File No. 333-27491
CIK #1025209
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
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: Van Kampen American Capital Equity
Opportunity Trust, Series 63
B. Name of Depositor: Van Kampen American Capital
Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital
Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: An indefinite
number of Units of proportionate interest pursuant to Rule 24f-2
under the Investment Company Act of 1940
F. Proposed maximum offering price to the public of the securities
being registered: Indefinite
G. Amount of registration fee: Not Applicable
H. Approximate date of proposed sale to the public:
As Soon As Practicable After the Effective Date of the
Registration Statement
/ X / Check box if it is proposed that this filing will become effective
on June 24, 1997 pursuant to Rule 487.
Van Kampen American Capital Equity Opportunity Trust
Series 63
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trust
trust's securities and ) Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) *
underwriter, trustee or any ) Trust Portfolio
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special Trusts ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Cover Page
securities ) Trust Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Trustamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions) Report of Independent Certified
1(c) to Form S-6) ) Public Accountants
) Statement of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
June 24, 1997
China Consumer Opportunity Trust, Series 1
The Fund. Van Kampen American Capital Equity Opportunity Trust, Series 63 (the
"Fund" ) is comprised of one underlying unit investment trust
designated as the China Consumer Opportunity (the "Trust" ). The Trust
offers investors the opportunity to purchase Units representing proportionate
interests in a fixed, diversified portfolio of common stocks issued by
companies which International Assets Advisory Corp. (the "Managing
Underwriter" ) believes have substantial present or future potential
opportunities in the China region consumer products and services sector (the
"Equity Securities" or "Securities" ). See "Trust
Portfolio." The Securities are common stocks of foreign issuers. The
foreign common stocks which are traded on a foreign securities exchange are
referred to herein as the "Foreign Securities." Unless terminated
earlier, the Trust will terminate on June 24, 2004 (the "Mandatory
Termination Date" ) and any Securities then held will, within a reasonable
time thereafter, be liquidated or distributed by the Trustee. Any Securities
liquidated at termination will be sold at the then current market value for
such Securities; therefore, the amount distributable in cash to a Unitholder
upon termination may be more or less than the amount such Unitholder paid for
his Units. Unless otherwise indicated, all amounts herein are stated in U.S.
dollars computed on the basis of the exchange rate for the relevant currency
on the Initial Date of Deposit.
Objective of the Trust. The objective of the Trust is to provide the potential
for above-average total return primarily through potential capital
appreciation with dividend income playing a lesser role. See "Objectives
and Securities Selection." There is, of course, no guarantee that the
objective of the Trust will be achieved.
Public Offering Price. The Public Offering Price of the Units of the Trust
includes the aggregate underlying value of the Securities in the Trust's
portfolio, the initial sales charge described below, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. The initial sales
charge is equal to the difference between the maximum total sales charge of
5.5% of the Public Offering Price and the maximum deferred sales charge ($0.30
per Unit). The monthly deferred sales charge ($0.05 per Unit) will begin
accruing on a daily basis on December 24, 1997 and will continue to accrue
through June 23, 1998. The monthly deferred sales charge will be charged to
the Trust, in arrears, commencing January 24, 1998 and will be charged on the
24th day of each month thereafter through June 24, 1998. Unitholders will be
assessed only that portion of the deferred sales charge payments not yet
collected. This deferred sales charge will be paid from funds in the Capital
Account, if sufficient, or from the periodic sale of Securities. The total
maximum sales charge assessed to Unitholders on a per Unit basis will be 5.5%
of the Public Offering Price (5.820% of the aggregate value of the Securities
less the deferred sales charge), subject to reduction as set forth in "
Public Offering--General." The Public Offering Price per Unit is based on
the aggregate value of the Foreign Securities computed on the basis of the
offering side value of the currency exchange rate for the relevant currency
expressed in U.S. dollars during the initial offering period and on the bid
side value for secondary market transactions. The sales charge is reduced on a
graduated scale for sales involving at least 10,000 Units. If Units were
available for purchase at the close of business on the day before on the
Initial Date of Deposit, the Public Offering Price per Unit would have been
that amount set forth under "Summary of Essential Financial
Information." The minimum purchase is 500 Units (100 Units for a
tax-sheltered retirement plan). See "Public Offering."
Additional Deposits. The Sponsor may, from time to time during a period of up
to approximately six months after the Initial Date of Deposit, deposit
additional Securities in the Trust as provided under "The Trust."
Units of the Trusts are not insured by the FDIC, are not deposits or other
obligations of, or guaranteed by, any depository institution or any government
agency and are subject to investment risk, including possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Dividend and Capital Distributions. Distributions of dividends and capital, if
any, received by the Trust will be paid in cash on the applicable Distribution
Date to Unitholders of record on the record date as set forth in the "
Summary of Essential Financial Information." The initial estimated
distribution will be approximately $.05 per Unit and will be made on December
25, 1997 to Unitholders of record on December 10, 1997. Any distribution of
income and/or capital will be net of the expenses of the Trust. See "
Taxation." Additionally, upon surrender of Units for redemption or
termination of the Trust, the Trustee will distribute to each Unitholder his
pro rata share of the Trust's assets, less expenses, in the manner set forth
under "Rights of Unitholders--Distributions of Income and Capital."
Secondary Market for Units. Although not obligated to do so, International
Assets Advisory Corp. (the "Managing Underwriter" ) currently intends
to maintain a market for Units of the Trust and offer to repurchase Units at
prices which are based on the aggregate underlying value of Equity Securities
in the Trust (generally determined by the closing sale prices of the
Securities) plus or minus cash, if any, in the Capital and Income Accounts of
the Trust. If a secondary market is not maintained, a Unitholder may redeem
Units at prices based upon the aggregate underlying value of the Equity
Securities in the Trust plus or minus a pro rata share of cash, if any, in the
Capital and Income Accounts of the Trust. See "Rights of
Unitholders--Redemption of Units."
Termination. Commencing on the Mandatory Termination Date, Securities will
begin to be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the Securities.
Written notice of any termination of the Trust shall be given by the Trustee
to each Unitholder at his address appearing on the registration books of the
Trust maintained by the Trustee. At least 30 days prior to the Mandatory
Termination Date the Trustee will provide written notice thereof to all
Unitholders. Unitholders will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trust is terminated.
See "Trust Administration--Amendment or Termination."
Portfolio Supervision. Global Assets Advisors, Inc. ("Global Assets
Advisors" ) is the Supervisor for the Trust and will provide research and
perform portfolio supervisory services for the Trust. Global Assets Advisors
provides expertise in equity research on individual foreign equity securities,
emerging markets and the foreign equity security markets in general.
Reinvestment Option. Unitholders may have the opportunity to have their
distributions reinvested into additional Units of the Trust, if Units are
available at the time of reinvestment. See "Rights of
Unitholders--Reinvestment Option."
Risk Factors. An investment in the Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and currency fluctuations, the lack of adequate financial
information concerning an issuer, exchange control restrictions impacting
foreign issuers and risks related to an investment in companies that do
business or are traded in China or its territorial possessions. For certain
risk considerations related to the Trust, see "Risk Factors." Units of
the Trust are not deposits or obligations of, and are not guaranteed or
endorsed by, any bank and are not federally insured or otherwise protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency and involve investment risk, including the possible loss of the
principal amount invested.
<TABLE>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
At the Close of the Relevant Stock Market on: June 24, 1997
Managing Underwriter: International Assets Advisory Corp.
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor: Global Assets Advisors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
GENERAL INFORMATION
<S> <C>
Number of Units <F1>...................................................... 15,000
Fractional Undivided Interest in the Trust per Unit <F1>.................. 1/15,000
Public Offering Price: ...................................................
Aggregate Value of Securities in Portfolio <F2>.......................... $ 144,764
Aggregate Value of Securities per Unit................................... $ 9.65
Maximum Sales Charge <F3>................................................ $ .54
Less Deferred Sales Charge............................................... $ .30
Public Offering Price per Unit <F3><F4><F5>.............................. $ 9.89
Redemption Price per Unit <F6>............................................ $ 9.31
Initial Secondary Market Repurchase Price per Unit <F6>................... $ 9.35
Excess of Public Offering Price per Unit over Redemption Price per Unit... $ .58
Calculation of Estimated Net Annual Dividends per Unit <F7>:..............
Estimated Gross Annual Dividends per Unit................................ $ .15968
Less: Estimated Annual Expense per Unit.................................. $ .02483
Estimated Net Annual Dividends per Unit.................................. $ .13485
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee...Maximum of $.007 per Unit
Evaluator's Annual Evaluation Fee.....Maximum of $.0025 per Unit
Mandatory Termination Date............June 24, 2004
The Trust may be terminated if the net asset value of the Trust is less than $500,000
unless the net asset value of the Trust's deposits has exceeded $15,000,000, then the Trust
Minimum Termination Value.............may be terminated if the net asset value of the Trust is less than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F8>......................$.008 per Unit
Income and Capital Account Record Date.........Tenth day of December
Income and Capital Account Distribution Date...Twenty-fifth day of December
Evaluation Time................................Generally 4 a.m. New York time
- ----------
<FN>
<F1>As of the close of business on any day on which the Sponsor is the sole
Unitholder of the Trust, the number of Units may be adjusted so that the
Public Offering Price per Unit will equal approximately $10. Therefore, to the
extent of any such adjustment the fractional undivided interest per Unit will
increase or decrease accordingly from the amounts indicated above.
<F2>Each Equity Security listed on a national or foreign securities exchange is
valued at the closing sale price, or if an Equity Security is not so listed,
at the closing ask price thereof. The aggregate value of Securities in the
Trust is based on the U.S. dollar value of the Foreign Securities based on the
offering side value of the related currency exchange rate at the Evaluation
Time on the date of this "Summary of Essential Financial Information" .
<F3>The Maximum Sales Charge consists of an initial sales charge and a deferred
sales charge. The initial sales charge is applicable to all Units and
represents an amount equal to the difference between the Maximum Sales Charge
of 5.5% of the Public Offering Price and the amount of the maximum deferred
sales charge of $0.30 per Unit. Subsequent to the Initial Date of Deposit, the
amount of the initial sales charge will vary with changes in the aggregate
value of the Securities in the Trust. In addition to the initial sales charge,
Unitholders will pay a deferred sales charge of $0.05 per Unit per month which
will begin accruing on a daily basis on December 24, 1997 and will continue to
accrue through June 23, 1998. The monthly deferred sales charge will be
charged to the Trust, in arrears, commencing January 24, 1998 and will be
charged on the 24th day of each month thereafter through June 24, 1998. Units
purchased subsequent to the initial deferred sales charge payment will be
subject only to the portion of the deferred sales charge payments not yet
collected. These deferred sales charge payments will be paid from funds in the
Capital Account, if sufficient, or from the periodic sale of Securities. The
total maximum sales charge will be 5.5% of the Public Offering Price (5.820%
of the aggregate value of the Securities in the Trust less the deferred sales
charge). See the "Fee Table" below and "Public Offering--Offering
Price" .
<F4>On the Initial Date of Deposit there will be no cash in the Income or Capital
Accounts. Anyone ordering Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts.
<F5>Commencing on June 24, 1998, the secondary market sales charge will not
include deferred payments but will instead include only a one-time initial
sales charge of 5.0% of the Public Offering Price and will be reduced by .5 of
1% on each subsequent June 24 to a minimum sales charge of 3.0%. See "
Public Offering."
<F6>The Redemption Price per Unit and the Secondary Market Repurchase Price per
Unit are reduced by the unpaid portion of the deferred sales charge. The
Redemption Price per Unit is based on the aggregate value of the Foreign
Securities computed on the basis of the bid side value of the related currency
exchange rate expressed in U.S. dollars.
<F7>Estimated annual dividends are based on the most recently declared dividends,
or on the most recent interim and final dividends declared, taking into
consideration any applicable foreign withholding tax. Estimated Annual
Dividends per Unit are based on the number of Units, the fractional undivided
interest in the Securities per Unit and the aggregate value of the Securities
per Unit as of the Initial Date of Deposit. Investors should note that the
actual annual dividends received per Unit will vary from the estimated amount
due to changes in the factors described in the preceding sentence and actual
dividends declared and paid by the issuers of the Securities.
<F8>The Trustee will receive additional annual compensation, payable in monthly
installments, of $.30, $.80 and $.40 per $1,000 of market value of the Equity
Securities traded on the Hong Kong, Shenzhen and Singapore securities
exchanges, respectively, and held in a sub-custodian account at month end.
</TABLE>
FEE TABLE
- --------------------------------------------------------------------------
This Fee Table is intended to assist investors in understanding the costs and
expenses that an investor in the Trust will bear directly or indirectly. See
"Public Offering--Offering Price" and "Trust Operating
Expenses" . Although the Trust is a unit investment trust rather than a
mutual fund, this information is presented to permit a comparison of fees.
Investors should note that while this example is based on the public offering
price and the estimated fees for the Trust, the actual public offering price
and fees could vary from the estimated amounts below.
<TABLE>
<CAPTION>
<S> <C> <C>
Amount Per
Unitholder Transaction Expenses (as of the Initial Date of Deposit) (as a percentage of offering price) 100 Units
--------------
Initial Sales Charge Imposed on Purchase <F1>............................................................ 2.50% $ 25.00
Deferred Sales Charge <F2>............................................................................... 3.00% 30.00
------------------------
Maximum Sales Charge..................................................................................... 5.50% $ 55.00
========================
Maximum Sales Charge Imposed on Reinvested Dividends <F3>................................................ 3.00% $ 30.00
========= ==============
Estimated Annual Trust Operating Expenses (as of the Initial Date of Deposit) (as a percentage of
aggregate value)
Trustee's Fee ........................................................................................... 0.083% $ 0.80
Portfolio Supervision and Evaluation Fees ............................................................... 0.098% 0.95
Other Operating Expenses ................................................................................ 0.076% 0.73
--------- --------------
Total.................................................................................................... 0.257% $ 2.48
========= ==============
</TABLE>
Example
<TABLE>
<CAPTION>
Cumulative Expenses Paid for Period of:
------------------------------------------------
1 Year 3 Years 5 Years 10 Years
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period $ 58 $ 64 $ 70 $ N/A
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission regulations applicable to mutual funds. For purposes of the
example, the deferred sales charge imposed on reinvestment of dividends is not
reflected until the year following payment of the dividend; the cumulative
expenses would be higher if sales charges on reinvested dividends were
reflected in the year of reinvestment. The example should not be considered as
a representation of past or future expenses or annual rate of return; the
actual expenses and annual rate of return may be more or less than those
assumed for purposes of the example.
- ----------
<FN>
<F1>The Initial Sales Charge is actually the difference between the Maximum Sales
Charge (5.50% of the Public Offering Price) and the maximum deferred sales
charge ($0.30 per Unit) and would exceed 2.50% if the Public Offering Price
exceeds $10 per Unit.
<F2>The actual fee is $0.05 per Unit per month, irrespective of purchase or
redemption price, deducted over the six months commencing January 24, 1998. If
a holder sells or redeems Units before all of these deductions have been made,
the balance of the deferred sales charge payments remaining will be deducted
from the sales or redemption proceeds. If Unit price exceeds $10 per Unit, the
deferred portion of the sales charge will be less than 3.00%; if Unit price is
less than $10 per Unit, the deferred portion of the sales charge will exceed
3.00%. Units purchased subsequent to the initial deferred sales charge payment
will be subject to only that portion of the deferred sales charge payments not
yet collected.
<F3>Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment. See "Rights of
Unitholders--Reinvestment Option" .
</TABLE>
THE TRUST
- --------------------------------------------------------------------------
Van Kampen American Capital Equity Opportunity Trust, Series 63, which is
comprised of one unit investment trust, China Consumer Opportunity Trust,
Series 1, was created under the laws of the State of New York pursuant to a
Trust Indenture and Trust Agreement (the "Trust Agreement" ), dated the
date of this Prospectus (the "Initial Date of Deposit" ), among Van
Kampen American Capital Distributors, Inc., as Sponsor, Global Assets
Advisors, Inc., as Supervisor, The Bank of New York, as Trustee, and American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator.
The Trust offers investors the opportunity to purchase Units representing
proportionate interests in a portfolio of equity securities issued by
companies which International Assets Advisory Corp. believes have substantial
present or future potential opportunities in the China region consumer
products and services sector.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio" herein, including delivery
statements relating to contracts for the purchase of certain such Securities
and an irrevocable letter of credit issued by a financial institution in the
amount required for such purchases. Thereafter, the Trustee, in exchange for
such Securities (and contracts) so deposited, delivered to the Sponsor
documentation evidencing the ownership of that number of Units of the Trust
indicated in "Summary of Essential Financial Information." Unless
terminated earlier, the Trust will terminate on the Mandatory Termination Date
set forth under "Summary of Essential Financial Information" and any
Securities then held will, within a reasonable time thereafter, be liquidated
or distributed by the Trustee. Any Securities liquidated at termination will
be sold at the then current market value for such Securities; therefore, the
amount distributable in cash to a Unitholder upon termination may be more or
less than the amount such Unitholder paid for his Units.
Additional Units of the Trust may be issued at any time by depositing in the
Trust (i) additional Securities, (ii) contracts to purchase securities
together with cash or irrevocable letters of credit or (iii) cash (including a
letter of credit) with instructions to purchase additional Securities. As
additional Units are issued by the Trust as a result of the deposit of
additional Securities, 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 or cash with instructions to purchase Securities into
the Trust following the Initial Date of Deposit, provided that such additional
deposits will be in amounts which will maintain, as nearly as practicable, the
same percentage relationship among the number of shares of each Equity
Security in the Trust's portfolio that existed immediately prior to any such
subsequent deposit. Any deposit of additional Equity Securities will
duplicate, as nearly as is practicable, this actual proportionate relationship
and not the original proportionate relationship on the Initial Date of
Deposit, since the actual proportionate relationship may be different than the
original proportionate relationship. Any such difference may be due to the
sale, redemption or liquidation of any of the Equity Securities deposited in
the Trust on the Initial, or any subsequent, Date of Deposit. If the Sponsor
deposits cash, however, 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 cash
deposit and the purchase of the Securities and because the Trust will pay the
associated brokerage fees.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee or
additional Units are issued as a result of additional Securities being
deposited by the Sponsor, the fractional undivided interest in the Trust
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor or the Managing
Underwriter, or until the termination of the Trust Agreement.
