May 11, 1998
VAN KAMPEN AMERICAN CAPITAL
STRATEGIC PICKS OPPORTUNITY TRUST, MAY 1998 SERIES
EAFE STRATEGIC 20 TRUST, MAY 1998 SERIES
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THE FUND. Van Kampen American Capital Equity Opportunity Trust, Series 94
(the "Fund") is comprised of several underlying separate unit investment trusts
including those set forth above (the "Trusts"). The Trusts offer investors the
opportunity to purchase Units representing proportionate interests in a fixed,
diversified portfolio of actively traded equity securities, including common
stocks of foreign issuers. The Strategic Picks Trust consists of ten common
stocks selected from a pre-screened subset (the "Strategic Picks Subset") of the
Morgan Stanley Capital International USA Index (the "MSCI USA Index") with the
highest dividend yields as of the close of business three business days prior to
the Initial Date of Deposit. The EAFE Strategic 20 Trust consists of twenty
common stocks selected from a pre-screened subset (the "EAFE Subset") of the
Morgan Stanley Capital International Europe, Australasia and Far East Index (the
"MSCI EAFESM Index") with the highest dividend yields as of the close of
business three business days prior to the Initial Date of Deposit. The MSCI USA
Index and MSCI EAFESM Index are the property of Morgan Stanley & Co. Morgan
Stanley has granted a license for use by the Trusts of the MSCI USA Index and
the MSCI EAFESM Index and related trademarks and tradenames. The publisher of
these indexes has not participated in any way in the creation of the Trusts or
in the selection of stocks included in the Trusts and have not approved any
information herein relating thereto.
ATTENTION FOREIGN INVESTORS. If you are not a United States citizen or
resident, that portion of distributions treated as United States source income
will generally be subject to U.S. federal withholding taxes; however, under
certain circumstances treaties between the United States and other countries may
reduce or eliminate such withholding tax. However, that portion of distributions
not treated as United States source income will generally not be subject to U.S.
federal withholding tax. See "Taxation." Such investors should consult their tax
advisers regarding the imposition of U.S. withholding on distributions.
OBJECTIVE OF THE FUND. The objective of each Trust is to provide an above
average total return through a combination of potential capital appreciation and
dividend income, consistent with the preservation of invested capital, by
investing in a portfolio of actively traded equity securities selected using a
refined indexing strategy. See "Objectives and Securities Selection." Each Trust
seeks to achieve better performance than the related index for such Trust. There
is, of course, no guarantee that the objectives of the Trusts will be achieved.
AN INVESTMENT IN UNITS WILL BE AUTOMATICALLY REDEEMED ON THE FIRST SPECIAL
REDEMPTION DATE (APPROXIMATELY THIRTEEN MONTHS FROM THE INITIAL DATE OF DEPOSIT)
UNLESS THE UNITHOLDER ELECTS IN WRITING TO HOLD UNITS THROUGH TRUST TERMINATION.
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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PUBLIC OFFERING PRICE.The Public Offering Price of the Units of a Trust
during the initial offering period and for secondary market transactions after
the initial offering period includes the aggregate underlying value of the
Securities in such Trust's portfolio, an initial sales charge, and cash, if any,
in the Income and Capital Accounts held or owned by such Trust. The initial
sales charge is computed as described under "Public Offering--General".
Unitholders will also be subject to deferred sales charges as described under
Offering--General". In the case of the EAFE Strategic 20 Trust, the Public
Offering Price per Unit is based on the aggregate value of the Securities
computed on the basis of the offering side value of the relevant currency
exchange rate expressed in U.S. dollars during the initial offering period and
on the bid side value for secondary market transactions. During the initial
offering period, the sales charge is reduced on a graduated scale for sales
involving at least 5,000 Units of a Trust. If Units were available for purchase
at the time stated in the "Summary of Essential Financial Information", the
Public Offering Price per Unit for each Trust would have been that amount set
forth under "Summary of Essential Financial Information". Except as provided in
"Public Offering--Unit Distribution", the minimum purchase is 100 Units (25
Units for qualified retirement plans) but may vary by selling firm. See "Public
Offering".
ADDITIONAL DEPOSITS. The Sponsor may, from time to time after the Initial
Date of Deposit, deposit additional Securities in the Trusts as provided under
"The Fund".
DIVIDEND AND CAPITAL DISTRIBUTIONS. Distributions of dividends and capital,
if any, received by a Trust will be reinvested into additional Units, if then
available, on the applicable Distribution Date to Unitholders of record of such
Trust on the record date as set forth in the "Summary of Essential Financial
Information". Unitholders may also elect to receive cash distributions as
provided under "Rights of Unitholders--Reinvestment Option." The estimated
initial distribution for each Trust will be that amount set forth under "Summary
of Essential Financial Information--Estimated Initial Distribution" and will be
made on November 25, 1998 to Unitholders of record on November 10, 1998. Gross
dividends received by a Trust will be distributed to Unitholders. Expenses of a
Trust will be paid with proceeds from the sale of Securities. For the
consequences of such sales, see "Taxation" and "Risk Factors." Additionally,
upon surrender of Units for redemption or termination of a Trust, the Trustee
will distribute to each Unitholder his pro rata share of such 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, the Sponsor
currently intends to maintain a market for Units of the Trusts and offer to
repurchase such Units at prices which are based on the aggregate underlying
value of Equity Securities in the applicable Trust (generally determined by the
closing sale prices of the Securities) plus or minus cash, if any, in the
Capital and Income Accounts of such 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 applicable Trust plus or minus
a pro rata share of cash, if any, in the Capital and Income Accounts of such
Trust. See "Rights of Unitholders--Redemption of Units". Units sold or tendered
for redemption prior to such time as the entire deferred sales charge on such
Units has been collected will be assessed the amount of the remaining deferred
sales charge at the time of sale or redemption.
A Unitholder tendering 1,000 or more Units of a Trust for redemption may
request a distribution of shares of U.S.-traded Securities (reduced by customary
transfer and registration charges) plus cash representing any foreign
Securities. See "Rights of Unitholders--Redemption of Units".
TERMINATION. An investment in Units of a Trust will terminate approximately
thirteen months from the Initial Date of Deposit unless a Unitholder elects in
writing to remain invested in the Trust through the Mandatory Termination Date.
At this time, Unitholders will be given the option to (i) have their Units
redeemed and reinvest the proceeds into a subsequent Series of the Trust, (ii)
receive an in-kind distribution of any U.S.-traded Securities in such Trust (if
applicable) or (iii) continue to hold the Units through the termination of the
Trust approximately two years following the Initial Date of Deposit. If a
Unitholder makes no election at the first Special Redemption Date, the
Unitholder's Units will be redeemed on such date and the Unitholder will receive
cash representing their pro rata portion of the Trust's assets. At least 30 days
prior to the Mandatory Termination Date the Trustee will provide written notice
thereof to all Unitholders and will include with such notice a form to enable
Unitholders to elect a distribution of shares of any U.S.-traded Securities in a
Trust (if applicable), rather than to receive payment in cash for such
Unitholder's pro rata share of the amounts realized upon the disposition of such
U.S.-traded Securities. Unitholders will receive cash representing any foreign
Securities and fractional shares. Unitholders of each of the Trusts may elect to
become Rollover Unitholders as described in "Special Redemption and Rollover in
New Fund" below. Rollover Unitholders will not receive the final liquidation
distribution but will receive units of a new Series of the Fund, if one is being
offered. Unitholders not electing the Rollover Option or a distribution of
shares of Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trusts are terminated.
See "Fund Administration--Amendment or Termination".
REINVESTMENT OPTION. Unitholders of any Van Kampen American Capital-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase units of any other Van Kampen American Capital trust in the initial
offering period accepting rollover investments subject to a reduced sales charge
to the extent stated in the related prospectus (which may be deferred in certain
cases).
Unitholders will initially have their distributions reinvested into
additional Units of the applicable Trust subject only to the remaining deferred
sales charge payments, if Units are available at the time of reinvestment, or,
upon request, either reinvested into an open-end management investment company
as described herein or distributed in cash. See "Rights of
Unitholders--Reinvestment Option".
SPECIAL REDEMPTION AND ROLLOVER IN NEW FUND. The Sponsor currently
anticipates that a new series of the Fund will be created each month.
Unitholders will have the option of specifying by either Rollover Notification
Date stated in "Summary of Essential Financial Information" to have all of their
Units redeemed and the distributed Securities sold by the Trustee, in its
capacity as Distribution Agent, on the related Special Redemption Date.
(Unitholders so electing are referred to herein as "Rollover Unitholders".) The
Distribution Agent will appoint the Sponsor as its agent to determine the
manner, timing and execution of sales of underlying Securities. The proceeds of
the redemption will then be invested in Units of the current Series of the Fund
(the "New Fund"), if one is offered, at a reduced sales charge. The Sponsor may,
however, stop offering units of the New Fund at any time in its sole discretion
without regard to whether all the proceeds to be invested have been invested.
Cash which has not been invested on behalf of the Rollover Unitholders in the
New Fund will be distributed shortly after the related Special Redemption Date.
However, the Sponsor anticipates that sufficient Units will be available,
although moneys in this Fund may not be fully invested on the next business day.
The trusts included in the New Fund are expected to contain portfolios selected
in accordance with the indexing strategies of the Trusts in the current Series
of the Fund. Rollover Unitholders will receive the amount of dividends in the
applicable Income Account of each Trust which will be included in the
reinvestment in units of the New Fund.
RISK FACTORS. An investment in the Fund 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 and exchange control restrictions impacting
foreign issuers. In addition, certain foreign securities may not be as liquid as
securities traded in the United States. If a Trust includes such foreign
securities, purchases of such securities by the Trust could have an upward
impact on the price of such securities during the initial offering period and
sales of such securities by the Trust could have a downward impact on the price
of such securities at the time of Trust termination or a rollover into a new
trust. Either or both of any such upward or downward price movements could have
a negative impact on a Unitholder's investment return related to the Units. For
certain risk considerations related to the Trusts, see "Risk Factors".
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 94
SUMMARY OF ESSENTIAL
FINANCIAL INFORMATION AT THE
CLOSE OF THE RELEVANT STOCK
MARKET ON MAY 8, 1998
SPONSOR: VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
SUPERVISOR: VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
(AN AFFILIATE OF THE SPONSOR)
EVALUATOR: AMERICAN PORTFOLIO EVALUATION SERVICES
(A DIVISION OF AN AFFILIATE OF THE SPONSOR)
TRUSTEE: THE BANK OF NEW YORK
STRATEGIC EAFE
PICKS STRATEGIC
GENERAL INFORMATION TRUST 20 TRUST
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<S> <C> <C>
Number of Units (1) 15,013 24,945
Fractional Undivided Interest in the Trust per Unit (1) 1/15,013 1/24,945
Public Offering Price:
Aggregate Value of Securities in Portfolio (2) $ 148,624 $ 246,951
Aggregate Value of Securities per Unit $ 9.900 $ 9.900
Sales Charge (3) $ .275 $ .295
Less Deferred Sales Charge per Unit $ .175 $ .195
Public Offering Price per Unit (3)(4) $ 10.000 $ 10.000
Redemption Price per Unit (5) $ 9.725 $ 9.680
Initial Secondary Market Repurchase Price per Unit (5) $ 9.725 $ 9.705
Excess of Public Offering Price per Unit over Redemption Price per Unit $ .275 $ .320
Estimated Initial Distribution per Unit $ .08515 $ .28584
Estimated Annual Dividends per Unit (6) $ .19311 $ .46130
Estimated Annual Organizational Expenses per Unit (7) $ .01835 $ .00724
Trustee's Annual Fee and Miscellaneous Expense per Unit $ .01130 $ .01066
Supervisor's Annual Supervisory Fee Maximum of $.0025 per Unit
Evaluator's Annual Evaluation Fee Maximum of $.0025 per Unit
Rollover Notification Dates May 17, 1999 and April 10, 2000
Special Redemption Dates June 15, 1999 and May 9, 2000
Mandatory Termination Date May 9, 2000
Minimum Termination Value Each Trust may be terminated if
the net asset value of such
Trust is less than
$500,000 unless the net
asset value of such Trust's
deposits has exceeded
$15,000,000, then the Trust
Agreement may be terminated
if the net asset value of
the Trust is less than
$3,000,000.
Income and Capital Account Record Dates November 10 and July 10
Income and Capital Account Distribution Dates November 25 and July 25
Evaluation Time Close of the New York Stock Exchange
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(1)As of the close of business on any day on which the Sponsor is the sole
Unitholder of a Trust, the number of Units of such Trust 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.
(2)Each Equity Security is valued at the closing sale price. The aggregate value
of Securities in the EAFE Strategic 20 Trust represents the U.S. dollar value
based on the offering side value of the currency exchange rates for the
related currency, at the Evaluation Time on the date of this "Summary of
Essential Financial Information".
(3)The Sales Charge consists of an initial sales charge and a deferred sales
charge. This initial sales charge represents an amount equal to the
difference between the first year sales charge for a Trust (2.75% of the
Public Offering Price (2.95% for the EAFE Strategic 20 Trust)) and the amount
of the deferred sales charge imposed prior to the first Special Redemption
Date ($0.175 per Unit ($0.195 per Unit for the EAFE Strategic 20 Trust)).
Unitholders will be subject to a deferred sales charge during the first year
of the Trusts equal to $0.175 per Unit ($0.195 per Unit for the EAFE
Strategic 20 Trust). Unitholders who elect to hold Units after the first
Special Redemption Date will be charged an additional $0.15 per Unit deferred
sales charge after such date ($0.17 per Unit for the EAFE Strategic 20
Trust). This additional deferred sales charge will not be imposed on
Unitholders who do not elect to hold Units after such date. 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. Units
purchased subsequent to the initial deferred sales charge payment, if any,
will be subject only to that portion of the deferred sales charge payments
not yet collected. All deferred sales charge payments will be paid from funds
in the Capital Account, if sufficient, or from the periodic sale of
Securities. See the "Fee Table" below and "Public Offering--General".
(4)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. In the
case of the EAFE Strategic 20 Trust, the Public Offering Price per Unit is
based on the aggregate value of the Securities computed on the basis of the
offering side value of the relevant currency exchange rate expressed in U.S.
dollars.
(5)The Redemption Price per Unit and the Initial Secondary Market Repurchase
Price per Unit are reduced by the unpaid portion of any deferred sales charge
imposed prior to the first Special Redemption Date. In the case of the EAFE
Strategic 20 Trust, the Redemption Price per Unit is based on the aggregate
value of the Securities computed on the basis of the bid side value of the
relevant currency exchange rate expressed in U.S. dollars.
(6)Estimated annual dividends are based on the most recently declared dividends
or, in the case of foreign Securities, on the most recent interim and final
dividends declared taking into consideration any foreign withholding taxes.
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.
(7)Each Trust (and therefore Unitholders of the respective Trust) will bear all
or a portion of its organizational costs (including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio and the initial fees and expenses of the
Trustee but not including the expenses incurred in the preparation and
printing of brochures and other advertising materials and any other selling
expenses) as is common for mutual funds. Total organizational expenses will
be amortized over one year. See "Fund Operating Expenses" and "Statements of
Condition".
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FEE TABLE
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This Fee Table is intended to assist investors in understanding the costs and
expenses that an investor in a Trust will bear directly or indirectly. See
"Public Offering--General" and "Fund Operating Expenses". Although each Trust
has a fixed term, and is a unit investment trust rather than a mutual fund, this
information is presented to permit a comparison of fees. The fee tables below
assume that the principal amount of and distributions on an investment are
redeemed at the first Special Redemption Date. The examples below assume that
the principal amount of and distributions on an investment are rolled over each
year into a new Series subject only to the anticipated reduced sales charge
applicable to Rollover Unitholders. See "Right of Unitholders--Special
Redemption and Rollover in New Fund." Investors should note that while these
examples are based on the public offering price and the estimated fees for the
current Trust series, the actual public offering price and fees for any new
Series created in the future periods indicated could vary from those of the
current Trust series.
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<TABLE>
<CAPTION>
STRATEGIC EAFE
PICKS STRATEGIC 20
TRUST TRUST
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UNITHOLDER TRANSACTION EXPENSES (AS A PERCENTAGE OF OFFERING PRICE)
<S> <C> <C>
Initial Sales Charge Imposed on Purchase (1) 1.00% 1.00%
Deferred Sales Charge (2)(3) 1.75% 1.95%
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Sales Charge (3) 2.75% 2.95%
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Maximum Sales Charge Imposed on Reinvested Dividends (3)(4) 1.75% 1.95%
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ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AGGREGATE VALUE)
Trustee's Fee and Other Operating Expenses 0.114% 0.108%
Portfolio Supervision and Evaluation Fees 0.051% 0.051%
Organizational Costs 0.185% 0,073%
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Total 0.350% 0.232%
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<CAPTION>
EXAMPLE
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.
STRATEGIC EAFE
PICKS STRATEGIC 20
TRUST TRUST
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1 Year $ 31 $ 30
3 Years $ 74 $ 71
5 Years N/A N/A
10 Years N/A N/A
The examples assume reinvestment of all dividends and distributions at the
end of each year and utilize a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations applicable to mutual funds. For
purposes of the examples, any 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 examples should not be
considered representations 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 examples.
