MEMORANDUM OF CHANGES
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 103
The Prospectus filed with Amendment No. 1 of the Registration Statement
on Form S-6 has been revised to reflect information regarding the deposit of Van
Kampen American Capital Equity Opportunity Trust, Series 103 on June 16, 1998.
An effort has been made to set forth below each of the major changes and also to
reflect the same by blacklining the marked counterparts of the Prospectus
submitted with the Amendment.
Cover Page. The date of the Prospectus has been completed.
Pages 3-5 "The Summary of Essential Financial Information" section
and "Fee Table" have been completed.
Pages 8-10. The "Trust Portfolio" section has been complted.
Pages 34-37. The Report of Independent Certified Public Accountants
and Statement of Condition have been completed.
The "Portfolio" and the "Notes to Portfolio" sections have been completed.
<PAGE>
FILE NO. 333-55931
CIK #1025249
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: VAN KAMPEN AMERICAN CAPITAL EQUITY
OPPORTUNITY TRUST, SERIES 103
B. Name of Depositor: VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
CHAPMAN AND CUTLER VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of undivided beneficial interest.
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT
/ X / Check box if it is proposed that this filing will become effective a
- ---- 2:00 p.m. on June 16, 1998 pursuant to Rule 487.
<PAGE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST
SERIES 103
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(C) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION
1 AS TO PROSPECTUS ON FORM S-6)
<TABLE>
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
<CAPTION>
I. ORGANIZATION AND GENERAL INFORMATION
<S> <C>
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
<PAGE>
<CAPTION>
II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
<S> <C>
10. General information regarding ) The Trust
trust's securities and ) Federal Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) *
underwriter, trustee or any ) Trust Portfolio
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special Trusts ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
<CAPTION>
III. ORGANIZATION, PERSONNEL AND AFFILIATED
PERSONS OF DEPOSITOR
<S> <C>
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
<CAPTION>
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
<S> <C>
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
<CAPTION>
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
<S> <C>
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
<CAPTION>
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
<S> <C>
51. Insurance of holders of trust's ) Cover Page
securities ) Trust Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Trustamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Federal Taxation
<CAPTION>
VII. FINANCIAL AND STATISTICAL INFORMATION
<S> <C>
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent Certified
1(c) to Form S-6) ) Public Accountants
) Statement of Condition
- ----------------------------------------------
* Inapplicable, omitted, answer negative or not required
</TABLE>
<PAGE>
June 16, 1998
VAN KAMPEN AMERICAN CAPITAL
FINANCIAL SERVICES TRUST, SERIES 1
- --------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital Equity Opportunity Trust, Series 103
(the "Fund") is comprised of one unit investment trust, Financial Services
Trust, Series 1 (the "Trust"). The Trust offers investors the opportunity to
purchase Units representing proportionate interests in a fixed portfolio of
equity securities diversified within the financial services industry ("Equity
Securities" or "Securities"). See "Trust Portfolio". Unless terminated earlier,
the Trust will terminate on June 20, 2000 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.
ATTENTION FOREIGN INVESTORS. If you are not a United States citizen or
resident, distributions 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. See "Federal
Taxation." Such investors should consult their tax advisers regarding the
imposition of U.S.
withholding on distributions.
OBJECTIVE OF THE TRUST. The objective of the Trust is to provide the
potential for capital appreciation by investing in a portfolio of equity
securities diversified within the financial services industry. See "Objective
and Securities Selection." There is, of course, no guarantee that the objective
of the Trust will be achieved.
PUBLIC OFFERING PRICE. The Public Offering Price of the Units of the Trust
includes the aggregate underlying value of the Securities in the Trust's
portfolio, an intial sales charge and cash, if any, in the Income and Capital
Accounts held or owned by the Trust. The initial sales charge is computed as
described under "Public Offering--General". Unitholders will also be subject to
a deferred sales charge described under "Public Offering--General". During the
initial offering period, the sales charge is reduced on a graduated scale for
sales involving at least 10,000 Units. If Units were available for purchase at
the close of business on the day before the Initial Date of Deposit, the Public
Offering Price per Unit would have been that amount set forth under "Summary of
Essential Financial Information". For sales charges in the secondary market, see
"Public Offering". 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 Trust as provided
under "The Trust."
