit default swaps. In an
interest rate swap transaction, two parties exchange rights to receive interest payments, such as exchanging the right to receive
floating rate payments based on a reference interest rate for the right to receive fixed rate payments. In addition to the general
risks associated with derivatives and swaps described above, interest rate swaps are subject to interest rate risk and credit risk.
In a total return swap transaction, one party agrees to pay another party an amount equal to the total return on a reference asset
during a specified period of time in return for periodic payments based on a fixed or variable interest rate or on the total return
from a different reference asset. In addition to the general risks associated with derivatives and swaps described above, total
return swaps could result in losses if the reference asset does not perform as anticipated and these swaps can have the potential
for unlimited losses. In a credit default swap transaction, one party makes one or more payments over the term of the contract
to the counterparty, provided that no event of default with respect to a specific obligation or issuer has occurred. In return,
upon any event of default, such party would receive from the counterparty a payment equal to the par (or other agreed-upon) value
of such specified obligation. In addition to general risks associated with derivatives and swaps described above, credit default
swaps involve special risks because they are difficult to value, are highly susceptible to liquidity and credit risk and generally
pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation
(as opposed to a credit downgrade or other indication of financial difficulty).

 

Forward Foreign
Currency Exchange Contracts
. Certain funds held by a trust may engage in forward foreign currency exchange transactions.
Forward foreign exchange transactions are contracts to purchase or sell a specified amount of a specified currency or multinational
currency unit at a price and future date set at the time of the contract. Forward foreign currency exchange contracts do not eliminate
fluctuations in the value of non-U.S. securities but rather allow a fund to establish a fixed rate of exchange for a future point
in time. This strategy can have the effect of reducing returns and minimizing opportunities for gain.

 

Indexed and Inverse
Securities
. Certain funds held by a trust may invest in indexed and inverse securities. In addition to general risks
associated with derivatives described above, indexed and inverse securities are subject to risk with respect to the value of the
particular index. These securities are subject to leverage risk and correlation risk. Certain indexed and inverse securities have
greater sensitivity to changes in interest rates or index levels than other securities,

 

 

and a fund’s investment in such instruments
may decline significantly in value if interest rates or index levels move in a way a fund’s management does not anticipate.

 

Futures.
Certain funds held by a trust may engage in futures transactions. In addition to general risks associated with derivatives described
above, the primary risks associated with the use of futures contracts and options are (a) the imperfect correlation between
the change in market value of the instruments held by a fund and the price of the futures contract or option; (b) possible
lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired;
(c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser’s
inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors;
and (e) the possibility that the counterparty will default in the performance of its obligations. While futures contracts
are generally liquid instruments, under certain market conditions they may become illiquid. Futures exchanges may impose daily
or intra-day price change limits and/or limit the volume of trading. Additionally, government regulation may further reduce liquidity
through similar trading restrictions.

 

Repurchase Agreement
Risk
. A repurchase agreement is a form of short-term borrowing where a dealer sells securities to investors (usually
on an overnight basis) and buys them back the following day. If the other party to a repurchase agreement defaults on its obligation
under such agreement, a fund held by a trust may suffer delays and incur costs or lose money in exercising its rights under the
agreement. If the seller fails to repurchase the security under a repurchase agreement and the market value of such security declines,
such fund may lose money.

 

Short Sales Risk.
Certain funds held by a trust may engage in short sales. Because making short sales in securities that it does not own exposes
a fund to the risks associated with those securities, such short sales involve speculative exposure risk. A fund will incur a loss
as a result of a short sale if the price of the security increases between the date of the short sale and the date on which such
fund replaces the security sold short. A fund will realize a gain if the security declines in price between those dates. As a result,
if a fund makes short sales in securities that increase in value, it will likely underperform similar funds that do not make short
sales in securities they do not own. There can be no assurance that a fund will be able to close out a short sale position at any
particular time or at an acceptable price. Although a fund’s gain is limited to the amount at which it sold a security short,
its potential loss is limited only by the maximum attainable price of the security, less the price at which the security was sold.
Short sale transactions involve leverage because they can provide investment exposure in an amount exceeding the initial investment.
A fund may also pay transaction costs and borrowing fees in connection with short sales.

 

Commodities.
Certain funds held by a trust may have exposure to the commodities market. This exposure could expose such funds and to greater
volatility than investment in other securities. The value of investments providing commodity exposure may be affected by changes
in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry
or commodity, such as drought, floods, weather, embargoes, tariffs and international economic, political and regulatory developments.

 

 

Concentration
Risk.
Concentration risk is the risk that the value of a trust may be more susceptible to fluctuations based on factors
that impact a particular sector because the trust provides exposure to investments concentrated within a particular sector or sectors.
A portfolio “concentrates” in a sector when securities in a particular sector make up 25% or more of the portfolio.

 

Communication
Services Sector.
General risks of communication services companies include rapidly changing technology, rapid product obsolescence,
loss of patent protection, cyclical market patterns, evolving industry standards and frequent new product introductions. Certain
communication companies are subject to substantial governmental regulation, which among other things, regulates permitted rates
of return and the kinds of services that a company may offer. Media and entertainment companies are subject to changing demographics,
consumer preferences and changes in the way people communicate and access information and entertainment content. Certain of these
companies may be particularly susceptible to cybersecurity threats, which could have an adverse effect on their business. Companies
in this sector may be subject to fierce competition for market share from existing competitors and new market entrants. Such competitive
pressures are intense and communication stocks can experience extreme volatility.

 

Companies in the communication
sector may encounter distressed cash flows and heavy debt burdens due to the need to commit substantial capital to meet increasing
competition and research and development costs. Technological innovations may also make the existing products and services of communication
companies obsolete. In addition, companies in this sector can be impacted by a lack of investor or consumer acceptance of new products,
changing consumer preferences and lack of standardization or compatibility with existing technologies making implementation of
new products more difficult.

 

Consumer Discretionary
and Consumer Staples Sectors.
The profitability of companies that manufacture or sell consumer products or provide consumer
services may be affected by various factors including the general state of the economy and consumer spending trends. The viability
of the retail industry depends on the industry’s ability to adapt and to compete in changing economic and social conditions,
to attract and retain capable management, and to finance expansion. Weakness in the banking or real estate industry, a recessionary
economic climate with the consequent slowdown in employment growth, less favorable trends in unemployment or a marked deceleration
in real disposable personal income growth could result in significant pressure on both consumer wealth and consumer confidence,
adversely affecting consumer spending habits. In addition, competitiveness of the retail industry may require large capital outlays
for technological investments. Increasing employee and retiree benefit costs may also have an adverse effect on the industry. In
many sectors of the retail industry, competition may be fierce due to market saturation, converging consumer tastes and other factors.
Many retailers may be involved in entering global markets which entail added risks such as sudden weakening of foreign economies,
military actions, difficulty in adapting to local conditions and constraints and added research costs. The COVID-19 pandemic may
adversely impact companies within these sectors, including but not limited to, companies involved in travel, entertainment and
retail consumer goods and services.

 

 

Energy Sector.
Energy companies may include but are not limited to companies involved in: production, generation, transmission, marketing,
control, or measurement of energy; the provision of component parts or services to companies engaged in the above activities; energy
research or experimentation; and environmental activities related to the solution of energy problems, such as energy conservation
and pollution control.

 

The securities of companies
in the energy field are subject to changes in value and dividend yield which depend, to a large extent, on the price and supply
of energy fuels. Swift price and supply fluctuations may be caused by events relating to international politics, military actions,
energy conservation, the success of exploration projects, and tax and other regulatory policies of various governments. As a result
of the foregoing, the securities issued by energy companies may be subject to rapid price volatility.

 

Any future scientific
advances concerning new sources of energy and fuels or legislative changes relating to the energy sector or the environment could
have a negative impact on the energy sector. Each of the problems referred to could adversely affect the financial stability of
the issuers of any energy sector securities.

 

Financials Sector.
Companies in the financials sector may include banks and their holding companies, finance companies, investment managers,
broker-dealers, insurance and reinsurance companies and mortgage REITs. Financial companies are subject to extensive governmental
regulation which may limit their permitted activities and affect their ability to earn a profit. These government actions include,
but are not limited to, restrictions on investment activities; increased oversight, regulation and involvement in financial services
company practices; adjustments to capital requirements; the acquisition of interests in and the extension of credit to private
entities; and increased investigation efforts into the actions of companies and individuals in the financial service industry.
There can be no assurance as to the actual impact these laws and their implementing regulations, or any other governmental program,
will have on any individual financial company or on the financial markets as a whole.

 

In addition, deterioration
in general economic conditions can have an adverse impact on financial companies. Financial difficulties of borrowers, limited
access to capital, deterioration of credit markets and unstable interest rates can have a disproportionate effect on the financials
sector. Financial markets are becoming increasingly intertwined on a global scale and adverse economic conditions in one country
or region may impact financial companies around the world. Companies in the financials sector may also be the targets of hacking
and potential theft of proprietary or customer information or disruptions in service, which could have a material adverse effect
on their businesses. Financial companies are also subject to intense competition, which could adversely affect the profitability
or viability of such companies.

 

Banks, thrifts and
their holding companies are especially subject to the adverse effects of economic recession, currency exchange rates, volatile
interest rates, portfolio concentrations in geographic markets, in commercial and residential real estate loans or any particular
segment or industry, and competition from new entrants in their fields of business. Banks, thrifts and their holding companies
are extensively regulated at both the federal and state level and may be adversely affected by increased regulations, which impose
strict capital requirements and

 

 

limitations on the permissible activities that banks and thrifts may pursue. In addition, these
companies may face increased competition from nontraditional lending sources as regulatory changes permit new entrants to offer
various financial products. Technological advances allow these nontraditional lending sources to cut overhead and permit the more
efficient use of customer data. Banks, thrifts and their holding companies face tremendous pressure from mutual funds, brokerage
firms and other providers in the competition to furnish services that were traditionally offered by banks and thrifts.

 

Companies engaged in
investment management and broker-dealer activities are subject to volatility in their earnings and share prices that often exceeds
the volatility of the equity market in general. Adverse changes in the direction of the stock market, investor confidence, equity
transaction volume, the level and direction of interest rates and the outlook of emerging markets could adversely affect the financial
stability, as well as the stock prices, of these companies. Additionally, competitive pressures, including increased competition
with new and existing competitors, the ongoing commoditization of traditional businesses and the need for increased capital expenditures
on new technology could adversely impact the profit margins of companies in the investment management and brokerage industries.
Companies involved in investment management and broker-dealer activities are also subject to extensive regulation by government
agencies and self-regulatory organizations, and changes in laws, regulations or rules, or in the interpretation of such laws, regulations
and rules could adversely affect the stock prices of such companies.