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(1)The Initial Sales Charge is actually the difference between the Sales Charge
(2.75% of the Public Offering Price (2.95% for the EAFE Strategic 20 Trust))
and the dollar amount of the Deferred Sales Charge. The Initial Sales Charge
will exceed 1.00%, if the Public Offering Price exceeds $10 per Unit.
(2)The deferred sales charge imposed during the Trust's first year is $0.0175
per Unit per month ($0.0195 for the EAFE Strategic 20 Trust), irrespective of
purchase or redemption price, deducted during the first year of the Trust. 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 the
percentage above; if Unit price is less than $10 per Unit, the deferred
portion of the sales charge will exceed the percentage above. 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.
Unitholders who do not elect to hold Units subsequent to the first Special
Redemption Date will be subject only to this deferred sales charge during the
first year of the Trust.
(3)In addition to the Deferred Sales Charge set forth above, Unitholders who
elect to hold Units subsequent to the first Special Redemption Date will be
subject to a deferred sales charge of $0.15 per Unit ($0.17 per Unit for the
EAFE Strategic 20 Trust) which will be imposed after such date as described
under "Public Offering--General". This would increase the total maximum sales
charge for such Unitholders to 4.25% of the Public Offering Price imposed
over a two year period (4.65% for the EAFE Strategic 20 Trust).
(4)Reinvested dividends will be subject only to the deferred sales charge, if
any, remaining at the time of reinvestment. See "Rights of
Unitholders--Reinvestment Option".
</TABLE>
THE FUND
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Van Kampen American Capital Equity Opportunity Trust, Series 94 is comprised
of the following separate underlying unit investment trusts: Strategic Ten Trust
United States Portfolio, May 1998 Series, Strategic Ten Trust United States
Portfolio, May 1998 Traditional Series, Strategic Ten Trust United Kingdom
Portfolio, May 1998 Series, Strategic Ten Trust Hong Kong Portfolio, May 1998
Series, Strategic Five Trust United States Portfolio, May 1998 Series, Strategic
Five Trust United States Portfolio, May 1998 Traditional Series, Strategic
Thirty Trust Global Portfolio, May 1998 Series, Strategic Fifteen Trust Global
Portfolio, May 1998 Series, Strategic Picks Opportunity Trust, May 1998 Series
(the "Strategic Picks Trust") and EAFE Strategic 20 Trust, May 1998 Series
("EAFE Strategic 20 Trust"). This prospectus applies only to the Strategic Picks
Trust and the EAFE Strategic 20 Trust and does not constitute an offer to sell,
or a solicitation of an offer to buy, securities of any trust other than the
Strategic Picks Trust and the EAFE Strategic 20 Trust. The other unit investment
trusts included in the Fund are offered by a separate prospectus which also
includes information relating to the Strategic Picks Trust and the EAFE
Strategic 20 Trust.
The Fund 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, Van Kampen American Capital Investment
Advisory Corp., 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 Evaluators.
The Fund offers investors the opportunity to purchase Units representing
proportionate interests in portfolios of actively traded equity securities which
are components of the MSCI USA Index or the MSCI EAFESM Index. The Strategic
Picks Trust consists of ten common stocks selected from a pre-screened subset of
the MSCI USA Index with the highest dividend yields as of the close of business
three business days prior to the Initial Date of Deposit. The EAFE Strategic 20
Trust consists of twenty common stocks selected from a prescreened subset of the
MSCI EAFESM Index with the highest dividend yields as of the close of business
three business days prior to the Initial Date of Deposit.
These yields are historical and there is no assurance that any dividends will
be declared or paid in the future on the Securities in the Trusts. See "Risk
Factors". As used herein the terms "Equity Securities" and "Securities" mean the
securities (including contracts to purchase such securities) listed in
"Portfolio" for each Trust and any additional securities deposited into each
Trust as provided herein. The publishers of the indexes described herein have
not participated in any way in the creation of the Fund or in selection of the
stocks included in the Trusts and have not approved any information herein
relating thereto. The Fund may be an appropriate medium for investors who desire
to participate in portfolios of common stocks with greater diversification than
they might be able to acquire individually and who are seeking to achieve a
better performance than the related indexes. Unless terminated earlier, the
Trusts will terminate on 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. Upon either Rollover Notification Date,
Unitholders may choose to reinvest their proceeds into a subsequent Series of
the Trusts, if available, at a reduced sales charge, to receive a pro rata
distribution of the U.S.-traded Securities then included in such Trust (if they
own the requisite minimum number of Units) or to receive a cash distribution. At
the first Rollover Notification Date, Unitholders may also elect to continue
their investment in Units through the Mandatory Termination Date (approximately
two years following the Initial Date of Deposit). Unitholders who make no
election at the first Rollover Notification Date will have their Units redeemed
and will receive a cash distribution of the proceeds.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolios" 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 Trusts indicated in
"Summary of Essential Financial Information". Unless otherwise terminated as
provided in the Trust Agreement, the Trusts will terminate on the Mandatory
Termination Date and any Securities then held will within a reasonable time
thereafter be liquidated or distributed by the Trustee.
Additional Units of a Trust may be issued at any time by depositing in such
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 a Trust, the aggregate value of the Securities in such Trust will
be increased and the fractional undivided interest in such Trust represented by
each Unit will be decreased. The Sponsor may continue to make additional
deposits of Securities or cash with instructions to purchase additional
Securities into a 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 such Trust's portfolio that existed immediately prior to any
such subsequent deposit. Any deposit by the Sponsor 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 a 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 or acquisition fees.
Each Unit of a Trust initially offered represents an undivided interest in
such Trust. To the extent that any Units are redeemed by the Trustee or
additional Units are issued as a result of additional Securities being deposited
by the Sponsor, the fractional undivided interest in a Trust represented by each
unredeemed Unit will increase or decrease accordingly, although the actual
interest in such Trust represented by such fraction will remain unchanged. Units
will remain outstanding until redeemed upon tender to the Trustee by
Unitholders, which may include the Sponsor, or until the termination of the
Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
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The objective of the Strategic Picks Trust is to provide an above average
total return through a combination of potential capital appreciation and
dividend income, consistent with the preservation of invested capital, by
investing in a portfolio of ten actively traded equity securities having the
highest dividend yield in the Strategic Picks Subset as of the close of business
three business days prior to the Initial Date of Deposit. The objective of the
EAFE Strategic 20 Trust is to provide an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital, by investing in a portfolio of twenty
actively traded equity securities having the highest dividend yield in the EAFE
Subset as of the close of business three business days prior to the Initial Date
of Deposit.
In seeking the Trusts' objectives, the Sponsor also considered the ability of
the Equity Securities to outpace inflation. While inflation is currently
relatively low, the United States has historically experienced periods of
double-digit inflation. While the prices of equity securities will fluctuate,
over time equity securities have outperformed the rate of inflation, and other
less risky investments, such as government bonds and U.S. Treasury bills.
Past performance is, however, no guarantee of future results.
The companies represented in the Trusts are some of the most well-known and
highly capitalized companies in the world. The Trusts seek to achieve better
performances than the related indexes through similar investment strategies.
Investment in a number of companies having high dividends relative to their
stock prices (usually because their stock prices are undervalued) is designed to
increase each Trust's potential for higher returns. There is, of course, no
assurance that a Trust (which includes expenses and sales charges) will achieve
its objective. The investment strategies utilized by the Trusts are designed to
be implemented on an annual basis. Investors who hold Units through Trust
termination may have investment results that differ significantly from a Unit
investment that is reinvested into a new trust each year. Investors should note
that a change in the federal taxation of capital gains was recently enacted that
reduces the maximum stated marginal tax rate for certain capital gains for
investments held for more than 18 months to 20% (10% in the case of certain
taxpayers in the lowest federal tax bracket). Unitholders who elect to continue
their investment through Trust termination would qualify for such treatment.
Unitholders who make no election at the first Special Redemption Date and
Unitholders who elect to reinvest into a new series of the Fund at the first
Special Redemption Date will not qualify for such treatment but would be subject
to a maximum stated marginal federal capital gains tax rate of 28%. See
"Taxation".
The EAFE Strategic 20 Trust may be suitable for investors who seek to
diversify their equity holdings with investments in foreign equity securities.
Today's international market offers many opportunities. While the U.S. stock
market has generally performed well in the past, international markets may
provide significant opportunities as well. The U.S. stock market has been one of
the top three performers in terms of total return among developed country
markets only once between 1993-1997 and was never the top performer in these
years. Global diversification may offer the potential to enhance overall
portfolio performance. In addition, investors may be able to achieve a better
risk/return potential by allocating an investment among a domestic investment
and an international investment. For example, rather than investing exclusively
in the Strategic Picks Trust strategy, the Standard & Poor's 500 Index stocks or
in the EAFE Strategic 20 Trust strategy, an investor may be able to achieve a
better combination of potential return and potential risk by investing 70% in
the Strategic Picks Trust strategy or Standard & Poor's 500 Index stocks and 30%
in the EAFE Strategic 20 Trust strategy. International markets can experience
different performances and while some markets may be experiencing rapid growth,
others may be in temporary decline. These market movements may offer attractive
growth potential and possible portfolio diversification for investors seeking to
add to their existing equity portfolio. The EAFE Strategic 20 Trust seeks to
combine the growth potential of undervalued stocks with the strength of stocks
listed on a foreign stock market index. Typically, companies listed on a major
market index are widely recognized, firmly established and financially strong.
Therefore, when undervalued, these stocks may provide investors with significant
growth opportunities.
Corporate restructuring, acquisitions and the use of technology may enhance
the ability of foreign companies to increase their potential profitability.
Progress of the European Monetary Union efforts to create a unified currency
could potentially add to European growth rates. In addition, if the U.S. dollar
does not remain as strong as in the recent past, foreign stocks may benefit and
foreign stocks may be relatively attractive from a valuation standpoint compared
to U.S. stock prices. Of course, an investment in foreign securities involves
risks, certain of which differ from an investment in U.S. stocks. See "Risk
Factors". In particular, the Sponsor believes that the EAFE Strategic 20 Trust
may offer investors an attractive opportunity to diversify their portfolio with
an international component. First, markets have tended to be cyclical in
performance and at certain times U.S. stocks have outperformed foreign stocks
while foreign stocks have outperformed U.S. stocks over other periods. Second,
the U.S. stock market has been among the top five markets in terms of total
returns from 1988 through 1997 only four times and was never the top performing
market in these years (as measured by the MSCI USA Index and other MSCI country
indexes in developed market countries). Third, while diversification of
investments cannot eliminate the risk of loss, an investor may be able to reduce
overall portfolio risk by diversifying into international investments since
approximately 60% of the world's market capitalization exists outside the U.S.
Finally, over the last 10 years the stocks in Standard & Poor's 500 Index have
collectively shown a total return that is greater than the 25-year average total
return 6 times while the stocks in the MSCI EAFESM Index have collectively
outperformed the 25-year average total return only twice in the last 10 years.
Although it is impossible to predict the future of stocks markets, the MSCI
EAFESM Index stocks at some time are likely to return to the average in the
future.
Investors will be subject to taxation on the dividend income received by the
Trusts and on gains from the sale or liquidation of Securities. The tax
consequences affecting Unitholders will vary in each of the respective Trusts
(see "Taxation"). Investors should be aware that there is not any guarantee that
the objective of the Trusts 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 in which the foreign Securities are denominated relative to
the U.S. dollar will adversely affect the value of the EAFE Strategic 20 Trust's
assets and income and the value of the Units of that Trust. See "Risk Factors".
Investors should note that the above criteria were applied to the Securities
for inclusion in the Trusts as of three business days prior to the Initial Date
of Deposit. Subsequent to this date, the Securities may no longer be included in
the related index, may not be providing one of the highest dividend yields
within these indexes or may not have one of the lowest per share prices within
the relevant index. Should a Security no longer be included in these indexes or
meet the criteria used for selection for a Trust, such Security will not as a
result thereof be removed from a Trust portfolio.
Investors should be aware that the Fund 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
"Fund Administration--Portfolio Administration"). In addition, Securities will
not be sold by a Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Investors should note in particular that the
Securities were selected by the Sponsor three business days prior to the date
the Securities were purchased by the Trusts. The Trusts may continue to hold
Securities originally selected through this process 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
Trusts.
TRUST PORTFOLIOS
- --------------------------------------------------------------------------------
The Strategic Picks Trust consists of ten common stocks selected from a
pre-screened subset of the MSCI USA Index with the highest dividend yields as of
the close of business three business days prior to the Initial Date of Deposit.
The EAFE Strategic 20 Trust consists of twenty common stocks selected from a
prescreened subset of the MSCI EAFESM Index with the highest dividend yields as
of the close of business three business days prior to the Initial Date of
Deposit. Each of the related stock indexes is described below.
In the case of the securities traded on the New York Stock Exchange, the
yield for each Equity Security was calculated by annualizing the last dividend
declared and dividing the result by the market value of the Equity Security as
of the close of business three business days prior to the Initial Date of
Deposit. In the case of securities traded on a foreign securities exchange, the
yield for each Equity Security was calculated by adding together the most recent
interim and final dividends declared (foreign companies generally pay one
interim and one final dividend per fiscal year) and dividing the result by the
market value of the Equity Security as of the close of business three business
days prior to the Initial Date of Deposit. An investment in each Trust involves
the purchase of a quality portfolio of attractive equities with high dividend
yields in one convenient purchase.
THE MSCI USA INDEX AND MSCI EAFESM INDEX. While the MSCI index methodology
has evolved to capture the growth of the investment universe, the index
philosophy has never been compromised to simplify the complicated process of
investing: MSCI indices are based on detailed analysis to make it easier for the
investor to measure international performance. Constituents are selected for a
country index through the following process: (1) Define the "Market"; (2)
Capture 60% of the market capitalization of the country across all industry
groups; (3) Select the most liquid securities within each industry; (4) Select
stocks with sufficient free float; (5) Avoid cross-ownership; and (6) Apply full
market capitalization weights.
In the case of the MSCI USA Index investment strategy, these criteria are
applied within the United States market and in the case of the MSCI EAFESM
Index, these criteria are applied within the European, Australian and Asian
markets. The MSCI USA Index consists of approximately 370 large domestic
companies in the United States and has existed since January 1, 1970. The MSCI
EAFESM Index is considered to be the premier equity benchmark for global
investing and represents more than 1,000 stocks in 38 industries across 21
developed countries. These countries include Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland and the United Kingdom.
The initial research for the MSCI Indices covers the full breadth of the
global equity securities market. Country specialists track the evolution of both
listed and unlisted shares of domestically listed companies in nearly every
country in the world. Based in Geneva, these country teams collect share,
pricing, ownership, float and liquidity data for effectively all companies
worldwide. Sources for this information are local stock exchanges and brokerage
firms, newspapers, and company contacts. From this master matrix, the total
country market capitalization is adjusted for double-counting and non-domiciled
companies. All of the companies within this research coverage are eligible for
inclusion in the MSCI indices except non-domiciled companies, investment trusts
and mutual funds.
Once the total country market capitalization is analyzed, 60% of the
capitalization of each industry group and thus 60% of the entire market is
targeted for each MSCI index. This ensures that the index reflects the industry
characteristics of the overall market, and permits the construction of accurate
regional and global industry indices. Research coverage in MSCI products and
publications extends beyond the index coverage (60%) to capture 80% of the
market for each country. This coverage includes daily performance as well as
monthly valuation ratios and summarized financial statement data. When selecting
the constituents of an index, the most effective industry classification is
used--either the local convention or the MSCI schema of 38 industry groups--in
order to mirror the industry characteristics of the local market. Once the
selection process is complete, the index constituents are re-classified into the
MSCI schema of 38 industries and 8 economic sectors in order to facilitate
cross-country comparisons. The MSCI classification schema has been adopted by
Reuters for their industry classification. Securities are selected to represent
an industry based on size and the portion of earnings and revenues attributable
to that industry group. Even within an industry the goal is to represent the
full diversity of business segments. An industry representation may exceed the
60% target because one or two large companies dominate an industry. Similarly,
an industry may fall below the 80% level under conventional analysis because its
companies lack good liquidity and float, or because of extensive
cross-ownership.
A goal of the MSCI index construction process is to select the most liquid
stocks within each industry group, all other things being equal, since liquidity
is necessary but not the sole determinant for inclusion in the index. Liquidity
is monitored by monthly average trading value over time in order to determine
normal levels of volume, excluding temporary peaks and troughs. A stock's
liquidity is significant not only in absolute terms, but also relative to its
market capitalization and to average liquidity for the country as a whole.
Float is monitored for every security in the market, and low float (a small
percentage of shares freely tradable) may exclude a stock from consideration in
the index. But float can be difficult to determine: in some markets good sources
are generally not available; in other markets, information on smaller and less
prominent issues can be subject to error and time lags. Government ownership and
cross-ownership positions can change over time and are not always made public.
Float also tends to be defined differently depending on the source. Thus,
evaluations of float run the risk of penalizing those markets that have good
disclosure, regardless of the actual degree of availability of shares. As with
liquidity, sufficient float is an important consideration, not an inflexible
rule.