OBJECTIVE AND SECURITIES SELECTION
- --------------------------------------------------------------------------
The objective of the Trust is to provide the potential for above-average total
return primarily through potential capital appreciation with dividend income
playing a lesser role. There is, of course, no assurance that the Trust (which
includes expenses and sales charges) will achieve its objective. The Equity
Securities selected for deposit in the Trust were chosen by International
Assets Advisory Corporation ("IAAC" ), the Managing Underwriter.
In many ways China is a consumer marketer's dream. A combination of pentup
demand for consumer goods, rising incomes and a revival of traditional Chinese
mores, which place high value on the accumulation and expression of wealth, is
precipitating a consumer boom in the world's most populated nation.
Thirty-five years of a production-driven communist economic system (from
roughly 1950-1985) in which the party line deemed consumer products frivolous
has created tremendous pent-up desire for consumer goods. At the same time,
China's stellar economic growth--averaging 10.2% annually in the decade
1984-1994--is augmenting household incomes, giving consumers the money they
need to purchase the plethora of new products that are arriving on the
shelves." Source: Statistics Bureau, Economist Intelligence Unit(c)
Consumer Marketing in China, 1996. Reproduced by permission of the Economist
Intelligence Unit, 111 West 57th Street, New York, New York 10019.
Total area in China is 9.6 million square miles, slightly larger than the
U.S., but with a population of 1.2 billion people, or almost five times that
of the United States. China borders 15 countries, with 14,000 miles of land
boundaries and 8,200 miles of coastland.
<TABLE>
<CAPTION>
Population Economic Growth GDP $ U.S. Trillion
(million) 1980-1995* 1995
-------------- ------------------ ----------------------
<S> <C> <C> <C>
China 1221 325% 0.693
U.S. 283 42% 7.25
Japan 125 60% 5.11
Germany 82 50% 2.41
*Chg. GDP 1990 local prices (source: IMF)
</TABLE>
China is now the most populous nation on earth and, if current growth rates
continue, it will within little more than two decades become its largest
economy.
<TABLE>
<CAPTION>
1990 1995 (Estimated) 2000
-------- -------- -------------------
<S> <C> <C> <C>
Total Population (billion) 1.14 1.23 1.3
Population Growth Rate 1.50% 1.30% 1.20%
Age Profile (% of population)
0-14 27.6 27 26.5
15-64 66.4 66.8 67.1
65 and Over 6 6.2 6.4
Life Expectancy (yrs)
Male 66 67 68
Female 69 70 71
Literacy Rate (% of population) 73.5 75 77
Labor Force (millions) 562 609 651
Source: Statistics Bureau, Economist Intelligence Unit(c) Consumer
Marketing in China, 1996. Reproduced by permission of the Economist
Intelligence Unit, 111 West 57th Street, New York, New York 10019.
</TABLE>
Since 1978, China's leaders have been moving the economy from a centrally
planned to market oriented economy, albeit at their own pace and of their own
definition: "Socialism with Chinese Characteristics" , which has meant
more market-oriented characteristics. Thus the late Deng Xiaoping's statement
in May of 1988: "Socialism is not about being poor, but being rich
together." Of course, while the Chinese government has begun to accept
economic reforms, investors should be aware that there can be no assurance
that these reforms will continue or that additional reforms will occur in the
future.
China's private (non-state) sector has grown rapidly in recent years. By the
end of 1995, the number of privately operated enterprises exceeded 600,000
(over six times the 1990 figure) employing 55.7 million workers. In 1996,
about 72% of China's retail consumer goods and 57% of China's industrial
output were produced by non-state enterprises (including collective and
private owned enterprises). In rural agriculture areas, where 70% of the
population still works and lives, more responsibility has been given to the
individual household, helping to liberate this sector from government
intervention. The above move is a major market move from a developing economy.
For example, in 1980 there were 15 cities with a population over one million.
In 1995, there were 32. The Ministry of Construction announced that it expects
to establish 432 new cities over the next 15 years and anticipates that the
number of towns will surge from 48,000 to 68,000. Of course, there can be no
assurance that these trends will continue or occur during the life of the
Trust.
Now the urban population represents about 360 million, some 30% of the
country's total, up from 20% in 1985, and that percentage continues to grow.
The state statistical bureau estimates that the urban population will rise to
36% of the population by the year 2000, while the United Nations Development
Program predicts the figure will be close to 50%. Additionally, there is a
fringe or suburban population bordering on urban areas with a population
estimated at about 380 million, and whose average per capita income is only
slightly lagging behind that of the urban population.
Urbanization has been especially significant to the consumer products
industry. China's urban population has a much higher income level than the
rural population, at about $570 per annum, and the urban consumer is much
easier to access geographically, particularly considering the current
inefficiency of China's transportation/distribution infrastructure,
particularly in rural areas.
<TABLE>
<CAPTION>
Urban Rural
----------- -----------
<S> <C> <C>
Average people per household 3.28 4.54
Average employees per household 1.88 2.59
Persons supported per wage earner 1.74 1.57
Annual income per capita 3502 Rmb 1789 Rmb
Annual per-capita income available for living expenses 3179 Rmb 1221 Rmb
Annual living expenditure per capita 2851 Rmb 1017 Rmb
Source: Statistics Bureau, Economist Intelligence Unit(c) Consumer Marketing
in China, 1996. Reproduced by permission of the Economist Intelligence Unit, 111
West 57th Street, New York, New York 10019.
</TABLE>
Thirty five years under communism during which the Communist party deemed
consumer products a frivolous luxury created desire among the populace for
consumer goods. With economic reform, China's GDP grew an average of 10.2%
annually from 1984 to 1994, helping to provide Chinese families with the
economic wherewithal to begin purchasing newly available consumer products.
Chinese households have typically saved a large percentage of their income,
estimated at about 18%, and significantly higher among the urban population.
This savings, among other things, is often targeted to funding future "
big-ticket" purchases. Additionally, multi-generational households are the
norm, with 20% of all national households including three generations. Such
households may have four workers and one or no dependents. With four incomes,
spending cash for a refrigerator or a TV may come within their reach.
The urban, consumer population appears to be growing much more sophisticated
in their shopping habits. For example, in 1985, only 4.4% of Chinese
households owned TVs, while over 42% of Chinese households now own TVs,
including 95% of urban households. Now that most urban households have access
to television, they are increasingly exposed to a new consumer-oriented
mentality. Obviously, many urban households are now for the first time in
their lives viewing television commercials advertising new consumer products.
Annual Chinese television advertising expenditures are reaching one billion
dollars annually, up from $24 million in 1985. One example: A five-second
daily advertisement following the national 7 o'clock news running through 1997
was bought for $39 million by a Chinese liquor company, hoping to reach
China's mass consumer audience.
<TABLE>
<CAPTION>
Nationwide Ownership of Goods (%) Nationwide Ownership of Goods (%)
- -------------------------------- ------ -------------------------------- ------
<S> <C> <C> <C>
Bicycle 81 Gas Stove 23
Electric Fan 63 Camera 14
Radio 58 Stereo 23
B&W TV 54 Walkman 12
Color TV 40 VCR 12
Rice Cooker 39 Telephone 15
Washing Machine 36 Motorcycle 6
Refrigerator 25 Vacuum 6
Source: Gallup, 1995 as reproduced in State Statistics Bureau, Economist
Intelligence Unit(c) Consumer Marketing in China, 1996. Reproduced by
permission of the Economist Intelligence Unit, 111 West 57th Street, New York,
New York 10019.
</TABLE>
According to the U.S. State Department, the size of the Chinese cosmetics and
toiletries market grew from 1.3 billion U.S. dollars in 1994 to 2.6 billion in
1996. The pharmaceuticals market grew from 9.7 billion U.S. dollars in 1994 to
14 billion in 1996. Sales of computer software grew, from 560 million U.S.
dollars in 1994 to 1.2 billion in 1996. Sales of computers grew from 3.6
billion U.S. dollars in 1994 to 6 billion in 1996. Cosmetics may be a $6
billion industry by the year 2000 according to estimates made by the official
Xinhua news agency.
<TABLE>
<CAPTION>
Women's Cosmetic Use Nationally Urban
- ----------------------- ------------- --------
<S> <C> <C>
Shampoo 66 78
Perfumes 33 46
Hand creams 31 39
Lipstick 16 30
Nail polish 9 18
Source: Statistics Bureau, Economist
Intelligence Unit(c) Consumer Marketing in
China, 1996. Reproduced by permission of the
Economist Intelligence Unit, 111 West 57th
Street, New York, New York 10019.
</TABLE>
According to a Gallup poll in 1995, most people in China embrace a "work
hard, get rich" ethic that they expect to help them buy consumer goods.
Also, just 4% said they subscribed to the collectivist belief in putting one's
society first. The same poll of 3,400 Chinese people resulted in a list of
things the Chinese planned to buy soon, which included color TVs, VCRs,
washing machines, refrigerators, and tape recorders.
China's total retail sales of consumer goods reached almost 300 billion U.S.
dollars in 1996 (2460 billion yuan), an increase of over 20% over the prior
year (see chart). Sales in urban areas reached $180 billion, and $117 billion
in rural areas.
[Bar Chart]
<TABLE>
China Consumer Retail Sales
<CAPTION>
Year Retail Sales (US$ bn.)
<S> <C>
85 118.781
86 117.581
87 137.500
88 175.672
89 148.302
90 138.889
91 154.419
92 171.752
93 209.897
94 190.031
95 247.205
96 296.216
<FN>
Source: State Statistics Bureau, Bloomberg
</TABLE>
Rising incomes and living standards may be creating the same effect on the
diet and food purchases patterns of China's consumers as has been seen in many
other countries around the world. Per capita consumption of meat, fruits,
vegetables, processed, and convenience foods is increasing. In major urban
markets consumers are rapidly adapting to fast foods, convenience foods, and
packaged food products.
Generally, the government has less of a hand in the consumer products market
than it does in much of China's industrial sector. For example, the government
substantially controls electricity, telecommunications, mining, and much of
heavy industry. In the consumer sector, 72% of production is coming from
non-governmental companies who are freer to produce and advertise the best
product possible, while the consumer is allowed to purchase the product he or
she wants. As the consumer market is one of the freest sectors in China's
economy, the Managing Underwriter believes this is one of the best areas to
look for investments.
An investment in the Trust must be made with an understanding of the risks of
investing companies within the China region. These risks are substantially
different than those associated with an investment in companies within the
United States. See "Risk Factors" for a more detailed discussion of
these risks. Risks that are unique to the China region and must be considered
include:
Political Considerations. An investment in companies within the China region
involves substantial uncertainty with respect to political considerations
which include, but are not limited to, changes in policies regarding laws or
regulations, or the interpretation thereof, taxation, restrictions on currency
conversion, the imposition of exchange controls or price controls, or the
expropriation of private or foreign business or property interests. While the
Chinese government has slowly accepted economic and social reforms in recent
years, no assurance can be made that any current trends will continue or that
the Chinese government will not revert to more restrictive economic and social
policies characteristic of a centrally planned communist government.
Economic Considerations. In the past, the allocation of resources and
productivity growth was set forth in plans created by central authorities.
Only in recent years has the Chinese government encouraged substantial private
economic activity, and there can be no assurance that the government's pursuit
of economic reforms will be consistent or effective.
Trade Relations. An increasingly large portion of China's economic activity is
export driven and therefore, affected by developments in the economies and
trade laws of its principal trading partners.
Tax. In order to encourage foreign investment in China, certain Sino-foreign
joint ventures have enjoyed preferential tax treatment in past years. No
assurance can be given that the current policy with respect to such
preferential treatment will continue.
Currency Conversion and Exchange Rate Risks. As of January 1, 1994, a floating
exchange rate system based on market forces was put into place and the
Renminbi-U.S. dollar exchange rate became susceptible to movements based on
the market. Since that time the exchange rate has remained relatively stable.
There is, however, no assurance that the Renminbi will not be subject to
devaluation or depreciation or that shortages in the availability of foreign
currency will not develop. While Renminbi are not fully convertible into U.S.
dollars, Chinese authorities have stated that full convertibility will occur
by the year 2000. In addition, the Securities are primarily traded in Hong
Kong dollars and the U.S. dollar value of the Securities is subject to
fluctuations in that currency.
Legal System. The legal system of China is a civil law system which is based
on written statutes and in which decided legal cases have little precedential
value. The Chinese government is still in the process of developing a
comprehensive system of laws and its legal system is underdeveloped in
comparison with the legal system of western countries.
For investors with a tolerance for volatility and uncertainty, and an
appropriate long-term investment time horizon, International Assets believes
that the Trust may potentially offer an above-average total return through a
long-term foreign sector investment opportunity. Even though the impending
transfer of Hong Kong to China introduces a new element of uncertainty to the
Asian political scene and the short-term prospects for Asian stocks, it is the
Managing Underwriter's view that any temporary weakness in stocks of companies
within the China region, whether traded in Hong Kong, Shanghai or New York,
may offer a significant investment opportunity. Specifically, based on current
market conditions, International Assets Advisory Corp. anticipates that:
- -Hong Kong's takeover by China, while not without uncertainties, is ultimately
liberating politically and economically for China.
- - Chinese entrepreneurialism is alive and well. It will be invigorated by the
incorporation of Hong Kong.
- - Chinese savings rates will remain high.
- -Yet, the appetite of the rapidly expanding middle class in China for a vast
array of goods and services will grow faster than the overall growth of the
Chinese economy.
- -Barring some unanticipated surprise, overseas capital will continue to pour
into China, effectively lowering local interest rates and driving up the value
of local (including Hong Kong) financial assets.
Of course, the realization of these factors depends heavily upon continuation
of current trends and the future actions of the Chinese government and there
can be no guarantee that these factors will be realized. The Securities, and
therefore Units, may be materially adversely affected if any of the above
estimates, projects or assumptions are not realized or if the current trends
described above do not continue in the future.
Although the portfolio contains securities of companies doing business or
traded in the China region, when added to a portfolio of global stocks, the
Trust may help to reduce overall portfolio volatility. The Trust is intended
to supplement an investment portfolio by helping investors achieve prudent
exposure to the growing Chinese consumer sector through an investment in a
portfolio of quality growth stocks. The Trust should not be considered as a
complete equity investment program and diversification of Trust assets will
not eliminate the risk of loss always inherent in an investment in securities.
See "Risk Factors." The above information has been provided solely by
International Assets Advisory Corp. and has not been independently verified or
approved by the Sponsor. The Sponsor makes no representation as to the
suitability of an investment in Units.
General. Investors will be subject to taxation on the dividend income received
by the Trust and on gains from the sale or liquidation of Securities.
Investors should be aware that there is not any guarantee that the objective
of the Trust will be achieved because it is subject to the continuing ability
of the respective issuers to declare and pay dividends and because the market
value of the Securities can be affected by a variety of factors. Common stocks
may be especially susceptible to general stock market movements and to
volatile increases and decreases of value as market confidence in and
perceptions of the issuers change. Investors should be aware that there can be
no assurance that the value of the underlying Securities will increase or that
the issuers of the Securities will pay dividends on outstanding common shares.
Any distribution of income will generally depend upon the declaration of
dividends by the issuers of the Securities and the declaration of any
dividends depends upon several factors including the financial condition of
the issuers and general economic conditions. In addition, a decrease in the
value of the foreign currencies relative to the U.S. dollar will adversely
affect the value of the Trust's assets and income and the value of the Units
of the Trust. See "Risk Factors."
Investors should note that the above criteria was applied to the Securities
for inclusion in the Trust as of the Initial Date of Deposit. Subsequent to
the Initial Date of Deposit, the Securities may no longer meet the above
criteria. Should a Security no longer meet the criteria originally established
for inclusion in the Trust, such Security will not as a result thereof be
removed from the Trust portfolio.
Investors should be aware that the Trust is not a "managed" fund and
as a result the adverse financial condition of a company will not result in
its elimination from the portfolio except under extraordinary circumstances
(see "Trust Administration--Portfolio Administration" ). In addition,
Securities will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation. The Trust may
continue to hold Securities even though the evaluation of the attractiveness
of the Securities may have changed and, if the evaluation were performed again
at that time, the Securities would not be selected for the Trust.
TRUST PORTFOLIO
- --------------------------------------------------------------------------
The Trust consists of 14 common stocks of companies that International Assets
Advisory Corp. believes have substantial present or future potential
opportunities in the China region consumer products and services sector. All
of the Equity Securities are listed on a national or foreign securities
exchange, the NASDAQ National Market or are traded in the over-the-counter
market. Each of the Securities was selected by the Managing Underwriter
based upon those factors referred to under "Objectives and Securities
Selection" above. The following is a general description of each of the
companies included in the Trust.
Amway Asia Pacific Limited. (NYSE Traded). Amway Asia Pacific, based in Hong
Kong, is a multi-level direct selling business in the Asia Pacific region.
Amway's most ambitious growth market is China, where they are presently
selling personal and home care products. Net sales for the first half of
fiscal year 1997 were $430 million, $84 million of which came from sales in
China.
Founder Hong Kong Limited. (HK Traded). Founder is 46% owned by Peking
University and is an established leader in Chinese language software
development. Key products are electronic desktop publishing systems used by
Chinese newspapers and magazines, sales of personal computers and accessories
and systems integration. Founder Ltd. was ranked China's fourth largest P.C.
maker in 1996.