 

Companies involved
in the insurance, reinsurance and risk management industry underwrite, sell or distribute property, casualty and business insurance.
Many factors affect insurance, reinsurance and risk management company profits, including but not limited to interest rate movements,
the imposition of premium rate caps, a misapprehension of the risks involved in given underwritings, competition and pressure to
compete globally, weather catastrophes or other natural or man-made disasters and the effects of client mergers. Individual companies
may be exposed to material risks including reserve inadequacy and the inability to collect from reinsurance carriers. Insurance
companies are subject to extensive governmental regulation, including the imposition of maximum rate levels, which may not be adequate
for some lines of business. Proposed or potential tax law changes may also adversely affect insurance companies’ policy sales,
tax obligations and profitability. In addition to the foregoing, profit margins of these companies continue to shrink due to the
commoditization of traditional businesses, new competitors, capital expenditures on new technology and the pressure to compete
globally.

 

In addition to the
normal risks of business, companies involved in the insurance and risk management industry are subject to significant risk factors,
including those applicable to regulated insurance companies, such as: the inherent uncertainty in the process of establishing property-liability
loss reserves, and the fact that ultimate losses could materially exceed established loss reserves, which could have a material
adverse effect on results of operations and financial condition; the fact that insurance companies have experienced, and can be
expected in the future to experience, catastrophic losses, which could have a material adverse impact on their financial conditions,
results of operations and cash flow; the inherent uncertainty in the process of establishing property-liability loss reserves due
to changes in loss payment patterns caused by

 

 

new claim settlement practices; the need for insurance companies and their subsidiaries
to maintain appropriate levels of statutory capital and surplus, particularly in light of continuing scrutiny by rating organizations
and state insurance regulatory authorities, and in order to maintain acceptable financial strength or claims-paying ability ratings;
the extensive regulation and supervision to which insurance companies are subject, and various regulatory and other legal actions;
the adverse impact that increases in interest rates could have on the value of an insurance company’s investment portfolio
and on the attractiveness of certain of its products; and the uncertainty involved in estimating the availability of reinsurance
and the collectability of reinsurance recoverables.

 

The state insurance
regulatory framework is also subject to the risk of federal and state legislatures potentially enacting laws that alter or increase
regulation of insurance companies and insurance holding company systems. Previously, Congress and certain federal agencies have
investigated the condition of the insurance industry in the United States to determine whether to promulgate additional federal
regulation. The Sponsor is unable to predict whether any state or federal legislation will be enacted to change the nature or scope
of regulation of the insurance industry, or what effect, if any, such legislation would have on the industry.

 

All insurance companies
are subject to state laws and regulations that require diversification of their investment portfolios and limit the amount of investments
in certain investment categories. Failure to comply with these laws and regulations would cause non- conforming investments to
be treated as non-admitted assets for purposes of measuring statutory surplus and, in some instances, would require divestiture.

 

Mortgage REITs engage
in financing real estate, purchasing or originating mortgages and mortgage-backed securities and earning income from the interest
on these investments. Such REITs face risks similar to those of other financial firms, such as changes in interest rates, general
market conditions and credit risk, in addition to risks associated with an investment in real estate (as discussed herein).

 

Health Care Sector.
Health care companies involved in advanced medical devices and instruments, drugs and biotech, managed care, hospital management/health
services and medical supplies have potential risks unique to their sector of the health care field. These companies are subject
to governmental regulation of their products and services, a factor which could have a significant and possibly unfavorable effect
on the price and availability of such products or services. Furthermore, such companies face the risk of increasing competition
from new products or services, generic drug sales, termination of patent protection for drug or medical supply products and the
risk that technological advances will render their products obsolete. The research and development costs of bringing a drug to
market are substantial and include lengthy governmental review processes with no guarantee that the product will ever come to market.
Many of these companies may have losses and not offer certain products for several years. Such companies may also have persistent
losses during a new product’s transition from development to production, and revenue patterns may be erratic. In addition,
health care facility operators may be affected by events and conditions including, among other things, pandemics and epidemics,
demand for services, the ability of the facility to provide the services required, physicians’ confidence in the facility,
management capabilities, competition with other hospitals, efforts by

 

 

insurers and governmental agencies to limit rates, legislation
establishing state rate-setting agencies, expenses, government regulation, the cost and possible unavailability of malpractice
insurance and the termination or restriction of governmental financial assistance, including that associated with Medicare, Medicaid
and other similar third-party payor programs. Legislative proposals concerning health care are proposed in Congress from time to
time. These proposals may span a wide range of topics, including cost and price controls (which might include a freeze on the prices
of prescription drugs), national health insurance incentives for competition in the provision of health care services, tax incentives
and penalties related to health care insurance premiums and promotion of prepaid health care plans.

 

Industrials Sector.
General risks of industrials companies include the general state of the economy, intense competition, consolidation, domestic
and international politics, excess capacity and consumer spending trends. In addition, capital goods companies may also be significantly
affected by overall capital spending levels, economic cycles, technical obsolescence, delays in modernization, limitations on supply
of key materials, labor relations, government regulations, government contracts and ecommerce initiatives. Furthermore, certain
companies involved in the industry have also faced scrutiny for alleged accounting irregularities that may have led to the overstatement
of their financial results, and other companies in the industry may face similar scrutiny.

 

Industrials companies
may also be affected by factors more specific to their individual industries. Industrial machinery manufacturers may be subject
to declines in commercial and consumer demand and the need for modernization. Aerospace and defense companies may be influenced
by decreased demand for new equipment, aircraft order cancellations, disputes over or ability to obtain or retain government contracts,
or changes in government budget priorities, changes in aircraft-leasing contracts and cutbacks in profitable business travel.

 

Information Technology
Sector.
Information technology companies generally include companies involved in the development, design, manufacture and
sale of computers and peripherals, software and services, data networking and communications equipment, internet access and information
providers, semiconductors and semiconductor equipment and other related products, systems and services. The market for these products,
especially those specifically related to the internet, may be characterized by rapidly changing technology, product obsolescence,
cyclical markets, evolving industry standards and frequent new product introductions. The success of companies in this sector depends,
in substantial part, on the timely and successful introduction of new products. An unexpected change in one or more of the technologies
affecting a company’s products or in the market for products based on a particular technology could have a material adverse
effect on an issuer’s operating results. Furthermore, there can be no assurance that any particular company will be able
to respond in a timely manner to compete in the rapidly developing marketplace.

 

Factors such as announcements
of new products or development of new technologies and general conditions of the industry have caused and are likely to cause the
market price of high- technology common stocks to fluctuate substantially. In addition, technology company stocks may experience
extreme price and volume fluctuations that are often unrelated to the operating

 

 

performance of such companies. Such market volatility
may adversely affect the price of shares of these companies.

 

Some key components
of certain products of technology issuers may be available only from single sources. There can be no assurance that suppliers will
be able to meet the demand for components in a timely and cost-effective manner. Accordingly, an issuer’s operating results
and customer relationships could be adversely affected by either an increase in price for, or an interruption or reduction in supply
of, any key components. Additionally, technology issuers may have a highly concentrated customer base consisting of a limited number
of large customers who may require product vendors to comply with rigorous industry standards. Any failure to comply with such
standards may result in a significant loss or reduction of sales. Because many products and technologies of technology companies
are incorporated into other related products, such companies are often highly dependent on the performance of the personal computer,
electronics and telecommunications industries. There can be no assurance that these customers will place additional orders, or
that an issuer will obtain orders of similar magnitude as past orders from other customers. Similarly, the success of certain technology
companies is tied to a relatively small concentration of products or technologies. Accordingly, a decline in demand of such products,
technologies or from such customers could have a material adverse impact on companies in this sector.

 

Many technology companies
rely on a combination of patents, copyrights, trademarks and trade secret laws to establish and protect their proprietary rights
in their products and technologies. There can be no assurance that the steps taken to protect proprietary rights will be adequate
to prevent misappropriation of technology or that competitors will not independently develop technologies that are substantially
equivalent or superior to an issuer’s technology. In addition, due to the increasing public use of the internet and connectivity
of devices, information technology companies are increasingly the subject of legal inquiries and legislative proposals. It is possible
that new laws and regulations may be adopted to address issues such as privacy, pricing, monopolistic characteristics, and the
character and quality of internet products and services. The adoption of any such laws could have a material adverse impact on
the issuers of securities in the information technology sector.

 

Materials Sector.
Companies in the basic materials sector are engaged in the manufacture, mining, processing, or distribution of raw materials
and intermediate goods used in the industrial sector. These may include materials and products such as chemicals, commodities,
forestry products, paper products, copper, iron ore, nickel, steel, aluminum, precious metals, textiles, cement, and gypsum. Basic
materials companies may be affected by the volatility of commodity prices, exchange rates, import controls, worldwide competition,
depletion of resources, and mandated expenditures for safety and pollution control devices. In addition, they may be adversely
affected by technical progress, labor relations and governmental regulation. These companies are also at risk for environmental
damage and product liability claims. Production of industrial materials often exceeds demand as a result of over-building or economic
downturns, which may lead to poor investment returns.

 

Real Estate Sector.
Real estate companies include REITs and real estate management and development companies. Companies in the real estate sector may
be exposed to the risks

 

 

associated with the ownership of real estate which include, among other factors, changes in general U.S.,
global and local economic conditions, declines in real estate values, changes in the financial health of tenants, overbuilding
and increased competition for tenants, oversupply of properties for sale, changing demographics, changes in interest rates, tax
rates and other operating expenses, changes in government regulations, faulty construction and the ongoing need for capital improvements,
regulatory and judicial requirements including relating to liability for environmental hazards, changes in neighborhood values
and buyer demand and the unavailability of construction financing or mortgage loans at rates acceptable to developers. The performance
of a REIT may also be adversely impacted by other factors (discussed above).

 

Real estate management
and development companies often are dependent upon specialized management skills, have limited diversification and are subject
to risks inherent in operating and financing a limited number of projects. To the extent such companies focus their business on
a particular geographic region of a country, they may also be subject to greater risks of adverse developments in that area. These
companies may also be subject to heavy cash flow dependency and defaults by borrowers. Certain real estate management and development
companies have a relatively small market capitalization, which may tend to increase the volatility of the market price of these
securities.

 

Real
estate related securities have, and may continue to, be negatively impacted by conditions caused by the spread of COVID-19. COVID-19
has adversely impacted many individuals and businesses and resulted in these individuals and businesses being unable to pay all
or a portion of their contracted rent, creating cashflow difficulties for many landlords and adversely impacting the value of some
real estate and related businesses.
The COVID-19 pandemic may also continue to have an adverse impact on REITs that invest
in real estate which provide space to these individuals and businesses.

 

Utilities Sector.
General problems of utility companies include risks of increases in energy and other operating costs; restrictions on operations
and increased costs and delays as a result of environmental, nuclear safety and other regulations; regulatory restrictions on the
ability to pass increasing wholesale costs along to the retail and business customer; energy conservation; technological innovations
that may render existing plants, equipment or products obsolete; the effects of local weather, maturing markets and difficulty
in expanding to new markets due to regulatory and other factors; natural or manmade disasters; difficulty obtaining adequate returns
on invested capital; the high cost of obtaining financing during periods of inflation; difficulties of the capital markets in absorbing
utility debt and equity securities; and increased competition. In addition, taxes, government regulation, international politics
including military actions, price and supply fluctuations, volatile interest rates and energy conservation may cause difficulties
for utilities. All of such issuers experience certain of these problems to varying degrees.