Cross-ownership occurs when one company has a significant ownership in
another company in the same country. In situations where cross-ownership is
substantial, including both companies in an index can skew industry weights,
distort country-level valuations (such as country price-earnings and price-book
value ratios) and overstate a country's true market size. An integral part of
the country research function is identifying cross ownerships in order to avoid
or minimize them. Country specialists in Geneva do much of the cross-ownership
identification through researching company reports, local newspapers and stock
exchange data.
All standard MSCI indices are weighted by each company's full market
capitalization (both listed and unlisted shares). This approach has the
significant advantage of objectivity--the number of shares outstanding for a
company is a constituent figure for companies around the world and is easily
agreed upon and obtainable. Full market capitalization weighting is favored to
other weighting schemes for both theoretical and practical reasons: (a) it is
impossible to judge whether a position which is currently in firm hands might be
available in the future; (b) the quality and timeliness of information on float
varies from market to market and adjustments penalize those markets with the
highest standards of disclosure; (c) the most serious consequence of float
limitations is limited liquidity which can be monitored objectively; much effort
is spent in researching and monitoring these factors when selecting constituents
for each country index but once a security is selected, it is included in the
index at its full market value. A growing number of very sizable companies have
been brought or are expected to be brought to the market with modest initial
tranches being publicly available. At the same time, the obvious relevance of
these companies instantly positions them among the core investment opportunities
in their market. In order to allow the MSCI indices to capture this new market
trend, in very exceptional cases, a company may be included at a portion of its
total market capitalization.
MORGAN STANLEY CAPITAL INTERNATIONAL. Recognized as a world leader in global
financial research, Morgan Stanley monitors more than 4,500 companies in 51
countries, representing 80% of the total market value of the world's stock
markets. The Morgan Stanley Capital International ("MSCI") databases are used as
a benchmark by more than 90% of the investment community. With hundreds of
analysts located across the globe, MSCI provides comprehensive research and
in-depth knowledge about general markets and specific companies around the
world.
Since 1968, MSCI global indices have presented an array of investment
opportunities available to the international investor, including indices such as
the MSCI USA Index and the MSCI EAFESM Index. These indices seek to represent an
accurate normal portfolio. In addition, index valuation ratios and company-level
fundamental data provide tools for the international investor. MSCI believes
that local stock exchange indices are not comparable with one another due to
differences in the representation of the local market, mathematical formulas,
methods of adjusting for capital changes, and base dates. The same criteria and
calculation methodology are applied across all MSCI indices. Further, while
accounting standards continue to differ according to local customs and
practices, fundamental data is analyzed and presented in a uniform and
meaningful manner in MSCI indices--allowing investors to compare investment
opportunities across markets. Each MSCI country index is constructed so as to
minimize double counting, assuring that all industry groups are proportionately
represented, and that each country's contribution to the global or regional
index is accurately based on its market capitalization.
In 1986, Morgan Stanley acquired the indices and data from Capital
International Perspective, S.A. ("CIPSA") based in Geneva, Switzerland. CIPSA
has been researching and publishing international indices since 1969 and
continues to be solely responsible for the decisions regarding constituent
additions and deletions as well as any other methodological modifications to the
indices. Morgan Stanley contributes its expertise in technology and the
marketing and distribution of the MSCI Indices and publications. Selection of
the constituents for MSCI Indices is conducted independent of the Sponsor which
has no input regarding the components of any index.
The MSCI USA Index and MSCI EAFESM Index are the exclusive property of Morgan
Stanley. Morgan Stanley Capital International is a service mark of Morgan
Stanley and has been licensed for use by Van Kampen American Capital
Distributors, Inc.
This fund is not sponsored, endorsed, sold or promoted by Morgan Stanley.
Morgan Stanley makes no representation or warranty, express or implied, to the
owners of this fund or any member of the public regarding the advisability of
investing in funds generally or in this fund particularly or the ability of the
MSCI USA Index or MSCI EAFESM Index to track general stock market performance.
Morgan Stanley is the licensor of certain trademarks, service marks and trade
names of Morgan Stanley and of the MSCI USA Index and MSCI EAFESM Index which
are determined, composed and calculated by Morgan Stanley without regard to the
issuer of this fund or this fund. Morgan Stanley has no obligation to take the
needs of the issuer of this fund or the owners of this fund into consideration
in determining, composing or calculating the MSCI USA Index or MSCI EAFESM
Index. Morgan Stanley is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of this fund to be
issued or in the determination or calculation of the equation by which Units of
this fund is redeemable for cash. Morgan Stanley has no obligation or liability
to owners of this fund in connection with the administration, marketing or
trading of this fund.
ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE
IN THE CALCULATION OF AN INDEX FROM SOURCES WHICH MORGAN STANLEY CONSIDERS
RELIABLE, NEITHER MORGAN STANLEY NOR ANY OTHER PARTY GUARANTEES THE ACCURACY
AND/OR THE COMPLETENESS OF AN INDEX OR ANY DATA INCLUDED THEREIN. NEITHER MORGAN
STANLEY NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES,
OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF AN INDEX OR
ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR
FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES ANY EXPRESS
OR IMPLIED WARRANTIES, AND MORGAN STANLEY HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO AN INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING,
IN NO EVENT SHALL MORGAN STANLEY OR ANY OTHER PARTY HAVE ANY LIABILITY FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
GENERAL. Each Trust consists of (a) the Equity Securities (including
contracts for the purchase thereof) listed under the applicable "Portfolio" as
may continue to be held from time to time in such Trust, (b) any additional
Equity Securities acquired and held by such Trust pursuant to the provisions of
the Trust Agreement and (c) any cash held in the related 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 such 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.
STRATEGIC PICKS OPPORTUNITY TRUST
- --------------------------------------------------------------------------------
The Strategic Picks Opportunity Trust consists of a diversified portfolio of
10 different issues of Securities selected by implementing the following
investment strategy. Beginning with the MSCI USA Index, all stocks of companies
in the financial or utility sectors and stocks included in the Dow Jones
Industrial Average are removed. This pool of stocks is screened for only those
companies that have positive one- and three-year sales and earnings growth rates
and two years positive dividend growth. The remaining stocks are ranked highest
to lowest by annual trading volume and only the top 75% are retained. The
remaining stocks, which then comprise the "Strategic Picks Subset," are ranked
by dividend yield and the ten highest-yielding stocks are selected for the
Strategic Picks Trust portfolio. All of the Securities are listed on a national
securities exchange, the NASDAQ National Market System or are traded in the
over-the-counter market. The following is a general description of each of the
companies that are included in the Strategic Picks Trust.
Abbott Laboratories. Abbott Laboratories discovers, develops, manufactures,
and sells a variety of health care products and services. The company's products
include adult and pediatric pharmaceuticals and nutritionals. Abbott's
pharmaceuticals are sold to retailers, wholesalers, health care facilities, and
government agencies.
American Home Products Corporation. American Home Products Corporation
discovers, develops, manufactures, distributes, and sells health care products
and agricultural products. Health care products include branded and generic
ethical pharmaceuticals, biologicals, nutritionals, consumer health care
products, and animal pharmaceuticals. Agricultural products include crop
protection and pest control products.
AMP, Inc. AMP, Inc. designs, manufactures, and markets a variety of
electronic, electrical, and electro-optic connection devices, in addition to
interconnection systems and connector-intensive assemblies. The company's
products are used in electronic, electrical, computer, and telecommunications
systems. AMP's customers include OEMs, utilities, government agencies,
distributors, and others.
Campbell Soup Company. Campbell Soup Company, with its subsidiaries,
manufactures and markets branded convenience food products. The company's three
core divisions include soups and sauces, biscuits and confectionery, and
foodservice. Campbell's brand names include "Prego", "Swanson", "Pace",
"Campbells", "V8" and many other names. The company distributes its products
worldwide.
Deere & Company. Deere & Company manufactures, distributes and finances a
range of agricultural, construction and forestry and commercial and consumer
equipment. The company also provides credit, insurance products, and managed
healthcare plans.
General Dynamics Corporation. General Dynamics Corporation manufactures
defense products. The company designs and builds nuclear submarines for the
United States Navy and performs overhaul, repair work, and engineering services.
General Dynamics also produces battle tanks for the United States Army and
Marine Corps and offers engineering, upgrade and support services.
Genuine Parts Company. Genuine Parts Company distributes replacement
automobile and industrial parts and office products. The company operates 62
"NAPA" and three "Balkamp" automobile parts distribution centers in the United
States. Genuine's other products include industrial bearings, power transmission
equipment, material handling components, agricultural and irrigation equipment,
and office furniture.
Harris Corporation. Harris Corporation develops and markets a range of
electronics products and services. The company provides wireless and personal
communications, digital television, health care information systems, multimedia
communications, automotive electronics, transportation, business information,
defense communications and information, and office products.
May Department Stores Company. May Department Stores Company, through its
various chains of department stores, retails a variety of goods throughout the
United States. The company operates approximately 369 department stores in 30
states and the District of Columbia.
Newell Company. Newell Company manufactures and markets consumer products
which are sold through a variety of retail and wholesale distribution channels.
The company's products include housewares, hardware, home furnishings, and
office products.
The following table sets forth a comparison of the hypothetical total return
of the ten highest yielding common stocks selected in accordance with the
investment strategy utilized by the Strategic Picks Trust (the "Strategy
Stocks") applied on an annual basis with the one-year total returns of all
common stocks comprising the S&P 500, the Dow Jones Industrial Average and the
MSCI USA Index. It should be noted that the common stocks comprising the
Strategy Stocks may not be the same stocks from year to year and may not be the
same common stocks as those included in the Strategic Picks Trust.
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)*
STANDARD & POOR'S DOW JONES
YEAR STRATEGY STOCKS 500 INDEX INDUSTRIAL AVERAGE MSCI USA INDEX
------------- ---------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1978 13.26% 6.39% 2.69% 6.00%
1979 17.00 18.19 10.52 13.86
1980 40.64 31.52 21.41 27.97
1981 5.09 (4.84) (3.40) (3.50)
1982 39.84 20.37 25.79 20.13
1983 17.66 22.31 25.65 21.11
1984 10.89 5.97 1.08 5.71
1985 46.11 31.05 32.78 31.04
1986 34.86 18.54 26.92 17.02
1987 11.38 5.67 6.02 4.41
1988 16.05 16.34 15.95 15.34
1989 31.87 31.21 31.71 30.21
1990 0.52 (3.13) (0.58) (1.89)
1991 47.88 30.00 23.93 30.17
1992 2.26 7.43 7.35 7.06
1993 7.32 9.92 16.74 9.82
1994 9.91 1.28 4.95 2.05
1995 38.10 37.11 36.49 37.04
1996 23.90 22.68 28.58 23.36
1997 28.64 33.10 24.78 33.35
1998 thru 3/31 15.28 13.95 11.74 13.64
* Source: Barron's, Fact Set, Bloomberg, Morgan Stanley Capital International
and The Wall Street Journal. The Sponsor has not independently verified this
data but has no reason to believe that this data is incorrect in any material
respect.
- --------------------------------------------------------------------------------
(1)The Strategy Stocks for each period were identified by ranking the dividend
yield for each of the stocks in the Strategic Picks Subset by annualizing the
last dividend paid (the last dividend declared was used in cases when the
stock was trading ex-dividend as of the last day of the period) and dividing
the result by the stock's market value on the first day of trading on the New
York Stock Exchange in the period. Total Return for each period was
calculated by taking the difference between period-end prices and prices at
the end of the following period (adjusted for any stock splits and corporate
spinoffs) and adding dividends for the period. If the dividend yield for two
companies was the same in any period, the company with the largest market
capitalization was utilized. Historical total returns thus represent actual
stocks and real time; the results illustrate what an investor would have
obtained had the investor been invested in the related stocks in the periods
indicated. Total Return does not take into consideration any sales charges,
commissions, expenses or taxes that will be incurred by the Strategic Picks
Trust or Unitholders.
</TABLE>
Based on the hypothetical total returns set forth in the table above, the
average annual total returns for the Strategy Stocks for the most recent three,
five, ten and twenty calendar year periods were 30.08%, 21.02%, 19.70% and
21.28%, respectively. Based on the hypothetical total returns set forth in the
table above, the average annual total returns for the S&P 500 for the most
recent three, five, ten and twenty calendar year periods were 30.82%, 20.04%,
17.80% and 16.37%, respectively. Based on the hypothetical returns set forth in
the table above, the average annual total returns for the DJIA for the most
recent three, five, ten and twenty calendar year periods were 29.86%, 21.82%,
18.41% and 16.33%, respectively. Based on the hypothetical returns set forth in
the table above, the average annual total returns for the MSCI USA Index for the
most recent three, five, ten and twenty calendar year periods were 31.12%,
20.37%, 17.90% and 15.87%, respectively.
The hypothetical returns shown above represent past performance and are not
guarantees of future performance and should not be used as a predictor of
returns to be expected in connection with the Strategic Picks Trust. Among other
factors, both stock prices (which may appreciate or depreciate) and dividends
(which may be increased, reduced or eliminated) will affect the returns. Had the
portfolio been available over the periods indicated in the above table, after
deductions for expenses and sales charges and not accounting for taxes, it would
have underperformed the S&P 500, the DJIA and the MSCI USA Index in 6, 4 and 4
of the last 20 calendar years, respectively. There can be no assurance that the
Strategic Picks Trust will outperform the S&P 500, the Dow Jones Industrial
Average or the MSCI USA Index over the life of such Trust or over consecutive
rollover periods, if available. A Unitholder would not necessarily realize as
high a total return on an investment in the stocks upon which the hypothetical
returns shown above are based for the following reasons: the hypothetical total
return figures shown above do not reflect sales charges, commissions, Trust
expenses or taxes; the Trusts are established at different times of the year;
the Trust may not be able to invest equally in the Strategy Stocks and may not
be fully invested at all times; and Equity Securities are often purchased or
sold at prices different from the closing prices used in buying and selling
Units.
The chart below represents past performance of the Strategy Stocks, S&P 500,
the Dow Jones Industrial Average and the MSCI USA Index (but does not represent
possible performance of the Strategic Picks Trust which, as indicated above,
includes certain expenses and commissions not included in the chart) and should
not be considered indicative of future results. Further, results are
hypothetical. The chart assumes that all dividends during a year (including
those on stocks trading ex-dividend as of the last day of the year) are
reinvested at the end of that year and does not reflect sales charges,
commissions, expenses or income taxes. Based on the foregoing assumptions, the
average annual returns (which represent the percentage return derived by taking
the sum of the initial investment and all appreciation and dividends for the
specified investment period) during the period ended December 31, 1997 were
21.28%, 16.37%, 16.33% and 15.87% for the Strategy Stocks, the S&P 500, the Dow
Jones Industrial Average and the MSCI USA Index, respectively. There can be no
assurance that the Strategic Picks Trust will outperform the S&P 500, the Dow
Jones Industrial Average or the MSCI USA Index over its life or over consecutive
rollover periods, if available.
<TABLE>
<CAPTION>
VALUE OF $10,000 INVESTED JANUARY 1, 1978
-----------------------------------------------------------------------------------------------------
STANDARD & DOW JONES MSCI
STRATEGY POOR'S 500 INDUSTRIAL USA
PERIOD STOCKS INDEX AVERAGE INDEX
------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
1978 $ 11,326 $ 10,639 $ 10,269 $ 10,600
1979 13,251 12,574 11,349 12,069
1980 18,637 16,538 13,779 15,445
1981 19,585 15,737 13,311 14,904
1982 27,388 18,943 16,744 17,905
1983 32,225 23,169 21,038 21,684
1984 35,734 24,552 21,265 22,922
1985 52,211 32,176 28,236 30,038
1986 70,412 38,141 35,837 35,150
1987 78,425 40,304 37,995 36,700
1988 91,012 46,889 44,055 42,330
1989 120,018 61,523 58,025 55,118
1990 120,642 59,598 57,688 54,076
1991 178,406 77,477 71,493 70,391
1992 182,438 83,234 76,748 75,360
1993 195,792 91,490 89,596 82,761
1994 215,195 92,661 94,031 84,457
1995 297,184 127,048 128,342 115,740
1996 368,211 155,863 165,022 142,777
1997 473,667 207,453 205,915 190,393
1998 thru 3/31 546,044 236,391 230,089 216,358
The following table sets forth a comparison of the hypothetical average
annual total returns of the ten highest yielding common stocks selected in
accordance with the investment strategy utilized by the Strategic Picks Trust
(the "Strategy Stocks") applied on a biennial basis with the two-year average
annual total returns of all common stocks comprising the S&P 500, the Dow Jones
Industrial Average and the MSCI USA Index. It should be noted that the common
stocks comprising the Strategy Stocks may not be the same stocks from period to
period and may not be the same common stocks as those included in the Strategic
Picks Trust.