Goldlion Holdings (HK Traded). A manufacturer and retailer of men's wear and
accessories, Goldlion Holdings has developed its "Goldlion" brand to
be one of the premier brands in China. Goldlion Holdings has over 8,000
outlets and department stores in China, and continues to expand. To further
capitalize on its brand recognition, the company diversified into the sale and
manufacture of cigarettes. In 1996, 68% of total sales came from China and 23%
from Hong Kong.
Guangdong Investments (HK Traded). This is the listed investment vehicle
ultimately controlled by the Guangdong provincial government. It operates in
five divisions, including tours & hotels, retail and wholesale, industrial
property and infrastructure. Industrial operations include beer brewing, malt
production and leather manufacturing.
Guangdong Kelon Electric Holdings (HK Traded). Kelon is China's largest
refrigerator and freezer manufacturer, with production capacity of 1.9 million
units per year and growing. Kelon produces over 22 models, including CFC-free
refrigerators under the "Rongsbeng" and "Kelon" brandname.
Already having the perception of a leading brand and high quality, Kelon has
hired an internationally known advertising agency to help it transition from a
regional to national industry leader.
Guangnan Holdings (HK Traded). Guangnan is involved in food importing and
exporting, food distribution (being Hong Kong's main supplier of fresh
foodstuff) and supermarket operation in China and Hong Kong. Guangnan has been
in the food business for over 30 years. All divisions work together, allowing
for vertical intergration. Eel farming and roasting (a delicacy in China) is
also a significant profit contributor.
Shandong Xinhua Pharmaceutical (HK Traded). SXP is China's leading painkiller
and fever reducing medicine maker with an 18% market share in 1996. SXP has a
wide range of products, high production volume and efficiency, a well-known
brandname and an established distribution network within China. SXP produces
170 types of bulk pharmaceuticals and ready to use preparations, including
aspirin, ibuprofen and Dipyrone. SXP is a low-cost producer of caffeine and is
expanding production capacity for this popular beverage additive.
Sinocan Holdings (HK Traded). Sinocan is one of the largest producers of
three-piece tinplate cans (the cans used for most non-carbonated foods and
beverages) in China, while providing expertise in tinplate-processing and
printing on containers for food products, drinks, paint and chemicals. Chinese
citizens use an average of seven cans per year versus 300 to 400 per annum in
Japan or the U.S. Sinocan also makes aerosol spray cans, rectangular cans and
44-gallon drums.
Swire Pacific Holdings (HK Traded). Swire Pacific is a major Hong Kong based
conglomerate with operations in aviation, industry and property. Swire Pacific
owns minority stakes in airlines Cathay Pacific and Dragonair (which primarily
services China). Swire Beverages is one of Coca-Cola's two anchor bottlers for
China, also servicing Hong Kong and Taiwan. Swire's Chinese bottling franchise
territories contain a total population of 370 million.
Television Broadcasts (HK Traded). Television Broadcasts (TVB) is Hong Kong's
leading terrestrial broadcaster, with a market share of over 70% in Hong Kong.
Advertising sales is its primary source of income. Parts of southern China
already received TVB broadcast and in Guangzhou, TVB captured four of the top
five rating shows in that city. TVB also owns valuable film and television
library in both the Cantonese and Mandarin languages. TVB is increasingly
expected to generate revenues from those wishing to advertise to consumers in
the southern China region.
Tingyi Holdings Co. (HK Traded). Tingyi is China's single largest instant
noodle producer in China, sold under the well known brand "Master
Kang." Tingyi has over 50 production lines in 5 cities and has diversified
into rice cracker, cookies and beverage production to take advantage of its
brand name and extensive advertising. Tingyi sold over 3 billion packages of
noodles in 1996 and continues to expand capacity.
Vitasoy International Holdings (HK Traded). Vitasoy produces and distributes
non-carbonated drinks including VITASOY, a nutritious soybean based soft drink
and VITA, a range of juices, teas and water. Vitasoy also makes tofu, pasta
and soy-related products. Vitasoy's major market is in Hong Kong but
distributes its products in North America and Asia, with mainland China being
the primary focus for expansion. Hong Kong factory lines have beverage
capacity of 146 million liters per annum, while in Shenzhen, a factory with
capacity of 52 million liters per annum is on line and a plant in Shanghai
with 50 million liters in annual capacity is scheduled to begin production in
1998.
Want Want Holdings (Singapore Traded). Want Want pioneered the sale of rice
crackers in China. Want Want now has six rice cracker plants running 24 hours
a day, 7 days a week with total production capacity of 25,200 tons of rice
crackers per year. These crackers are sold under the well-known "Want
Want" and "Hot-Kid" brand names. Want Want also produces and is
stepping up production of beverages and other snack foods.
Wuxi Little Swan (Shenzhen Traded). Little Swan is China's first and leading
manufacturer of fully-automatic washing machines. Consumers prefer
fully-automatic washing machines over the older semi-automatic models and its
brand "Little Swan" has consistently ranked first among automatic
brands. Little Swan sold 808,000 cylindrical tub machines in 1995; all in
China. Little Swan has established a national sales and after-sales service
network consisting of 11 distribution centers and 18 sales offices to service
over 900 wholesalers and retailers.
The Trust consists of (a) the Equity Securities (including contracts for the
purchase thereof) listed under "Portfolio" as may continue to be held
from time to time in the Trust, (b) any additional Equity Securities acquired
and held by the Trust pursuant to the provisions of the Trust Agreement and
(c) any cash held in the Income and Capital Accounts. Neither the Sponsor nor
the Trustee shall be liable in any way for any failure in any of the Equity
Securities. However, should any contract for the purchase of any of the Equity
Securities initially deposited hereunder fail, the Sponsor will, unless
substantially all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Equity Securities in accordance with the Trust
Agreement, refund the cash and sales charge attributable to such failed
contract to all Unitholders on or before the next scheduled distribution date.
Investors should note that the above criteria was applied to the Equity
Securities selected by the Managing Underwriter for inclusion in the Trust
portfolio as of the date indicated above. Since the Sponsor may deposit
additional Equity Securities which were originally selected through this
process, the Sponsor and Managing Underwriter may continue to sell Units of
the Trust even though the Equity Securities would no longer be chosen for
deposit into the Trust if the selection process were to be made again at a
later time.
RISK FACTORS
- --------------------------------------------------------------------------
General. An investment in Units of the Trust should be made with an
understanding of the risks which an investment in common stocks of foreign
issuers entails, including the risk that the financial condition of the
issuers of the Equity Securities or the general condition of the common stock
market may worsen and the value of the Equity Securities and therefore the
value of the Units may decline. Common stocks are especially susceptible to
general stock market movements and to volatile increases and decreases of
value as market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors including expectations
regarding government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or regional
political, economic or banking crises. Shareholders of common stocks have
rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or preferred stocks of, such issuers. Shareholders of common stocks of the
type held by the Trust have a right to receive dividends only when and if, and
in the amounts, declared by each issuer's board of directors and have a right
to participate in amounts available for distribution by such issuer only after
all other claims on such issuer have been paid or provided for. Common stocks
do not represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock or the rights of holders of
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks is subject to market fluctuations for
as long as the common stocks remain outstanding, and thus the value of the
Equity Securities in the portfolio may be expected to fluctuate over the life
of the Trust to values higher or lower than those prevailing on the Initial
Date of Deposit.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, have
generally inferior rights to receive payments from the issuer in comparison
with the rights of creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Cumulative preferred stock dividends must be
paid before common stock dividends and any cumulative preferred stock dividend
omitted is added to future dividends payable to the holders of cumulative
preferred stock. Preferred stockholders are also generally entitled to rights
on liquidation which are senior to those of common stockholders.
Whether or not the Equity Securities are listed on a national or foreign
securities exchange, the principal trading market for the Equity Securities
may be in the over-the-counter market. As a result, the existence of a liquid
trading market for the Equity Securities may depend on whether dealers will
make a market in the Equity Securities. There can be no assurance that a
market will be made for any of the Equity Securities, that any market for the
Equity Securities will be maintained or of the liquidity of the Equity
Securities in any markets made. In addition, the Trust may be restricted under
the Investment Company Act of 1940 from selling Equity Securities to the
Sponsor or the Managing Underwriter. The price at which the Equity Securities
may be sold to meet redemption, and the value of the Trust, will be adversely
affected if trading markets for the Equity Securities are limited or absent.
Unitholders will be unable to dispose of any of the Equity Securities in the
Trust, as such, and will not be able to vote the Equity Securities. As the
holder of the Equity Securities, the Trustee will have the right to vote all
of the voting stocks in the Trust and will vote such stocks in accordance with
the instructions of the Sponsor (who may rely on the Supervisor). In the
absence of any such instructions, the Trustee will vote such Securities so as
to insure that the Securities are voted as closely as possible in the same
manner and the same general proportion as are shares held by owners other than
the Trust.
Foreign Equity Risks. Since the Equity Securities consist of securities of
foreign issuers (certain of which may be held in American Depositary Receipt
form), an investment in the Trust involves certain investment risks that are
different in some respects from an investment in a trust which invests
entirely 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 Equity Securities,
the possibility that the financial condition of the issuers of the Equity
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 the Equity Securities and thus in the value of the Units), 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, there may be less publicly available
information than is available from a domestic issuer. Also, 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 on
foreign securities exchanges 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. However, due to the nature of the issuers of the Equity
Securities, the Sponsor believes that adequate information will be available
to allow the Supervisor to provide portfolio surveillance for the Trust.
Equity securities issued by non-U.S. issuers generally pay dividends in
foreign currencies and are principally traded in foreign currencies.
Therefore, there is a risk that the United States dollar value of these
securities will vary with fluctuations in the U.S. dollar foreign exchange
rates for the various Equity Securities. See "Exchange Rate" below.
Investors should also realize that, although certain Equity Securities are
ADRs, all foreign issuers which operate internationally are subject to
currency risks.
On the basis of the best information available at the present time, none of
the Equity Securities are subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from the sale of, the Equity Securities.
However, there can be no assurance that exchange control regulations might not
be adopted in the future which might adversely affect payment to the Trust. In
addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of
international securities in the Trust and on the ability of the Trust to
satisfy its obligation to redeem Units tendered to the Trustee for redemption.
Investors should be aware that it may not be possible to buy all of the Equity
Securities at the same time because of the unavailability of any Equity
Security, and restrictions applicable to the Trust relating to the purchase of
an Equity Security by reason of the federal securities laws or otherwise.
Foreign securities generally have not been registered under the Securities Act
of 1933 and may not be exempt from the registration requirements of such Act.
Sales of non-exempt Equity Securities by the Trust in the United States
securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these Equity Securities by the Trust will
generally be effected only in foreign securities markets. Although the
Managing Underwriter does not believe that the Trust will encounter obstacles
in disposing of the Equity Securities, investors should realize that the
Equity Securities may 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 the Equity Securities will be adversely
affected if trading markets for the Equity Securities are limited or absent.
China Region. Investment in securities issued by companies organized, doing
business or traded in China or its territorial possessions involves risks not
typically associated with investments in securities of U.S. companies. See
"Foreign Equity Risks" above. For many centuries, the economy of the
People's Republic of China was largely closed by geography as well as by
government policy. Large-scale foreign investment in China's economy began
during the middle of the 19th century and was curtailed after 1949 when the
Communist government barred foreign investment. Political and economic
structures in China are undergoing significant evolution and rapid development
and may lack the social, political and economic stability characteristics of
the United States. In 1978, China began implementing an economic reform
program in an effort to revitalize the economy and improve the standard of
living. Since that time, the Chinese government's economic policies have
allowed for an increasing degree of liberalization from a centrally-planned
economy to a more market-oriented economy. In October 1992, the National
People's Congress called for a "socialist market economy" in which
full reign should be given to market forces with the government limiting its
role to setting and implementing broad macro-economic policies. As part of the
economic reforms, managers of enterprises have been granted more
decision-making powers and responsibilities in relation to matters such as
production, marketing, use of funds, and employment and disciplining of staff.
Economic reform in China, designed to replace Communist style central
planning, has proceeded largely by trial and error aimed at achieving the
fastest possible change with the minimum social dislocation. The reform
process has not always been even, however, it has generally proceeded in a
direction toward increased openness and decentralization of economic
decision-making. While there is a broad base of support for these reforms,
there can be no assurance that current or future reforms in economic, trade
and investment policies will be successful. Despite recent reforms, the
Chinese Communist Party continues to play the leading role in formulating
policy and selecting and providing personnel at all levels of government. In
addition, a significant portion of China's output continues to be derived from
state-owned enterprises and, therefore, the Chinese government maintains
control over a significant range of products, including the production
obligations and prices of such products. Of course, there can be no assurance
that reform efforts will be successful and in certain economies, such as the
former Soviet-bloc countries, reform efforts have experienced difficulties.
The development of China's economy has been characterized by the adoption,
since 1953, of Five Year Plans and Twenty Year Plans carried out under the
supervision of the State Planning Commission which reports to the State
Council, China's highest executive body (the National People''s Congress is
the highest authority and law-making body). The current Twenty Year Plan
(1981-2000) calls for an average growth in GNP over the period of 7%. One
objective of the current Ninth Five Year Plan for 1996-2000 is for China's
output to grow at an average annual rate of about 8%. From 1980 to 1990, China
had an average GNP growth rate of approximately 9%. Achievement of the growth
rate objective could depend on actions designed to slow the growth if it
exceeds the 8% objective. The current plan also calls for the establishment of
an economic structure consistent with a socialist planned economy based on
public ownership and market regulation. In addition, emphasis is placed on
further opening of China to the outside world by expanding economic and
technological exchanges with other countries. The plan also seeks to relieve
supply problems which have arisen from rapid growth during the 1980s and to
allocate resources to the priority areas of agriculture, energy,
transportation, telecommunications and basic materials industries. There can
be no assurance that the objectives of the current plan will be achieved.
The value and liquidity of the Securities may be affected favorably or
unfavorably by political, economic, fiscal, regulatory or other developments
in the China region or neighboring regions. The extent of economic
development, political stability and market depth of different countries in
the China region varies widely. In general, fewer securities are available for
trading and the trading volume on stock exchanges in the China region are
lighter than for stock exchanges in the U.S. and the market capitalization of
individual issuers and the market as a whole is smaller. Moreover, foreigners
investing in China region securities markets, such as the Trust, may be
subject to investment restrictions that restrict the availability of
securities to foreigners in such markets, which can lead to higher investment
costs for foreigners.
China is comparatively underdeveloped when compared to other countries. An
investment in Units involves greater potential for gain or loss than
investments in securities of issuers in more developed countries. China is
essentially an export-driven economy and is affected by developments in the
economies of its principal trading partners. Certain provinces have limited
natural resources, resulting in dependence on foreign sources for certain raw
materials and economic vulnerability to global fluctuations of price and
supply. The Trust will likely be particularly sensitive to changes in China's
economy as the result of a reversal of economic liberalization, political
unrest or changes in China's trading status. China currently enjoys most
favored nation status from the United States, which is subject to annual
review by the President of the United States and Congress. Revocation of most
favored nation status would have a severe effect on China's trade and thus
could have a materially adverse effect on the value of the Securities.
Certain China region stock markets are undergoing a period of growth and
change which may result in trading volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant law and regulations. In particular, the securities industry in China
is not well developed. China does not have a comprehensive system of laws,
although substantial changes have occurred in this regard in recent years. The
corporate form of organization has only recently been permitted in China and
national regulations governing corporations were introduced only in May 1992.
Prior to the introduction of such regulations Shanghai had adopted a set of
corporate regulations applicable to corporations located or listed in
Shanghai, and the relationship between the two sets of regulations is not
clear. Consequently, until a firmer legal basis is provided, even such
fundamental corporate law principles as the limited liability status of
Chinese issuers and their authority to issue shares remain open to question.
China has no securities laws of national applicability. The existing national
code of regulations is new, and provisional only. The municipal securities
regulations adopted by Shanghai and Shenzhen municipalities are also new, as
are their respective securities exchanges. The regulatory roles of the China
Securities Regulatory Commission and the two municipal governments are not
well-established. Given the still-developing nature of laws impacting China
region securities markets and corporate entities, changes in regulatory policy
could have a material adverse affect on the Securities.
While certain of the Securities are principally traded on the Shenzhen
(China), Singapore or New York Stock Exchanges, the majority of the Securities
are principally traded, and many issuers are located, in Hong Kong.
Accordingly, an investment in Units should be made with an understanding of
the risks associated with investing in Hong Kong. Hong Kong, established as a
British colony in the 1840s, is currently ruled by the British Government
through an appointed Governor. Hong Kong will revert to Chinese sovereignty
effective July 1, 1997 with Hong Kong becoming a Special Administrative Region
("SAR" ) of China. The current Hong Kong government generally follows a
laissez-faire policy towards industry. There are currently no major import,
export or foreign exchange restrictions. At the present time, regulation of
business is generally minimal with certain exceptions, including regulated
entry into certain sectors of the economy and a fixed exchange rate regime by
which the Hong Kong dollar has been pegged to the U.S. dollar.
Although China has committed by treaty to preserve for 50 years the economic
and social freedoms currently enjoyed in Hong Kong, the continuation of the
economic system in Hong Kong after the reversion will be dependent on the
Chinese government and there can be no assurances that the commitment made by
China regarding Hong Kong will be maintained. Legislation has been enacted in
Hong Kong that will extend democratic voting procedures for Hong Kong's
legislature. China has expressed disagreement with this legislation which it
states is in contravention of the principles evidenced in the Basic Law of the
Hong Kong SAR. The National People's Congress of China has passed a resolution
to the effect that the Legislative Council and certain other councils and
boards of the Hong Kong Government will be terminated on June 30, 1997. It is
expected that such bodies will be subsequently reconstituted in accordance
with China's interpretation of the Basic Law. The future leadership of Hong
Kong has stated that current freedoms will be maintained, however, changes to
certain civil liberties have been proposed. Any increase in uncertainty as to
the future economic and political status of Hong Kong could have a materially
adverse effect on the value of the Trust. It is impossible to predict the
level of market liquidity or volatility which may occur after the reversion to
sovereignty, both of which may negatively impact the value of the Units.