 

California.
The information provided below is only a brief summary of the complex factors affecting the financial situation in California and
is derived from sources that are generally available to investors and are believed to be accurate. Except where otherwise indicated,
the information is based on California’s 2019-20 fiscal year running from July 1, 2019 to June 30, 2020. No independent verification
has been made of the accuracy or completeness of

 

 

any of the following information. It is based in part on information obtained
from various state and local agencies in California or contained in official statements for various California municipal obligations.

 

Economic Outlook.
California’s economy recovered during the 2020-21 fiscal year. As of the end of the 2020-21 fiscal year, California’s
GDP approached $3.3 trillion, which represented a 17% increase over the 2019-20 fiscal year. Additionally, by the end of the 2020-21
fiscal year California’s economic output surpassed the pre-COVID-19 pandemic GDP by 6.7%. Personal income for Californians
also increased, gaining 4.2% over the 2020-21 fiscal year.

 

The unemployment rate
in California steadily recovered during the 2020-21 fiscal year, dropping from 14.1% as of the end of the 2019-20 fiscal year to
7.6% as of the end of the 2020-21 fiscal year. The leisure and hospitality sector recuperated 265,000 jobs during the 2020-21 fiscal
year, representing an increase of 20.2%. However, as of the end of the 2020-21 fiscal year, the leisure and hospitality sector
was still lacking nearly 500,000 jobs that existed prior to the COVID-19 pandemic.

 

The housing market
showed signs of growth during the 2020-21 fiscal year. Existing home sales in June 2021 totaled 436,020 units an increase of 28.3%
from June 2020. The median home price in California rose to a record high of $819,630, which was an increase of 30.9% from June
2020.

 

New vehicle registrations
in California increased from 98,865 in June 2020 to 144,282 in June 2021, an increase of 45.9%.

 

At the end of the 2020-21
fiscal year, California’s economy showed signs of growth and recovery from the initial impacts of the COVID-19 pandemic.
The continued recovery and growth remains uncertain however due to the continued evolution of the pandemic and rise in inflation
rates in California from 1.4% in the 2019-20 fiscal year to 4.4% during the 2020-21 fiscal year. Since June 2021 annual price inflation
has exceeded 5.0% each month compared to about 2.0% over the last decade. An increased demand from consumers paired with continued
frictions in the production and transportation of goods has led to higher than normal growth in prices of many goods and services.

 

Net Assets.
The California primary government’s combined net deficit position (governmental and business-type activities) declined by
$338 million (0.6%) from a negative $54.5 billion, as restated, to a negative $54.8 billion as of the 2019-20 fiscal year end.

 

The California primary
government’s net investment in capital assets such as land, buildings, equipment, and infrastructure of $119.7 billion comprise
a significant portion of its net position. This amount of capital assets is net of any outstanding debt used to acquire those assets.
California uses capital assets when providing services to citizens and consequently, these assets are not available for future
spending. Although California’s investment in capital assets is reported net of related debt, the resources needed to repay
this debt must come from other sources because California cannot use the capital assets to pay off the liabilities.

 

 

The California primary
government’s net position includes another $54.4 billion, which represents resources that are externally restricted as to
how they may be used, such as resources pledged to debt service. The internally-imposed earmarking of resources is not presented
as restricted net position. As of the end of the 2019-20 fiscal year, the primary government’s combined unrestricted net
deficit position was $228.9 billion ($208 billion for governmental activities and $20.9 billion for business-type activities).

 

As of the end of fiscal
year 2019-20, the California primary government recognized $186.8 billion, which accounted for 81.6% of the $228.9 billion unrestricted
net deficit, in unfunded employee related obligations—net pension liability, net OPEB liability, and compensated absences.
In addition, the California primary government recognized $65.0 billion in outstanding bonded debt issued to build capital assets
for school districts and other local governmental entities, a common state practice nationwide. Because California does not own
these capital assets, neither the assets nor the related bonded debt is included in the portion of net position reported as net
investment in capital assets. Rather, the bonded debt is reported as a noncurrent liability that increases California’s unrestricted
net deficit position. A major factor contributing to the unrestricted net deficit is that California must recognize a liability
on the government-wide Statement of Net Position as soon as an obligation occurs, while financing and budgeting functions focus
on when a liability will be paid. California can expect continued deficits in the unrestricted net position of governmental activities
as long as it has significant unfunded employee-related obligations and outstanding obligations for school districts and other
local governmental entities.

 

California General
Fund
. California’s main operating fund (the “California General Fund”) ended the 2019-20 fiscal year
with assets of $57.0 billion; liabilities and deferred inflows of resources of $28.5 billion; and non-spendable, restricted, committed
and assigned fund balances of $2.1 billion, $16.7 billion, $3.0 billion and $3.1 billion, respectively. The California General
Fund was left with an unassigned fund balance of $3.6 billion, a $2.9 billion increase over the 2018-19 fiscal year. Total assets
of the California General Fund increased by $7.3 billion (14.6%) versus the 2018-19 fiscal year. Total liabilities and deferred
inflows of resources decreased by $2.7 billion (8.5%) versus the 2018-19 fiscal year.

 

The California General
Fund had an excess of revenues over expenditures of $17.4 billion ($155.9 billion in revenues and $138.5 billion in expenditures).
Approximately $149.5 billion (95.9%) of California General Fund revenue is derived from California’s largest three taxes:
personal income taxes ($110.3 billion), sales and use taxes ($25.5 billion), and corporation taxes ($13.7 billion).

 

During 2019-20 fiscal
year, total California General Fund revenue increased by $15.4 billion (11.0%), which primarily resulted from an increase in personal
income taxes of $15.3 billion (16.1%). California General Fund expenditures increased by $9.4 billion (7.3%). The largest increases
were in health and human services and general government, which were up $4.3 billion and $4.7 billion, respectively. The California
General Fund ended the 2019-20 fiscal year with a fund balance of $28.5 billion, an increase of $10.3 billion from the 2018-19
fiscal year’s restated ending fund balance of $18.2 billion. The California General Fund’s ending fund balance includes
$16.1 billion restricted for budget stabilization if California’s Governor must

 

 

declare a budget emergency during an economic
crisis (such as the COVID-19 pandemic encountered in the final quarter of the 2019-20 fiscal year).

 

Budget
Outlook
. California’s 2020-21 Budget Act was enacted on June 29, 2020 (the “California Budget Act”).
The California Budget Act appropriated $202.1 billion—$133.9 billion from the California General Fund, $62.1 billion from
special funds, and $6.1 billion from bond funds. The California General Fund’s budgeted expenditures decreased by $13 billion
(8.9%) over the 2019-20 fiscal year budget. The California General Fund’s revenues were projected to be $137.7 billion after
a $7.8 billion transfer from the Budget Stabilization Account (BSA), California’s rainy-day fund. California General Fund
revenue comes predominantly from taxes, with personal income taxes expected to provide 59.7% of total revenue in fiscal year 2020-21.
California’s major taxes (personal income, sales and use, and corporation taxes) were projected to provide approximately
88.3% of the California General Fund’s in the 2020-21 fiscal year. The
California General Fund was projected to end the 2020-21 fiscal year with $10.7 billion in total reserves—$8.3 billion in
the BSA, $2.6 billion in the California General Fund’s Special Fund for Economic Uncertainties (SFEU), $450 million in the
Safety Net Reserve (SNR), and an expected deficit of $716 million in COVID reserve. In addition to the required minimum annual
transfer to the BSA, Proposition 2 requires the California General Fund to make an equivalent minimum annual amount of debt reduction
payments; the 2020-21 fiscal year spending plan included $2.0 billion of debt reduction expenditures.

 

The California Budget
Act decreased total California expenditures by $12.9 billion over the 2019-20 fiscal year budgeted level, driven by a decrease
in budgeted California General Fund expenditures of $13.9 billion. The primary decreases in spending in the California General
Fund were from reductions of $10.2 billion for K-12 education, $1.7 billion for higher education and $3.6 billion for general government.
The California General Fund’s share of Proposition 98 guaranteed minimum funding level for K-12 schools and community colleges
decreased by $7.6 billion to $45.1 billion.

 

The California Budget
Act planned to close a $54.3 billion deficit caused by the COVID-19 recession. Specific strategies to reduce the deficit included:
using $8.8 billion in reserves, borrowing $9.3 billion form special funds, temporarily suspending $4.4 billion in incentive tax
credits provided to businesses, cancelling $10.6 billion in government program expansions, obtaining $10.1 billion in expanded
federal assistance and initiating $11.1 billion in funding reductions and deferrals which would be restored if certain federal
funding targets were met.

 

Specific California
Budget Act provisions included a $15.9 billion increase in Medi-Cal local assistance to address COVID-19 caseload growth, $1.6
billion in additional funding for In-Home Supportive Services, increased CalWORKs costs projected to reach $7.8 billion and $1.2
billion allocated across multiple departments and programs to support local governments’ housing and homelessness programs.

 

California’s
state government received $9.5 billion from the Coronavirus Relief Fund. The California Budget Act allocated $4.5 billion of these
funds to schools and community colleges to mitigate the effects of school closures related to COVID-19. The California Budget Act
provided $1.3 billion to counties and $500 million to cities to address homelessness, public

 

 

health, public safety and other services.
Additionally, another $550 million was allocated to the Department of Housing and Community Development to help provide housing
for individuals and families at risk of becoming homeless due to the COVID-19 pandemic.

 

In June 2021, the 2021-22
Budget Act (the “2021-22 California Budget Act”) was enacted and provided updated estimates of fiscal year 2020-21
California General Fund revenues, expenditures, and reserves. The 2021-22 California Budget Act, projected for the 2020-21 fiscal
year California General Fund revenue of $188.8 billion (after transfers), expenditures of $166.1 billion, and total year-end reserves
of $14.7 billion —$1.9 billion Public School System Stabilization Account, $12.3 billion in the BSA and $450 million in the
SNR—which is $4.0 billion more than projected in the California Budget Act in June 2020.

 

Capital Assets.
As of June 30, 2020, California’s investment in capital assets for its governmental and business-type activities amounted
to $152.9 billion (net of accumulated depreciation/amortization). California’s capital assets include land, state highway
infrastructure, collections, buildings and other depreciable property, intangible assets, and construction/development in progress.
The buildings and other depreciable property account includes buildings, improvements other than buildings, equipment, certain
infrastructure assets, certain books, and other capitalized and depreciable property. Intangible assets include computer software,
land use rights, patents, copyrights, and trademarks. Infrastructure assets are items that normally are immovable, such as roads
and bridges, and can be preserved for a greater number of years than can most capital assets.

 

As of June 30, 2020,
California’s capital assets increased by $4.6 billion (3.1%) versus the 2018-19 fiscal year. The majority of the increase
occurred in state highway infrastructure, buildings and other depreciable property and construction/development in progress.