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)*
TWO YEAR
PERIOD
ENDED STANDARD & POOR'S DOW JONES
DECEMBER 31 STRATEGY STOCKS 500 INDEX INDUSTRIAL AVERAGE MSCI USA INDEX
------------- --------------------- -------------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
1979 12.07% 12.13% 6.53% 9.86%
1981 22.24 11.87 8.30 11.13
1983 30.59 21.34 25.72 20.62
1985 23.43 17.84 15.85 17.70
1987 21.44 11.92 16.00 10.54
1989 22.15 23.55 23.58 22.55
1991 11.27 12.22 11.00 13.01
1993 0.49 8.67 11.95 8.43
1995 21.47 17.84 19.69 18.26
1997 25.15 27.78 26.67 28.26
1998 thru 3/31 15.28 13.95 11.74 13.64
* Source: Barron's, Fact Set, Bloomberg, Morgan Stanley Capital International
and The Wall Street Journal. The Sponsor has not independently verified this
data but has no reason to believe that this data is incorrect in any material
respect.
- --------------------------------------------------------------------------------
(1)The Strategy Stocks for each period were identified by ranking the dividend
yield for each of the stocks in the Strategic Picks Subset by annualizing the
last dividend paid (the last dividend declared was used in cases when the
stock was trading ex-dividend as of the last day of the period) and dividing
the result by the stock's market value on the first day of trading on the New
York Stock Exchange in the period. Total Return for each period was
calculated by taking the difference between period-end prices and prices at
the end of the following period (adjusted for any stock splits and corporate
spinoffs) and adding dividends for the period. If the dividend yield for two
companies was the same in any period, the company with the largest market
capitalization was utilized. Historical total returns thus represent actual
stocks and real time; the results illustrate what an investor would have
obtained had the investor been invested in the related stocks in the periods
indicated. Total Return does not take into consideration any sales charges,
commissions, expenses or taxes that will be incurred by the Strategic Picks
Trust or Unitholders.
</TABLE>
Based on the hypothetical total returns set forth in the table above, the
average annual total returns for the Strategy Stocks for the most recent three,
five, ten and twenty calendar year periods were 28.12%, 17.94%, 15.74% and
18.73%, respectively. Based on the hypothetical total returns set forth in the
table above, the average annual total returns for the S&P 500 for the most
recent three, five, ten and twenty calendar year periods were 30.82%, 20.04%,
17.80% and 16.37%, respectively. Based on the hypothetical returns set forth in
the table above, the average annual total returns for the DJIA for the most
recent three, five, ten and twenty calendar year periods were 29.86%, 21.82%,
18.41% and 16.33%, respectively. Based on the hypothetical returns set forth in
the table above, the average annual total returns for the MSCI USA Index for the
most recent three, five, ten and twenty calendar year periods were 31.12%,
20.37%, 17.90% and 15.87%, respectively.
The hypothetical returns shown above represent past performance and are not
guarantees of future performance and should not be used as a predictor of
returns to be expected in connection with the Strategic Picks Trust. Among other
factors, both stock prices (which may appreciate or depreciate) and dividends
(which may be increased, reduced or eliminated) will affect the returns. Had the
portfolio been available over the periods indicated in the above table, after
deductions for expenses and sales charges and not accounting for taxes, it would
have underperformed the S&P 500, the DJIA and the MSCI USA Index in 5, 3 and 4
of the last 10 two-year periods, respectively. There can be no assurance that
the Strategic Picks Trust will outperform the S&P 500, the Dow Jones Industrial
Average or the MSCI USA Index over the life of such Trust or over consecutive
rollover periods, if available. A Unitholder would not necessarily realize as
high a total return on an investment in the stocks upon which the hypothetical
returns shown above are based for the following reasons: the hypothetical total
return figures shown above do not reflect sales charges, commissions, Trust
expenses or taxes; the Trusts are established at different times of the year;
the Trust may not be able to invest equally in the Strategy Stocks and may not
be fully invested at all times; and Equity Securities are often purchased or
sold at prices different from the closing prices used in buying and selling
Units.
The chart below represents past performance of the Strategy Stocks, S&P 500,
the Dow Jones Industrial Average and the MSCI USA Index (but does not represent
possible performance of the Strategic Picks Trust which, as indicated above,
includes certain expenses and commissions not included in the chart) and should
not be considered indicative of future results. Further, results are
hypothetical. The chart assumes that all dividends during a period (including
those on stocks trading ex-dividend as of the last day of the period) are
reinvested at the end of that period and does not reflect sales charges,
commissions, expenses or income taxes. Based on the foregoing assumptions, the
average annual returns (which represent the percentage return derived by taking
the sum of the initial investment and all appreciation and dividends for the
specified investment period) during the period ended December 31, 1997 were
18.73%, 16.37%, 16.33% and 15.87% for the Strategy Stocks, the S&P 500, the Dow
Jones Industrial Average and the MSCI USA Index, respectively. There can be no
assurance that the Strategic Picks Trust will outperform the S&P 500, the Dow
Jones Industrial Average or the MSCI USA Index over its life or over consecutive
rollover periods, if available.
<TABLE>
<CAPTION>
VALUE OF $10,000 INVESTED JANUARY 1, 1978
--------------------------------------------------------------------------------------------------------
TWO YEAR STANDARD & DOW JONES MSCI
PERIOD ENDED STRATEGY POOR'S 500 INDUSTRIAL USA
DECEMBER 31 STOCKS INDEX AVERAGE INDEX
------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
1979 $ 12,561 $ 12,574 $ 11,349 $ 12,069
1981 18,769 15,737 13,311 14,904
1983 32,008 23,169 21,038 21,684
1985 48,765 32,176 28,236 30,038
1987 71,920 40,304 37,995 36,700
1989 107,317 61,523 58,025 55,118
1991 132,880 77,477 71,493 70,391
1993 134,185 91,490 89,596 82,761
1995 197,995 127,048 128,342 115,740
1997 310,128 207,453 205,915 190,393
1998 thru 3/31 357,516 236,391 230,089 216,358
</TABLE>
EAFE STRATEGIC 20 TRUST
- --------------------------------------------------------------------------------
The EAFE Strategic 20 Trust consists of common stocks of the twenty companies
in the EAFE Subset which had the highest dividend yield as of the close of
business three business days prior to the Initial Date of Deposit. The portfolio
of the Trust is selected by implementing the following investment strategy.
Beginning with the MSCI EAFESM Index, all stocks are screened for positive one-
and three-year sales and earnings growth rates and three years of consecutive
dividend increases. The remaining stocks, which then comprise the "EAFE Subset",
are ranked by dividend yield and the twenty highest-dividend yielding stocks are
selected for the Trust portfolio. The Trust consists of common stocks of the
following companies:
BASF AG. BASF AG produces industrial and commercial raw materials and
finished products worldwide. The company explores and refines oil, operates gas
and oil distribution and storage facilities, as well as produces
pharmaceuticals, chemicals, drugs, vitamins, and agricultural fertilizers and
crop protection agents. BASF also produces a variety of plastics, dyestuffs,
pigments and polymer products.
Bayer AG. Bayer AG manufactures a variety of industrial chemicals and
polymers, as well as human and animal health care products, pharmaceuticals, and
agricultural crop protection agents. The company also produces photographic and
imaging products and systems. Bayer markets its products to the automotive,
electronic, medical, construction, farming, textile, utility and printing
enterprises worldwide.
Chinese Estates Holdings. Chinese Estates Holdings is an investment holding
company. The principal activities of its subsidiaries are property investment
and development, securities investment and finance.
CLP Holdings Limited. CLP Holdings Limited is an investment holding company
whose subsidiaries generate and supply electricity to Kowloon and the New
Territories in Hong Kong. The company also exports electric power to Guangdong
Province in the People's Republic of China. Its subsidiaries are involved in
property investment and development.
Elkem ASA. Elkem ASA manufactures and markets metals and alloys. Materials
include chrome and manganese alloys, carbon, silicon and filters for industrial
gas cleaning. The company serves the steel, metal casting, chemical and
electronic industries. Elkem also has metallurgical/smelting and environmental
technology activities which provide waste handling solutions for a number of
businesses.
Escada AG. Escada AG manufactures and markets ladies outerwear, knitwear,
blouses, skirts, jackets, dresses and other apparel. In addition, the company
also manufactures accessories such as jewelry, shoes, leatherwear, luggage and
perfume. Escada sells its brand name products, "Escada", "Cerruti", "Apriori",
"Collection Clasen", "Cavita", and "Laurel" in Europe, North America, Asia, and
Africa.
Friedrich Grohe AG. Friedrich Grohe AG designs, manufactures, and markets a
variety of water fixtures for homes and commercial and industrial buildings. The
company provides multifunctional thermostat and electronically controlled water
supply, as well as drainage armatures and piping systems for kitchens and
bathrooms. Friedrich operates in Europe, North America and Asia.
Guinness Anchor Bhd. Guinness Anchor Bhd produces, packages, markets, and
distributes "Guinness Stout", "Guinness Special Light", "Lion Stout", "Anchor
Beer", "Anchor Ice Beer", "Tiger Beer", "Heineken Beer", "Anglia Shandy", and
"Malta".
Hollandsche Beton Groep N.V. Hollandsche Beton Groep N.V. provides
construction services. The company provides general and industrial building,
housing, tunneling, roads and civil engineering, foundation engineering,
offshore structures and steel fabrication. Hollandsche also offers development
and engineering consultation and explores for oil and gas.
Hong Kong Telecommunications Limited. Hong Kong Telecommunications Limited
provides telecommunications, computer, engineering and other services. The
company also sells and rents telecommunications equipment. The principal
activities of the company were carried out in Hong Kong.
Hume Industries Bhd. Hume Industries Bhd manufactures and sells concrete,
asbestos cement and steel products. The company also makes pre-cast concrete
piles, plastics, engineered rubber products, wood cement boards, and pre-mix
road surfacing.
Koninklijke Hoogovens N.V. Koninklijke Hoogovens N.V. produces steel,
aluminum and related products. The company provides engineering, consulting and
contracting services for steel and aluminum. Hoogovens supplies their products
to automobile manufacturers, the construction and engineering industry and
household applications. The company also manufactures rolled and non-ferrous
products.
Pernod Ricard. Pernod Ricard manufactures anise-based spirits, whiskey, wines
and fruit juices. The company's brands include "Richard Pastis 51" and "Pernod"
anise-based spirits and "Orangina" fruit drinks. Pernod also distributes "Wild
Turkey", "Jameson", and "Clan Campbell" whiskeys and produces processed fruits
for the food industry. The company is active in Europe, Asia and the Americas.
Robinson and Company, Limited. Robinson and Company, Limited is a holding
company whose subsidiaries operate retail stores, department stores, wholesale
businesses, and import and export businesses. Products of its subsidiaries
include ladies' wear, menswear, footwear, cosmetics and food.
Rothmans Holdings, Limited. Rothmans Holdings, Limited produces, processes,
imports and sells cigarettes, cigars and tobacco products under the names
"Winfield," "Kansas," "Dunhill" and "Holiday." Products are sold throughout
Australia, New Zealand and Asia/Pacific regions. The company also has activities
in the paper, packaging and paper and board converting industries.
Rothmans of Pall Mall Bhd. Rothmans of Pall Mall Bhd an investment holding
company whose subsidiaries manufacture, import, distribute and sell cigarettes
and other tobacco products.
Santos Limited. Santos Limited is an independent oil, gas and natural gas
liquid exploration, and production company. The company conducts major onshore
and offshore petroleum activities in Australia (Cooper/Eromanga Basins), the
United States, the United Kingdom, Indonesia and Papua New Guinea.
The company also transports crude oil by pipeline.
SEITA. SEITA manufactures cigarettes including Gauloises and Gitanes brands
as well as pipe and loose tobacco. The company distributes its own products and
its competitors' products. It also manufactures and markets cigars and matches.
Sun Hung Kai Properties, Limited. Sun Hung Kai Properties, Limited is
involved in property development and investment, hotel ownership, construction,
finance, insurance, property and parking management, cinema and
godown/warehousing operations, garment manufacturing, public transport and
telecommunications.
Telecom Corporation of New Zealand, Limited. Telecom Corporation of New
Zealand, Limited provides telecommunications services throughout New Zealand and
internationally, to both households and businesses. The company offers cellular
telephone, telephone directories and radio dispatch and paging services.
The following table sets forth a comparison of the hypothetical total return
of the twenty highest yielding common stocks selected in accordance with the
investment strategy utilized by the EAFE Strategic 20 Trust (the "Strategy
Stocks") on an annual basis with the one-year total returns of all common stocks
comprising the MSCI EAFESM Index and the Standard & Poor's 500 Index in each of
the last 25 years, as of December 31 in each of those years (and as of the end
of the most recent quarter). It should be noted that the common stocks
comprising the Strategy Stocks may not be the same stocks from year to year and
may not be the same common stocks as those included in the EAFE Strategic 20
Trust.
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)*
STANDARD & POOR'S
YEAR STRATEGY STOCKS MSCI EAFESM INDEX 500 INDEX
---------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
1973 (9.61)% (14.17)% (14.51)%
1974 (32.50) (22.14) (26.01)
1975 107.00 37.10 36.93
1976 (1.32) 3.74 23.54
1977 75.19 19.42 (7.16)
1978 16.81 34.30 6.39
1979 21.60 6.18 18.19
1980 13.87 24.43 31.52
1981 1.34 (1.03) (4.84)
1982 (5.77) (0.86) 20.37
1983 40.31 24.61 22.31
1984 27.22 7.86 5.97
1985 61.13 56.72 31.05
1986 44.21 69.94 18.54
1987 35.66 24.93 5.67
1988 33.63 28.59 16.34
1989 5.91 10.80 31.21
1990 (7.04) (23.20) (3.13)
1991 30.71 12.50 30.00
1992 (3.40) (11.85) 7.43
1993 75.05 32.94 9.92
1994 1.25 8.06 1.28
1995 26.12 11.55 37.11
1996 21.39 6.36 22.68
1997 26.79 2.06 33.10
1998 thru 3/31 6.43 14.30 13.95
* Source: Barron's, Bloomberg L.P., Morgan Stanley Capital International and
Ibotson Associates. The Sponsor has not independently verified this data but has
no reason to believe that this data is incorrect in any material respect.
Reasonable assumptions were relied on where data was either unavailable or only
partially available and these assumptions could have a material impact on the
historical performance calculations.
- --------------------------------------------------------------------------------
(1)The Strategy Stocks for each period were identified by ranking the dividend
yield for each of the stocks in the MSCI EAFESM Index by annualizing the last
dividend paid or by adding together the last interim and final dividends paid
(the last dividend declared was used in cases when the stock was trading
ex-dividend as of the last day of the period) and dividing the result by the
stock's market value on the first day of trading in the period. Total Return
for each period was calculated by taking the difference between period-end
prices and prices at the end of the following period (adjusted for any stock
splits and corporate spinoffs) and adding dividends for the period.
Historical total returns thus represent actual stocks and real time; the
results illustrate what an investor would have obtained had the investor been
invested in the related stocks in the periods indicated. Total Return does
not take into consideration any sales charges, commissions, expenses or taxes
that will be incurred by a Trust.
</TABLE>
Based on the total returns set forth in the table above, the average annual
total returns for the Strategy Stocks for the most recent complete three, five,
ten, twenty and twenty-five year periods were 24.74%, 28.03%, 19.04%, 21.56% and
19.48%, respectively. On the other hand, based on the total returns set forth in
the table above, the average annual total returns for the MSCI EAFESM Index for
the most recent complete three, five, ten, twenty and twenty-five year periods
were 6.59%, 11.71%, 6.56%, 14.38% and 11.92%, respectively. Based on the total
returns set forth in the table above, the average annual total returns for the
S&P 500 Index for the most recent three, five, ten, twenty and twenty-five
periods were 30.82%, 20.04%, 17.80%, 16.37% and 12.87%, respectively.
The returns shown above represent past performance and are not guarantees of
future performance and should not be used as a predictor of returns to be
expected in connection with the EAFE Strategic 20 Trust. Among other factors,
both stock prices (which may appreciate or depreciate) and dividends (which may
be increased, reduced or eliminated) will affect the returns. Had the portfolio
been available over the periods indicated in the above table, after deductions
for expenses and sales charges and not accounting for taxes, they would have
underperformed the MSCI EAFESM Index and the S&P 500 Index in 8 and 12 of the
last 25 calendar years, respectively, and there can be no assurance that the
Trust will outperform the MSCI EAFESM Index or the S&P 500 Index over the life
of such Trust or over consecutive rollover periods, if available. A Unitholder
in the Trust would not necessarily realize as high a total return on an
investment in the stocks upon which the hypothetical returns shown above are
based for the following reasons: the total return figures shown above do not
reflect sales charges, commissions, Trust expenses or taxes; the Trusts are
established at different times of the year; the Trust may not be able to invest
equally in the Strategy Stocks and may not be fully invested at all times;
Equity Securities are often purchased or sold at prices different from the
closing prices used in buying and selling Units, and currency exchange rates
will be different.
The chart below represents past performance of the MSCI EAFESM Index, the S&P
500 Index and the Strategy Stocks (but does not represent possible performance
of the EAFE Strategic 20 Trust which, as indicated above, includes certain
expenses and commissions not included in the chart) and should not be considered
indicative of future results. Further, results are hypothetical. The chart
assumes that all dividends during a year (including those on stocks trading
ex-dividend as of the last day of the year) are reinvested at the end of that
year and does not reflect sales charges, commissions, expenses or income taxes.