Securities prices on the Hong Kong Stock Exchange (the "HKSE" ) can be
highly volatile and are sensitive to developments in Hong Kong and China, as
well as other world markets. For example, in 1989, the Hang Seng Index (a
primary stock market index in Hong Kong) dropped 1,216 points (approximately
58%) in early June following the events at Tiananmen Square. The Hang Seng
Index gradually climbed in subsequent months but fell by 181 points on October
13, 1989 (approximately 6.5%) following a substantial fall in the U.S. stock
market. During 1994, the Hang Seng Index lost approximately 31% of its value.
Following Hong Kong's reversion to Chinese sovereignty, an increased number of
Chinese companies could become listed in Hong Kong, thereby changing the
composition of the stock market. The HKSE is currently regulated by the Hong
Kong Securities and Futures Commission ("HKSFC" ), which was
established in May 1989 as an autonomous statutory body external to the civil
service. The HKSFC administers securities laws and ordinances governing the
protection of investors, disclosure of interests and insider transactions. In
addition, the HKSE promulgates its own rules governing share trading and
disclosure of information to shareholders and investors. There can be no
assurance that the current regulatory scheme will be maintained after Hong
Kong's reversion to China.
Exchange Rates. The Trust is concentrated in Equity Securities that are
principally traded in foreign currencies (primarily in Hong Kong dollars) and
as such involves investment risks that are substantially different from an
investment in a fund which invests in securities that are traded only in
United States dollars. The United States dollar value of the portfolio (and
hence of the Units) and of the distributions from the portfolio will vary with
fluctuations in the United States dollar foreign exchange rates for the
related foreign currencies. 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 rate of inflation in the respective
economies compared to the United States, the impact of interest rate
differentials between different currencies on the movement of foreign currency
rates, the balance of imports and exports of goods and services, 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. The following table
sets forth the range of fluctuation of the equivalent U.S. dollar rates of
exchange for the Hong Kong dollar:
<TABLE>
FOREIGN EXCHANGE RATES
Range of Fluctuations in Foreign Currencies
<CAPTION>
Annual Period Hong Kong/U.S. Dollar
- ----------------- ------------------------
<S> <C>
1987 7.751-7.822
1988 7.764-7.912
1989 7.775-7.817
1990 7.740-7.817
1991 7.716-7.803
1992 7.697-7.781
1993 7.722-7.766
1994 7.723-7.750
1995 7.726-7.763
1996 7.724-7.742
1997 thru 5/31 7.735-7.750
</TABLE>
Source: Bloomberg L.P.
The post-World War II international monetary system was, until 1973, dominated
by the Bretton Woods Treaty, which established a system of fixed exchange
rates and the convertibility of the United States dollar into gold through
foreign central banks. Starting in 1971, growing volatility in the foreign
exchange markets caused the United States to abandon gold convertibility and
to effect a small devaluation of the United States dollar. In 1973, the system
of fixed exchange rates between a number of the most important industrial
countries of the world, among them the United States and most western European
countries, was completely abandoned. Subsequently, major industrialized
countries have adopted "floating" exchange rates, under which daily
currency valuations depend on supply and demand in a freely fluctuating
international market. Many smaller or developing countries have continued to
"peg" their currencies to the United States dollar although there has
been some interest in recent years in "pegging" currencies to "
baskets" of other currencies or to a Special Drawing Right administered by
the International Monetary Fund. Currencies are generally traded by leading
international commercial banks and institutional investors (including
corporate treasurers, money managers, pension funds and insurance companies).
From time to time, central banks in a number of countries also are major
buyers and sellers of foreign currencies, mostly for the purpose of preventing
or reducing substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of actual
and proposed government policies on the value of currencies, interest rate
differentials between the currencies and the balance of imports and exports of
goods and services and transfers of income and capital from one country to
another. These economic factors are influenced primarily by a particular
country's monetary and fiscal policies (although the perceived political
situation in a particular country may have an influence as well--particularly
with respect to transfers of capital). Investor psychology may also be an
important determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative strength or
weakness of a particular currency may sometimes exercise considerable
speculative influence on currency exchange rates by purchasing or selling
large amounts of the same currency or currencies. However, over the long term,
the currency of a country with a low rate of inflation and a favorable balance
of trade should increase in value relative to the currency of a country with a
high rate of inflation and deficits in the balance of trade.
The Evaluator will estimate the current exchange rate for the appropriate
foreign currencies based on activity in the related currency exchange market.
However, since this market may be volatile and is constantly changing,
depending on the activity at any particular time of the large international
commercial banks, various central banks, large multi-national corporations,
speculators and other buyers and sellers of foreign currencies, and since
actual foreign currency transactions may not be instantly reported, the
exchange rates estimated by the Evaluator may not be indicative of the amount
in United States dollars the Trust would receive had the Trustee sold any
particular currency in the market. The foreign exchange transactions of the
Trust will be concluded by the Trustee with foreign exchange dealers acting as
principals on a spot (i.e., cash) buying basis. Although foreign exchange
dealers trade on a net basis, they do realize a profit based upon the
difference between the price at which they are willing to buy a particular
currency (bid price) and the price at which they are willing to sell the
currency (offer price).
Consumer Products Companies. The Trust is concentrated in issuers within the
consumer products industry. A portfolio concentrated in a single industry may
present more risk than a portfolio of more broadly diversified investments.
The Trust, and therefore Unitholders, may be particularly susceptible to a
negative impact resulting from adverse market conditions or other factors
affecting issuers in the consumer products industry because any negative
impact on the consumer products industry will not be diversified among issuers
within other unrelated industries. Accordingly, an investment in Units should
be made with an understanding of the risks inherent in the consumer products
industry.
Investment in securities issued by consumer products companies should be made
with an understanding of the 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, changing consumer demands, regulatory
restrictions, products liability litigation and other litigation resulting
from accidents, extensive competition (including that of low-cost foreign
companies), unfunded pension fund liabilities and employee and retiree benefit
costs and financial deterioration resulting from leveraged buy-outs, takeovers
or acquisitions. In general, expenditures on consumer products will be
affected by the economic health of consumers. Various factors such as
recession and any related tightening of consumer credit and spending may have
a continued adverse effect on the industry. Other factors of particular
relevance to the profitability of the industry are the effects of increasing
environmental regulation on packaging and on waste disposal, the continuing
need to conform with foreign regulations governing packaging and the
environment, the outcome of trade negotiations and their effect on foreign
subsidies and tariffs, foreign exchange rates, the price of oil and its effect
on energy costs, inventory cutbacks by retailers, transportation and
distribution costs, health concerns relating to the consumption of certain
products, the effect of demographics on consumer demand, the availability and
cost of raw materials and the ongoing need to develop new products and to
improve productivity.
Investment tin stocks of the food and beverage industry, including
manufacturers of packaged foods, processors of agricultural products, beverage
companies and food distributors, should be made with an understanding of the
many factors that may have an adverse impact on the value of the stocks of
these companies and their ability to pay dividends. These factors include the
sensitivity of revenues, earnings, and prices of agricultural commodities,
fluctuations in the cost of other raw materials such as packaging, and the
effects of inflation on pricing flexibility. The revenues and earnings of
these companies can also be affected by extensive competition that can result
in lost sales or in lower margins resulting from efforts to maintain market
share. Food and beverage companies may also be subject to regulation under
various laws. Costs associated with complying with changing regulatory
restrictions, such as food labelling requirements, could adversely affect
earnings. Food and beverage companies are also becoming increasingly exposed
to risks associated with international operation, including foreign currency
fluctuations and future political and economic developments in other
countries. Other risk factors include potential deterioration in financial
condition resulting from litigation related to product liability, accidents,
or trademark or patent disputes; unfunded pension liability; changing
accounting standards and leveraged buyouts, takeovers, or recapitalizations.
TAXATION
- --------------------------------------------------------------------------
General. The following is a general discussion of certain of the federal
income tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as capital
assets (generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986 (the "Code" ). Unitholders
should consult their tax advisers in determining the federal, state, local and
any other tax consequences of the purchase, ownership and disposition of Units
in the Trust. For purposes of the following discussion and opinions, it is
assumed that each Security is equity for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from each Security when such income is received by the Trust.
2. A Unitholder will be considered to have received all of the dividends paid
on his pro rata portion of each Security when such dividends are received by
the Trust regardless of whether such dividends are used to pay a portion of
the deferred sales charge. Unitholders will be taxed in this manner regardless
of whether distributions from the Trust are actually received by the
Unitholder or are automatically reinvested (see "Rights of
Unitholders--Reinvestment Option" ).
3. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, taxable exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unitholder. The
price a Unitholder pays for his Units, generally including sales charges, is
allocated among his pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the valuation date nearest the
date the Unitholder purchases his Units) in order to determine his initial tax
basis for his pro rata portion of each Security held by the Trust. It should
be noted that certain legislative proposals have been made which could affect
the calculation of basis for Unitholders holding securities that are
substantially identical to the Securities. Unitholders should consult their
own tax advisers with regard to calculation of basis. For federal income tax
purposes, a Unitholder's pro rata portion of dividends as defined by Section
316 of the Code paid with respect to a Security held by the Trust is taxable
as ordinary income to the extent of such corporation's current and accumulated
"earnings and profits." A Unitholder's pro rata portion of dividends
paid on such Security which exceeds such current and accumulated earnings and
profits will first reduce a Unitholder's tax basis in such Security, and to
the extent that such dividends exceed a Unitholder's tax basis in such
Security shall generally be treated as capital gain. In general, any such
capital gain will be short-term unless a Unitholder has held his Units for
more than one year.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain (except in the case of a dealer or a financial
institution) and, will be long-term if the Unitholder has held his Units for
more than one year (the date on which the Units are acquired (i.e., the "
trade date" ) is excluded for purposes of determining whether the Units
have been held for more than one year). A Unitholder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of Securities
held by the Trust will generally be considered a capital loss (except in the
case of a dealer or a financial institution) and, in general, will be
long-term if the Unitholder has held his Units for more than one year.
Unitholders should consult their tax advisers regarding the recognition of
gains and losses for federal income tax purposes.
Deferred Sales Charge. Generally, the tax basis of a Unitholder includes sales
charges, and such charges are not deductible. A portion of the sales charge
may be treated as interest which would be deductible by a Unitholder subject
to limitations on the deduction of investment interest. In such a case, the
non-interest portion of the deferred sales charge would be added to the
Unitholder's tax basis in his Units. The deferred sales charge could cause the
Unitholder's Units to be considered to be debt-financed under Section 246A of
the Code which would result in a small reduction of the dividends-received
deduction. In any case, the income (or proceeds from redemption) a Unitholder
must take into account for federal income tax purposes is not reduced by
amounts deducted to pay the deferred sales charge. Unitholders should consult
their own tax advisers as to the income tax consequences of the deferred sales
charge.
Dividends Received Deduction. To the extent dividends received by the Trust
are attributable to foreign corporations, a corporation that owns Units will
not be entitled to the dividends received deduction with respect to its pro
rata portion of such dividends, since the dividends received deduction is
generally available only with respect to dividends paid by domestic
corporations.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income. Unitholders may be required to treat some or all of the expenses
of the Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by the
Trust or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by the Trust or if the
Unitholder disposes of a Unit. For taxpayers other than corporations, net
capital gains (which is defined as net long-term capital gain over net
short-term capital loss for a taxable year) are subject to a maximum marginal
stated tax rate of 28%. However, it should be noted that legislative proposals
are introduced from time to time that affect tax rates and could affect
relative differences at which ordinary income and capital gains are taxed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act" )
raised tax rates on ordinary income while capital gains remain subject to a
28% maximum stated rate for taxpayers other than corporations. Because some or
all capital gains are taxed at a comparatively lower rate under the Tax Act,
the Tax Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are "
conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
If a Unitholder disposes of a Unit he is deemed thereby to have disposed of
his entire pro rata interest in all assets of the Trust involved including his
pro rata portion of all the Securities represented by a Unit. Legislative
proposals have been made that would treat certain transactions designed to
reduce or eliminate risk of loss and opportunities for gain as constructive
sales for purposes of recognition of gain (but not loss). Unitholders should
consult their own tax advisers with regard to any such constructive sale rules.
Computation of the Unitholder's Tax Basis. Initially, a Unitholder's tax basis
in his Units will generally equal the price paid by such Unitholder for his
Units. The cost of the Units is allocated among the Securities held in the
Trust in accordance with the proportion of the fair market values of such
Securities on the valuation date nearest the date the Units are purchased in
order to determine such Unitholder's tax basis for his pro rata portion of
each Security.
A Unitholder's tax basis in his Units and his pro rata portion of a Security
held by the Trust will be reduced to the extent dividends paid with respect to
such Security are received by the Trust which are not taxable as ordinary
income as described above.
Other Matters. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by
the Trust to such Unitholder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. Distribution by a Trust
(other than those that are not treated as United States source income, if any)
will generally not be subject to United States income taxation and withholding
in the case of Units held by non-resident alien individuals, foreign
corporations or other non-United States persons. Investors should consult
their tax advisers.
In general, income that is not effectively connected to the conduct of a trade
or business within the United States that is earned by non-U.S. Unitholders
and derived from dividends of foreign corporations will not be subject to U.S.
withholding tax provided that less than 25 percent of the gross income of the
foreign corporation for a three-year period ending with the close of its
taxable year preceding payment was not effectively connected to the conduct of
a trade or business within the United States. In addition, such earnings may
be exempt from U.S. withholding pursuant to a specific treaty between the
United States and a foreign county. Non-U.S. Unitholders should consult their
own tax advisers regarding the imposition of U.S. withholding on distributions
from the Trust.
It should be noted that payments to the Trust of dividends on Securities that
are attributable to foreign corporations may be subject to foreign withholding
taxes and Unitholders should consult their tax advisers regarding the
potential tax consequences relating to the payment of any such withholding
taxes by the Trust. Any dividends withheld as a result thereof will
nevertheless be treated as income to the Unitholders. Because, under the
grantor trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax purposes
with respect to such taxes. Legislative proposals have been made which would
impose a required holding period for such credits. Investors should consult
their tax advisers with respect to foreign withholding taxes and foreign tax
credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security (resulting from redemption or the
sale of any Security), and the fees and expenses paid by the Trust. The
Trustee will also furnish annual information returns to Unitholders and to the
Internal Revenue Service.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of Kroll & Tract LLP, special counsel to the Fund for New York
tax matters, the Trust is not an association taxable as a corporation and the
income of the Trust will be treated as the income of the Unitholders under the
existing income tax laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S. Unitholders
("U.S. Unitholders" ) with regard to federal and certain aspects of New
York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers
in this regard. As used herein, the term "U.S. Unitholder" means an
owner of a Unit of the Trust that (a) is (i) for United States federal income
tax purposes a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, or (iii) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unitholder in
paragraph (a) but whose income from a Unit is effectively connected with such
Unitholder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and gain on
the Units will be taxable.
The tax discussion set forth above is a summary included for general
informational purposes only. In view of the individual nature of tax
consequences, each Unitholder is advised to consult his own tax adviser with
respect to the specific tax consequences of being a Unitholder of the Trust
and the exercise or expiration of the rights, including the effect and
applicability of state, local, foreign, and other tax laws and the possible
effects of changes in federal, foreign or other tax laws.
TRUST OPERATING EXPENSES
- --------------------------------------------------------------------------
Initial Costs. All costs and expenses incurred in creating and establishing
the Trust, including the cost of the initial preparation, printing and
execution of the Trust Agreement and the certificates, legal and accounting
expenses, advertising and selling expenses, expenses of the Trustee, initial
fees of an evaluator and other out-of-pocket expenses have been borne by the
Sponsor at no cost to the Fund.
Compensation of Sponsor, Evaluator and Supervisor. The Sponsor will not
receive any fees in connection with its activities relating to the Trust.
Global Assets Advisors, Inc. will receive an annual supervisory fee, payable
in monthly installments, which is not to exceed the amount set forth under
"Summary of Essential Financial Information" , for providing portfolio
supervisory services for the Trust. Such fee (which is based on the number of
Units outstanding on January 1 of each year for which such compensation
relates except during the initial offering period in which case the
calculation is based on the number of Units outstanding at the end of the
month of such calculation) may exceed the actual costs of providing such
supervisory services for this Trust, but at no time will the total amount
received for portfolio supervisory services rendered to unit investment trusts
for which the Supervisor acts as principal underwriter and provides portfolio
supervisory services in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. In addition, American
Portfolio Evaluation Services, which is a division of Van Kampen American
Capital Investment Advisory Corp., shall receive for regularly providing
evaluation services to the Trust the annual per Unit evaluation fee, payable
in monthly installments, set forth under "Summary of Essential Financial
Information" (which is based on the number of Units of the Trust
outstanding on January 1 of each year for which such compensation relates
except during the initial offering period in which event the calculation is
based on the number of Units of the Trust outstanding at the end of the month
of such calculation) for regularly evaluating the Trust portfolio. The
foregoing fees are payable as described under "General" below. Both of
the foregoing fees may be increased without approval of the Unitholders by
amounts not exceeding proportionate increases under the category "All
Services Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor or, if such category is no longer
published, in a comparable category. The Sponsor and the Managing Underwriter
will receive sales commissions and the Managing Underwriter may realize other
profits (or losses) in connection with the sale of Units and the deposit of
the Securities as described under "Public Offering--Sponsor and Managing
Underwriter Compensation" .