 

Debt Administration.
As of June 30, 2020, California had total bonded debt outstanding of $109.9 billion, $79.7 billion (72.5%) of which represents
general obligation bonds, which are backed by the full faith and credit of California. The current portion of general obligation
bonds outstanding is $4.4 billion and the long-term portion is $75.3 billion. The remaining $30.2 billion (27.5%) of bonded debt
outstanding represents revenue bonds, which are secured solely by specified revenue sources. The current portion of revenue bonds
outstanding is $2.1 billion and the long-term portion is $28.1 billion.

 

During the 2019-20
fiscal year, California issued a total of $7.8 billion in new general obligation bonds to fund various capital projects and other
voter-approved costs related to K-12 schools and higher education facilities, transportation improvements and high-speed rail,
water quality and environmental protection, and other public purposes.

 

Budgetary
Control
.
California’s annual budget is primarily prepared on a modified accrual basis for governmental funds.
The Governor of California recommends a budget for approval by the California legislature each year. This recommended budget includes
estimated revenues, but revenues are not included in the annual budget bill adopted by the legislature. Under California law, California
cannot adopt a spending plan that exceeds estimated revenues.

 

 

Under the California
Constitution, money may be drawn from the treasury only through a legal appropriation. The appropriations contained in the California
Budget Act, as approved by the California legislature and signed by the Governor of California, are the primary sources of annual
expenditure authorizations and establish the legal level of control for the annual operating budget. The budget can be amended
throughout the year by special legislative action, budget revisions by the California Department of Finance, or executive orders
of the Governor of California. Amendments to the original budget for the 2019-20 fiscal year, increased spending authority for
the budgetary/legal basis-reported California General Fund, Transportation Funds, and the Environmental and Natural Resources Funds.

 

Appropriations are
generally available for expenditure or encumbrance either in the year appropriated or for a period of three years if the legislation
does not specify a period of availability. At the end of the availability period, the encumbering authority for the unencumbered
balance lapses. Some appropriations continue indefinitely, while others are available until fully spent. Generally, encumbrances
must be liquidated within two years from the end of the period in which the appropriation is available. If the encumbrances are
not liquidated within this additional two-year period, the spending authority for these encumbrances lapses.

 

Risk Management.
The primary government has elected, with a few exceptions, to be self-insured against loss or liability. The primary government
generally does not maintain reserves. Losses are covered by appropriations from each fund responsible for payment in the year in
which the payment occurs. California is permissively self-insured and, barring any extraordinary catastrophic event, the potential
amount of loss faced by California is not considered material in relation to the primary government’s financial position.
Generally, the exceptions are when a bond resolution or a contract requires the primary government to purchase commercial insurance
for coverage against property loss or liability. There have been no significant reductions in insurance coverage from the prior
year. In addition, no insurance settlement in the last three years has exceeded insurance coverage. All claim payments are on a
“pay-as-you-go” basis, with workers’ compensation benefits for self-insured agencies initially being paid by
the California Compensation Insurance Fund.

 

The discounted liability
for unpaid self-insurance claims of the primary government is estimated to be $4.7 billion as of the 2019-20 fiscal year end. This
estimate is primarily based on actuarial reviews of California’s workers’ compensation program and includes indemnity
payments to claimants, as well as all other costs of providing workers’ compensation benefits, such as medical care and rehabilitation.
The estimate also includes the liability for unpaid services fees, industrial disability leave benefits, and incurred-but-not-reported
amounts. The estimated total liability of approximately $6.6 billion is discounted to $4.7 billion using a 3.5% interest rate.
Of the total discounted liability, $486 million is a current liability, of which $350 million is included in the California General
Fund, $133 million in the special revenue funds and $3 million in the internal service funds. The remaining $4.2 billion is reported
as other noncurrent liabilities in the government-wide Statement of Net Position. The University of California, a discretely presented
component unit, is self-insured or insured through a wholly-owned captive insurance company.

 

 

Ratings. As
of December 30, 2022, all outstanding general obligation bonds of the state of California were rated “AA-” by S&P
and “Aa2” by Moody’s. Any explanation concerning the significance of such ratings must be obtained from the rating
agencies. There is no assurance that any ratings will continue for any period of time or that they will not be revised or withdrawn.

 

Local Issuances.
It should be noted that the creditworthiness of obligations issued by local California issuers may be unrelated to the creditworthiness
of obligations issued by the state of California, and there is no obligation on the part of the state to make payment on such local
obligations in the event of default.

 

The foregoing information
constitutes only a brief summary of some of the general factors which may impact certain issuers of California bonds and does not
purport to be a complete or exhaustive description of all adverse conditions to which the issuers of such obligations are subject.
Additionally, many factors including national economic, social and environmental policies and conditions, which are not within
the control of the issuers of such bonds, could affect or could have an adverse impact on the financial condition of the state
and various agencies and political subdivisions thereof. The sponsor is unable to predict whether or to what extent such factors
or other factors may affect the issuers of the bonds, the market value or marketability of such bonds or the ability of the respective
issuers of such bonds to pay interest on or principal of such bonds.

 

New Jersey. The
information provided below is only a brief summary of the complex factors affecting the financial situation in New Jersey and is
derived from sources that are generally available to investors and are believed to be accurate. Except where otherwise indicated,
the information is based on New Jersey’s 2020-21 fiscal year running from July 1, 2020 to June 30, 2021. No independent verification
has been made of the accuracy or completeness of any of the following information. It is based in part on information obtained
from various state and local agencies in New Jersey or contained in official statements for various New Jersey municipal obligations.

 

Economic Outlook.
New Jersey’s labor market added 212,400 jobs during the fiscal year 2020-21, adding jobs in every month. Job growth was
led by the service sectors, with the leisure & hospitality sector adding 63,700 jobs; the professional & business services
sector adding 45,400 jobs; and the trade/transportation/utilities sector adding 34,800 jobs. The manufacturing and construction
sectors added 4,000 and 6,000 jobs, respectively.

 

New Jersey’s
unemployment rate was 5.1% for fiscal year 2020-21, which was 1.2% higher than the national average. The unemployment rate declined
2.3% during the fiscal year 2020-21. The labor force participation rate was 62.6% as of the end of the 2020-21 fiscal year, a decrease
of 0.1% from fiscal year 2019-20. The labor force participation was 1.7% lower than during the COVID-19 Pandemic during the 2019-20
fiscal year.

 

New Jersey’s
existing home sales in fiscal year 2020-21 were 4.7% higher than in fiscal year 2019-20. The number of single-family homes sold
was 0.6% than in the fiscal year 2019-20, and the number of townhomes and condos sold was 18.1 percent higher. The foreclosure
picture also improved. The share of mortgages in foreclosure continued to steadily decline, falling to

 

 

0.8% in the fourth quarter
of 2021, however the share of seriously delinquent mortgages rose to above pre-pandemic levels.

 

New Jersey experienced
strong economic growth throughout the fiscal year 2020-21. Gross Domestic Product (GDP) rebounded sharply after the initial drop
from the pandemic in 2020, and real GDP grew at a seasonally adjusted rate of 7.5% in the first quarter of 2021 and 4.9% overall
in 2021.

 

Personal Income in
New Jersey declined at a 16.5% annual rate in the second quarter of 2021. However, wage and salary income increased 9.0% in second
quarter and continued to rise, growing at an annual rate of 12.7% in third quarter and 10.5% in the fourth quarter of 2021 due
to continued job growth and a tight labor market.

 

A majority of the Federal
Open Market Committee (“FOMC”) members projected at least six interest rate increases in 2022 to combat continually
elevated inflation. It is anticipated that personal consumption expenditure inflation will average 4.3% in 2022 and 2.7% in 2023.
The FOMC estimates real GDP in the United States will grow 2.8% in 2022 according to March 2023 projections. In a survey by the
Wall Street Journal in April 2022, economists predicted real GDP growth of 2.6% in 2022.

 

Revenues and Expenditures.
During the 2020-21 fiscal year, New Jersey’s revenues, including transfers, totaled $97.3 billion, which was an increase
of $23.4 billion versus the 2019-20 fiscal year after restatements. This increase is primarily attributable to higher operating
grants and general taxes. Operating grants totaled $41.7 billion and accounted for 42.7% of New Jerseys’ revenues for the
2020-21 fiscal year. General taxes totaled $42.8 billion and accounted for 43.8% of total New Jersey revenues for the 2020-21 fiscal
year. New Jersey’s gross income tax totaled $17.5 billion, the Sales and Use tax totaled $11.4 billion, and the Corporation
Business tax totaled $4.9 billion. New Jersey’s three major taxes comprised 78.8% of the total general taxes that were collected
during the 2020-21 fiscal year. General taxes increased by $7.0 billion as compared to the 2019-20 fiscal year.

 

New Jersey’s
2020-21 fiscal year expenses totaled $93.5 billion, an increase of $18.0 billion after restatements in comparison to the 2019-20
fiscal year. New Jersey’s spending increased by $10.1 billion in the Unemployment Compensation Fund due to claims exceeding
available resources. Other material spending increases included: government direction, management, and control ($2.5 billion);
physical and mental health ($1.9 billion); education, cultural, and intellectual development ($1.9 billion); and economic planning,
development, and security ($1.1 billion).

 

New Jersey General
Fund.
New Jersey’s chief operating fund (the “New Jersey General Fund”) is the fund into which all
state revenues, not otherwise restricted by statute, are deposited. The New Jersey General Fund’s ending balance totaled
$14.5 billion of which $4.3 billion represented unassigned fund balance. The unassigned fund balance increased by $2.2 billion
in the 2020-21 fiscal year. A major underlying reason for the increase in fund balance was due to a $4.8 billion increase in taxes;
96% of this increase came from increases to the Corporation Business Tax, the Sales and Use Tax, and the Pass-Through Business
Alternative

 

 

Income Tax, the latter of which was a new tax in fiscal year 2020-21. The “Surplus Revenue Fund” is an
account within the New Jersey General Fund that is used as a “rainy day fund.” Surplus revenue is defined as an amount
equivalent to 50% of the excess between the New Jersey General Fund revenues certified by the New Jersey Governor at the time of
approval of the annual New Jersey Appropriations Act and the amount of revenue reported from the annual financial report of the
New Jersey General Fund for the fiscal year. Excess in the New Jersey General Fund is subtracted by the amount of revenue reported
in the annual financial report of the New Jersey Property Tax Relief Fund that is less than revenue amounts certified by the New
Jersey Governor at the time of approval of the annual New Jersey Appropriations Act. New Jersey made a deposit of $2.4 billion
in fiscal year 2020-21 to the New Jersey Surplus Revenue Fund. As of the end of fiscal year 2020-21, the New Jersey Surplus Revenue
Fund had a balance of $2.4 billion.

 

On a budgetary basis,
the New Jersey General Fund collected general revenues of $46.6 billion which were $0.3 billion lower than the final budget. However,
this figure was $7.9 billion higher than originally anticipated, due to increases in taxes and federal and other grants.