Based on the foregoing assumptions, the average annual returns (which represent
the percentage return derived by taking the sum of the initial investment and
all appreciation and dividends for the specified investment period) during the
25 year period ended December 31, 1997, referred to in the table were 20.62%,
11.92% and 12.87% for the Strategy Stocks, the MSCI EAFESM Index and the S&P 500
Index, respectively. There can be no assurance that the Strategic 20 Trust will
outperform the MSCI EAFESM Index and the S&P 500 Index over its life or over
consecutive rollover periods, if available.
<TABLE>
<CAPTION>
VALUE OF $10,000 INVESTED JANUARY 1, 1973
- ---------------------------------------------------------------------------------------
STANDARD & POOR'S
PERIOD STRATEGY STOCKS MSCI EAFESM INDEX 500 INDEX
- ---------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
1973 $ 9,039 $ 8,583 $ 8,549
1974 6,101 6,683 6,325
1975 12,630 9,162 8,661
1976 12,463 9,505 10,700
1977 21,834 11,350 9,934
1978 25,504 15,244 10,569
1979 31,013 16,186 12,491
1980 35,315 20,140 16,429
1981 35,788 19,932 15,634
1982 33,723 19,761 18,818
1983 47,317 24,624 23,016
1984 60,196 26,560 24,391
1985 96,994 41,624 31,964
1986 139,876 70,737 37,890
1987 189,755 88,371 40,038
1988 253,570 113,637 46,580
1989 268,556 125,909 61,118
1990 249,650 96,698 59,205
1991 326,317 108,786 76,967
1992 315,222 95,895 82,685
1993 551,797 127,482 90,888
1994 558,694 137,757 92,051
1995 704,625 153,668 126,211
1996 855,344 163,441 154,836
1997 1,084,491 166,808 206,087
1998 thru 3/31 1,154,224 190,654 234,836
</TABLE>
The following table sets forth a comparison of the hypothetical average
annual total return of the twenty highest yielding common stocks selected in
accordance with the investment strategy utilized by the EAFE Strategic 20 Trust
(the "Strategy Stocks") on a biennial basis with the two-year average annual
total returns of all common stocks comprising the MSCI EAFESM Index and the
Standard & Poor's 500 Index in the last 25 years. It should be noted that the
common stocks comprising the Strategy Stocks may not be the same stocks from
year to year and may not be the same common stocks as those included in the EAFE
Strategic 20 Trust.
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURNS(1)*
TWO YEAR PERIOD
ENDED STRATEGY MSCI EAFESM STANDARD & POOR'S
DECEMBER 31 STOCKS INDEX 500 INDEX
-------------------- ---------------------- ---------------------- -----------------
<S> <C> <C> <C>
1974 (21.89)% (18.25)% (20.47)%
1976 42.92 19.26 30.06
1978 40.70 26.64 43.05
1980 15.37 14.94 17.67
1982 (4.58) (0.95) (2.28)
1984 31.30 15.93 33.60
1986 50.13 63.20 52.44
1988 32.34 26.75 34.64
1990 (3.08) (7.75) (0.78)
1992 10.04 (0.42) 12.37
1994 30.74 19.86 33.13
1996 21.43 8.92 23.73
1998 thru 3/31 13.86 8.00 16.16
* Source: Barron's, Bloomberg L.P., Dow Jones Corporation and Ibotson
Associates. The Sponsor has not independently verified this data but has no
reason to believe that this data is incorrect in any material respect.
Reasonable assumptions were relied on where data was either unavailable or only
partially available and these assumptions could have a material impact on the
historical performance calculations.
- --------------------------------------------------------------------------------
(1)The Strategy Stocks for each period were identified by ranking the dividend
yield for each of the stocks in the MSCI EAFESM Index by annualizing the last
dividend paid or by adding together the last interim and final dividends paid
(the last dividend declared was used in cases when the stock was trading
ex-dividend as of the last day of the period) and dividing the result by the
stock's market value on the first day of trading in the period. Total Return
for each period was calculated by taking the difference between period-end
prices and prices at the end of the following period (adjusted for any stock
splits and corporate spinoffs) and adding dividends for the period.
Historical total returns thus represent actual stocks and real time; the
results illustrate what an investor would have obtained had the investor been
invested in the related stocks in the periods indicated. Total Return does
not take into consideration any sales charges, commissions, expenses or taxes
that will be incurred by a Trust.
</TABLE>
Based on the total returns set forth in the table above, the average annual
total returns for the Strategy Stocks for the most recent complete three, five,
ten, twenty and twenty-five year periods were 24.74%, 28.03%, 19.04%, 21.56% and
20.62%, respectively. On the other hand, based on the total returns set forth in
the table above, the average annual total returns for the MSCI EAFESM Index for
the most recent complete three, five, ten, twenty and twenty-five year periods
were 6.59%, 11.71%, 6.56%, 14.38% and 11.92%, respectively. Based on the total
returns set forth in the table above, the average annual total returns for the
S&P 500 Index for the most recent three, five, ten, twenty and twenty-five year
periods were 30.82%, 20.04%, 17.80%, 16.37% and 12.87%, respectively.
The returns shown above represent past performance and are not guarantees of
future performance and should not be used as a predictor of returns to be
expected in connection with the Trust. Among other factors, both stock prices
(which may appreciate or depreciate) and dividends (which may be increased,
reduced or eliminated) will affect the returns. A Unitholder in the Trust would
not necessarily realize as high a total return on an investment in the stocks
upon which the hypothetical returns shown above are based for the following
reasons: the total return figures shown above do not reflect sales charges,
commissions, Trust expenses or taxes; the Trusts are established at different
times of the year; the Trust may not be able to invest equally in the Strategy
Stocks and may not be fully invested at all times; Equity Securities are often
purchased or sold at prices different from the closing prices used in buying and
selling Units; and currency exchange rates will be different.
The chart below represents past performance of the MSCI EAFESM Index, the S&P
500 Index and the Strategy Stocks (but does not represent possible performance
of the EAFE Strategic 20 Trust which, as indicated above, includes certain
expenses and commissions not included in the chart) and should not be considered
indicative of future results. Further, results are hypothetical. The chart
assumes that all dividends during a period (including those on stocks trading
ex-dividend as of the last day of the period) are reinvested at the end of that
period and does not reflect sales charges, commissions, expenses or income
taxes. Based on the foregoing assumptions, the average annual returns (which
represent the percentage return derived by taking the sum of the initial
investment and all appreciation and dividends for the specified investment
period) during the 25 year period ended December 31, 1997 referred to in the
table were 20.62%, 11.92% and 12.87% for the Strategy Stocks, the MSCI EAFESM
Index and the S&P 500 Index, respectively. There can be no assurance that the
EAFE Trust will outperform the MSCI EAFESM Index over its life or over
consecutive rollover periods, if available.
<TABLE>
<CAPTION>
VALUE OF $10,000 INVESTED JANUARY 1, 1973
----------------------------------------------------------------------
TWO YEAR PERIOD
ENDED STRATEGY MSCI EAFESM STANDARD & POOR'S
DECEMBER 31 STOCKS INDEX 500 INDEX
-------------------- ---------------------- ---------------------- -----------------
<S> <C> <C> <C>
1974 $ 6,101 $ 6,683 $ 6,325
1976 12,463 9,505 10,700
1978 25,504 15,244 10,569
1980 35,315 20,140 16,429
1982 33,723 19,761 18,818
1984 60,196 26,560 24,391
1986 139,876 70,737 37,890
1988 253,570 113,637 46,580
1990 249,650 96,698 59,205
1992 315,222 95,895 82,685
1994 558,694 137,757 92,051
1996 855,344 163,441 154,836
1998 thru 3/31 1,154,224 190,654 234,836
</TABLE>
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. An investment in Units of a Trust should be made with an
understanding of the risks which an investment in common stocks 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 Trusts 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 a portfolio may be expected to
fluctuate over the life of a 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 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 Trusts may be restricted under the Investment Company Act of 1940
from selling Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemption, and the value of a Trust, will be
adversely affected if trading markets for the Equity Securities are limited or
absent.
An investment in Units of a Trust will terminate approximately thirteen
months from the Initial Date of Deposit unless a Unitholder elects in writing to
remain invested in the Trust through the Mandatory Termination Date. If a
Unitholder makes no election at the first Special Redemption Date, the
Unitholder's Units will be redeemed on such date and the Unitholder will receive
cash representing their pro rata portion of the Trust's assets. Unitholders who
sell or redeem their Units prior to holding such Units for more than 18 months
will not benefit from the reduced federal long-term capital gains tax rate of
20%. For example, Unitholders who elect to become Rollover Unitholders on or
prior to the first Special Redemption Date will not benefit from this reduced
tax rate. Of course, there can be no assurance that Unitholders will realize
capital gains upon the disposition of Units or Securities. Unitholders who elect
to hold Units after the first Special Redemption Date should note that this
redemption process could cause the value of the Trust to fall below the Minimum
Termination Value stated under "Summary of Essential Financial Information" and
could result in a termination of the Trust before the Mandatory Termination
Date. This could cause a Unitholder who elects to hold Units after the first
Special Redemption Date to receive a distribution of Unit proceeds prior to
holding such Units for more than 18 months notwithstanding such election.
The Trust Agreement authorizes the Sponsor to increase the size of each Trust
and the number of Units thereof by the deposit of additional Securities, or cash
(including a letter of credit) with instructions to purchase additional
Securities, in the Trust and the issuance of a corresponding number of
additional Units. If the Sponsor deposits cash, 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 each Trust
will pay the associated brokerage fees.
As described under "Fund Operating Expenses," all of the expenses of the
Trusts will be paid from the sale of the Securities in such Trust. It is
expected that such sales will be made at the end of the initial offering period
and each month thereafter through termination of the Trust. Such sales will
result in capital gains or losses (both of which will generally be characterized
for U.S. federal income tax purposes as short term capital gains or losses) and
may be made at times and prices which adversely affect the Trust. For a
discussion of the tax consequences of such sales, see "Taxation."
Unitholders will be unable to dispose of any of the Equity Securities in a
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 each Trust and will vote such stocks in accordance with the
instructions of the Sponsor. In the absence of any such instructions by the
Sponsor, the Trustee will vote such stocks so as to insure that the stocks are
voted as closely as possible in the same manner and the same general proportion
as are stocks held by owners other than the Trust.
Like other investment companies, financial and business organizations and
individuals around the world, the Trusts could be adversely affected if the
computer systems used by the Sponsor, Evaluator, Supervisor or Trustee or other
service providers to the Trusts do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Sponsor, Evaluator, Supervisor
and Trustee are taking steps that they believe are reasonably designed to
address the Year 2000 Problem with respect to computer systems that they use and
to obtain reasonable assurances that comparable steps are being taken by the
Trusts' other service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Trusts.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of Equity Securities contained in the Trusts, to varying degrees based
upon various factors, including, but not limited to, their industry sector and
degree of technological sophistication. The Sponsor is unable to predict what
impact, if any, the Year 2000 Problem will have on issuers of the Equity
Securities contained in the Trusts.
FOREIGN SECURITIES. Since the Securities included in the EAFE Strategic 20
Trust consist of securities of foreign issuers, an investment in this 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 selected for
the EAFE Strategic 20 Trust, 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.
On the basis of the best information available to the Sponsor 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 Trusts
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 either 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 EAFE Strategic 20 Trust and on the ability of such Trust to
satisfy their obligation to redeem Units tendered to the Trustee for redemption.
Investors should be aware that it may not be possible to buy all Equity
Securities at the same time because of the unavailability of any Equity
Security, and restrictions applicable to the Trusts 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 a Trust in the United States
securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these Equity Securities by a Trust will
generally be effected only in foreign securities markets. Although the Sponsor
does not believe that a 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.
EXCHANGE RATE. The EAFE Strategic 20 Trust is comprised of Equity Securities
that are principally traded in foreign currencies and as such involve investment
risks that are substantially different from an investment in a fund which
invests in securities that are principally traded in United States dollars. The
United States dollar value of a 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 relevant 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 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. Since
1983, the Hong Kong dollar has been pegged to the U.S. dollar. In Europe a
European Currency Unit ("ECU") has been developed. 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 current exchange rates for the relevant
currencies based on activity in the various currency exchange markets. However,
since these markets are volatile and are 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 a Trust
would receive had the Trustee sold any particular currency in the market. The
foreign exchange transactions of a 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).
TAXATION
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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, as amended (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 a
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. Each 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 a Trust under the Code; and the income of each
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 considered to be received by a
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 a
Trust regardless of whether such dividends are used to pay a portion of any
deferred sales charge imposed. Unitholders will be taxed in this manner
regardless of whether distributions from a 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 a Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, or otherwise) or
upon the sale or redemption of Units by such Unitholder (except to the extent an
in kind distribution of stock is received by such Unitholder from a Trust as
described below). The price a Unitholder pays for his Units, generally including
sales charges, is allocated among his pro rata portion of each Security held by
a Trust (in 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 Security held by a Trust.
Unitholders should consult their own tax advisers with regard to the calculation
of basis. For federal income tax purposes, a Unitholder's pro rata portion of
the dividends, as defined by Section 316 of the Code, paid with respect to a
Security held by a 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 exceed 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,
the holding period for such capital gain will be determined by the period of
time a Unitholder has held his Units.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by a Trust will generally be
considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by a Trust will
generally be considered a capital loss (except in the case of a dealer or a
financial institution). Unitholders should consult their tax advisers regarding
the recognition of gains and losses for federal income tax purposes. In
particular, a Rollover Unitholder should be aware that a Rollover Unitholder's
loss, if any, incurred in connection with the exchange of Units for units in the
next new series of the Trusts (the "New Fund") will generally be disallowed with
respect to the disposition of any Securities pursuant to such exchange to the
extent that such Unitholder is considered the owner of substantially identical
securities under the wash sale provisions of the Code taking into account such
Unitholder's deemed ownership of the securities underlying the Units in the New
Fund in the manner described above, if such substantially identical securities
were acquired within a period beginning 30 days before and ending 30 days after
such disposition. However, any gains incurred in connection with such an
exchange by a Rollover Unitholder would be recognized. 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 for the Trusts is deferred. 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 any deferred sales
charge imposed.
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such Unitholder's
pro rata portion of dividends received by a Trust (to the extent such dividends
are taxable as ordinary income, as discussed above, and are attributable to
domestic corporations) in the same manner as if such corporation directly owned
the Securities paying such dividends (other than corporate Unitholders, such as
"S" corporations, which are not eligible for the deduction because of their
special characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding corporation tax). However, a
corporation owning Units should be aware that Sections 246 and 246A of the Code
impose additional limitations on the eligibility of dividends for the 70%
dividends received deduction. These limitations include a requirement that stock
(and therefore Units) must generally be held at least 46 days (as determined
under Section 246(c) of the Code). Final regulations have been issued which
address special rules that must be considered in determining whether the 46 day
holding period requirement is met. Moreover, the allowable percentage of the
deduction will be reduced from 70% if a corporate Unitholder owns certain stock
(or Units) the financing of which is directly attributable to indebtedness
incurred by such corporation. It should be noted that various legislative
proposals that would affect the dividends received deduction have been
introduced. Unitholders should consult with their tax advisers with respect to
the limitations on and possible modifications to the dividends received
deduction.
To the extent dividends received by a 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 a 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 a
Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by a Trust
or Disposition of Units. As discussed above, a Unitholder may recognize taxable
gain (or loss) when a Security is disposed of by a Trust or if the Unitholder
disposes of a Unit (although losses incurred by Rollover Unitholders may be
subject to disallowance, as discussed above). The Taxpayer Relief Act of 1997
(the "1997 Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) is subject to a maximum marginal stated tax
rate of either 28% or 20%, depending upon the holding periods of the capital
assets. Capital gain or loss is long-term if the holding period for the asset is
more than one year, and is short-term if the holding period for the asset is one
year or less. The date on which a Unit is acquired (i.e., the "trade date") is
excluded for purposes of determining the holding period of the Units. Generally,
capital gains realized from assets held for more than one year but not more than
18 months are taxed at a maximum marginal stated tax rate of 28% and capital
gains realized from assets (with certain exclusions) held for more than 18
months are taxed at a maximum marginal stated tax rate of 20% (10% in the case
of certain taxpayers in the lowest tax bracket). Further, capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income. Legislation is currently pending that provides the appropriate
methodology that should be applied in netting the realized capital gains and
losses. Such legislation is proposed to be effective retroactively for tax years
ending after May 6, 1997. 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.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "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 Securities represented by a Unit. The 1997 Tax Act
includes provisions that treat certain transactions designed to reduce or
eliminate risk of loss and opportunities for gain (e.g., short sales, offsetting
national principal contracts, futures or forward contracts, or similar
transactions) as constructive sales for purposes of recognition of gain (but not
loss) and for purposes of determining the holding period. Unitholders should
consult their own tax advisers with regard to any such constructive sales rules.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of a Trust. As discussed in "Rights of Unitholders--Redemption of
Units," under certain circumstances a Unitholder tendering Units for redemption
may request an In Kind Distribution of the U.S.-traded Securities in a Trust. A
Unitholder may also under certain circumstances request an In Kind Distribution
of the U.S.-traded Securities in a Trust upon the termination of such Trust. A
Unitholder will receive cash representing his pro rata portion of the foreign
Securities in a Trust. See "Rights of Unitholders--Redemption of Units". The
Unitholder requesting an In Kind Distribution will be liable for expenses
related thereto (the "Distribution Expenses") and the amount of such In Kind
Distribution will be reduced by the amount of the Distribution Expenses. See
"Rights of Unitholders--Redemption of Units". As previously discussed, prior to
the redemption of Units or the termination of a Trust, a Unitholder is
considered as owning a pro rata portion of each of such Trust's assets for
federal income tax purposes. The receipt of an In Kind Distribution will result
in a Unitholder receiving an undivided interest in whole shares of stock plus,
possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
with respect to each Security owned by a Trust will depend on whether or not a
Unitholder receives cash in addition to Securities. A "Security" for this
purpose is a particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only receives
Securities in exchange for his or her pro rata portion in the Securities held by
a Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of a U.S.-traded Security or for a foreign Security held by a
Trust, such Unitholder will generally recognize gain or loss based upon the
difference between the amount of cash received by the Unitholder and his tax
basis in such fractional share of a U.S.-traded Security or such foreign
Security held by such Trust.