Units of the Trust are not insured by the FDIC, are not deposits or other
obligations of, or guaranteed by, any depository institution or any government
agency and are subject to investment risk, including possible loss of the
principal amount invested.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DIVIDEND AND CAPITAL DISTRIBUTIONS. Distributions of dividends and capital,
if any, received by the Trust will be paid in cash on the applicable
Distribution Date to Unitholders of record on the record date as set forth in
the "Summary of Essential Financial Information." The initial estimated
distribution will be $.04 per Unit and will be made on December 25, 1998 to
Unitholders of record on December 10, 1998. Gross dividends received by the
Trust will be distributed to Unitholders. Expenses of the Trust will be paid
with proceeds from the sale of Securities. For the consequences of such sales,
see "Federal Taxation". Additionally, upon termination of the Trust, the Trustee
will distribute, upon surrender of Units for redemption, to each Unitholder his
pro rata share of the Trust's assets, less expenses, in the manner set forth
under "Rights of Unitholders--Distributions of Income and Capital."
SECONDARY MARKET FOR UNITS. After the initial offering period, although not
obligated to do so, the Sponsor intends to maintain a market for Units of the
Trust and offer to repurchase such Units at prices which are based on the
aggregate underlying value of Equity Securities in the Trust (generally
determined by the closing sale or bid prices of the Securities) plus or minus
cash, if any, in the Capital and Income Accounts of the Trust. If a secondary
market is maintained during the initial offering period, the prices at which
Units will be repurchased will be based upon the aggregate underlying value of
the Equity Securities in the Trust (generally determined by the closing sale or
asked prices of the Securities) plus or minus cash, if any, in the Capital and
Income Accounts of the Trust. If a secondary market is not maintained, a
Unitholder may redeem Units through redemption at prices based upon the
aggregate underlying value of the Equity Securities in the Trust plus or minus a
pro rata share of cash, if any, in the Capital and Income Accounts of the Trust.
A Unitholder tendering 1,000 or more Units for redemption may request a
distribution of shares of Securities (reduced by customary transfer and
registration charges) in lieu of payment in cash. See "Rights of
Unitholders--Redemption of Units."
TERMINATION. Commencing on the Mandatory Termination Date Equity Securities
will begin to be sold in connection with the termination of the Trust. The
Sponsor will determine the manner, timing and execution of the sale of the
Equity Securities. Written notice of any termination of the Trust specifying the
time or times at which Unitholders may surrender their certificates for
cancellation shall be given by the Trustee to each Unitholder at his address
appearing on the registration books of the Trust maintained by the Trustee. At
least 30 days prior to the Mandatory Termination Date the Trustee will provide
written notice thereof to all Unitholders and will include with such notice a
form to enable Unitholders to elect a distribution of shares of Equity
Securities if such Unitholder owns at least 1,000 Units of the Trust, rather
than to receive payment in cash for such Unitholder's pro rata share of the
amounts realized upon the disposition by the Trustee of Equity Securities. All
Unitholders will receive cash in lieu of any fractional shares. To be effective,
the election form, together with surrendered certificates if issued, and other
documentation required by the Trustee, must be returned to the Trustee at least
five business days prior to the Mandatory Termination Date. Unitholders not
electing a distribution of shares of Equity Securities will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
after the Trust is terminated. See "Trust Administration--Amendment or
Termination."
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 also have the opportunity to have their distributions
reinvested into additional Units of the Trust, if Units are available at the
time of reinvestment, or into an open-end management investment company as
described herein. See "Rights of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in the Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of the
financial condition of the issuers, the general condition of the stock market,
volatile interest rate and risks related to the financial services industry. See
"Risk Factors."
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 103
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AT THE CLOSE OF BUSINESS ON THE DAY BEFORE THE INITIAL DATE OF DEPOSIT: JUNE 15, 1998
SPONSOR: VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
SUPERVISOR: VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
EVALUATOR: AMERICAN PORTFOLIO EVALUATION SERVICES
(A DIVISION OF AN AFFILIATE OF THE SPONSOR)
TRUSTEE: THE BANK OF NEW YORK
<S> <C>
Number of Units (1) 14,805
Fractional Undivided Interest in the Trust per Unit (1) 1/14,805
Public Offering Price:
Aggregate Value of Securities in Portfolio (2) $ 146,563
Aggregate Value of Securities per Unit $ 9.900
Maximum Sales Charge (3) $ .325
Less Deferred Sales Charge per Unit $ .225
Public Offering Price Per Unit (3)(4) $ 10.000
Redemption Price per Unit (5) $ 9.675
Secondary Market Repurchase Price per Unit (5) $ 9.675
Excess of Public Offering Price per Unit over Redemption Price per Unit $ .325
Supervisor's Annual Supervisory Fee Maximum of $.0025 per Unit
Evaluator's Annual Evaluation Fee Maximum of $.0025 per Unit
Evaluation Time Close of the New York Stock Exchange
Mandatory Termination Date June 20, 2000
Minimum Termination Value The Trust may be terminated if the net asset value of the Trust is less than
$500,000 unless the net asset value of the Trust 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.