 

Total expenditures
were $0.8 billion lower than original appropriations as set forth in the annual Appropriations Act plus supplemental appropriations
enacted during the 2020-21 fiscal year. A major cause for under-spending resulted from the overestimate of federal funds, a practice
that allows New Jersey to receive the maximum federal dollars available. From a 2020-21 fiscal year program perspective, the following
areas under-spent: community development and environmental management ($2.3 billion); economic planning, development, and security
($1.5 billion); physical and mental health ($1.2 billion); transportation programs ($768.6 million); special government services
($63.5 million); and public safety and criminal justice ($46.0 million). This underspending was offset by overspending in: government
direction, management, and control ($1.4 billion); and educational, cultural, and intellectual development ($1.1 billion).

 

Net Assets.
The New Jersey primary government’s assets and deferred outflows of resources totaled $121.7 billion for the 2020-21 fiscal
year, an increase of $46.3 billion from the 2019-20 fiscal year after restatements (that resulted in a $0.3 billion increase in
net position). Restatements were made to increase net position over various accounts. As of 2020-21 fiscal year end, liabilities
and deferred inflows of resources exceeded assets and deferred outflows of resources by $196.2 billion. New Jersey’s unrestricted
net position (representing the net position that has not statutory commitments and is available for discretionary use), totaled
negative $216.0 billion. This negative balance is primarily a result of New Jersey implementing in the 2014-15 fiscal year, GASB
Statement No. 68, Accounting and Financial Reporting for Pensions, and in the fiscal year 2017-28, GASB Statement No. 75, Accounting
and Financial Reporting for Postemployment Benefits Other Than Pensions. Financing activities that have contributed to New Jersey’s
negative unrestricted net position include: liabilities from pension obligation bonds, funding of a portion of local elementary
and high school construction, and the securitization of all annual tobacco master settlement agreement receipts with no corresponding
assets. During the 2020-21 fiscal year, the proprietary funds’ net position decreased by $958.2 million resulting in a net
position of $272.5 million as of the 2020-21 fiscal year end.

 

 

Changes in Net Assets.
In the 2020-21 fiscal year New Jersey’s net position increased by $3.8 billion after restatements. Approximately 43.8%
of New Jersey’s total revenues came from general taxes, while 42.7% came from operating grants. Charges for services totaled
12.4% of total revenues; and items such as capital grants, miscellaneous revenues, and interest earnings accounted for the remainder.
New Jersey’s expenses cover a range of services. The largest expense was for the New Jersey Unemployment Compensation Fund
(22.9%); educational, cultural, and intellectual development (22.8%) which includes approximately $307.3 million disbursed by the
New Jersey Schools Development Authority (a blended component unit) to help finance school facilities construction; physical and
mental health (19%); and government direction, management, and control (11.6%) which includes transfers of $3.7 billion to the
New Jersey Debt Defeasance and Prevention Fund. Other major expenses included economic planning, development, and security and
criminal justice; and the New Jersey Lottery Fund. During the 2020-21 fiscal year, expenses from governmental activities exceeded
program revenues. This imbalance was primarily funded through $43.6 billion of general revenues (mostly taxes). The remaining $4.7
billion resulted in an increase in net position. Offsetting the net position increase, Business-type Activities reflected a net
position decrease of $1.0 billion. This decrease was mainly a result of the Unemployment Compensation Fund’s claims exceeding
available resources due to the COVID-19 pandemic.

 

Debt Administration.
As of the end of the 2020-21 fiscal year, New Jersey’s outstanding long-term obligations for governmental activities
totaled $248.6 billion, a $44.3 billion increase, after restatements, from the 2019-20 fiscal year. That increase is primarily
attributable to a $4.4 billion increase in the Net Pension Liability and $36.1 billion increase in Other Postemployment Benefits
(OPEB) Liability. There was also an increase of $3.8 billion in bonded debt. Long-term bonded obligations totaled $48.2 billion
and other long-term non-bonded obligations totaled $200.4 billion. In addition, New Jersey has $10.3 billion of legislatively authorized
bonding capacity that has not yet been issued. As of the end of the 2020-21 fiscal year, the legislatively authorized but unissued
debt decreased by $2.4 billion from the 2019-20 fiscal year.

 

Ratings. As
of December 30, 2022, all outstanding general obligation bonds of the State of New Jersey were rated “A-” by S&P
and “A2” by Moody’s. Any explanation concerning the significance of such ratings must be obtained from the rating
agencies. There is no assurance that any ratings will continue for any period of time or that they will not be revised or withdrawn.

 

Local Issuances.
It should be noted that the creditworthiness of obligations issued by local New Jersey issuers may be unrelated to the creditworthiness
of obligations issued by the State of New Jersey, and there is no obligation on the part of the state to make payment on such local
obligations in the event of default.

 

The foregoing information
constitutes only a brief summary of some of the general factors which may impact certain issuers of bonds and does not purport
to be a complete or exhaustive description of all adverse conditions to which the issuers of such obligations are subject. Additionally,
many factors including national economic, social and environmental policies and conditions, which are not within the control of
the issuers of such bonds, could affect or could have an adverse impact on the financial condition of the state and various agencies
and political subdivisions thereof. The sponsor is unable to predict whether or to what

 

 

extent such factors or other factors may
affect the issuers of the bonds, the market value or marketability of such bonds or the ability of the respective issuers of such
bonds to pay interest on or principal of such bonds.

 

New York.
The information provided below is only a brief summary of the complex factors affecting the financial situation in New York and
is derived from sources that are generally available to investors and are believed to be accurate. Except where otherwise indicated,
the information is based on New York’s 2021-2022 fiscal year running from April 1, 2021 to March 31, 2022. No independent
verification has been made of the accuracy or completeness of any of the following information. It is based in part on information
obtained from various state and local agencies in New York or contained in official statements for various New York municipal obligations.

 

Economic Condition
and Outlook.
After a short but deep recession in early 2020 due to the COVID-19 pandemic, the national economy began to recover
in the second half of 2021. Real gross domestic product (GDP) increased nationally by 5.7 percent in 2021, compared to a 3.4 percent
decline in 2020.

 

New York’s economy
experienced a more severe recession than the nation as whole with a 5.0 percent decrease in gross state product (GSP). New York’s
recovery also lagged the nation, with real GSP growing 5.0 percent. New York’s real GSP has not yet returned to its pre-pandemic
level, unlike over two-thirds of the other states

 

Shutdowns in 2020 due
to the pandemic caused significant job losses both nationally and in New York. From February to April 2020, the nation and New
York lost nearly 22 million and 2 million jobs, respectively. By the end of the 2020, 55 percent of the jobs nationwide had been
recovered; whereas in New York, the job recovery was much slower with only 48 percent of lost jobs were recovered at the end of
2020. The rate of employment in New York increased in 2021, however it still lagged the national rate. At the end of 2021, 72 percent
of the jobs lost in New York were recovered, compared to 85 percent nationally.

 

New York experienced
job losses in all regions of the state in 2020, with the largest declines in New York City and Long Island at 11.1 percent and
10.1 percent, respectively. As employment recovered in 2021, all regions realized increases; however, the total number of jobs
were still below pre-pandemic levels. The downstate regions of Long Island and the Hudson Valley experienced the largest growth
rates of 4.5 percent and 3.1 percent, respectively.

 

The unemployment rate
hit 9.9 percent in 2020, which was its highest annual rate since 1977. With the increase in employment in 2021, the unemployment
rate declined to 6.9 percent. Despite more people being employed, the labor force decreased by 133,500 workers. As a result, the
labor force participation rate continued to fall, declining from 59.1 percent in 2020 to 59 percent in 2021.

 

In New York, the annual
change in total wages paid to all employees increased by 8.7 percent in 2021, due to the slower employment growth in New York,
which trailed the national increase of a 9.1 percent increase in total wages. However, average annual wages earned by

 

 

workers in
New York outpaced those nationally, growing 5.9 percent in New York versus 5.6 percent nationally. Due to larger bonuses in 2020,
which were paid in the first quarter of 2021, the finance and insurance industry realized the highest percentage growth in average
annual wages in 2021 (13.3 percent), while the other services sector (which includes personal care, repair, and laundry services)
realized the lowest (1.4 percent).

 

Total personal income
in New York increased by 5.3 percent in 2021. This increase can be attributed to wage and employment growth throughout the year,
as well as the economic impact checks and enhanced unemployment benefits provided to individuals under the federal ARPA funding.
In the second quarter of 2021, over one-quarter of New York’s personal income was from this stimulus as well as other government
benefits. As this stimulus faded in the second half of the year, personal income growth for the year stalled.

 

The securities industry
in New York City is an important contributor to New York and New York City revenues due to its large share of high-paid jobs and
often large bonuses. Profits across the industry in the first three quarters of 2021 were almost 20 percent higher than in 2020
and the average bonus in the industry in New York City increased by an estimated 20 percent. However, finance and insurance industry
employment in New York City decreased by over 5,200 jobs in 2021.

 

According to the 2020
Census, New York’s population rose by an estimated 823,000 from 2010 to 2020, an increase of 4.2 percent. Based on estimates
from the U.S. Census Bureau, the population declined by over 365,000 in 2021, a decrease of 1.8 percent. While the population decreased
in 40 percent of states, New York’s decline was the steepest.

 

General Governmental
Results.
An operating surplus of $11.3 billion is reported in New York’s general fund (the “New York General
Fund”
) for the 2021-22 fiscal year, resulting in an increased accumulated fund balance of $31.7 billion. New York completed
the 2021-22 fiscal year with a combined governmental funds operating surplus of $18.7 billion as compared to a combined governmental
funds operating surplus in the 2020-21 fiscal year of $15.8 billion. The combined operating surplus of $18.7 billion for the 2021-22
fiscal year included an operating surplus in the New York General Fund of $11.3 billion, an operating surplus in the “General
Debt Service Fund” of $4.4 billion, and an operating surplus in “Other Governmental Funds” of $3.0 billion.

 

New York’s financial
position as shown in its governmental funds Balance Sheet as of 2021-22 fiscal year includes a fund balance of $55.5 billion, which
is comprised of $133.5 billion of assets less liabilities of $74.5 billion and deferred inflows of resources of $3.5 billion. The
governmental funds fund balance includes a $31.7 billion accumulated New York General Fund balance.

 

Overall Financial
Position and Results of Operations.
For the 2021-22 fiscal year, New York reported a net position surplus of $6.5 billion,
comprising $74.1 billion in net investment in capital assets, and $17.4 billion in restricted net position, offset by an unrestricted
net position deficit of $85 billion.

 

 

Net position reported
for governmental activities increased by $18.1 billion to a $25.4 billion net position surplus. Unrestricted net position for governmental
activities – the part of net position that can be used to finance day-to-day operations without constraints established by
debt covenants, enabling legislation, or other legal requirements – had a deficit of $63 billion as of the 2021-22 fiscal
year end.