Because each Trust will own many Securities, a Unitholder who requests an In
Kind Distribution will have to analyze the tax consequences with respect to each
Security owned by such Trust. The amount of taxable gain (or loss) recognized
upon such exchange will generally equal the sum of the gain (or loss) recognized
under the rules described above by such Unitholder with respect to each Security
owned by such Trust. Unitholders who request an In Kind Distribution are advised
to consult their tax advisers in this regard.
Rollover Unitholders. As discussed in "Rights of Unitholders--Special
Redemption and Rollover in New Fund," a Unitholder may elect to become a
Rollover Unitholder. To the extent a Rollover Unitholder exchanges his Units for
Units of the New Fund in a taxable transaction, such Unitholder will recognize
gains, if any, but generally will not be entitled to a deduction for any losses
recognized upon the disposition of any Securities pursuant to such exchange to
the extent that such Unitholder is considered the owner of substantially
identical securities under the wash sale provisions of the Code taking into
account such Unitholder's deemed ownership of the securities underlying the
Units in the New Fund in the manner described above, if such substantially
identical securities were acquired within a period beginning 30 days before and
ending 30 days after such disposition under the wash sale provisions contained
in Section 1091 of the Code. In the event a loss is disallowed under the wash
sale provisions, special rules contained in Section 1091(d) of the Code apply to
determine the Unitholder's tax basis in the securities acquired. Rollover
Unitholders are advised to consult their tax advisers.
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 a
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 a 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 a Trust to such
Unitholder (including amounts received upon the redemption of Units) will be
subject to back-up withholding. Distributions by a Trust (other than those that
are not treated as United States source income, if any) will generally 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. Such persons 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 country. Non-U.S. Unitholders should
consult their own tax advisers regarding the imposition of U.S. withholding on
distributions from a Trust.
It should be noted that payments to the Trusts 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 Trusts. 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. The 1997 Tax Act imposes 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 a Trust, the Trustee will furnish to each Unitholder of
such Trust a statement containing information relating to the dividends received
by such Trust on the Securities, the gross proceeds received by such Trust from
the disposition of any Security (resulting from redemption or the sale of any
Security), and the fees and expenses paid by such 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 special counsel to the Fund for New York tax matters, each
Trust is not an association taxable as a corporation and the income of the
Trusts 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
in one of the Trusts 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. Unitholders should consult their tax advisers
regarding potential state or local taxation with respect to the Units.
FUND OPERATING EXPENSES
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COMPENSATION OF SPONSOR AND EVALUATOR. The Sponsor will not receive any fees
in connection with its activities relating to the Fund. However, Van Kampen
American Capital Investment Advisory Corp., which is an affiliate of the
Sponsor, will receive an annual supervisory fee, which is not to exceed the
amount set forth under "Summary of Essential Financial Information", for
providing portfolio supervisory services for the Fund. Such fee (which is based
on the number of Units of each Trust outstanding on January 1 of each year
except during the initial offering period in which event the calculation is
based on the number of Units of each Trust outstanding at the end of the month
of such calculation) may exceed the actual costs of providing such supervisory
services for these Trusts, but at no time will the total amount received for
portfolio supervisory services rendered to all Series of the Fund and to any
other unit investment trusts sponsored by the Sponsor for which the Supervisor
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 Fund the annual evaluation fee set forth
under "Summary of Essential Financial Information" (which is based on the number
of Units of each 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 each Trust outstanding at the
end of the month of such calculation) for regularly evaluating the Fund
portfolios. The foregoing fees are payable as described under " 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 will receive sales commissions and 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 Other Compensation".
TRUSTEE'S FEE. For its services the Trustee will receive the fee from each
Trust set forth under "Summary of Essential Financial Information" (which is
based on the number of Units of each Trust outstanding at the end of the month
of such calculation until the end of the initial offering period at which time
such calculation is based on the number of Units of each Trust outstanding on
such date). 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 Unitholders and the amounts earned by
the Trustee are retained by the Trustee. Part of the Trustee's compensation for
its services to each 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 "Fund Administration".
MISCELLANEOUS EXPENSES. Expenses incurred in establishing each Trust,
including the cost of the initial preparation of documents relating to such
Trust (including the Prospectus, Trust Agreement and closing documents), federal
and state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by such Trust and amortized over one year. The following
additional charges are or may be incurred by a Trust: (a) normal expenses
(including the cost of mailing reports to Unitholders) incurred in connection
with the operation of such 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 a Trust and the
rights and interests of Unitholders, (f) indemnification of the Trustee for any
loss, liability or expenses incurred in the administration of a Trust without
negligence, bad faith or wilful misconduct on its part, (g) foreign custodial
and transaction fees, (h) accrual of costs associated with liquidating the
securities held in a Trust portfolio and (i) expenditures incurred in contacting
Unitholders upon termination of a Trust. The expenses set forth herein are
payable as described under "General" below.
GENERAL. During the initial offering period of each Trust, all of the fees
and expenses of such Trust will accrue on a daily basis and will be charged to
such Trust, in arrears, at the end of the initial offering period. After the
initial offering period, all of the fees and expenses of each Trust will accrue
on a daily basis and will be charged to such Trust, in arrears, on a monthly
basis on or before the tenth day of each month. The fees and expenses are
payable out of the Capital Account of the related Trust. When such fees and
expenses are paid by or owing to the Trustee, they are secured by a lien on the
related Trust's portfolio. It is expected that the balance in the Capital
Account of each Trust will be insufficient to provide for amounts payable by the
related Trust, and that Equity Securities will be sold from such Trust to pay
such amounts. These sales will result in capital gains or losses to Unitholders.
See "Taxation" and "Risk Factors".
PUBLIC OFFERING
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GENERAL. Units are offered at the Public Offering Price. During the initial
offering period and for secondary market transactions after the initial offering
period the Public Offering Price is based on the aggregate underlying value of
the Securities in each Trustportfolio, the initial sales charge described below,
and cash, if any, in the Income and Capital Accounts held or owned by such
Trust.
For the Strategic Picks Trust, the initial sales charge is equal to the
difference between the total first year sales charge for a Trust (2.75% of the
Public Offering Price) and the deferred sales charge imposed prior to the first
Special Redemption Date ($0.175 per Unit).
For the EAFE Strategic 20 Trust, the initial sales charge is equal to the
difference between the total first year sales charge (2.95% of the Public
Offering Price) and the deferred sales charge imposed prior to the first Special
Redemption Date ($0.195 per Unit).
The monthly deferred sales charge will begin accruing on a daily basis on
July 14, 1998 and will continue to accrue through May 13, 1999; the monthly
deferred sales charge will be charged to the Trust, in arrears, commencing
August 14, 1998 and will be charged on the 14th day of each month thereafter
through May 14, 1999.
In addition, Unitholders who elect to hold Units after the first Special
Redemption Date will be subject to a deferred sales charge of $0.15 per Unit
($0.17 per Unit for EAFE Strategic 20 Trust). This deferred sales charge will
begin accruing on a daily basis commencing July 12, 1999 and will continue to
accrue through March 11, 2000; this monthly deferred sales charge will be
charged to the Trust, in arrears, commencing August 12, 1999 and will be charged
on the 12th day of each month thereafter through March 12, 2000.
If any deferred sales charge payment date is not a business day, the payment
will be charged to the Trusts on the next business day. Unitholders will be
assessed 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. The deferred sales charge will be paid from
funds in the Capital Account, if sufficient, or from the periodic sale of
Securities. For the EAFE Strategic 20 Trust, the total maximum sales charge
prior to the first Special Redemption Date will be 2.95% of the Public Offering
Price (3.040% of the aggregate value of the Securities less the deferred sales
charge). For the Strategic Picks Trust, the total maximum sales charge prior to
the first Special Redemption Date on a per Unit basis will be 2.75% of the
Public Offering Price (2.828% of the aggregate value of the Securities less any
deferred sales charge). For the EAFE Strategic 20 Trust, the total maximum sales
charge assessed to each Unitholder who elects to hold Units through termination
of the Trust will be 4.65% of the Public Offering Price (4.877% of the aggregate
value of the Securities less the deferred sales charge). For the Strategic Picks
Trust, the total sales charge assessed to each Unitholder who elects to hold
Units through termination of a Trust will be 4.25% of the Public Offering Price
(4.439% of the aggregate value of the Securities less any deferred sales
charge). The sales charge applicable to quantity purchases is reduced on a
graduated basis as follows:
AGGREGATE DOLLAR AMOUNT PERCENTAGE SALES CHARGE
OF UNITS PURCHASED* REDUCTION PER UNIT
------------------------ --------------------------------
$50,000 - $99,999 0.25%
$100,000 - $149,999 0.50
$150,000 - $999,999 0.85
$1,000,000 or more 1.75
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*The breakpoint sales charges are also applied on a per Unit basis utilizing
a breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor.
The sales charge reduction will primarily be the responsibility of the
selling broker, dealer or agent. An investor may aggregate purchases of Units of
the Trusts for purposes of qualifying for volume purchase discounts listed
above. The reduced sales charge structure will also apply on all purchases by
the same person from any one dealer of units of Van Kampen American
Capital-sponsored unit investment trusts which are being offered in the initial
offering period (a) on any one day (the "Initial Purchase Date") or (b) on any
day subsequent to the Initial Purchase Date if (1) the units purchased are of a
unit investment trust purchased on the Initial Purchase Date, and (2) the person
purchasing the units purchased a sufficient amount of units on the Initial
Purchase Date to qualify for a reduced sales charge on such date. In the event
units of more than one trust are purchased on the Initial Purchase Date, the
aggregate dollar amount of such purchases will be used to determine whether
purchasers are eligible for a reduced sales charge. Such aggregate dollar amount
will be divided by the public offering price per unit (on the day preceding the
date of purchase) of each respective trust purchased to determine the total
number of units which such amount could have purchased of each individual trust.
Purchasers must then consult the applicable trust's prospectus to determine
whether the total number of units which could have been purchased of a specific
trust would have qualified for a reduced sales charge and, if so qualified, the
amount of such reduction. Assuming a purchaser qualified for a sales charge
reduction or reductions, to determine the applicable sales charge reduction or
reductions it is necessary to accumulate all purchases made on the Initial
Purchase Date and all purchases made in accordance with (b) above. Units
purchased in the name of the spouse of a purchaser or in the name of a child of
such purchaser ("immediate family members") will be deemed for the purposes of
calculating the applicable sales charge to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a trustee or
other fiduciary purchasing securities for one or more trust estate or fiduciary
accounts.
A purchaser desiring to purchase during a 13 month period $500,000 or more of
any combination of series of Van Kampen American Capital unit investment trusts
may qualify for a reduced sales charge by signing a nonbinding Letter of Intent
with any single broker-dealer. After signing a Letter of Intent, at the date
total purchases, less redemptions, of units of any combination of series of Van
Kampen American Capital unit investment trusts by a purchaser (including units
purchased in the name of the spouse of a purchaser or in the name of a child of
such purchaser under 21 years of age) exceed $500,000, the selling
broker-dealer, bank or other will credit the unitholder with cash as a
retroactive reduction of the sales charge on such units equal to the amount
which would have been paid for the total aggregated sale amount. If a purchaser
does not complete the required purchases under the Letter of Intent within the
13 month period, no such retroactive sales charge reduction shall be made. To
qualify under a Letter of Intent each purchase of units of Van Kampen Capital
unit investment trusts must equal or exceed $100,000.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge reduction
for quantity purchases) less the concession the Sponsor typically allows to
brokers and dealers for purchases (see "Public Offering--Unit Distribution") by
(1) investors who purchase Units through registered investment advisers,
certified financial planners and registered broker-dealers who in each case
either charge periodic fees for financial planning, investment advisory or asset
management service, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap fee"
charge is imposed, (2) bank trust departments investing funds over which they
exercise exclusive discretionary investment authority and that are held in a
fiduciary, agency, custodial or similar capacity, (3) any person who for at
least 90 days, has been an officer, director or bona fide employee of any firm
offering Units for sale to investors or their immediate family members (as
described above) and (4) officers and directors of bank holding companies that
make Units available directly or through subsidiaries or bank affiliates.
Notwithstanding anything to the contrary in this Prospectus, such investors,
bank trust departments, firm employees and bank holding company officers and
directors who purchase Units through this program will not receive sales charge
reductions for quantity purchases.
During the initial offering period, unitholders of any Van Kampen American
Capital-sponsored unit investment trust may utilize their redemption or
termination proceeds to purchase Units of all Trusts at the Public Offering
Price per Unit less 1%.
During the initial offering period of the Trusts, unitholders of unaffiliated
unit investment trusts having an investment strategy similar to the investment
strategy of the Trusts may utilize proceeds received upon termination or upon
redemption immediately preceding termination of such unaffiliated trust to
purchase Units of a Trust at the Public Offering Price per Unit less 1%.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law, and trustees, custodians or fiduciaries for the
benefit of such persons) of the Van Kampen American Capital Distributors, Inc.
and its affiliates, dealers and their affiliates and vendors providing services
to the Sponsor may purchase Units at the Public Offering Price less the
applicable dealer concession.
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 Trusts. In
the case of the EAFE Strategic 20 Trust, the Public Offering Price per Unit is
based on the aggregate value of the Securities computed on the basis of the
offering side or bid side value of the relevant currency exchange rate expressed
in U.S. dollars during the initial offering period or secondary market.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities in each Trust
an amount equal to the initial sales charge and dividing the sum so obtained by
the number of Units in each Trust outstanding. In addition, the Public Offering
Price shall include the proportionate share of any cash held in the Income and
Capital Accounts in each Trust. The initial price determination was made on the
basis of an evaluation of the Securities in the Trusts 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 will appraise or cause to be appraised the value of the underlying
Securities in the applicable Trust as of the relevant 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
the Evaluation Time on each such day. Orders received by the Trustee or Sponsor
for purchases, sales or redemptions after that time, or on a day which is not a
business day for the related Trust, will be held until the next determination of
price. The term "business day", as used herein and under "Rights of
Unitholders--Redemption of Units", shall exclude Saturdays, Sundays and holidays
observed by the New York Stock Exchange, Inc. In connection with the EAFE
Strategic 20 Trust, the term "business day" shall also exclude any day on which
Securities representing greater than 33% of the Securities 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 in such
Trust 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 Unit price).
Unitholders who purchase Units subsequent to the Initial Date of Deposit will
pay the initial sales charge described above and will be assessed a deferred
sales charge of $0.0175 per Unit ($0.0195 per Unit for the EAFE Strategic 20
Trust) on each of the remaining deferred sales charge payment dates as set forth
in "Public Offering--GeneralIn addition, Unitholders who elect to hold Units
after the first Special Redemption Date will be assessed a deferred sales charge
of $0.15 per Unit ($0.17 per Unit for the EAFE Strategic 20 Trust) during the
Trust's second year as set forth in "Public Offering--General". The Sponsor
currently does not intend to maintain a secondary market after November 9, 1998.
The aggregate underlying 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
listed on a national or foreign securities exchange 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. In the case of the EAFE Strategic 20
Trust, the value of the Equity Securities during the initial offering period is
based on the aggregate underlying value of the foreign Securities computed on
the basis of the offering side value of the relevant currency exchange rate
expressed in U.S. dollars as of the related Evaluation Time.
In offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities in the Trusts
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 Sponsor, 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.
The Sponsor intends to qualify the Units for sale in a number of states.
Brokers, dealers and others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period as
set forth in the following table. A portion of such concessions or agency
commissions represents amounts paid by the Sponsor to such brokers, dealers and
others out of its own assets as additional compensation.