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial
Information" (which is based on the number of Units of the Trust
outstanding on January 1 of each year for which such compensation relates
except during the initial offering period in which case the calculation is
based on the number of Units outstanding at the end of the month of such
calculation) and, in connection with certain Equity Securities held in
sub-custodian accounts, the additional amounts set forth in footnote (8) in
the "Summary of Essential Financial Information" . The Trustee's fees
are payable as described under "General" below. The Trustee benefits
to the extent there are funds for future distributions, payment of expenses
and redemptions in the Capital and Income Accounts since these Accounts are
non-interest bearing to the Trust and the amounts earned by the Trustee are
retained by the Trustee. Part of the Trustee's compensation for its services
to the Trust is expected to result from the use of these funds. Such fees may
be increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a
comparable category. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration."
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trust: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of the
Trust, (b) fees of the Trustee for extraordinary services, (c) expenses of the
Trustee (including legal and auditing expenses) and of counsel designated by
the Sponsor, (d) various governmental charges, (e) expenses and costs of any
action taken by the Trustee to protect the Trust and the rights and interests
of Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of the Trust without negligence, bad
faith or wilful misconduct on its part, (g) foreign custodial and transaction
fees, (h) accrual of costs associated with liquidating securities and (i)
expenditures incurred in contacting Unitholders upon termination of the Trust.
The expenses set forth herein are payable as described under "General"
below.
General. All of the fees and expenses of the Trust will accrue on a daily
basis and will be charged to the Trust, in arrears, on a monthly basis as of
the tenth day of each month. When such fees and expenses are paid by or owing
to the Trustee, they are secured by a lien on the Trust's portfolio. Since the
Equity Securities are all common stocks, and the income stream produced by
dividend payments is unpredictable, the Sponsor cannot provide any assurance
that dividends will be sufficient to meet any or all expenses of 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 Equity
Securities to pay such amounts. These sales may result in capital gains or
losses to Unitholders. See "Taxation."
PUBLIC OFFERING
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General. Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate underlying value of the Securities in the
Trust's portfolio, the initial sales charge described below, and cash, if any,
in the Income and Capital Accounts held or owned by the Trust. The initial
sales charge is equal to the difference between the maximum total sales charge
for the Trust of 5.5% of the Public Offering Price and the maximum deferred
sales charge for the Trust ($0.30 per Unit). The monthly deferred sales charge
($0.05 per Unit) will begin accruing on a daily basis on December 24, 1997 and
will continue to accrue through June 23, 1998. The monthly deferred sales
charge will be charged to the Trust, in arrears, commencing January 24, 1998
and will be charged on the 24th day of each month thereafter through June 24,
1998. If any deferred sales charge payment date is not a business day, the
payment will be charged to the Trust on the next business day. Unitholders
will be assessed only that portion of the deferred sales charge accrued from
the time they became Unitholders of record. Units purchased subsequent to the
initial deferred sales charge payment will be subject to only that portion of
the deferred sales charge payments not yet collected. This deferred sales
charge will be paid from funds in the Capital Account, if sufficient, or from
the periodic sale of Securities. The total maximum sales charge assessed to
Unitholders on a per Unit basis will be 5.5% of the Public Offering Price
(5.820% of the aggregate value of the Securities in the Trust less the
deferred sales charge). The sales charge for secondary market transactions is
described under "Offering Price" below. The aggregate underlying value
of the Securities is based on the U.S. dollar value of the Foreign Securities
computed on the basis of the offering side value of the related currency
exchange rate expressed in U.S. dollars as of the Evaluation Time during the
initial offering period and on the bid side value for secondary market
transactions. The sales charge applicable to quantity purchases is, during the
initial offering period and secondary market, reduced on a graduated basis to
any person acquiring 10,000 or more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number of Units
Purchased Percentage Sales Charge Reduction Per Unit
- -------------------------------- ------------------------------------------------
<S> <C>
10,000-24,999 .60%
25,000-49,999 .90
50,000-99,999 1.30
100,000 or more 2.10
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
Managing Underwriter, broker, dealer or agent. A Unitholder who purchases
additional Units of the Trust may obtain a reduced sales charge through a
right of accumulation on current purchases of Units. The applicable sales
charge on such additional purchases will be determined based on the total of
(a) the number of Units currently purchased plus (b) the total number of Units
previously purchased. The following purchases may be aggregated for purposes
of determining the total number of Units purchased: (i) individual purchases
on behalf of a single purchaser, the purchaser's spouse and the purchaser's
children under the age of 21 years; (ii) purchases made by clients of same
registered investment advisor; (iii) purchases in connection with an employee
benefits plan exclusively for the benefit of such individuals, such as an IRA,
individual plan under Internal Revenue Code section 403(b) or a
single-participant Keogh-type plan; (iv) purchases made by a company
controlled by such individuals.
Registered representatives of the Managing Underwriter may purchase Units of
the Trust at the current Public Offering Price less the underwriting
commission during the initial offering period, and less the dealer's
concession for secondary market transactions. Registered representatives of
selling brokers, dealers, or agents may purchase Units of the Trust at the
current Public Offering Price less the dealer's concession during the initial
offering period and for secondary market transactions.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in the
Trust. The aggregate underlying value of the Securities is based on the U.S.
dollar value of the Foreign Securities computed on the basis of the offering
side or bid side value of the related currency exchange rate expressed in U.S.
dollars during the initial offering period or secondary market, respectively.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities in the Trust
an amount equal to the difference between the maximum total sales charge of
5.5% of the Public Offering Price and the maximum deferred sales charge ($0.30
per Unit) and dividing the sum so obtained by the number of Units in the Trust
outstanding. The Public Offering Price shall include the proportionate share
of any cash held in the Income and Capital Accounts in the Trust. This
computation produced a gross underwriting profit equal to 5.5% of the Public
Offering Price. Such price determination as of the close of the relevant stock
market on the date set forth under "Summary of Essential Financial
Information" was made on the basis of an evaluation of the Securities in
the Trust prepared by Interactive Data Corporation, a firm regularly engaged
in the business of evaluating, quoting or appraising comparable securities.
Thereafter, the Evaluator on each business day (except as stated below) will
appraise or cause to be appraised the value of the underlying Securities in
the Trust as of the Evaluation Time and will adjust the Public Offering Price
of the Units commensurate with such valuation. Such Public Offering Price will
be effective for all orders received prior to 4:00 a.m. New York time on each
such day. Orders received by the Trustee or Managing Underwriter for
purchases, sales or redemptions after 4:00 a.m. New York time, or on a day
which is not a business day for the Trust, will be held until the next
determination of price. No such evaluation shall be made on any date on which
Securities representing greater than 33% of the aggregate value of the Trust
are not traded on the principal trading exchange for such Securities due to a
customary business holiday on such exchange. Accordingly, purchases or
redemptions of Units on such a day will be based on the next determination of
price of the Securities (and the price of such Units would be the next
computed price). Unitholders who purchase Units subsequent to the Initial Date
of Deposit will pay an initial sales charge equal to the difference between
the maximum total sales charge for the Trust of 5.5% of the Public Offering
Price and the maximum deferred sales charge for the Trust ($0.30 per Unit) and
will be assessed a deferred sales charge of $0.05 per Unit on each of the
remaining deferred sales charge payment dates as set forth in "Public
Offering--general" . The Managing Underwriter currently does not intend to
maintain a secondary market after December 23, 2003. Commencing on June 24,
1998 the secondary market sales charge will not include deferred payments but
will instead include only a one-time initial sales charge of 5.0% of the
Public Offering Price and will be reduced by .5 of 1% on each subsequent June
24, to a minimum sales charge of 3.0%.
The value of the Equity Securities during the initial offering period is
determined on each business day by the Evaluator in the following manner: if
the Equity Securities are listed on a national or foreign securities exchange,
this evaluation is generally based on the closing sale prices on that exchange
(unless it is determined that these prices are inappropriate as a basis for
valuation) or, if there is no closing sale price on that exchange, at the
closing ask prices. If the Equity Securities are not so listed or, if so
listed and the principal market therefore is other than on the exchange, the
evaluation shall generally be based on the current ask price on the
over-the-counter market (unless it is determined that these prices are
inappropriate as a basis for evaluation). If current ask prices are
unavailable, the evaluation is generally determined (a) on the basis of
current ask prices for comparable securities, (b) by appraising the value of
the Equity Securities on the ask side of the market or (c) by any combination
of the above. The value of the Equity Securities during the initial offering
period is based on the U.S. dollar value of the Foreign Securities computed on
the basis of the offering side value of the currency exchange rate as of the
Evaluation Time.
In offering the Units to the public, neither, the Managing Underwriter nor any
broker-dealers are recommending any of the individual Securities in the Trust
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Managing Underwriter, broker-dealers and
others at the Public Offering Price. Upon the completion of the initial
offering period, Units repurchased in the secondary market, if any, may be
offered by this Prospectus at the secondary market Public Offering Price in
the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for sale in a
number of states. Sales initially will be made to any broker, dealer or bank
at prices which represent a concession or agency commission in connection with
the distribution of Units during the initial offering period of 3.30% of the
Public Offering Price. Volume concessions or agency commissions of an
additional .40% of the Public Offering Price will be given to any broker,
dealer or bank who purchases from the Managing Underwriter at least $100,000
on the Initial Date of Deposit. Resale of Units of the Trust by such Managing
Underwriter, dealers and others to the public will be made at the Public
Offering Price described in the then current prospectus.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 500 Units (100 Units for a
tax-sheltered retirement plan). The Managing Underwriter reserves the right to
reject, in whole or in part, any order for the purchase of Units and to change
the amount of the concession or agency commission to dealers and others from
time to time.
Sponsor and Managing Underwriter Compensation. The Managing Underwriter will
receive the gross sales commission equal to 5.5% of the Public Offering Price
of the Units, less any reduced sales charge for quantity purchases as
described under "General" above. Any such quantity discount provided
to investors will be borne by the Managing Underwriter or the selling dealer
or agent. The Sponsor will receive from the Managing Underwriter the excess of
such gross sales commission over the Managing Underwriter's discount. The
Managing Underwriter will be allowed a discount in connection with the
distribution of Units of (a) 4.0% per Unit for sales up to $10,000,000 and (b)
4.2% per Unit for sales in excess of $10,000,000.
In addition, the Managing Underwriter will realize a profit or will sustain a
loss, as the case may be, as a result of the difference between the price paid
for the Securities by the Managing Underwriter and the cost of such Securities
to the Trust on the Initial Date of Deposit as well as on subsequent deposits.
See "Notes to Portfolio." The Sponsor and Managing Underwriter have
not participated as sole underwriter or as manager or as a member of the
underwriting syndicates or as an agent in a private placement for any of the
Securities in the Trust portfolio. The Managing Underwriter may further
realize additional profit or loss during the initial offering period as a
result of the possible fluctuations in the market value of the Securities in
the Trust after a date of deposit, since all proceeds received from purchasers
of Units (excluding dealer concessions and agency commissions allowed, if any)
will be retained by the Managing Underwriter.
A person will become the owner of Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor or
Managing Underwriter prior to the date of settlement for the purchase of Units
may be used in the Sponsor's or the Managing Underwriter's business and may be
deemed to be a benefit to the Sponsor or Managing Underwriter, subject to the
limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Managing Underwriter
currently intends to maintain a secondary market for Units of the Trust. In so
maintaining a market, the Managing Underwriter will also realize profits or
sustain losses in the amount of any difference between the price at which
Units are purchased and the price at which Units are resold (which price
includes the applicable sales charge). In addition, the Managing Underwriter
or Sponsor will also realize profits or sustain losses resulting from a
redemption of such repurchased Units at a price above or below the purchase
price for such Units, respectively.
Public Market. Although it is not obligated to do so, the Managing Underwriter
currently intends to maintain a market for the Units offered hereby and offer
continuously to purchase Units at prices, subject to change at any time, based
upon the aggregate underlying value of the Equity Securities in the Trust
(computed as indicated under "Offering Price" above and "Rights of
Unitholders--Redemption of Units" ). The aggregate underlying value of the
Foreign Securities is computed on the basis of the bid side value of the
related currency exchange rate (offer side during the initial offering period)
expressed in U.S. dollars. If the supply of Units exceeds demand or if some
other business reason warrants it, the Managing Underwriter may either
discontinue all purchases of Units or discontinue purchases of Units at such
prices. In the event that a market is not maintained for the Units and the
Unitholder cannot find another purchaser, a Unitholder desiring to dispose of
his Units will be able to dispose of such Units by tendering them to the
Trustee for redemption at the Redemption Price. See "Rights of
Unitholders--Redemption of Units." A Unitholder who wishes to dispose of
his Units should inquire of his broker as to current market prices in order to
determine whether there is in existence any price in excess of the Redemption
Price and, if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for individuals, Simplified Employee Pension
Plans for employees, qualified plans for self-employed individuals, and
qualified corporate pension and profit sharing plans for employees. The
purchase of Units of the Trust may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-sheltered retirement plan is 100 Units.
RIGHTS OF UNITHOLDERS
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Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust will be evidenced by book entry unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee that ownership be evidenced by certificates. Units are
transferable by making a written request to the Trustee and, in the case of
Units evidenced by a certificate, by presentation and surrender of such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign such written
request, and such certificate or transfer instrument, exactly as his name
appears on the records of the Trustee and on the face of any certificate
representing the Units to be transferred with the signature guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("
STAMP" ) or such other signature guarantee program in addition to, or in
substitution for, STAMP as may be accepted by the Trustee. In certain
instances the Trustee may require additional documents such as, but not
limited to, trust instruments, certificates of death, appointments as executor
or administrator or certificates of corporate authority. Certificates will be
issued in denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Income and Capital. Any dividends received by the Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account of the Trust. Other receipts (e.g., capital gains, proceeds
from the sale of Securities, etc.) are credited to the Capital Account of the
Trust. Dividends with respect to the Foreign Securities to be credited to such
accounts are first converted into U.S. dollars at the applicable exchange rate.
The Trustee will distribute any net income received with respect to any of the
Securities in the Trust on or about the Income Distribution Dates to
Unitholders of record on the preceding Income Record Dates. See "Summary
of Essential Financial Information." Proceeds received on the sale of any
Securities in the Trust, to the extent not used to meet redemptions of Units
or pay expenses, will be distributed annually on the Capital Account
Distribution Date to Unitholders of record on the preceding Capital Account
Record Date. 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 of the Trust and not distributed until the next
distribution date applicable to the Capital Account. 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 Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income Account after deducting
estimated expenses. Because dividends are not received by the Trust at a
constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate from distribution to distribution. Persons who purchase
Units will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business such
notice is provided by the selling broker-dealer.
As of the tenth day of each month, the Trustee will deduct from the Income
Account and, to the extent funds are not sufficient therein, from the Capital
Account of the Trust amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating Expenses" ).
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 the Trust. Amounts so withdrawn shall not be considered a part of the
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 the Trust such amounts as may
be necessary to cover redemptions of Units.
It is anticipated that the deferred sales charge will be collected from the
Capital Account. To the extent that amounts in the Capital Account are
insufficient to satisfy the then current deferred sales charge obligation,
Equity Securities will be sold to meet such shortfall. Distributions of
amounts necessary to pay the deferred portion of the sales charge will be made
to an account maintained by the Trustee for purposes of satisfying
Unitholders' deferred sales charge obligations.
Reinvestment Option. Unitholders of the Trust may elect to have each
distribution of income, capital gains and/or capital on their Units
automatically reinvested in additional Units of the Trust subject to the
remaining deferred sales charge payments due on Units, if any, pursuant to the
"Automatic Reinvestment Option" (to the extent Units may be lawfully
offered for sale in the state in which the Unitholder resides). Brokers and
dealers who distribute Units to Unitholders pursuant to the Automatic
Reinvestment Option may do so through two options. Brokers and dealers can use
the Dividend Reinvestment Service through Depository Trust Company or purchase
the available Automatic Reinvestment Option CUSIP. If a broker or dealer
decides to continue to utilize the Dividend Reinvestment Service through the
Depository Trust Company, the broker or dealer must have access to a PTS
terminal equipped with the Elective Dividend System function (EDS) prior to
the first Record Date set forth under "Summary of Essential Financial
Information" . The second option available is to purchase the appropriate
CUSIP for automatic reinvestment. To participate in the reinvestment plan, a
Unitholder may either contact his or her broker or agent or file with the
Trustee a written notice of election at least five days prior to the Record
Date for which the first distribution is to apply. A Unitholder's election to
participate in the reinvestment plan will apply to all Units of the Trust
owned by such Unitholder and such election will remain in effect until changed
by the Unitholder.
Reinvestment plan distributions may be reinvested in Units already held in
inventory by the Managing Underwriter only (see "Public Offering--Public
Market" ). If Units are unavailable in the secondary market, distributions
which would otherwise have been reinvested shall be paid in cash to the
Unitholder on the applicable Distribution Date.
Purchases of additional Units made pursuant to the reinvestment plan will be
made subject to any remaining deferred sales charge based on the net asset
value for Units of the Trust as of the Evaluation Time on the related
Distribution Dates. Under the reinvestment plan, the Trust will pay the
Unitholder's distributions to the Trustee which in turn will purchase for such
Unitholder full and fractional Units of the Trust and will send such
Unitholder a statement reflecting the reinvestment.
A participant may at any time prior to five days preceding the next succeeding
distribution date, by so notifying the Trustee in writing, elect to terminate
his or her reinvestment plan and receive future distributions on his or her
Units in cash. There will be no charge or other penalty for such termination.
The Managing Underwriter and Sponsor shall have the right to suspend or
terminate the reinvestment plan at any time.