 

The net position deficit
in unrestricted governmental activities, which decreased by $13.5 billion (17.7 percent) in 2022, exists primarily because New
York has issued debt for purposes not resulting in a capital asset related to New York governmental activities and because of the
obligation related to other postemployment benefits ($52.1 billion). This outstanding debt included: borrowing for local highway
and bridge projects ($4.4 billion), local mass transit projects ($6.4 billion) and a wide variety of grants and other expenditures
not resulting in New York capital assets ($18.2 billion). This deficit in unrestricted net position of governmental activities
can be expected to continue for as long as New York continues to have obligations outstanding for purposes other than the acquisition
of New York governmental capital assets.

 

The net position deficit
in business-type activities decreased by $2.0 billion (9.9 percent) to $18.9 billion in 2022, compared to $20.9 billion in 2021.
This decrease in net position deficit for business-type activities was due to City University of New York Senior Colleges’
revenues and New York support exceeding expenses by $240 million, State University of New York revenues and New York support exceeding
expenses by $948 million, and employer contributions and other revenue exceeding unemployment benefit payments for the Unemployment
Insurance Fund by $935 million. This was partially offset by Lottery education aid transfers exceeding net income by $16 million.

 

New York General
Fund Budgetary Highlights
. New York’s financial plan, which uses the cash basis of accounting, is updated quarterly throughout
the year as required by the New York Finance Law. The quarterly updates to the 2021-22 financial plan reflected revisions to the
original financial plan based on actual operating results to date and an updated analysis of underlying economic, revenue, and
spending trends, as well as other actions and developments. This discussion includes comparisons to estimates from two different
financial plan updates in 2021-22: the original financial plan (the “Enacted Budget Financial Plan” issued May 25,
2021) and the final financial plan (the “Updated Financial Plan” issued February 18, 2022).

 

New York General Fund
receipts exceeded disbursements by $23.9 billion in the 2021-22 fiscal year. Total New York General Fund receipts for the year
(including transfers from other funds) were $112.8 billion. Total New York General Fund disbursements for the year (including transfers
to other funds) were $88.9 billion. Tax receipts and General Fund reserves were impacted by the enactment of the Pass-Through Entity
Tax (“PTET”) program which resulted in business tax collections of $16.4 billion in the 2021-22 fiscal year. These
receipts were placed in reserve for payment of accompanying Personal Income Tax (“PIT”) credits that are expected to
reduce PIT collections beginning in April 2022.

 

The New York General
Fund ended the fiscal year with a closing cash fund balance of $33.1 billion, which consisted of $3.3 billion in New York’s
rainy day reserve funds ($1.4 billion in the Tax Stabilization Reserve Account and $1.9 billion in the Rainy Day Reserve Fund),
$26

 

 

million in the Community Projects Fund, $21 million in the Contingency Reserve Fund, and $29.7 billion in the Refund Reserve
Account. At the end of the 2021-22 fiscal year, the Division of the Budget (DOB) informally designated a portion of the $29.7 billion
on deposit in the Refund Reserve for: timing of PTET/PIT Credits ($16.4 billion); economic uncertainties ($5.7 billion); debt management
($500 million); transfers to capital projects funds ($1.8 billion); pandemic assistance ($2.0 billion); and labor settlements/agency
operations ($275 million). However, these allocated amounts can be used for other purposes.

 

New York General Fund
receipts in the 2021-22 fiscal year were $25.6 billion higher than the Enacted Budget Financial Plan estimate. PIT receipts, including
transfers from other funds after debt service payments, exceeded estimates by $6.2 billion. These higher than estimated PIT collections
reflect stronger than expected growth in withholdings and estimated payments, particularly among high income taxpayers. These gains
were offset by $4 billion in repayment of debt service due in future years. Lower consumption tax receipts were primarily due to
the repayment in 2021-22 of debt service due in future years ($2.25 billion), which offset higher collections resulting from a
stronger than expected recovery in taxable consumption from the COVID-19 downturn. Higher business taxes were attributable to impact
of PTET collections ($16.4 billion) and stronger than anticipated Corporate Franchise Tax collections. Growth in Other Taxes was
attributable to a better than expected recovery in the real estate market and a higher number of super-large estate tax payments.
Higher than projected miscellaneous receipts and grants are mainly due to the reclassification of pandemic assistance provided
through the ARPA to Federal grants rather than a transfer from Federal Funds ($4.5 billion), as well as higher than expected revenues
from reimbursements, licenses/fees, abandoned property and motor vehicle fees.

 

New York General Fund
disbursements in 2021-22 exceeded the Enacted Budget Financial Plan estimate by $73 million. Local Assistance spending was $2.7
billion lower than planned as a result of the timing of payments and conservative spending estimates. Agency operations were $102
million below initial expectations, attributable to savings from the reclassification of eligible expenses to the Coronavirus Relief
Funds (“CRF”), augmented by a conservative estimation of spending through March, which was partially offset by higher
spending on non-personal service costs driven by the delay of cost shifts to the Federal Emergency Management Agency (“FEMA”),
deposit of monies to the health insurance escrow fund for future Health Insurance charges and repayment of the New York share of
non-Medicare payroll taxes deferred in fiscal year 2021 in their entirety. Transfers to other funds were $2.7 billion higher than
initially projected mainly to support nearly $3.0 billion in capital projects related to lower than projected bond reimbursements
and payment advances to the Metropolitan Transportation Agency (“MTA”).

 

Net operating results
were $2.5 billion more favorable than expected in the Updated Financial Plan, which estimated a net operating surplus of $21.4
billion. The improvement comprised $764 million in higher receipts, primarily due to the reclassification of the deposit of American
Rescue Plan Act (“ARPA”) monies from a transfer to Federal grants, partially offset by the payment of debt service
due in future years, and lower disbursements of $1.8 billion. The lower disbursements were a result of normal underspending and
conservative estimation of disbursements.

 

 

New York’s current
year New York General Fund GAAP surplus of $11.3 billion differs from the New York General Fund’s cash basis operating surplus
of $23.9 billion reported in the reconciliation. This variation results from differences in basis of accounting, and entity and
perspective differences between budgetary reporting versus those established as GAAP and followed in preparation of this financial
statement.

 

Capital Assets.
As of the 2021-22 fiscal year, New York has $112.2 billion invested in a broad range of capital assets, including equipment,
buildings, construction in progress, land preparation, and infrastructure, which primarily consists of roads and bridges. This
amount represents a net increase (including additions and deductions) of $1.3 billion over fiscal year 2020-21.

 

Debt Administration.
New York has obtained long-term financing in the form of voter-approved General Obligation debt (voter-approved debt) and other
obligations that are authorized by legislation but not approved by the voters (non-voter-approved debt), including lease-purchase
and contractual obligations where New York’s legal obligation to make payments is subject to and paid from annual appropriations
made by the Legislature. Equipment capital leases and mortgage loan commitments totaled $591 million as of the end of the 2021-22
fiscal year, neither of which require legislative or voter approval. Other obligations include certain bonds issued through New
York public authorities and certificates of participation. New York administers its long-term financing needs as a single portfolio
of New York-supported debt that includes general obligation bonds and other obligations of both its governmental activities and
business-type activities. Most of the debt reported under business-type activities, all of which was issued for capital assets
used in those activities, is supported by payments from resources generated by New York’s governmental activities—therefore
it is not expected to be directly repaid from resources generated by business-type activities. New York Finance Law allows the
bonded portion of this single combined debt portfolio, which includes debt reported in both governmental and business-type activities,
to include debt instruments which result in a net variable rate exposure in an amount that does not exceed 15 percent of total
outstanding New York-supported debt, and interest rate exchange agreements (swaps) that do not exceed 15 percent of total outstanding
New York-supported debt. As of June 30, 2021 fiscal year end, New York had $258 million in interest rate exchange agreements, in
which New York issues variable rate bonds and enters into a swap agreement that effectively converts the rate to a fixed rate.

 

New York had $70 billion
in bonds, notes, and other financing agreements outstanding as of the 2021-22 fiscal year end, compared with $66.4 billion in the
2020-21 fiscal year end, an increase of $3.6 billion.

 

New York reported $2.2
billion in collateralized borrowings, consisting of $268 million in governmental activities and $1.9 billion in business-type activities,
for which specific revenues have been pledged. New York reported $2.1 billion in collateralized borrowings in the 2020-21 fiscal
year ($283 million in governmental activities and $1.8 billion in business-type activities).

 

During the 2021-22
fiscal year, New York issued $10.6 billion in bonds, of which $1.7 billion was for refunding and $8.9 billion was for new borrowing.

 

 

New York’s Constitution,
with exceptions for emergencies, limits the amount of general obligation bonds that can be issued to that amount approved by the
voters for a single work or purpose in a general election. New York currently has $2.2 billion in authorized but unissued bond
capacity that can be used to issue bonds for specifically approved purposes. New York may issue short-term debt without voter approval
in anticipation of the receipt of taxes and revenues or proceeds from duly authorized but not issued general obligation bonds.

 

New York finance law,
through the Debt Reform Act of 2000 (the “New York Debt Reform Act”), also imposes phased-in caps on the issuance
of the new New York-supported debt and related debt service costs. The New York Debt Reform Act also limits the use of debt to
capital works and purposes, and establishes a maximum term length for repayment of 30 years. The New York Debt Reform Act applies
to all New York-supported debt. The New York Debt Reform Act does not apply to debt issued prior to April 1, 2000, or to other
obligations issued by public authorities where New York is not the direct obligor. New York state legislation authorized in connection
with the enacted budgets for the 2020-21 and 2021-22 fiscal years a suspension of the New York Debt Reform Act as part of the state
of New York’s response to the COVID-19 pandemic. Accordingly, New York-supported debt issued in 2020-21 and 2021-22 is not
limited to capital purposes and is not counted towards the statutory caps on debt outstanding and debt service.

 

Litigation. The
State of New York is a defendant in a number of legal proceedings pertaining to matters incidental to the performance of routine
governmental operations. These proceedings include, but are not limited to, claims asserted against the State of New York arising
from alleged torts, alleged breaches of contracts, condemnation proceedings and other alleged violations of New York and federal
laws.

 

Included in New York’s
outstanding litigation are numerous cases challenging the legality or the adequacy of a variety of significant social welfare programs,
primarily involving New York’s Medicaid and mental health programs. Adverse judgments in these matters generally could result
in injunctive relief coupled with prospective changes in patient care that could require substantial increased financing of the
litigated programs in the future.

 

Related to pending
and threatened litigation, New York has reported $1.3 billion in the primary government, $599 million is related to governmental
activities and $699 million pertains to State University of New York. State University of New York reported $831 million as of
December 31, 2021, for awarded claims, anticipated unfavorable judgments, and incurred but not reported loss estimates related
to medical malpractice claims. The difference of $132 million is due to a timing difference between New York and State University
of New York’s fiscal year end. New York is also a party to other claims and litigation that its legal counsel has advised
may result in possible adverse court decisions with estimated potential losses of approximately $295 million.