AGGREGATE DOLLAR AMOUNT INITIAL OFFERING PERIOD CONCESSION
OF UNITS PURCHASED* OR AGENCY COMMISSION PER UNIT
-------------------------- -----------------------------------------
$10 - $49,999 2.10%
$50,000 - $99,999 1.85
$100,000 - $149,999 1.60
$150,000 - $999,999 1.25
$1,000,000 or more 0.50
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*The breakpoint concessions or agency commissions are also applied on
a per Unit basis utilizing a breakpoint equivalent in the above table
of $10 per Unit and will be applied on whichever basis is more
favorable to the broker, dealer or agent.
In addition to the amounts set forth above, during the initial offering
period any firm that distributes 500,000 - 999,999 Units of the Strategic Picks
Trust will receive additional compensation of $.0025 per Unit; any firm that
distributes 1,000,000 - 1,999,999 Units of such Trust will receive additional
compensation of $.005 per Unit; any firm that distributes 2,000,000 - 2,999,999
Units of such Trust will receive additional compensation of $.01 per Unit; any
firm that distributes 3,000,000 - 3,999,999 Units of such Trust will receive
additional compensation of $.015 per Unit; any firm that distributes 4,000,000 -
4,999,999 Units of such Trust will receive additional compensation of $.02 per
Unit; any firm that distributes 5,000,000 Units or more of such Trust will
receive additional compensation of $.025 per Unit. Such additional compensation
will be paid by the Sponsor out of its own assets at the end of the initial
offering period.
Any discount provided to investors will be borne by the selling dealer or
agent as indicated under "General" above. For transactions involving Rollover
Unitholders the total concession or agency commission will amount to 1.1% per
Unit (or such lesser amount resulting from quantity sales discounts). For all
secondary market transactions the total concession or agency commission will
amount to 2.1% per Unit. In addition to the amounts set forth above, for
transactions involving Unitholders who elect to hold Units after the first
Special Redemption Date, the total concession or agency commission will include
an additional 1% per Unit which will be paid to the broker, dealer or agent
subsequent to the first Special Redemption Date. Notwithstanding anything to the
contrary herein, in no case shall the total of any concessions, agency
commissions and any additional compensation allowed or paid to any broker,
dealer or other distributor of Units with respect to any individual transaction
exceed the total sales charge applicable to such transaction.
Certain commercial banks are making Units of the Trusts 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 100 Units (25 Units for qualified
retirement plans) but may vary by selling firm. In connection with fully
disclosed transactions with the Sponsor, the minimum purchase requirement will
be that number of Units set forth in the contract between the Sponsor and the
related broker or agent. The Sponsor 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.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trusts and returns over
specified time periods on other similar Van Kampen American Capital trusts or
investment strategies utilized by the Trusts (which may show performance net of
expenses and charges which the Trusts would have charged) with returns on other
taxable investments such as the common stocks comprising the Dow Jones
Industrial Average, the S&P 500, other investment indices, corporate or U.S.
government bonds, bank CDs, money market accounts or money market funds, or with
performance data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc. or various publications, each of which has characteristics
that may differ from those of the Trusts. Information on percentage changes in
the dollar value of Units may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective Unitholders. Total return figures may not be averaged and may not
reflect deduction of the sales charge, which would decrease return. No provision
is made for any income taxes payable. Past performance may not be indicative of
future results. The Trust portfolios are not managed and Unit price and return
fluctuate with the value of common stocks in the portfolios, so there may be a
gain or loss when Units are sold. As with other performance data, performance
comparisons should not be considered representative of the Trust's relative
performance for any future period.
SPONSOR AND OTHER COMPENSATION. The Sponsor will receive gross sales
commission equal to the total sales charge applicable to a transaction as
described under "General" above. Any discount provided to investors will be
borne by the selling dealer or agent.
In addition, the Sponsor 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 Sponsor and the cost of such Securities to each Trust on the
Initial Date of Deposit as well as on subsequent deposits. See "Notes to
Portfolios". The Sponsor has 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 Fund portfolios. The Sponsor 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 Trusts after a date of deposit, since all proceeds received from purchasers
of Units.
Broker-dealers of the Trusts, banks and/or others may be eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their representatives who have sold a minimum number of units
of unit investment trusts created by the Sponsor during a specified time period.
In addition, at various times the Sponsor may implement other programs under
which the sales forces of brokers, dealers, banks and/or others may be eligible
to win other nominal awards for certain sales efforts, or under which the
Sponsor will reallow to such brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by the
Sponsor, or participate in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales generated by such
persons at the public offering price during such programs. Also, the Sponsor in
its discretion may from time to time pursuant to objective criteria established
by the Sponsor pay fees to qualifying entities for certain services or
activities which are primarily intended to result in sales of Units of the
Trusts. Such payments are made by the Sponsor out of its own assets, and not out
of the assets of any Trust. These programs will not change the price Unitholders
pay for their Units or the amount that a Trust will receive from the Units sold.
Cash, if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor currently intends to
maintain a secondary market for Units of the Trusts for the period indicated. In
so maintaining a market, the Sponsor 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 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 Sponsor currently
intends to maintain a market for the Units offered hereby through November 9,
1998 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 Trusts (computed as indicated under "Offering Price" above and "Rights of
Unitholders--Redemption of Units"). In the case of the Global Trusts, the
aggregate underlying value of the Equity Securities is computed on the basis of
the bid side value of the relevant 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 Sponsor 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 UnitsA 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. Units sold prior to such time as the entire deferred sales charge on
such Units has been collected will be assessed the amount of any remaining
deferred sales charge at the time of sale (however, Units sold on or prior to
the first Special Redemption Date will not be assessed the unpaid second year
deferred sales charge remaining after such date).
TAX-SHELTERED RETIREMENT PLANS. Units of the Trusts are available for
purchase in connection with certain types of tax-sheltered retirement plans,
including Individual Retirement Accounts for the 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 Trusts may be limited by the plans'
provisions and does not itself establish such plans. The minimum purchase for
retirement plans is 25 Units but may vary by selling firm.
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 Trusts will be evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written request
to the Trustee that ownership be in book entry form. 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 a Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account of such Trust. Other receipts (e.g., capital gains, proceeds from
the sale of Securities, etc.) are credited to the Capital Account of such Trust.
Proceeds from the sale of Securities made to meet redemptions of Units shall be
segregated within the Capital Account of a Trust from proceeds from the sale of
Securities made to satisfy the fees, expenses and charges of such Trust. In the
case of the EAFE Strategic 20 Trust, dividends to be credited to such accounts
are first converted into U.S. dollars at the applicable exchange rate.
The Trustee will distribute any income received with respect to any of the
Securities in a Trust on or about the Income Account Distribution Dates to
Unitholders of record on the preceding Income Account Record Dates. See "Summary
of Essential Financial Information". Proceeds received on the sale of any
Securities in a Trust, to the extent not used to meet redemptions of Units, pay
the deferred sales charge or pay fees and expenses, will be distributed
semi-annually on the Capital Account Distribution Dates to Unitholders of record
on the preceding Capital Account Record Dates. 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
appropriate Trust and not distributed until the next distribution date
applicable to such 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. Unitholders will
initially receive their distributions in the form of an automatic reinvestment
into additional Units unless the Unitholder elects to receive distributions in
cash. See "Rights of Unitholders--Reinvestment Option." 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.
At the end of the initial offering period for each Trust and on or before the
tenth day of each month thereafter, the Trustee will deduct from the Capital
Account of the appropriate Trust amounts necessary to pay the fees and expenses
of such Trust (as determined on the basis set forth under "Fund Operating
Expenses"). The Trustee also may withdraw from the Income and Capital Accounts
such amounts, if any, as it deems necessary to establish a reserve for any
governmental charges payable out of each Trust. Amounts so withdrawn shall not
be considered a part of such Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the appropriate accounts. In addition,
the Trustee may withdraw from the Income and Capital Accounts of the appropriate
Trust such amounts as may be necessary to cover redemptions of Units.
It is anticipated that any 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 a Trust will initially have each
distribution of dividend income, capital gains and/or principal on their Units
automatically reinvested in additional Units of such Trust under 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. Unitholders receiving
Units of a Trust pursuant to participation in the Automatic Reinvestment Option
will be subject to the remaining deferred sales charge payments due on Units
(assuming for these purposes such Units had been outstanding during the primary
offering period). Unitholders may also elect to receive distributions of
dividend income, capital gains and/or principal on their Units in cash. To
receive cash, a Unitholder or his or her broker or agent must file with the
Trustee a written notice of election, together with any certificate representing
Units and other documentation that the Trustee may then require, at least five
days prior to the Record Date for which the first distribution is to apply. A
Unitholder's election to receive cash will apply to all Units of a 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 Sponsor (see "Public Offering--Public Market") or, until such
time as additional Units cease to be issued by a Trust (see "The Fund"),
distributions may be reinvested in such additional Units. 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
based on the net asset value for Units of a Trust as of the Evaluation Time on
the related Income or Capital Account Distribution Dates plus any remaining
deferred sales charge. Under the reinvestment plan, a Trust will pay the
Unitholder's distributions to the Trustee which in turn will purchase for such
Unitholder full and fractional Units of a Trust and will send such Unitholder a
statement reflecting the reinvestment.
Unitholders may also elect to have each distribution of interest income,
capital gains and/or principal on their Units automatically reinvested in Class
A shares of Van Kampen American Capital or Morgan Stanley mutual funds which are
registered in the Unitholder's state of residence. Such mutual funds are
hereinafter collectively referred to as the "Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. Texas residents who desire to reinvest may request that a broker-dealer
registered in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units will,
on the applicable distribution date, automatically be applied, as directed by
such person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such date.
Unitholders with an existing Guaranteed Reinvestment Option (GRO) Program
account (whereby a sales charge is imposed on distribution reinvestments) may
transfer their existing account into a new GRO account which allows purchases of
Reinvestment Fund shares at net asset value as described above. Confirmations of
all reinvestments by a Unitholder into a Reinvestment Fund will be mailed to the
Unitholder by such Reinvestment Fund.
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 Sponsor, each Reinvestment Fund, and its investment adviser
shall have the right to suspend or terminate the reinvestment plan at any time.
REPORTS PROVIDED. The Trustee shall furnish Unitholders of a 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 a 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 a
Trust a statement (i) as to the Income Account: income received, deductions for
applicable taxes and for fees and expenses of such 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 such 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 such Trust outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit of such 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
such 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 a 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 (unless the redeeming Unitholder elects an In Kind Distribution as
described below) 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 in the
case of the Global Trusts 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 on which Units are received by the Trustee,
except that with respect to Units received after the applicable Evaluation Time,
the date of tender is deemed to be the next business day as defined under
"Public Offering--Offering Price" and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption price
computed on that day. Foreign stock exchanges are open for trading on certain
days which are U.S. holidays on which the Fund will not transact business. The
foreign Securities will continue to trade on those days and thus the value of
the EAFE Strategic 20 Trust may be significantly affected on days when a
Unitholder cannot sell or redeem his Units. Units redeemed prior to such time as
the entire deferred sales charge has been collected will be assessed the amount
of the remaining deferred sales charge at the time of redemption (however, Units
redeemed on or prior to the first Special Redemption Date will not be assessed
the unpaid second year deferred sales charge remaining after such date).
An investment in Units of a Trust will be redeemed on the first Special
Redemption Date unless a Unitholder elects in writing to remain invested in the
Trust through the Mandatory Termination Date. On the first Rollover Notification
Date Unitholders will have the option to (i) have their Units redeemed and
reinvest the proceeds into a subsequent Series of the Trust (i.e., become
Rollover Unitholders), (ii) receive an In Kind Distribution of any U.S.-traded
Securities in such Trust (if the Unitholder owns at least 1,000 Units) or (iii)
continue to hold the Units through the Mandatory Termination Date. Unitholders
who do not affirmatively elect in writing on the first Rollover Notification
Date to become Rollover Unitholders, to receive an in-kind distribution or to
continue to hold Units through the Mandatory Termination Date will have their
Units redeemed on the first Special Redemption Date and will receive a cash
distribution equal to the Redemption Price per Unit on such date. To be
effective, any such election must be received by the Trustee no later than five
business days prior to the first Special Redemption Date.
The Trustee is empowered to sell Securities of a Trust in order to make funds
available for redemption if funds are not otherwise available in the Capital and
Income Accounts of such 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. Units
tendered for redemption prior to such time as the entire deferred sales charge
on such Units has been collected will be assessed the amount of the remaining
deferred sales charge at the time of redemption.
Unitholders tendering 1,000 or more Units of a Trust for redemption may
request from the Trustee an in kind distribution ("In Kind Distribution") of an
amount and value of U.S.-traded Securities per Unit (plus cash) equal to the
Redemption Price per Unit as determined as of the evaluation next following the
tender. An In Kind Distribution on redemption of Units will be made by the
Trustee through the distribution of each of the U.S.-traded Securities in
book-entry form to the account of the Unitholder's bank or broker-dealer at
Depository Trust Company. A Unitholder in the EAFE Strategic 20 Trust may not
receive a distribution of shares of the foreign exchange-traded Securities. The
tendering Unitholder will receive his pro rata number of whole shares of each of
the U.S.-traded Securities comprising a Trust portfolio and cash from the
Capital Account equal to any fractional shares to which the tendering Unitholder
is entitled. The Trustee may adjust the number of shares of any issue of
Securities included in a Unitholder's In Kind Distribution to facilitate the
distribution of whole shares, such adjustment to be made on the basis of the
value of Securities on the date of tender. If funds in the Capital Account are
insufficient to cover the required cash distribution to the tendering
Unitholder, the Trustee may sell Securities according to the criteria discussed
above.
To the extent that Securities are redeemed in kind or sold, the size of a
Trust will be, and the diversity of such Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result in
lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder depending
on the value of the Securities in the portfolio at the time of redemption.
Special U.S. federal income tax consequences will result if a Unitholder
requests an In Kind Distribution. See "Taxation".
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 each Trust, plus or minus cash, if any, in the
Income and Capital Accounts of such Trust. 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 each Trust determined on the basis of (i) the
cash on hand in such Trust, (ii) the value of the Securities in such Trust and
(iii) dividends receivable on the Equity Securities of such Trust trading
ex-dividend as of the date of computation, less (a) amounts representing taxes
or other governmental charges payable out of such Trust, (b) the accrued
expenses of such Trust and (c) any unpaid deferred sales charge payments
(however, Unitholders who terminate their investment on or prior to the first
Special Redemption Date will not be assessed the unpaid second year deferred
sales charge remaining after such date). The Evaluator may determine the value
of the Equity Securities in a 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 of a Trust 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. In the case of the EAFE
Strategic 20 Trust, 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 relevant 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 a Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit.
SPECIAL REDEMPTION AND ROLLOVER IN NEW FUND. It is expected that a special
redemption will be made of all Units of each Trust held by any Unitholder (a
"Rollover Unitholder") who affirmatively notifies the Trustee in writing that he
desires to rollover his Units by either Rollover Notification Date.
All Units of Rollover Unitholders will be redeemed on the related Special
Redemption Date and the underlying Securities will be distributed to the
Distribution Agent on behalf of the Rollover Unitholders. On the related Special
Redemption Date (as set forth in "Summary of Essential Financial Information"),
the Distribution Agent will be required to sell all of the underlying Securities
on behalf of Rollover Unitholders. The sales proceeds will be net of brokerage
fees, governmental charges or any expenses involved in the sales.
The Distribution Agent will attempt to sell Securities as quickly as is
practicable on the appropriate Special Redemption Date. The Sponsor does not
anticipate that the period will be longer than one day given that the Securities
are usually highly liquid. However, certain of the factors discussed under "Risk
Factors" could affect the ability of the Sponsor to sell the Securities and
thereby affect the length of the sale period and could have a negative impact on
Unit value. The liquidity of any Security depends on the daily trading volume of
the Security and the amount that the Sponsor has available for sale on any
particular day.
Pursuant to an exemptive order, each terminating Trust (and the Distribution
Agent on behalf of Rollover Unitholders) can sell Securities to a New Series if
those Securities continue to meet the related investment strategy of the
respective Series. The exemption will enable each Trust to eliminate commission
costs on these transactions. The price for those securities will be the closing
sale price on the sale date on the exchange where the Securities are principally
traded, as certified by the Trustee.
The Rollover Unitholders' proceeds will be invested in the then current
series of the Fund (the "New Fund"), if then being offered, the trusts of which
will contain portfolios selected in accordance with the indexing strategies of
the Trusts in this Fund. The proceeds of redemption will be used to buy New Fund
units in the appropriate portfolio as the proceeds become available.
The Sponsor intends to create a New Fund shortly prior to each Special
Redemption Date, dependent upon the availability and reasonably favorable prices
of the Securities included in the New Fund portfolios, and it is intended that
Rollover Unitholders will be given first priority to purchase the New Fund
units. There can be no assurance, however, as to the exact timing of the
creation of the New Fund units or the aggregate number of units in each trust
portfolio which the Sponsor will create. The Sponsor may, in its sole
discretion, stop creating new units in each trust portfolio at any time it
chooses, regardless of whether all proceeds of the Special Redemption have been
invested on behalf of Rollover Unitholders. Cash which has not been invested on
behalf of the Rollover Unitholders in New Fund units will be distributed shortly
after the related Special Redemption Date.