Reports Provided. The Trustee shall furnish Unitholders of the Trust in
connection with each distribution a statement of the amount of income and the
amount of other receipts (received since the preceding distribution), if any,
being distributed, expressed in each case as a dollar amount representing the
pro rata share of each Unit of the Trust outstanding. Within a reasonable
period of time after the end of each calendar year, the Trustee shall furnish
to each person who at any time during the calendar year was a registered
Unitholder of the Trust a statement (i) as to the Income Account: income
received, deductions for applicable taxes and for fees and expenses of the
Trust, for redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed in each case both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (ii) as to the
Capital Account: the dates of disposition of any Securities and the net
proceeds received therefrom, deductions for payment of applicable taxes, fees
and expenses of the Trust held for distribution to Unitholders of record as of
a date prior to the determination and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
by such Trust and the number of Units of the Trust outstanding on the last
business day of such calendar year; (iv) the Redemption Price per Unit of the
Trust based upon the last computation thereof made during such calendar year;
and (v) amounts actually distributed during such calendar year from the Income
and Capital Accounts of the Trust, separately stated, expressed as total
dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay
Street, 20th Floor, New York, New York 10286 and, in the case of Units
evidenced by a certificate, by tendering such certificate to the Trustee, duly
endorsed or accompanied by proper instruments of transfer with signature
guaranteed as described above (or by providing satisfactory indemnity, as in
connection with lost, stolen or destroyed certificates) and by payment of
applicable governmental charges, if any. No redemption fee will be charged. On
the third business day following such tender the Unitholder will be entitled
to receive in cash an amount for each Unit equal to the Redemption Price per
Unit next computed after receipt by the Trustee of such tender of Units and
converted into U.S. dollars as of the Evaluation Time set forth under "
Summary of Essential Financial Information" . The "date of tender"
is deemed to be the date of the next computation of the net asset value per
Unit after Units are received by the Trustee for redemption. No such
computation shall be made on any day on which Securities representing greater
than 33% of the aggregate value of the Trust are not traded on the principal
trading exchange for such Securities due to a customary business holiday on
such exchange. Accordingly, purchases or redemptions of Units on such a day
will be based on the next determination of price of the Securities (and the
price of such Units would be the next computed price). Foreign securities
exchanges are open for trading on certain days which are U.S. holidays on
which the Trust will not transact business. The Foreign Securities will
continue to trade on those days and thus the value of the Trust may be
significantly affected on days when a Unitholder cannot sell or redeem his
Units.
The Trustee is empowered to sell Securities of the Trust in order to make
funds available for redemption if funds are not otherwise available in the
Capital and Income Accounts of the Trust to meet redemptions. The Securities
to be sold will be selected by the Trustee from those designated on a current
list provided by the Supervisor for this purpose. Units so redeemed shall be
cancelled.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the aggregate underlying value of
the Equity Securities in the Trust, plus or minus cash, if any, in the Income
and Capital Accounts of the Trust (net of applicable commissions, exchange
fees and stamp taxes). On the Initial Date of Deposit, the Public Offering
Price per Unit (which includes the sales charge) exceeded the values at which
Units could have been redeemed by the amounts shown under "Summary of
Essential Financial Information." The Redemption Price per Unit is the pro
rata share of each Unit in the Trust determined on the basis of (i) the cash
on hand in the Trust, (ii) the value of the Securities in the Trust and (iii)
dividends receivable on the Equity Securities of the Trust trading ex-dividend
as of the date of computation, less (a) amounts representing taxes or other
governmental charges payable out of the Trust and (b) the accrued expenses of
the Trust. The Evaluator may determine the value of the Equity Securities in
the Trust in the following manner: if the Equity Securities are listed on a
national or foreign securities exchange, this evaluation is generally based on
the closing sale prices on that exchange (unless it is determined that these
prices are inappropriate as a basis for valuation) or, if there is no closing
sale price on that exchange, at the closing bid prices. If the Equity
Securities are not so listed or, if so listed and the principal market
therefore is other than on the exchange, the evaluation shall generally be
based on the current bid price on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the value of
the Equity Securities of such Trust on the bid side of the market or (c) by
any combination of the above. The value of the Equity Securities in the
secondary market is based on the aggregate value of the Foreign Securities
computed on the basis of the bid side value of the applicable currency
exchange rate expressed in U.S. dollars as of the Evaluation Time.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
- --------------------------------------------------------------------------
Managing Underwriter Purchases of Units. The Trustee shall notify the Managing
Underwriter of any Units tendered for redemption. If the Managing
Underwriter's bid in the secondary market at that time equals or exceeds the
Redemption Price per Unit, it may purchase such Units by notifying the Trustee
before the close of business on the next succeeding business day and by making
payment therefor to the Unitholder not later than the day on which the Units
would otherwise have been redeemed by the Trustee. Units held by the Managing
Underwriter may be tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Managing Underwriter will be
in accord with the Public Offering Price described in the then currently
effective prospectus describing such Units. Any profit resulting from the
resale of such Units will belong to the Managing Underwriter which likewise
will bear any loss resulting from a lower offering or redemption price
subsequent to its acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed"
by the Sponsor, Supervisor or the Trustee; their activities described herein
are governed solely by the provisions of the Trust Agreement. Traditional
methods of investment management for a managed fund typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. While the Trust will not be managed, the Trust Agreement does
provide that the Sponsor may (but need not) direct the Trustee to dispose of
an Equity Security in certain events such as the issuer having defaulted on
the payment on any of its outstanding obligations or the price of an Equity
Security has declined to such an extent or other such credit factors exist so
that in the opinion of the Sponsor the retention of such Securities would be
detrimental to the Trust. Pursuant to the Trust Agreement and with limited
exceptions, the Trustee may sell any securities or other properties acquired
in exchange for Equity Securities such as those acquired in connection with a
merger or other transaction. If offered such new or exchanged securities or
property, the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by the Trust, they may be
accepted for deposit in the Trust and either sold by the Trustee or held in
the Trust pursuant to the direction of the Sponsor (who may rely on the advice
of the Supervisor). Proceeds from the sale of Securities (or any securities or
other property received by the Trust in exchange for Equity Securities) are
credited to the Capital Account for distribution to Unitholders or to meet
redemptions. Except as stated under "Trust Portfolio" for failed
securities and as provided in this paragraph, the acquisition by the Trust of
any securities other than the Securities is prohibited.
As indicated under "Rights of Unitholders--Redemption of Units" above,
the Trustee may also sell Securities designated by the Supervisor, or if no
such designation has been made, in its own discretion, for the purpose of
redeeming Units of the Trust tendered for redemption and the payment of
expenses.
The Supervisor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares of
individual issues of Equity Securities in the Trust. To the extent this is not
practicable, the composition and diversity of the Equity Securities in the
Trust may be altered. In order to obtain the best price for the Trust, it may
be necessary for the Supervisor to specify minimum amounts (generally 100
shares) in which blocks of Equity Securities are to be sold.
Amendment or Termination. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders (1) to cure any
ambiguity or to correct or supplement any provision thereof which may be
defective or inconsistent, or (2) to make such other provisions as shall not
adversely affect the Unitholders (as determined in good faith by the Sponsor
and the Trustee), provided, however, that the Trust Agreement may not be
amended to increase the number of Units (except as provided in the Trust
Agreement). The Trust Agreement may also be amended in any respect by the
Trustee and Sponsor, or any of the provisions thereof may be waived, with the
consent of the holders representing 51% of the Units of the Trust then
outstanding, provided that no such amendment or waiver will reduce the
interest in the Trust of any Unitholder without the consent of such Unitholder
or reduce the percentage of Units required to consent to any such amendment or
waiver without the consent of all Unitholders. The Trustee shall advise the
Unitholders of any amendment promptly after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of the Trust then outstanding, or by the Trustee when the
value of the Equity Securities owned by the Trust, as shown by any evaluation,
is less than that amount set forth under Minimum Termination Value in "
Summary of Essential Financial Information." The 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 Managing Underwriter or 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 the Trust is liquidated because of the redemption of unsold Units by the
Sponsor and/or the Managing Underwriter, the Sponsor will refund to each
purchaser of Units the entire sales charge paid by such purchaser. The Trust
Agreement will terminate upon the sale or other disposition of the last
Security held thereunder, but in no event will it continue beyond the
Mandatory Termination Date stated under "Summary of Essential Financial
Information."
Commencing on the Mandatory Termination Date, Equity Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor will
determine the manner, timing and execution of the sales of the Equity
Securities. The Sponsor shall direct the liquidation of Securities in such
manner as to effectuate orderly sales and a minimal market impact. In the
event the Sponsor does not so direct, the Securities shall be sold within a
reasonable period and in such manner as the Trustee, in its sole discretion,
shall determine. At least 30 days before the Mandatory Termination Date the
Trustee will provide written notice of any termination to all Unitholders of
the Trust. Unitholders will receive a cash distribution from the sale of the
remaining Securities within a reasonable time following the Mandatory
Termination Date. The Trustee will deduct from the funds of the Trust any
accrued costs, expenses, advances or indemnities provided by the Trust
Agreement, including estimated compensation of the Trustee, costs of
liquidation and any amounts required as a reserve to provide for payment of
any applicable taxes or other governmental charges. Any sale of Securities in
the Trust upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. The Trustee will then
distribute to each Unitholder of the Trust his pro rata share of the balance
of the Income and Capital Accounts of the Trust.
Within 60 days after the final distribution Unitholders will be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and the
Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder.
The Trustee shall not be liable for depreciation or loss incurred by reason of
the sale by the Trustee of any of the Securities. In the event of the failure
of the Sponsor to act under the Trust Agreement, the Trustee may act
thereunder and shall not be liable for any action taken by it in good faith
under the Trust Agreement. The Trustee shall not be liable for any taxes or
other governmental charges imposed upon or in respect of the Securities or
upon the interest thereon or upon it as Trustee under the Trust Agreement or
upon or in respect of the Trust which the Trustee may be required to pay under
any present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor or Unitholders for errors in judgment. This provision shall
not protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Managing Underwriter and Supervisor. International Assets Advisory Corporation
("IAAC" ), the Managing Underwriter for the Trust, is a full-service
securities brokerage firm specializing in global investing. IAAC was formed as
a Florida corporation in 1981 and registered as a broker/dealer in 1982. The
firm has focused on the sale of global debt and equity securities to its
clients. IAAC has developed an experienced team specializing in the selection,
research, trading, currency exchange and execution of individual equity and
fixed-income products on a global basis. Members of this team are also
affiliated with Global Assets Advisors, Inc. and have many years of experience
in the global marketplace. Global Assets Advisors, Inc., is the Supervisor and
provides research and portfolio supervisory services for the Trust. Global
Assets Advisors is a wholly-owned subsidiary of International Assets Holding
Corporation and a related corporation of IAAC. The principal offices of IAAC
and Global Assets Advisors are located at 250 Park Avenue South, Suite 200,
Winter Park, Florida 32789. The telephone number is (800) 432-0000.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect
subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned
subsidiary of MSAM Holdings II, Inc., which in turn is a wholly owned
subsidiary of Morgan Stanley Group Inc.
On May 31, 1997, Morgan Stanley Group Inc. merged with and into Dean Witter,
Discover & Co. to create Morgan Stanley, Dean Witter, Discover & Co. ("
MSDWD" ), a global financial services firm with a market capitalization of
more than $21 billion. MSDWD, together with various of its directly and
indirectly owned subsidiaries, is engaged in a wide range of financial
services through three primary businesses: securities, asset management and
credit services. These principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring and other
corporate finance advisory activities; merchant banking; stock brokerage and
research services; asset management; trading of futures, options, foreign
exchange commodities and swaps (involving foreign exchange, commodities,
indices and interest rates); real estate advice, financing and investing;
global custody, securities clearance services and securities lending; and
credit card services. As of June 2, 1997, MSDWD, together with its affiliated
investment advisory companies, had approximately $270 billion of assets under
management and fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the underwriting
and distribution of unit investment trusts and mutual funds with roots in
money management dating back to 1926. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has offices at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco and Seattle. As of November 30, 1996 the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Trust or to any other Series thereof. The information is included
herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of March 31, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $58.45 billion of investment
products, of which over $11.85 billion is invested in municipal securities.
The Sponsor and its Van Kampen American Capital affiliates managed $47 billion
of assets, consisting of $29.23 billion for 59 open-end mutual funds (of which
46 are distributed by Van Kampen American Capital Distributors, Inc.) $13.4
billion for 37 closed-end funds and $4.97 billion for 106 institutional
accounts. The Sponsor has also deposited approximately $26 billion of unit
investment trusts. All of Van Kampen American Capital's open-end funds,
closed-ended funds and unit investment trusts are professionally distributed
by leading financial firms nationwide. Based on cumulative assets deposited,
the Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R)trust. The Sponsor also provides
surveillance and evaluation services at cost for approximately $13 billion of
unit investment trust assets outstanding. Since 1976, the Sponsor has serviced
over two million investor accounts, opened through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286, (800) 221-7668. The Bank of New York 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.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided" ).
The Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 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 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
- --------------------------------------------------------------------------
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Kroll & Tract LLP has acted as counsel for the
Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 63 (China Consumer Opportunity Trust, Series 1):
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Equity Opportunity Trust, Series 63
(China Consumer Opportunity Trust, Series 1) as of June 24, 1997. The
statement of condition and portfolio are the responsibility of the Sponsor.
Our responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of an irrevocable letter of credit deposited
to purchase securities by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by the Sponsor, as well as evaluating the overall financial statement
presentation.
We believe our audit provides a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 63 (China Consumer Opportunity Trust, Series
1) as of June 24, 1997, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Chicago, Illinois
June 24, 1997
<TABLE>
CHINA CONSUMER OPPORTUNITY TRUST, SERIES 1
STATEMENT OF CONDITION
As of June 24, 1997
<CAPTION>
<S> <C>
Investment in Securities:
Contracts to purchase securities <F1>.......... $ 144,764
-----------
............................................... $ 144,764
===========
Liabilities and Interest of Unitholders:
Liabilities--..................................
Deferred sales charge liability <F2>........... $ 4,500
Interest of Unitholders-- .....................
Cost to investors <F3>......................... 148,350
Less: Gross underwriting commission <F3><F4>... 8,086
-----------
Net interest to Unitholders <F3>............... 140,264
-----------
Total.......................................... $ 144,764
===========
- ----------
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" and
their cost to the Trust are the same. The value of the Securities is
determined by Interactive Data Corporation on the bases set forth under "
Public Offering--Offering Price" . The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $144,764 which has been
deposited with the Trustee.
<F2>Represents the amount of mandatory distributions from the Trust on the bases
set forth under "Public Offering" .
<F3>The aggregate public offering price and the aggregate sales charge of 5.5% are
computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor and Managing Underwriter Compensation"
and assume all single transactions involve less than 10,000 Units. For single
transactions involving 10,000 or more Units, the sales charge is reduced (see
"Public Offering--General" ) resulting in an equal reduction in both
the Cost to investors and the Gross underwriting commission while the Net
interest to Unitholders remains unchanged.
<F4>Assumes the maximum sales charge.
</TABLE>
<TABLE>
CHINA CONSUMER OPPORTUNITY TRUST, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 63)
as of the Initial Date of Deposit: June 24, 1997
<CAPTION>
Estimated
Annual
Number Dividends Cost of
of Market Value per Share Securities
Shares Name of Issuer<F1> per Share <F2> <F2> to Trust <F2>
---------- ------------------------------------ ---------------- ---------- --------------
<S> <C> <C> <C> <C>
# 228 Amway Asia Pacific Ltd. $ 44.750 $ 0.880 $ 10,203.00
16,000 Founder Hong Kong Limited 0.646 0.010 10,329.64
20,000 Goldlion Holdings 0.529 0.023 10,587.89
8,000 Guangdong Investments 1.375 0.012 11,001.07
11,000 Guangdong Kelon Electric Holdings 0.981 0.013 10,794.48
6,000 Guangnan Holdings 1.459 0.016 8,754.37
26,000 Shandong Xinhua Pharmaceutical 0.381 0.001 9,903.55
26,000 Sinocan Holdings 0.426 0.012 11,078.54
7,500 Swire Pacific Holdings B Shares 1.517 0.046 11,378.75
2,000 Television Broadcasts 4.519 0.103 9,038.44
40,000 Tingyi Holdings Co. 0.256 0.000 10,226.35
28,000 Vitasoy International Holdings 0.365 0.012 10,213.44
3,000 Want Want Holdings 3.400 0.000 10,200.00
7,000 Wuxi Little Swan 1.579 0.000 11,054.01
200,728 $ 144,763.53
========== ==============
NOTES TO PORTFOLIO
- --------------------------------------------------------------------------
<FN>
<F1>All of the Securities are represented by "regular way" contracts for
the performance of which an irrevocable letter of credit has been deposited
with the Trustee. At the Initial Date of Deposit, the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into on June 23, 1997 and are
expected to settle on June 25, 1997, June 27, 1997 and July 1, 1997. (see "
The Trust" ).
<F2>The market value of each of the Equity Securities is based on the closing sale
price of each Security (in the case of the Foreign Securities, converted into
U.S. dollars at the offer side of the applicable currency exchange rate at the
Evaluation Time and includes the costs associated with acquiring the Foreign
Securities) on the day prior to the Initial Date of Deposit. Estimated annual
dividends are based on the most recently declared dividends or on the most
recent interim and final dividend's declared taking into consideration any
applicable foreign withholding tax (in the case of the Foreign Securities,
converted into U.S. dollars at the offer side of the applicable currency
exchange rate at the Evaluation Time). The aggregate value of the Securities
on the day prior to the Initial Date of Deposit (based on the closing sale or
bid price of each Security and, for the Foreign Securities, converted into
U.S. dollars at the bid side of the related currency exchange rate at the
Evaluation Time reduced by the costs of liquidating such Securities) was
$144,747. This is the basis on which the Redemption Price per Unit will be
determined. The ask price of the applicable Securities and the offer side
exchange rates of the Foreign Securities (the basis on which the Public
Offering Price per Unit will be determined during the initial offering period)
is greater than the related bid side values. Other information regarding the
Securities in the Trust, as of the Initial Date of Deposit (in the case of the
Foreign Securities, converted into U.S. dollars at the offer side of the
applicable currency exchange rate at the Evaluation Time on the day prior to
the Initial Date of Deposit), is as follows:
</TABLE>
<TABLE>
<CAPTION>
Cost To
Managing Profit (Loss) To Aggregate Estimated
Underwriter Managing Underwriter Annual Dividends
------------------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
$144,888 $(124) $2,395
</TABLE>
A Security marked by "#" indicates a U.S. dollar denominated foreign
common stock listed on the New York
Stock Exchange.