 

Ratings. As
of December 30, 2022, all outstanding general obligation bonds of the State of New York were rated “AA+”
by
S&P and “Aa1” by Moody’s. Any explanation concerning
the significance of such ratings must be obtained from the rating agencies. There is no assurance

 

 

that any ratings will continue
for any period of time or that they will not be revised or withdrawn.

 

Local Issuances.
It should be noted that the creditworthiness of obligations issued by local New York issuers may be unrelated to the creditworthiness
of obligations issued by the State of New York, and there is no obligation on the part of the state to make payment on such local
obligations in the event of default.

 

The foregoing information
constitutes only a brief summary of some of the general factors which may impact certain issuers of bonds and does not purport
to be a complete or exhaustive description of all adverse conditions to which the issuers of such obligations are subject. Additionally,
many factors including national economic, social and environmental policies and conditions, which are not within the control of
the issuers of such bonds, could affect or could have an adverse impact on the financial condition of the state and various agencies
and political subdivisions thereof. The sponsor is unable to predict whether or to what extent such factors or other factors may
affect the issuers of the bonds, the market value or marketability of such bonds or the ability of the respective issuers of such
bonds to pay interest on or principal of such bonds.

 

Administration of the
Trust

 

Distributions
to Unitholders by Regulated Investment Companies Making Semiannual/Quarterly Distributions or Grantor Trusts
. The discussion
in this section applies to all trusts other than trusts that are “regulated investment companies” for tax purposes
that have monthly distribution dates. Income received by a trust is credited by the trustee to the Income Account for the trust.
All other receipts are credited by the trustee to a separate Capital Account for the trust. The trustee will normally distribute
any income received by a trust on each distribution date or shortly thereafter to unitholders of record on the preceding record
date. A trust will also generally make required distributions or distributions to avoid imposition of tax at the end of each year
if it has elected to be taxed as a RIC for federal tax purposes. Unitholders will receive an amount substantially equal to their
pro rata share of the available balance of the Income Account of the related trust. All distributions will be net of applicable
expenses. There is no assurance that any actual distributions will be made since all dividends and other income distributions received
may be used to pay expenses. In addition, excess amounts from the Capital Account of a trust, if any, will be distributed on each
distribution date or shortly thereafter to unitholders of record on the preceding record date, provided that the trustee
is not required to make a distribution from the Capital Account unless the amount available for distribution is at least $1.00
per 100 units. Proceeds received from the disposition of any of the securities after a record date and prior to the following distribution
date will be held in the Capital Account and not distributed until the next distribution date applicable to the Capital Account.
Notwithstanding the foregoing, if a trust is designed to be a grantor trust for tax purposes, the trustee is not required to make
a distribution from the Income Account or the Capital Account unless the total cash held for distribution equals at least 0.1%
of the trust’s net asset value as determined under the trust agreement, provided that the trustee is required to distribute
the balance of the Income Account and Capital Account on the distribution date occurring in December of each year. The

 

 

trustee
is not required to pay interest on funds held in the Capital or Income Accounts (but may itself earn interest thereon and therefore
benefits from the use of such funds).

 

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

 

Distributions
to Unitholders by Regulated Investment Companies Making Monthly Distributions
. The discussion in this section applies if
your trust is a RIC that has monthly distribution dates. Income received by a trust is credited by the trustee to the Income Account
for the trust. All other receipts are credited by the trustee to a separate Capital Account for the trust. The trustee will normally
distribute income received by a trust on each distribution date or shortly thereafter to unitholders of record on the preceding
record date. The trust generally pays distributions from its Income Account (pro-rated on an annual basis) along with any excess
balance from the Capital Account on each monthly distribution date to unitholders of record on the preceding record date as described
in greater detail below. All distributions will be net of applicable expenses. The amount of your distributions will vary from
time to time as companies change their dividends and other income distributions or trust expenses change. The trust will also generally
make required distributions or distributions to avoid imposition of tax at the end of each year if it has elected to be taxed as
a RIC for federal tax purposes. Excess amounts from the Capital Account of a trust, if any, will be distributed at least annually
to the unitholders then of record. Proceeds received from the disposition of any of the securities after a record date and prior
to the following distribution date will be held in the Capital Account and not distributed until the next distribution date applicable
to the Capital Account. The trustee shall not be required to make a distribution from the Capital Account unless the cash balance
on deposit therein available for distribution shall be sufficient to distribute at least $1.00 per 100 units. The trustee is not
required to pay interest on funds held in the Capital or Income Accounts (but may itself earn interest thereon and therefore benefits
from the use of such funds).

 

The distribution to
the unitholders as of each record date will be made on the following distribution date or shortly thereafter. When the trust receives
dividends and other income distributions from a portfolio security, the trustee credits the dividends and other income distributions
to the trust’s accounts. In an effort to make relatively regular income distributions, the trust’s distribution from
the Income Account on each distribution date to each unitholder is equal to such unitholder’s pro rata share of the cash
balance in the Income Account calculated on the basis of a fraction (the numerator of which is one and the denominator of which
is the total number of distribution dates per year) of the estimated annual income to the trust for the ensuing twelve months computed
as of the close of business on the record date immediately preceding such distribution after deduction of (1) the fees and expenses
then deductible pursuant to the trust agreement and (2) the trustee’s estimate of other expenses properly chargeable to the
Income Account pursuant to the trust agreement which have accrued as of such record date or are otherwise properly attributable
to the period to which such distribution relates. Because the trust does not receive dividends and other income distributions from
the portfolio securities at a

 

 

constant rate throughout the year, the trust’s income distributions to unitholders may be more
or less than the amount credited to the trust accounts as of the record date. In the event that the amount on deposit in the Income
Account is not sufficient for the payment of the amount intended to be distributed to unitholders on the basis of the computation
described above, the trustee is authorized to advance its own funds and cause to be deposited in and credited to the Income Account
such amounts as may be required to permit payment of the related distribution to be made as described above. In such an event,
the trustee shall be entitled to be reimbursed, without interest, out of income payments received by the trust subsequent to the
date of such advance. Any such advance shall be reflected in the Income Account until repaid.

 

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

 

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

 

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

 

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

 

(A) As to the Income Account:

 

(1) the amount of income received on the securities (including income received as a portion of the
proceeds of any disposition of securities);

 

(2) the amounts paid for purchases of replacement securities or for purchases of securities otherwise
pursuant to the applicable trust agreement, if any, and for redemptions;

 

 

(3) the deductions, if any, from the Income Account for payment into the Reserve Account;

 

(4) the deductions for applicable taxes and fees and expenses of the trustee, the sponsor, the evaluator,
the supervisor, counsel, auditors and any other expenses paid by the trust;

 

(5) the amounts reserved for purchases of contract securities, for purchases made pursuant to replace
failed contract securities or for purchases of securities otherwise pursuant to the applicable trust agreement, if any;

 

(6) the deductions for payment of the sponsor’s expenses of maintaining the registration of the
trust units, if any;

 

(7) the aggregate distributions to unitholders; and

 

(8) the balance remaining after such deductions and distributions, expressed both as a total dollar
amount and as a dollar amount per unit outstanding on the last business day of such calendar year;

 

(B) As to the Capital Account:

 

(1) the net proceeds received due to sale, maturity, redemption, liquidation or disposition of any
of the securities, excluding any portion thereof credited to the Income Account;

 

(2) the amount paid for purchases of replacement securities or for purchases of securities otherwise
pursuant to the applicable trust agreement, if any, and for redemptions;

 

(3) the deductions, if any, from the Capital Account for payments into the Reserve Account;

 

(4) the deductions for payment of applicable taxes and fees and expenses of the trustee, the sponsor,
the evaluator, the supervisor, counsel, auditors and any other expenses paid by the trust;

 

(5) the deductions for payment of the sponsor’s expenses of organizing the trust;

 

(6) the amounts reserved for purchases of contract securities, for purchases made pursuant to replace
failed contract securities or for purchases of securities otherwise pursuant to the trust agreement, if any;

 

(7) the deductions for payment of deferred sales charge and creation and development fee, if any;

 

 

(8) the deductions for payment of the sponsor’s expenses of maintaining the registration of the
trust units, if any;

 

(9) the aggregate distributions to unitholders; and

 

(10) the balance remaining after such distributions and deductions, expressed both as a total dollar
amount and as a dollar amount per unit outstanding on the last business day of such calendar year; and

 

(C) The following information:

 

(1) a list of the securities held as of the last business day of such calendar year and a list which
identifies all securities sold or other securities acquired during such calendar year, if any;

 

(2) the number of units outstanding on the last business day of such calendar year;

 

(3) the unit value based on the last trust evaluation of such trust made during such calendar year;
and

 

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

 

The trustee may furnish
such statement by posting it to a website that is set forth in the trust’s prospectus (which may be a publicly available
website). A unitholder may request delivery of such statement by contacting the sponsor at the applicable phone number in the trust’s
prospectus.

 

Rights of Unitholders.
The death or incapacity of any unitholder will not operate to terminate a trust nor entitle legal representatives or heirs to claim
an accounting or to bring any action or proceeding in any court for partition or winding up of the trust, nor otherwise affect
the rights, obligations and liabilities of the parties to the applicable trust agreement. By purchasing units of a trust, each
unitholder expressly waives any right he may have under any rule of law, or the provisions of any statute, or otherwise, to require
the trustee at any time to account, in any manner other than as expressly provided in the applicable trust agreement, in respect
of the portfolio securities or moneys from time to time received, held and applied by the trustee under the trust agreement. No
unitholder shall have the right to control the operation and management of a trust in any manner, except to vote with respect to
the amendment of the related trust agreement or termination of the trust.

 

Amendment.
Each trust agreement may be amended from time to time by the sponsor and trustee or their respective successors, without the consent
of any of the unitholders, (i) to cure any ambiguity or to correct or supplement any provision which may be defective or

 

 

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

 

Except for the amendments,
changes or modifications described above, neither the sponsor nor the trustee nor their respective successors may consent to any
other amendment, change or modification of a trust agreement without the giving of notice and the obtaining of the approval or
consent of unitholders representing at least 66 2/3% of the units then outstanding of the affected trust. No amendment may reduce
the aggregate percentage of units the holders of which are required to consent to any amendment, change or modification of a trust
agreement without the consent of the unitholders of all of the units then outstanding of the affected trust and in no event may
any amendment be made which would (1) alter the rights to the unitholders of the trust as against each other, (2) provide the trustee
with the power to engage in business or investment activities other than as specifically provided in the trust agreement, (3) adversely
affect the tax status of the related trust for federal income tax purposes or result in the units being deemed to be sold or exchanged
for federal income tax purposes or (4) unless a trust has elected to be taxed as a RIC for federal income tax purposes, result
in a variation of the investment of unitholders in the trust. The trustee will notify unitholders of a trust of the substance of
any such amendment to the trust agreement for such trust.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

The Trustee.
The trustee is The Bank of New York Mellon, a trust company organized under the laws of New York. The Bank of New York Mellon has
its principal unit investment trust division offices at 240 Greenwich Street, 22W Floor, New York, NY 10286, (800) 848-6468. The
Bank of New York Mellon is subject to supervision and examination by the

 

 

Superintendent of Banks of the State of New York and the
Board of Governors of the Federal Reserve System, and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.