Any Rollover Unitholder may thus be redeemed out of the Fund and become a
holder of an entirely different unit investment trust with a different portfolio
of Securities. The Rollover Unitholders' Units will be redeemed and the
distributed Securities shall be sold on the related Special Redemption Date. In
accordance with the Rollover Unitholders' offer to purchase the New Fund units,
the proceeds of the sales (and any other cash distributed upon redemption) will
be invested in the appropriate portfolio at the public offering price, including
the applicable sales charge.
This process of redemption and rollover into a new trust is intended to allow
for the fact that the portfolios selected by the Sponsor are chosen on the basis
of growth and income potential for the near term, at which point a new portfolio
is chosen. It is contemplated that a similar process of redemption and rollover
in new unit investment trusts will be available for each subsequent series of
the Fund.
There can be no assurance that the redemption and rollover will avoid any
negative market price consequences stemming from the trading of large volumes of
securities and of the underlying Securities. The above procedures may be
insufficient or unsuccessful in avoiding such price consequences. In fact,
market price trends may make it advantageous to sell or buy more quickly or more
slowly than permitted by these procedures.
It should also be noted that Rollover Unitholders may realize taxable capital
gains on the Special Redemption and Rollover but, in certain circumstances, will
not be entitled to a deduction for certain capital losses and, due to the
procedures for investing in the subsequent Trust, no cash would be distributed
at that time to pay any taxes. Included in the cash for the Special Redemption
and Rollover will be any amount of cash attributable to the last distribution of
dividend income; accordingly, Rollover Unitholders also will not have such cash
distributed to pay any taxes. See "Taxation". Unitholders who do not inform the
Distribution Agent that they wish to have their Units so redeemed and liquidated
will not realize capital gains or losses due to either Special Redemption and
Rollover.
The Sponsor may for any reason, in its sole discretion, decide not to sponsor
a subsequent series of the Fund, without penalty or incurring liability to any
Unitholder. If the Sponsor so decides, the Sponsor shall notify the Unitholders
before each Special Redemption Date would have commenced. The Sponsor may modify
the terms of any subsequent series of the Fund. The Sponsor may also modify the
terms of the Special Redemption and Rollover upon notice to the Unitholders
prior to the related Rollover Notification Date.
FUND ADMINISTRATION
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SPONSOR PURCHASES OF UNITS. The Trustee shall notify the Sponsor of any Units
tendered for redemption. If the Sponsor'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 Sponsor may be tendered to the Trustee for redemption as any other
Units.
The offering price of any Units acquired by the Sponsor 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 Sponsor which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to its acquisition of such
Units.
PORTFOLIO ADMINISTRATION. The portfolios of the Fund are 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.
The Fund, however, will not be managed. The Trust Agreement, however, provides
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
a 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 a Trust, they may be accepted for deposit
in such Trust and either sold by the Trustee or held in such 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 Fund in exchange for Equity Securities) are credited to the
Capital Account for distribution to Unitholders or to pay fees and expenses of
the Trusts. Except as stated under "Trust Portfolios" for failed securities and
as provided in this paragraph, the acquisition by a 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 a Trust tendered for redemption and the payment of expenses.
To the extent practicable, the Supervisor may (but is not obligated to)
designate Securities to be sold by the Trustee in order to maintain the
proportionate relationship among the number of shares of individual issues of
Equity Securities in a Trust. To the extent this is not practicable, the
composition and diversity of the Equity Securities in such Trust may be altered.
In order to obtain the best price for a 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. In effecting purchases and sales of a Trust's
portfolio securities, the Sponsor may direct that orders be placed with and
brokerage commissions be paid to brokers, including brokers which may be
affiliated with the Trust, the Sponsor or dealers participating in the offering
of Units. In addition, in selecting among firms to handle a particular
transaction, the Sponsor may take into account whether the firm has sold or is
selling units or unit investment trusts which is sponsors.
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 a Trust then outstanding, provided that no such
amendment or waiver will reduce the interest in such 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.
An investment in Units of a Trust will terminate on the first Special
Redemption Date unless a Unitholder elects in writing to remain invested in the
Trust through the Mandatory Termination Date. On the first Rollover Notification
Date Unitholders will have the option to (i) have their Units redeemed and
reinvest the proceeds into a subsequent Series of the Trust (i.e., become
Rollover Unitholders), (ii) receive an In Kind Distribution of any U.S.-traded
Securities in such Trust (if the Unitholder owns at least 1,000 Units) or (iii)
continue to hold the Units through the Mandatory Termination Date. Unitholders
who do not affirmatively elect on the first Rollover Notification Date to become
Rollover Unitholders, to receive an In Kind Distribution or to continue to hold
Units through the Mandatory Termination Date will have their Units redeemed on
the first Special Redemption Date and will receive a cash distribution equal to
the Redemption Price per Unit on such date. To be effective, any such election
must be received by the Trustee no later than five business days prior to the
first Special Redemption Date. Unitholders who elect to remain invested in a
Trust through the Mandatory Termination Date will not receive new Units and will
not receive an interest in a new investment. Such Unitholder will continue to
hold the same Units and remain invested in the same Trust until the Mandatory
Termination Date or until such time as the Unitholder redeems the Units.
A Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of such Trust then outstanding or by the Trustee when the
value of the Equity Securities owned by a Trust, as shown by any evaluation, is
less than that amount set forth under Minimum Termination Value in the "Summary
of Essential Financial Information." A Trust will be liquidated by the Trustee
in the event that a sufficient number of Units of such Trust not yet sold are
tendered for redemption by the Sponsor, so that the net worth of such Trust
would be reduced to less than 40% of the value of the Securities at the time
they were deposited in such Trust. If a Trust is liquidated because of the
redemption of unsold Units by the Sponsor, the Sponsor will refund to each
purchaser of Units the entire sales 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.
Commencing during the period beginning nine business days prior to, and no
later than, the Mandatory Termination Date, Equity Securities will begin to be
sold in connection with the termination of the Fund. The Sponsor will determine
the manner, timing and execution of the sales of the Equity Securities. The
Sponsor shall direct the liquidation of the 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 appropriate Trust and will
include with such notice a form to enable Unitholders owning 1,000 or more Units
to request an In Kind Distribution of the U.S.-traded Securities. To be
effective, this request must be returned to the Trustee at least five business
days prior to the Mandatory Termination Date. On the Mandatory Termination Date
(or on the next business day thereafter if a holiday) the Trustee will deliver
each requesting Unitholder's pro rata number of whole shares of the U.S.-traded
Securities in a Trust to the account of the broker-dealer or bank designated by
the Unitholder at Depository Trust Company. A Unitholder in the EAFE Strategic
20 Trust may not elect an In Kind Distribution of shares of the foreign
exchange-traded Securities. The value of the Unitholder's fractional shares of
the Securities will be paid in cash. Unitholders with less than 1,000 Units,
Unitholders with 1,000 or more Units not requesting an In Kind Distribution and
Unitholders who do not elect the Rollover Option will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
following the Mandatory Termination Date. Regardless of the distribution
involved, the Trustee will deduct from the funds of the appropriate 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 a 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 each Trust his pro rata share of the balance of the Income
and Capital Accounts of such Trust.
The Sponsor currently intends to, but is not obligated to, offer for sale
units of a subsequent series of the Trusts pursuant to the Rollover Option (see
"Rights of Unitholders--Special Redemption and Rollover in New Fund"). There is,
however, no assurance that units of any new series of such Fund will be offered
for sale at that time, or if offered, that there will be sufficient units
available for sale to meet the requests of any or all Unitholders.
Within 60 days of 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
a 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.
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
Dean Witter & Co. ("MSDW").
MSDW, 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.
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. 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 September 30, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $65.3 billion of investment
products, of which over $10.85 billion is invested in municipal securities. The
Sponsor and its Van Kampen American Capital affiliates managed $54 billion of
assets, consisting of $34.3 billion for 55 open-end mutual funds (of which 45
are distributed by Van Kampen American Capital Distributors, Inc.) $14.2 billion
for 37 closed-end funds and $5.5 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 unit investment trust
division 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 portfolios. In
accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for each Trust. Such
records shall include the name and address of, and the number of Units of each
Trust held by, every Unitholder of the Fund. 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 each 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. Winston & Strawn has acted as counsel for the Trustee.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statements of condition and the
related securities portfolios 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 94:
We have audited the accompanying statements of condition and the related
portfolios of Van Kampen American Capital Equity Opportunity Trust, Series 94
as of May 11, 1998. The statements of condition and portfolios 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 irrevocable letters 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 94 as of May 11, 1998, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
May 11, 1998
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST,
SERIES 94
STATEMENTS OF CONDITION
AS OF MAY 11, 1998
STRATEGIC EAFE
PICKS STRATEGIC 20
TRUST TRUST
------------ ------------
INVESTMENTINSECURITIES
Contracts to purchase Securities(1) $ 148,624 $ 246,951
Organizational costs(2) 36,695 54,292
------------- -------------
Total $ 185,319 $ 301,243
============ =============
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities --
Accrued organizational costs (2) $ 36,695 $ 54,292
Deferred sales charge liability (3) 2,627 4,864
Interest of Unitholders --
Cost to investors (4) 150,130 249,450
Less: Gross underwriting commission (4) (5) 4,133 7,363
------------- -------------
Net interest to Unitholders (4) 145,997 242,087
------------- -------------
Total $ 185,319 $ 301,243
============= =============
- --------------------------------------------------------------------------------
(1)The aggregate value of the Securities listed under "Portfolios" herein and
their cost to each 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 separate irrevocable letters of credit of $148,624 and
$246,951 which have been deposited with the Trustee with respect to the
Strategic Picks and EAFE Strategic 20 Trusts, respectively.
(2)Each Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over one year. Organizational costs have been
estimated based on a projected Trust size of $20,000,000 and $75,000,000 for
the Strategic Picks and EAFE Strategic 20 Trusts, respectively. To the extent
a Trust is larger or smaller, the estimate will vary. Securities will be sold
to pay organizational costs.
(3)Represents the amount of mandatory distributions from a Trust on the bases
set forth under "Public Offering".
(4)The aggregate public offering price and the aggregate first year sales charge
are computed on the bases set forth under "Public Offering--General" and
"Public Offering--Sponsor and Other Compensation" and assume all single
transactions involve less than 5,000 Units. For single transactions involving
5,000 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.
(5)Assumes only the first year sales charge.
<TABLE>
<CAPTION>
STRATEGIC PICKS OPPORTUNITY TRUST, MAY 1998 SERIES
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 94)
AS OF THE INITIAL DATE OF DEPOSIT: MAY 11, 1998
- --------------------------------------------------------------------------------------------------------------------
ESTIMATED
ANNUAL COST OF
NUMBER MARKET VALUE DIVIDENDS SECURITIES
OF SHARES NAME OF ISSUER (1) PER SHARE (2) PER SHARE (2) TO TRUST (2)
- ---------- -------------------------------------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C>
205 Abbott Laboratories $ 72.500 $ 1.20 $ 14,862.50
327 American Home Products Corporation 45.313 0.86 14,817.19
374 AMP, Inc. 39.875 1.08 14,913.25
271 Campbell Soup Company 54.438 0.84 14,752.56
258 Deere &Company 57.313 0.88 14,786.63
357 General Dynamics Corporation 41.938 0.88 14,971.69
423 Genuine Parts Company 35.000 1.00 14,805.00
287 Harris Corporation 52.188 0.88 14,977.81
232 May Department Stores Company 63.500 1.27 14,732.00
318 Newell Company 47.188 0.72 15,005.63
- ------------ ------------------
3,052 $ 148,624.26
============ ==================
<CAPTION>
EAFE STRATEGIC 20 TRUST, MAY 1998 SERIES
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 94)
AS OF THE INITIAL DATE OF DEPOSIT: MAY 11, 1998
- -------------------------------------------------------------------------------------------------------------------
ESTIMATED
ANNUAL COST OF
NUMBER MARKET VALUE DIVIDENDS SECURITIES
OF SHARES NAME OF ISSUER (1) PER SHARE (2) PER SHARE (2) TO TRUST (2)
- ---------- -------------------------------------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C>
284 BASF AG $ 44.142 $ 1.24 $ 12,536.26
288 Bayer AG 43.237 1.38 12,452.38
52,000 Chinese Estates Holdings 0.256 0.03 13,286.19
2,500 CLPHoldings Limited 4.555 0.20 11,387.98
846 Elkem ASA 14.454 0.57 12,228.08
78 Escada AG 159.950 5.81 12,476.12
39 Friedrich Grohe AG 310.857 12.35 12,123.44
8,584 Guinness Anchor Bhd 1.432 0.07 12,293.19
586 Hollandsche Beton Groep N.V. 21.219 0.57 12,434.31
6,800 Hong Kong Telecommunications, Limited 1.852 0.11 12,591.94
15,213 Hume Industries Bhd 0.828 0.05 12,596.63
263 Koninklijke Hoogovens N.V. 46.953 1.41 12,348.53
183 Pernod Ricard 67.485 2.04 12,349.73
4,193 Robinson and Company, Limited 2.985 0.13 12,515.65
1,920 Rothmans Holdings, Limited 6.379 0.30 12,248.57
1,748 Rothmans of Pall Mall Bhd 7.291 0.49 12,744.17
3,513 Santos Limited 3.488 0.14 12,254.65
266 SEITA 46.378 1.42 12,336.53
2,000 Sun Hung Kai Properties, Limited 5.717 0.29 11,433.14
2,697 Telecom Corporation of New Zealand, Limited 4.565 0.29 12,313.06
- ------------ ------------------
104,001 $ 246,950.55
============ ==================
</TABLE>
NOTES TO PORTFOLIOS
- --------------------------------------------------------------------------------
(1) 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 May 8, 1998 and have
settlement dates ranging from May 12, 1998 to May 29, 1998 (see "The Fund").
(2) The market value of each of the Equity Securities is based on the closing
sale price of each Security on the applicable exchange (converted into U.S.
dollars at the offer side of the exchange rate at the Evaluation Time in the
case of the EAFE Strategic 20 Trust) on the day prior to the Initial Date of
Deposit. Estimated annual dividends are based on the most recently declared
dividends or, with respect to dividends of foreign Securities in the EAFE
Strategic 20 Trust, on the most recent interim and final dividends declared
(converted into U.S. dollars at the offer side of the exchange rate at the
Evaluation Time). Estimated annual dividends of foreign Securities in the
EAFE Strategic 20 Trust reflect the net amounts after giving effect to
foreign withholding taxes. The aggregate value of the Securities at the
Evaluation Time for the EAFE Strategic 20 Trust (based on the closing sale
price of each Security and, if applicable, converted into U.S. dollars at
the bid side of the related currency exchange rate at the Evaluation Time)
was $246,753 for the EAFE Strategic 20 Trust. This is the basis on which the
Redemption Price per Unit will be determined. The offer side exchange rates
of the Securities in the EAFE Strategic 20 Trust (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 Fund, as of the Initial Date of
Deposit (converted into U.S. dollars at the offer side of the exchange rate
at the Evaluation Time in the case of the EAFE Strategic 20 Trust), is as
follows:
AGGREGATE
PROFIT ESTIMATED
COST TO (LOSS) TO ANNUAL
SPONSOR SPONSOR DIVIDENDS
-------------- -------------- --------------
Strategic Picks Trust $ 148,291 $ 333 $ 2,899
EAFE Strategic 20 Trust $ 247,958 $ (1,007) $ 10,953
-------------------------------------------------
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 Trusts. 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 Fund or the Sponsor. 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
- --------------------------------------------------------------------------------
TITLE PAGE
----- ----
Summary of Essential Financial Information.. 4
Fee Table................................... 6
The Fund.................................... 7
Objectives and Securities Selection......... 8
Trust Portfolios............................ 10
Strategic Picks Opportunity Trust........... 14
EAFE Strategic 20 Trust..................... 19
Risk Factors................................ 26
Taxation.................................... 30
Fund Operating Expenses..................... 35
Public Offering............................. 36
Rights of Unitholders....................... 42
Fund Administration......................... 48
Other Matters............................... 52
Report of Independent Certified Public
Accountants............................... 53
Statements of Condition .................... 54
Portfolios.................................. 55
Notes to Portfolios......................... 56
- --------------
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statement 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.
- ------------------
When Units of the Trusts are no longer available, or for investors who will
reinvest into subsequent series of the Trusts, this When Units of the Trusts are
no longer available, or for investors who will reinvest into subsequent series
of the Trusts, this Prospectus may be used as a preliminary prospectus for a
future series, in which case investors would note the following:
Information contained herein is subject to completion or amendment. A
registration statement relating to securities of a future series has been filed
with the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration statement
becomes effective. The Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
- --------------------------------------------------------------------------------
MAY 11, 1998
VAN KAMPEN
AMERICAN CAPITAL
EQUITY OPPORTUNITY
TRUST, SERIES 94
STRATEGIC PICKS
OPPORTUNITY TRUST,
MAY 1998 SERIES
EAFE STRATEGIC
20 TRUST,
MAY 1998 SERIES
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this
Prospectus for future reference.