An affiliate of the Sponsor may have participated as issuer, sole underwriter,
managing underwriter or member of an underwriting syndicate in a public
offering of one or more of the stocks in the Trust. An affiliate of the
Sponsor may serve as a specialist in the stocks in the Trust on one or more
stock exchanges and may have a long or short position in any of these stocks
or in options on any of these stocks, and may be on the opposite side of
public orders executed on the floor of an exchange where such stocks are
listed. An officer, director or employee of the Sponsor or an affiliate may be
an officer or director of one or more of the issuers of the stocks in the
Trust. An affiliate of the Sponsor may trade for its own account as an odd-lot
dealer, market maker, block positioner and/or arbitrageur in any stocks or
options relating thereto. The Sponsor, its affiliates, directors, elected
officers and employee benefit programs may have either a long or short
position in any stock or option of the issuers.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or the Managing Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, securities
in any state to any person to whom it is not lawful to make such offer in such
state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 3
Fee Table 5
The Trust 6
Trust Portfolio 12
Risk Factors 14
Taxation 21
Trust Operating Expenses 24
Public Offering 25
Rights of Unitholders 28
Trust Administration 32
Other Matters 36
Report of Independent Certified Public
Accountants 36
Statement of Condition 37
Portfolio 38
Notes to Portfolio 39
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
June 24, 1997
CHINA CONSUMER
OPPORTUNITY TRUST, SERIES 1
Van Kampen American Capital
Equity Opportunity Trust, Series 63
International Assets Advisory Corp.
250 Park Avenue South
Suite 200
Winter Park, Florida 32789
Please retain this Prospectus for future reference.
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
3.1 Opinion and consent of counsel as to legality of securities
being registered.
3.2 Opinion of Counsel as to the Federal Income tax status of
securities being registered.
3.3 Opinion and consent of counsel as to New York tax status
of securites being registered.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Independent Certified Public Acountants.
EX-27 Financial Data Schedule.
Signatures
The Registrant, Van Kampen American Capital Equity Opportunity
Trust, Series 63, hereby identifies Van Kampen Merritt Equity Opportunity
Trust, Series 4 and Series 7, and Van Kampen American Capital Equity
Opportunity Trust, Series 13, Series 14 and Series 57 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, Van Kampen American Capital Equity Opportunity Trust, Series
63 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 Chicago and State of Illinois on the 24th day of June, 1997.
Van Kampen American Capital Equity
Opportunity Trust, Series 63
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on June 24, 1997.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth (Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
Exhibit 1.1
Van Kampen American Capital Equity Opportunity Trust
Series 63
Trust Agreement
Dated: June 24, 1997
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of
Van Kampen American Capital Investment Advisory Corp., as Evaluator,
Global Assets Advisors, Inc., as Supervisory Servicer, and The Bank of
New York, as Trustee, sets forth certain provisions in full and
incorporates other provisions by reference to the document entitled "Van
Kampen Merritt Equity Opportunity Trust, Series 1 and Subsequent Series,
Standard Terms and Conditions of Trust, Effective November 21, 1991"
(herein called the "Standard Terms and Conditions of Trust") and such
provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references
herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee
agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(22), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus. Such fractional
undivided interest may be (a) increased by the number of any
additional Units issued pursuant to Section 2.03,(b) increased or
decreased in connection with an adjustment to the number of Units
pursuant to Section 2.03, or (c) decreased by the number of Units
redeemed pursuant to Section 5.02.
3. Section 1.01(1) shall be amended to read as follows:
"(1) "Depositor" shall mean Van Kampen American Capital
Distributors, Inc. and its successors in interest, or any
successor depositor appointed as hereinafter provided."
4. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean American Portfolio
Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp. and its successors in
interest, or any successor evaluator appointed as
hereinafter provided."
5. Section 1.01(4) shall be amended to read as follows:
"(4) "Supervisory Servicer" shall mean Global Assets
Advisors, Inc. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
6. Section 1.01(19) is hereby replaced in its entirety by the
following:
(19) "Percentage Ratio" shall mean, for each Trust which
will issue additional Units pursuant to Section 2.03
hereof, (a) the actual number of shares of each Equity
Security as a percent of all shares of Equity Securities
existing immediately prior to the related additional
issuance of Units with respect to the Select Equity Trust
and (b) the percentage relationship existing on the
Initial Date of Deposit among the maturity value per Unit
of the Zero Coupon Obligations, each Equity Security per
Unit as a percent of all shares of Equity Securities and
the sum of the maturity value per Unit of the Zero Coupon
Obligations and all Equity Securities attributable to each
Unit with respect to the Select Equity and Treasury Trust.
The Percentage Ratio shall be adjusted to the extent
necessary, and may be rounded, to reflect the occurrence
of a stock dividend, a stock split or a similar event
which affects the capital structure of the issuer of an
Equity Security.
7. The Initial Date of Deposit for the Trust is June 24,
1997.
8. Section 2.01(c) of the Standard Terms and Conditions of
Trust is hereby amended by adding the following at the conclusion
thereof:
"If any Contract Obligations requires settlement in a
foreign currency, in connection with the deposit of such
Contract Obligation the Depositor will deposit with the Trustee
either an amount of such currency sufficient to settle the
contract or a foreign exchange contract in such amount which
settles concurrently with the settlement of the Contract
Obligation and cash or a Letter of Credit in U.S. dollars
sufficient to perform such foreign exchange contract."
9. Notwithstanding anything to the contrary appearing in the
Standard Terms and Conditions of Trust, "China Consumer Opportunity
Trust, Series 1" will replace "Select Equity Trust."
10. The second sentence in the second paragraph of Section
3.11 shall be revised as follows: "However, should any issuance,
exchange or substitution be effected notwithstanding such rejection
or without an initial offer, any securities, cash and/or property
received shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee unless the Depositor advises
the Trustee to keep such securities, cash or properties."
11. Article III, Section 3.13 of the Standard Terms and
Conditions of Trust is hereby amended by deleting the reference to
"$0.25 per 100 Units" in the first sentence of such Section and
replacing such reference with "$.007 per Unit."
12. Article III of the Standard Terms and Conditions of Trust
is hereby amended by inserting the following paragraph which shall
be entitled Section 3.15.:
"Section 3.15. Foreign Exchange Transactions; Reclaiming
Foreign Taxes. The Trustee shall use reasonable efforts to
reclaim or recoup any amounts of non-U.S. tax paid by the Trust
or withheld from income received by the Trust to which the
Trust may be entitled as a refund."
13. Article III of the Standard Terms and Conditions of Trust
is hereby amended by inserting the following paragraph which shall
be entitled Section 3.16.:
"Section 3.16. Foreign Exchange Transactions; Foreign
Currency Exchange. Unless the Depositor shall otherwise
direct, whenever funds are received by the Trustee in foreign
currency, upon the receipt thereof or, if such funds are to be
received in respect of a sale of Securities, concurrently with
the contract of the sale for the Security (in the latter case
the foreign exchange contract to have a settlement date
coincident with the relevant contract of sale for the
Security), the Depositor shall enter into a foreign exchange
contract for the conversion of such funds to U.S. dollars. The
Depositor shall have no liability for any loss or depreciation
resulting from such action taken."
14. Article IV, Section 4.01(b) of the Standard Terms and
Conditions of Trust is hereby deleted and replaced in its entirety
with the following:
"(b) During the initial offering period such Evaluation
shall be made in the following manner: if the Securities are
listed on a national or foreign securities exchange, such
Evaluation shall generally be based on the last available sale
price on or immediately prior to the Evaluation Time on the
exchange which is the principal market therefor, which shall be
deemed to be the New York Stock Exchange if the Securities are
listed thereon (unless the Evaluator deems such price
inappropriate as a basis for evaluation) or, if there is no
such available sale price on such exchange at the last
available ask prices of the Equity Securities. If the
Securities are not so listed or, if so listed, and the
principal market therefor is other than on such exchange or
there is no such available sale price on such exchange, such
Evaluation shall generally be based on the following methods or
any combination thereof whichever the Evaluator deems
appropriate: (i) in the case of Equity Securities, on the basis
of the current ask price on the over-the-counter market (unless
the Evaluator deems such price inappropriate as a basis for
evaluation), (ii) on the basis of current offering prices for
the Zero Coupon Obligations as obtained from investment dealers
or brokers who customarily deal in securities comparable to
those held by the Fund, (iii) if offering prices are not
available for the Zero Coupon Obligations or the Equity
Securities, on the basis of offering or ask price for
comparable securities, (iv) by determining the valuation of the
Zero Coupon Obligations or the Equity Securities on the
offering or ask side of the market by appraisal or (v) by any
combination of the above. If the Trust holds Securities
denominated in a currency other than U.S. dollars, the
Evaluation of such Security shall be converted to U.S. dollars
based on current offering side exchange rates (unless the
Evaluator deems such prices inappropriate as a basis for
valuation). The Evaluator shall add to the Evaluation of each
such Security the amount of any commissions and relevant taxes
associated with the acquisition of the Security. As used
herein, the closing sale price is deemed to mean the most
recent closing sale price on the relevant securities exchange
immediately prior to the Evaluation time. For each Evaluation,
the Evaluator shall also confirm and furnish to the Trustee and
the Depositor, on the basis of the information furnished to the
Evaluator by the Trustee as to the value of all Trust assets
other than Securities, the calculation of the Trust Fund
Evaluation to be computed pursuant to Section 5.01."
15. Article IV, Section 4.01(c) of the Standard Terms and
Conditions of Trust is hereby deleted and replaced in its entirety
with the following:
"(c) After the initial offering period, for purposes of
the Trust Fund Evaluations required by Section 5.01 in
determining Redemption Value and Unit Value, Evaluation of the
Securities shall be made in the manner described in Section
4.01(b), on the basis of current bid prices for the Zero Coupon
Obligations, the bid side value of the relevant currency
exchange rate expressed in U.S. dollars and, except in those
cases in which the Equity Securities are listed on a national
or foreign securities exchange and the last available sale
prices are utilized, on the basis of the last available bid
prices of the Equity Securities. In addition, the Evaluator
shall (i) not make the addition specified in the fourth
sentence of Section 4.01(b) and (ii) shall reduce the
Evaluation of each Security by the amount of any liquidation
costs (other than brokerage costs incurred on any national
securities exchange) and any capital gains or other taxes which
would be incurred by the Trust upon the sale of such Security,
such taxes being computed as if the Security were sold on the
date of the Evaluation."
16. Article V, Section 5.01 of the Standard Terms and
Conditions of Trust is hereby amended to add the following at the
conclusion of the first paragraph thereof:
"Amounts receivable by the Trust in foreign currency shall
be converted by the Trustee to U.S. dollars based on current
exchange rates, in the same manner as provided in Section
4.01(b) or 4.01(c), as applicable, for the conversion of the
valuation of foreign Equity Securities, and the Evaluator shall
report such conversion with each Evaluation made pursuant to
Section 4.01."
17. Article VI, Section 6.01(e) of the Standard Terms and
Conditions of Trust is hereby amended to read as follows:
"(e) (I) Subject to the provisions of subparagraphs (II)
and (III) of this paragraph, the Trustee may employ agents, sub-
custodians, attorneys, accountants and auditors and shall not
be answerable for the default or misconduct of any such agents,
sub-custodians, attorneys, accountants or auditors if such
agents, sub-custodians, attorneys, accountants or auditors
shall have been selected with reasonable care. The Trustee
shall be fully protected in respect of any action under this
Indenture taken or suffered in good faith by the Trustee in
accordance with the opinion of counsel, which may be counsel to
the Depositor acceptable to the Trustee, provided, however,
that this disclaimer of liability shall not (i) excuse the
Trustee from the responsibilities specified in subparagraph II
below or (ii) limit the obligation of the Trustee to indemnify
the Trust under subparagraph III below. The fees and expenses
charged by such agents, sub-custodians, attorneys, accountants
or auditors shall constitute an expense of the Trust
reimbursable from the Income and Capital Accounts of the
affected Trust as set forth in section 6.04 hereof.
(II) The Trustee may place and maintain in the care of an
eligible foreign custodian (which is employed by the Trustee as
a sub-custodian as contemplated by subparagraph (I) of this
paragraph (e) and which may be an affiliate or subsidiary of
the Trustee or any other entity in which the Trustee may have
an ownership interest) the Trust's foreign securities, cash and
cash equivalents in amounts reasonably necessary to effect the
Trust's foreign securities transactions, provided that:
(1) The Trustee shall have:
(i) determined that maintaining the Trust's assets
in a particular country or countries is consistent with
the best interests of the Trust and the
Certificateholders;
(ii) determined that maintaining the Trust's assets
with such eligible foreign custodian is consistent with
the best interests of the Trust and the
Certificateholders; and
(iii) entered into a written contract which is
consistent with the best interests of the Trust and the
Certificateholders and which will govern the manner in
which such eligible foreign custodian will maintain the
Trust's assets and which provides that:
(A) The Trust will be adequately indemnified
and its assets adequately insured in the event of
loss (without regard to the indemnity provided by the
Trustee under Section III hereof);
(B) The Trust's assets will not be subject to
any right, charge, security interest, lien or claim
of any kind in favor of the eligible foreign
custodian or its creditors except a claim for payment
for their safe custody or administration;
(C) Beneficial ownership of the Trust's assets
will be freely transferable without the payment of
money or value other than for safe custody or
administration;
(D) Adequate records will be maintained
identifying the assets as belonging to the Trust;
(E) The Trust's independent public accountants
will be given access to records identifying assets of
the Trust or confirmation of the contents of those
records; and
(F) The Trustee will receive periodic reports
with respect to safekeeping of the Trust's assets,
including, but not necessarily limited to,
notification of any transfer to or from the Trustee's
account.
(2) The Trustee shall establish a system to monitor such
foreign custody arrangements to ensure compliance with the
conditions of this subparagraph.
(3) The Trustee, at least annually, shall review and
approve the continuing maintenance of Trust assets in a
particular country or countries with a particular eligible
foreign custodian or particular eligible foreign custodians as
consistent with the best interests of the Trust and the
Certificateholders.
(4) The Trustee shall maintain and keep current written
records regarding the basis for the choice or continued use of
a particular eligible foreign custodian pursuant to this
subparagraph, and such records shall be available for
inspection by Certificateholders and the Securities and
Exchange Commission at the Trustee's offices at all reasonable
times during its usual business hours.
(5) Where the Trustee has determined that a foreign
custodian may no longer be considered eligible under this
subparagraph or that, pursuant to clause (3) above, continuance
of the arrangement would not be consistent with the best
interests of the Trust and the Certificateholders, the Trust
must withdraw its assets from the care of that custodian as
soon as reasonably practicable, and in any event within 180
days of the date when the Trustee made the determination.
As used in this subparagraph (II),
(1) "foreign securities" include: securities issued
and sold primarily outside the United States by a foreign
government, a national of any foreign country or a corporation
or other organization incorporated or organized under the laws
of any foreign country and securities issued or guaranteed by
the government of the United States or by any state or any
political subdivision thereof or by any agency thereof or by
any entity organized under the laws of the United States or of
any state thereof which have been issued and sold primarily
outside the United States.
(2) "eligible foreign custodian" means
(a) The following securities depositories and
clearing agencies which operate transnational systems for the
central handling of securities or equivalent book entries
which, by appropriate exemptive order issued by the Securities
and Exchange Commission, have been qualified as eligible
foreign custodians for the Trust but only for so long as such
exemptive order continues in effect: Morgan Guaranty Trust
Company of New York, Brussels, Belgium, in its capacity as
operator of the Euroclear System ("Euroclear"), and Central de
Livraison de Valeurs Mobilires, S.A. ("CEDEL").
(b) Any other entity that shall have been qualified
as an eligible foreign custodian for the foreign securities of
the Trust by the Securities and Exchange Commission by
exemptive order, rule or other appropriate action, commencing
on such date as it shall have been so qualified but only for so
long as such exemptive order, rule or other appropriate action
continues in effect.
The determinations set forth above to be made by the
Trustee should be made only after consideration of all matters
which the Trustee, in carrying out its fiduciary duties, finds
relevant, including, but not necessarily limited to,
consideration of the following:
1. With respect to the selection of the country
where the Trust's assets will be maintained, the Trustee should
consider:
a. Whether applicable foreign law would restrict
the access afforded the Trust's independent public accountants
to books and records kept by an eligible foreign custodian
located in that country;
b. Whether applicable foreign law would restrict
the Trust's ability to recover its assets in the event of the
bankruptcy of an eligible foreign custodian located in that
country;
c. Whether applicable foreign law would restrict
the Trust's ability to recover assets that are lost while under
the control of an eligible foreign custodian located in that
country;
d. The likelihood of expropriation,
nationalization, freezes, or confiscation of the Trust's
assets; and
e. Whether difficulties in converting the Trust's
cash and cash equivalents to U.S. dollars are reasonably
foreseeable.
2. With respect to the selection of an eligible
foreign custodian, the Trustee should consider:
a. The financial strength of the eligible foreign
custodian, its general reputation and standing in the country
in which it is located, its ability to provide efficiently the
custodial services required and the relative cost for those
services;
b. Whether the eligible foreign custodian would
provide a level of safeguards for maintaining the Trust's
assets not materially different from that provided by the
Trustee in maintaining the Trust's securities in the United
States;
c. Whether the eligible foreign custodian has
branch offices in the United States in order to facilitate the
assertion of jurisdiction over and enforcement of judgments
against such custodian; and
d. In the case of an eligible foreign custodian
that is a foreign securities depository, the number of
participants in, and operating history of, the depository.