 

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

 

The trustee or successor
trustee must deliver a copy of the notice of resignation to all unitholders then of record, not less than sixty days before the
date specified in such notice when such resignation is to take effect. The sponsor upon receiving notice of such resignation is
obligated to appoint a successor trustee promptly. If, upon such resignation, no successor trustee has been appointed and has accepted
the appointment within thirty days after notification, the retiring trustee may apply to a court of competent jurisdiction for
the appointment of a successor. In case at any time the trustee shall not meet the requirements set forth in the trust agreement,
or shall become incapable of acting, or if a court having jurisdiction in the premises shall enter a decree or order for relief
in respect of the trustee in an involuntary case, or the trustee shall commence a voluntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the trustee or for any substantial part of its property shall be appointed, or the trustee shall generally
fail to pay its debts as they become due, or shall fail to meet such written standards for the trustee’s performance as shall
be established from time to time by the sponsor, or if the sponsor determines in good faith that there has occurred either (1)
a material deterioration in the creditworthiness of the trustee or (2) one or more grossly negligent acts on the part of the trustee
with respect to a trust, the sponsor, upon sixty days’ prior written notice, may remove the trustee and appoint a successor
trustee by written instrument, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the
successor trustee. Notice of such removal and appointment shall be delivered to each unitholder by the successor trustee. Upon
execution of a written acceptance of such appointment by such successor trustee, all the rights, powers, duties and obligations
of the original trustee shall vest in the successor. The trustee must be a corporation organized under the laws of the United States,
or any state thereof, be authorized under such laws to exercise trust powers and have at all times an aggregate capital, surplus
and undivided profits of not less than $5,000,000.

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

Expenses of the
Trust
. The sponsor may receive a fee from your trust for creating and developing the trust, including determining the trust’s
objectives, policies, composition and size, selecting service providers and information services and for providing other similar
administrative and ministerial functions. The amount of this “creation and development fee” is set forth in the prospectus.
For trusts in which the prospectus provides that the creation and development fee be paid at the conclusion of the initial offering
period, the trustee will deduct this amount from your trust’s assets as of the close of the initial offering period. 
For trusts in which the prospectus provides that the creation and development fee will accrue on a daily basis after the close
of the initial offering period, the fee will accrue daily from the day after the close of the initial offering period and such
amounts of accrued creation and development fee will be paid to the sponsor on a monthly basis. No portion of this fee is applied
to the payment of distribution expenses or as compensation for sales efforts. This fee will not be deducted from proceeds received
upon a repurchase, redemption or exchange of units before the close of the initial public offering period. For trusts in which
the prospectus provides that the creation and development fee will accrue on a daily basis after the close of the initial offering
period, if you sell or redeem units after the initial offering period has closed, you will not pay any unaccrued amounts of
the creation and development fee upon sale or redemption of your units.

 

For services performed
under a trust’s trust agreement the trustee shall be paid a fee at an annual rate in the amount per unit set forth in such
trust agreement. The trustee shall charge a pro-rated portion of its annual fee at the times specified in such trust agreement,
which pro-rated portion shall be calculated on the basis of the largest number of units in such trust at any time during the primary
offering period. After the primary offering period has terminated, the fee shall accrue daily and be based on the number of units
outstanding on the first business day of each calendar year in which the fee is calculated or the number of units outstanding at
the end of the primary offering period, as appropriate. The annual trustee fee shall be prorated for any calendar year in which
the trustee provides services during less than the whole of such year. The trustee may from time to time adjust its compensation
as set forth in the trust agreement provided that total adjustment upward does not, at the time of such adjustment, exceed the
percentage of the total increase in consumer prices for services as measured by the United States Department of Labor Consumer
Price Index entitled “All Services Less Rent of Shelter” or similar index, if such index should no longer be published.
The consent or concurrence of any unitholder shall not be required for any such adjustment or increase. Such compensation shall
be calculated and paid in installments by the trustee against the Income and Capital Accounts of each trust; provided, however,
that such compensation shall be deemed to provide only for the usual, normal and

 

 

proper functions undertaken as trustee pursuant
to the trust agreement. The trustee shall also charge the Income and Capital Accounts of each trust for any and all expenses and
disbursements incurred as provided in the trust agreement.

 

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

 

The following additional
charges are or may be incurred by a trust in addition to any other fees, expenses or charges described in the prospectus: (a) fees
for the trustee’s extraordinary services; (b) expenses of the trustee (including legal and auditing expenses and reimbursement
of the cost of advances to the trust for payment of expenses and distributions, but not including any fees and expenses charged
by an agent for custody and safeguarding of securities) and of counsel, if any; (c) various governmental charges; (d) expenses
and costs of any action taken by the trustee to protect the trust or the rights and interests of the unitholders; (e) indemnification
of the trustee for any loss or liability accruing to it without gross negligence, bad faith or willful misconduct on its part arising
out of or in connection with the acceptance or administration of the trust; (f) indemnification of the sponsor for any loss,
liability or expense incurred in acting in that capacity other than by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties or its reckless disregard of its obligations and duties under the trust agreement; (g) indemnification
of the supervisor for any loss, liability or expense incurred in acting as supervisor of the trust other than by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations
and duties under the trust agreement; (h) indemnification of the evaluator for any loss, liability or expense incurred in acting
as evaluator of the trust other than by reason of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties under the trust agreement; (i) expenditures

 

 

incurred in contacting unitholders upon termination of the trust; and (j) license fees for the right to use trademarks and
trade names, intellectual property rights or for the use of databases and research owned by third-party licensors. The sponsor
is authorized to obtain from Mutual Fund Quotation Service (or similar service operated by The Nasdaq Stock Market, Inc. or
its successor) a UIT ticker symbol for each trust and to contract for the dissemination of the unit prices through that service.
A trust will bear any cost or expense incurred in connection with the obtaining of the ticker symbol and the dissemination
of unit prices. A trust may pay the costs of updating its registration statement each year. All fees and expenses are payable
out of a trust and, when owing to the trustee, are secured by a lien on the trust. If the balances in the Income and Capital
Accounts are insufficient to provide for amounts payable by the trust, the trustee has the power to sell securities to pay
such amounts. These sales may result in capital gains or losses to unitholders.

 

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

 

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

 

Undertakings

1. Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned
registrant hereby undertakes to file with the Securities and Exchange Commission (the “Commission”) such supplementary and
periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter
duly adopted pursuant to authority conferred in that section.
2. Insofar as indemnification for liability arising under the Securities Act of 1933 (the “Securities
Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to Rule 484 under the Securities
Act, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such issue.

 

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:

1.1.1 Standard
Terms and Conditions of Trust.
Reference is made to Exhibit 1.1.1 to the Registration Statement on Form S-6 for Advisors Disciplined
Trust 1670 (File No. 333-210025) as filed on May 6, 2016.
1.3 Bylaws of
Advisors Asset Management, Inc.
Reference is made to Exhibit 1.3 to the Registration Statement on Form S-6 for Advisors Disciplined
Trust 647 (File No. 333-171079) as filed on January 6, 2011.
1.5 Form of
Dealer Agreement.
Reference is made to Exhibit 1.5 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 262 (File
No. 333-150575) as filed of June 17, 2008.
1.6 Advisors Disciplined Trust Rule 12d1-4 Fund of Funds Agreements. Reference is made to Exhibit
A(9)(a)
to the Registration Statement on Form N-8B-2/A for Advisors Disciplined Trust Series 1 (File No.
811-21056) as filed on January 19, 2022, Exhibit
A(9)(a)
to the Registration Statement on Form N-8B-2/A for Advisors Disciplined Trust Series 1 (File No. 811-21056) as filed on February
8, 2022 and Exhibit A(9)(a) to the Registration
Statement on Form N-8B-2/A for Advisors Disciplined Trust Series 1 (File No. 811-21056) as filed on June 15, 2023.
2.2 Form of
Code of Ethics.
Reference is made to Exhibit 2.2 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 1853 (File
No. 333-221628) as filed on February 21, 2018.
7.1 Powers of
Attorney.
Reference is made to Exhibit 7.1 to the Registration Statement on Form S-6 for Advisors Disciplined Trust 2099 (File No.
333-259544) as filed on December 8, 2021.

Signatures

The Registrant, Advisors
Disciplined Trust 2197, hereby identifies Matrix Unit Trust, Series 1, Series 2, Series 3, Series 4, Series 5 and Series 8; Advisor’s
Disciplined Trust, Series 10, Series 11 and Series 13; Advisor’s Disciplined Trust 23 and 40; and Advisors Disciplined Trust 256,
318, 404, 459, 460, 518, 533, 544, 560, 588, 595, 610, 625, 677, 678, 699, 731, 782, 785, 803, 814, 820, 830, 834, 833, 839, 847, 854,
855, 862, 863, 867, 879, 880, 888, 891, 897, 901, 910, 911, 931, 932, 936, 938, 949, 952, 967, 980, 981, 982, 990, 1000, 1006, 1015, 1049,
1102, 1146, 1198, 1258, 1309, 1341, 1516, 1609, 1682, 1828, 1856, 1865, 1884, 1900, 1921, 1937, 1951, 1968, 1986, 2011, 2025, 2035, 2040,
2054, 2067, 2082, 2094, 2122, 2134, 2151, 2166 and 2181 for purposes of the representations required by Rule 487 and represents the following:

(1) that the portfolio
securities deposited in the series as to the securities of which this Registration Statement is being filed do not differ materially in
type or quality from those deposited in such previous series;

(2) that, except to
the extent necessary to identify the specific portfolio securities deposited in, and to provide essential financial information for, the
series with respect to the securities of which this Registration Statement is being filed, this Registration Statement does not contain
disclosures that differ in any material respect from those contained in the registration statements for such previous series as to which
the effective date was determined by the Commission or the staff; and

(3) that it has complied
with Rule 460 under the Securities Act of 1933.

Pursuant to the requirements
of the Securities Act of 1933, the Registrant, Advisors Disciplined Trust 2197 has duly caused this Amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wichita and State of Kansas on November 20, 2023.

 

Advisors
Disciplined Trust 2197

 

By Advisors
Asset Management, Inc., Depositor

 

 

By               /s/
ALEX R. MEITZNER      

Alex R. Meitzner

Senior Vice President

 

Pursuant to the requirements
of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below on November 20, 2023 by the following
persons in the capacities indicated.

 

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

 

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

 

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

 

 

ATTACHMENTS / EXHIBITS

TRUST AGREEMENT

OPINION AND CONSENT OF COUNSEL

OPINION AND CONSENT OF COUNSEL

OPINION OF COUNSEL

CONSENT OF INITIAL EVALUATOR

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



[ad_2]

Source link