3. The Trustee should consider the extent of the
Trust's exposure to loss because of the use of an eligible
foreign custodian. The potential effect of such exposure upon
Certificateholders shall be disclosed, if material, by the
Depositor in the prospectus relating to the Trust.
(III) The Trustee will indemnify and hold the
Trust harmless from and against any loss that shall occur as
the result of the failure of an eligible foreign custodian
holding the foreign securities of the Trust to exercise
reasonable care with respect to the safekeeping of such foreign
securities to the same extent that the Trustee would be
required to indemnify and hold the Trust harmless if the
Trustee were holding such foreign securities in the
jurisdiction of the United States whose laws govern the
indenture, provided, however, that the Trustee will not be
liable for loss except by reason of the negligence, bad faith
or willful misconduct of the Trustee or the eligible foreign
custodian."
18. Notwithstanding anything to the contrary, all references
to In-Kind-Distributions as set forth in Sections 5.02 and 8.02 of
the Standard Terms and Conditions of Trust shall be inapplicable to
the Trust.
19. Section 8.02 is hereby revised to require an affirmative
vote of Unitholders representing 66 2/3% of the then outstanding
Units to terminate the Trust rather than the 51% indicated therein.
20. Section 1.01(5) is hereby replaced with the following:
"(5) "Business Day" shall mean any day on which the New York
Stock Exchange is open other than any day on which Securities
representing greater than one-third of the aggregate value
(determined as described in Section 4.01) of the Trust are not
traded on the principal trading exchange for such Securities
due to a customary business holiday on such exchange."
21. Section 2.03(a) shall be amended by adding the following
sentence immediately after the first sentence of such Section: "The
number of Units may be increased through a split of the Units or
decreased through a reverse split thereof, as directed by the
Depositor, on any day on which the Depositor is the only Unitholder,
which revised number of Units shall be recorded by the Trustee on
its books."
22. Article III of the Standard Terms and Conditions of Trust
is hereby amended by inserting the following paragraph which shall
be entitled Section 3.17.:
"Section 3.17. Deferred Sales Charge. If the prospectus
related to the Trust specifies a deferred sale charge, the
Trustee shall, on the dates specified in and as permitted
by such Prospectus, withdraw from the Capital Account, an
amount per Unit specified in such Prospectus and credit
such amount to a special non-Trust account maintained at
the Trustee out of which the deferred sales charge will be
distributed to the Depositor. If the balance in the
Capital Account is insufficient to make any such
withdrawal, the Trustee shall, as directed by the
Depositor, either advance funds in an amount equal to the
proposed withdrawal and be entitled to reimbursement of
such advance upon the deposit of additional monies in the
Capital Account, sell Securities and credit the proceeds
thereof to such special Depositor's account or credit (if
permitted by law) Securities in kind to such special
Depositor's Account. If a Unitholder redeems Units prior
to full payment of the deferred sales charge, the Trustee
shall, if so provided in the related Prospectus, on the
Redemption Date, withhold from the Redemption Price
payable to such Unitholder an amount equal to the unpaid
portion of the deferred sales charge and distribute such
amount to such special Depositor's Account. The Depositor
may at any time instruct the Trustee in writing to
distribute to the Depositor cash or Securities previously
credited to the special Depositor's Account."
23. Section 2.01(b) is hereby replaced with the following:
(b) From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its discretion,
to assign, convey to and deposit with the Trustee (i)
additional Securities, duly endorsed in blank or accompanied by
all necessary instruments of assignment and transfer in proper
form (or Contract Obligations relating to such Securities),
and/or (ii) cash (or a Letter of Credit in lieu of cash) with
instructions to purchase additional Securities, in an amount
equal to the portion of the Unit Value of the Units created by
such deposit attributable to the Securities to be purchased
pursuant to such instructions. Such deposit of additional
Securities or cash with instructions to purchase additional
Securities shall be made, in each case, pursuant to a
Supplemental Indenture accompanied by a legal opinion issued by
legal counsel satisfactory to the Depositor. Instructions to
purchase additional Securities shall be in writing, and shall
specify the name of the Security, CUSIP number, if any,
aggregate amount, price or price range and date to be
purchased. When requested by the Trustee, the Depositor shall
act as broker to execute purchases in accordance with such
instructions; the Depositor shall be entitled to compensation
therefor in accordance with applicable law and regulations.
The Trustee shall have no liability for any loss or
depreciation resulting from any purchase made pursuant to the
Depositor's instructions or made by the Depositor as broker,
except by reason of its own negligence, lack of good faith or
willful misconduct.
In connection with any deposit pursuant to this Section 2.01(b)
in the Select Equity and Treasury Trust, the Depositor shall be
obligated to determine that the maturity value of the Zero
Coupon Obligations included in the deposit, divided by the
number of Units created by reason of the deposit, shall equal
at least $10.00.
The Depositor, in each case, shall ensure that each deposit of
additional Securities pursuant to this Section shall be, as
nearly as is practicable, in the identical ratio as the
Percentage Ratio for such Securities as is specified in the
Trust Agreement for each Trust. The Depositor shall deliver
the additional Securities which were not delivered concurrently
with the deposit of additional Securities and which were
represented by Contract Obligations within 10 calendar days
after such deposit of additional Securities (the "Additional
Securities Delivery Period"). If a contract to buy such
Securities between the Depositor and seller is terminated by
the seller thereof for any reason beyond the control of the
Depositor or if for any other reason the Securities are not
delivered to the Trust by the end of the Additional Securities
Delivery Period for such deposit, the Trustee shall immediately
draw on the Letter of Credit, if any, in its entirety, apply
the moneys in accordance with Section 2.01(d), and the
Depositor shall forthwith take the remedial action specified in
Section 3.12. If the Depositor does not take the action
specified in Section 3.12 within 10 calendar days of the end of
the Additional Securities Delivery Period, the Trustee shall
forthwith take the action specified in Section 3.12.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., and Global Assets Advisors, Inc., have each caused this Trust
Indenture and Agreement to be executed by their respective President or
one of their respective Vice Presidents and the corporate seal of each to
be hereto affixed and attested to by the Secretary, Assistant Secretary
or one of their respective Vice Presidents or Assistant Vice Presidents
and The Bank of New York, has caused this Trust Agreement to be executed
by one of its Vice Presidents and its corporate seal to be hereto affixed
and attested to by one of its Assistant Treasurers all as of the day,
month and year first above written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
Global Assets Advisors, Inc.
By William B. Young, Jr.
Vice President
Attest
By Stephen Saker
Secretary
The Bank of New York
By Jeffrey Bieselin
Vice President
Attest
By Norbert Loney
Assistant Treasurer
Schedule A to Trust Agreement
Securities Initially Deposited
in
Van Kampen American Capital Equity Opportunity Trust, Series 63
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
June 24, 1997
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Van Kampen American Capital Equity Opportunity Trust,
Series 63
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc. as Sponsor and Depositor of Van Kampen American
Capital Equity Opportunity Trust, Series 63 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated June 24, 1997, among Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., as Evaluator, Global Assets Advisors, Inc., as Supervisory
Servicer, and The Bank of New York, as Trustee, pursuant to which the
Depositor has delivered to and deposited the Securities listed in the
Schedule to the Trust Agreement with the Trustee and pursuant to which
the Trustee has provided to or on the order of the Depositor
documentation evidencing ownership of Units of fractional undivided
interest in and ownership of the Trust (hereinafter referred to as the
"Units"), created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of documentation evidencing
ownership of the Units in the Trust have been duly authorized;
and
2. The documentation evidencing ownership of the Units
in the Trust, when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust
Agreement, will constitute valid and binding obligations of the
Trust and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-27491) relating to the Units
referred to above and to the use of our name and to the reference to our
firm in said Registration Statement and in the related Prospectus.
Respectfully submitted,
Chapman And Cutler
MJK/slm
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
June 24, 1997
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Van Kampen American Capital Equity Opportunity Trust, Series 63
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 63 (the "Fund"), in connection with the
issuance of Units of fractional undivided interest in the Fund, under a
Trust Agreement dated June 24, 1997 (the "Indenture") among Van Kampen
American Capital Distributors, Inc., as Depositor, Van Kampen American
Capital Investment Advisory Corp., as Evaluator, Global Assets Advisors,
Inc., as Supervisory Servicer, and The Bank of New York, as Trustee. The
Fund is comprised of one separate unit investment trust, China Consumer
Opportunity Trust, Series 1.
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of the Trust will consist of a portfolio of equity
securities (the "Equity Securities" or "Securities") as set forth in the
Prospectus. For purposes of this opinion, it is assumed that each Equity
Security is equity for federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) The Trust is not an association taxable as a
corporation but will be governed by the provisions of
subchapter J (relating to Trusts) of chapter 1, Internal
Revenue Code of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata
share of each asset of the particular Trust in the proportion
that the number of Units held by him bears to the total number
of Units outstanding. Under subpart E, subchapter J of chapter
1 of the Code, income of a Trust will be treated as income of
each Unitholder in the proportion described, and an item of
Trust income will have the same character in the hands of a
Unitholder as it would have in the hands of the Trustee. Each
Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income
is considered to be received by the Trust. A Unitholder's pro
rata portion of distributions of cash or property by a
corporation with respect to an Equity Security ("dividends" as
defined by Section 316 of the Code ) are taxable as ordinary
income to the extent of such corporation's current and
accumulated "earnings and profits." A Unitholder's pro rata
portion of dividends which exceed such current and accumulated
earnings and profits will first reduce the Unitholder's tax
basis in such Equity Security, and to the extent that such
dividends exceed a Unitholder's tax basis in such Equity
Security, shall be treated as gain from the sale or exchange of
property.
(iii) The price a Unitholder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Equity Security held by the Trust (in the proportion to the
fair market values thereof on the valuation date closest to the
date the Unitholder purchases his Units), in order to determine
his tax basis for his pro rata portion of each Equity Security
held by the Trust.
(iv) Gain or loss will be recognized to a Unitholder
(subject to various nonrecognition provisions under the Code)
upon redemption or sale of his Units. Such gain or loss is
measured by comparing the proceeds of such redemption or sale
with the adjusted basis of his Units. Before adjustment, such
basis would normally be cost if the Unitholder had acquired his
units by purchase. Such basis will be reduced, but not below
zero, by the Unitholder's pro rata portion of dividends with
respect to each Equity Security which is not taxable as
ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, liquidation, redemption, payment on maturity or
otherwise) gain or loss will be recognized to the Unitholder
(subject to various nonrecognition provisions under the Code)
and the amount thereof will be measured by comparing the
Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning
the tax basis for his Units (as of the date on which his Units
were acquired) among each of the Trust assets (as of the date
on which his Units were acquired) ratably according to their
values as of the valuation date nearest the date on which he
purchased such Units. A Unitholder's basis in his Units and of
his fractional interest in each Trust asset must be reduced,
but not below zero, by the Unitholder's pro rata portion of
dividends with respect to each Equity Security which is not
taxable as ordinary income.
To the extent dividends received by the Trust are attributable to
foreign corporations, a corporation that owns Units will not be entitled
to the dividends received deduction with respect to its pro rata portion
of such dividends since the dividends received deduction is generally
available only with respect to dividends paid by domestic corporations.
Section 67 of the Code provides that certain itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by individuals only to the extent
they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of a Trust as
miscellaneous itemized deductions subject to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part
of the pro rata interest in an Equity Security is either sold by the
Trust or redeemed or when a Unitholder disposes of his Units in a taxable
transaction, in each case for an amount greater (or less) than his tax
basis therefor.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject
to foreign withholding taxes and Unitholders should consult their tax
advisers regarding the potential tax consequences relating to the payment
of any such withholding taxes by the Trust. Any dividends withheld as a
result thereof will nevertheless be treated as income to the Unitholders.
Because under the grantor trust rules, an investor is deemed to have paid
directly his share of foreign taxes that have been paid or accrued, if
any, an investor may be entitled to a foreign tax credit or deduction for
United States tax purposes with respect to such taxes. Investors should
consult their tax advisers with respect to foreign withholding taxes and
foreign tax credits.
Any gain recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set
forth herein, and, except as expressly set forth above, we express no
opinion with respect to any other taxes, including foreign, state or
local taxes or collateral tax consequences with respect to the purchase,
ownership and disposition of Units.
Very truly yours
Chapman and Cutler
MJK/slm
Exhibit 3.3
Kroll & Tract LLP
520 Madison Avenue
New York, New York 10022-4235
June 24, 1997
Van Kampen American Capital Equity
Opportunity Trust, Series 63
China Consumer Opportunity Trust, Series 1
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 63 (the "Fund") consisting of China
Consumer Opportunity Trust, Series 1 (the "Trust") for purposes of
determining the applicability of certain New York taxes under the
circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the
"Indenture"), dated as of today (the "Date of Deposit") among Van Kampen
American Capital Distributors, Inc. (the "Depositor"), American Portfolio
Evaluation Services, a division of an affiliate of Depositor, as
Evaluator, Global Assets Advisors, Inc., as Supervisor and The Bank of
New York, as Trustee (the "Trustee"). As described in the prospectus
relating to the Fund dated today to be filed as an amendment to a
registration statement heretofore filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (respectively the
"Prospectus" and the "Registration Statement") (File number 333-27491),
the objectives of the Fund are to provide the potential for capital
appreciation from a portfolio of equity securities of companies that the
Managing Underwriter believes have substantial present or future
potential opportunities in the China region consumer products and
services sector. It is noted that no opinion is expressed herein with
regard to the Federal tax aspects of the securities, the Trust, units of
the Trust (the "Units"), or any income, gains or losses in respect
thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to the Trust the securities and/or contracts and cash for
the purchase thereof together with an irrevocable letter of credit in the
amount required for the purchase price of the securities comprising the
corpus of the Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities
to be deposited in the Trust, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of the Trust as more fully set forth in
the Prospectus. The Units, which are represented by certificates
("Certificates"), will be offered to the public upon the effectiveness of
the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash
dividends received by the Fund and with the proceeds from the disposition
of securities held in the Fund and the distribution of such cash
dividends and proceeds to the Unit holders. The Trustee will also
maintain records of the registered holders of Certificates representing
an interest in the Fund and administer the redemption of Units by such
Certificate holders and may perform certain administrative functions with
respect to an automatic reinvestment option.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations.
Prior to the termination of the Fund, the Trustee is empowered to
sell equity securities designated by the Supervisory Servicer only for
the purpose of redeeming Units tendered to it and of paying expenses for
which funds are not available. The Trustee does not have the power to
vary the investment of any Unitholder in the Fund, and under no
circumstances may the proceeds of sale of any equity securities held by
the Fund be used to purchase new equity securities to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(l)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in
which interest or ownership is evidenced by
certificate or other written instrument includes, but
is not limited to, an association commonly referred
to as a "business trust" or "Massachusetts trust".
In determining whether a trustee or trustees are
conducting a business, the form of the agreement is
of significance but is not controlling. The actual
activities of the trustee or trustees, not their
purposes and powers, will be regarded as decisive
factors in determining whether a trust is subject to
tax under Article 9-A. The mere investment of funds
and the collection of income therefrom, with
incidental replacement of securities and reinvestment
of funds, does not constitute the conduct of a
business in the case of a business conducted by a
trustee or trustees. 20 NYCRR 1-2.5(b)(2) (July 11,
1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1083, 85 N.Y.S.2d 705 (3rd
Dept. 1949).
In an Opinion of the Attorney General of the State of New York,
47 N.Y. Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the
trustee of an unincorporated investment trust was without authority to
reinvest amounts received upon the sales of securities and could dispose
of securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to, and we
assume will not, sell securities contained in the corpus of the Fund and
reinvest the proceeds therefrom. Further, the power to sell such
securities is limited to circumstances in which the credit-worthiness or
soundness of the issuer of such equity security is in question or in
which cash is needed to pay redeeming Unitholders or to pay expenses, or
where the Fund is liquidated subsequent to the termination of the
Indenture. In substance, the Trustee will merely collect and distribute
income and will not reinvest any income or proceeds, and the Trustee has
no power to vary the investment of any Unitholder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance, June 23,
1978.
By letter dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unitholder will be considered
as owning a share of each asset of the Trust in the proportion that the
number of Units held by such holder bears to the total number of Units
outstanding and the income of a Trust will be treated as the income of
each Unitholder in said proportion pursuant to Subpart E of Part I,
Subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York:
1. The Trust will not constitute an association taxable as a
corporation under New York law and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax;
2. The income of the Trust will be treated as the income of the
Unitholders under the income tax laws of the State and City of New York;
and
3. Unitholders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business, trade, profession or occupation
carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
Kroll & Tract LLP
MNS:hbm
Exhibit 4.1
Interactive Data
14 Wall Street
New York, NY 10005
June 23, 1997
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital
International Assets Advisory Corp. China Consumer Opportunity
Trust, Series 1
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 333-27491
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation, as
the Evaluator, and to the use of the Obligations prepared by us which are
referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Independent Certified Public Accountants' Consent
We have issued our report dated June 24, 1997 on the statement of
condition and related securities portfolio of Van Kampen American Capital
Equity Opportunity Trust, Series 63 as of June 24, 1997 contained in the
Registration Statement on Form S-6 and Prospectus. We consent to the use
of our report in the Registration Statement and Prospectus and to the use
of our name as it appears under the caption "Other Matters-Independent
Certified Public Accountants" in the Prospectus.
Grant Thornton LLP
Chicago, Illinois
June 24, 1997
<TABLE> <S> <C>
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<LEGEND>
This report reflects current period taken from 487 on June 24, 1997 it is
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</LEGEND>
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