Estimated Annual Dividends per Unit (6) $.09558
Trustee's Annual Fee and Miscellaneous Expense
per Unit $.01107
Estimated Annual Organizational Expenses per
Unit (7) $.01241
Income and Capital Account Record Dates June 10 and December 10
Income and Capital Account Distribution Dates June 25 and December 25
- --------------------------------------------------------------------------------
(1)As of the close of business on any day on which the Sponsor is the sole
Unitholder of the Trust, the number of Units may be adjusted so that the
Public Offering Price per Unit will equal approximately $10. Therefore, to
the extent of any such adjustment the fractional undivided interest per Unit
will increase or decrease from the amount indicated above.
(2)Each Equity Security listed on a national securities exchange is valued at
the closing sale price or, if the Equity Security is not listed, at the
closing ask price thereof.
(3)The Maximum Sales Charge consists of an initial sales charge and a deferred
sales charge. The initial sales charge is applicable to all Units and
represents an amount equal to the difference between the total sales charge
(3.25% of the Public Offering Price) and the amount of the deferred sales
charge ($0.225 per Unit). Unitholders will also be subject to a deferred
sales charge equal to $0.225 per Unit. Subsequent to the Initial Date of
Deposit, the amount of the initial sales charge will vary with changes in the
aggregate value of the Securities. Units purchased subsequent to the initial
deferred sales charge payment will be subject only to that portion of the
deferred sales charge payment not yet collected. These deferred sales charge
payments will be paid from funds in the Capital Account, if sufficient, or
from the periodic sale of Securities. See the "Fee Table" below and "Public
Offering--General". 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.
(4)Commencing on June 16, 1999, the secondary market sales charge will not
include a deferred sales charge but will instead include only a one-time
sales charge of 2.75% of the Public Offering Price. See "Public Offering."
(5)The Redemption Price per Unit and the Secondary Market Repurchase Price per
Unit are reduced by the unpaid portion of the deferred sales charge.
(6)Estimated annual dividends are based on annualizing the most recently
declared dividends. 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)The Trust (and therefore Unitholders) 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 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 material and any other selling expenses) as is common
for mutual funds. Total organizational expenses will be amortized over the
life of the Trust. See "Trust Operating Expenses" and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
</TABLE>
FEE TABLE
- --------------------------------------------------------------------------------
This Fee Table is intended to assist investors in understanding the
costs and expenses that an investor in the Trust will bear directly or
indirectly. See "Public Offering--General" and "Trust Operating Expenses".
Although the 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.
Investors should note that while the example is based on the public offering
price and the estimated fees for the Trust, the actual public offering price and
fees could vary.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT PER
100 UNITS
-----------
UNITHOLDER TRANSITION EXPENSES (AS A PERCENTAGE OF OFFERING PRICE)
<S> <C> <C>
Initial Sales Charge Imposed on Purchase (1) 1.00% $ 10.00
Deferred Sales Charge (2) 2.25% $ 22.50
-------- -----------
Total Sales Charge 3.25% $ 32.50
======== ===========
Maximum Sales Charge Imposed on Reinvested Dividends (3) 2.25% $ 22.50
======== ===========
ESTIMATED ANNUAL TRUST OPERATING EXPENSES (AS A PERCENTAGE OF AGGREGATE VALUE)
Trustee's Fee 0.081% $ 0.80
Portfolio Supervision and Evaluation Fees 0.051% $ 0.50
Organizational Costs 0.125% $ 1.24
Other Operating Expenses 0.031% $ 0.31
-------- -----------
Total 0.288% $ 2.85
======== ===========
<CAPTION>
EXAMPLE
CUMULATIVE EXPENSES PAID FOR PERIOD OF:
- --------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the
end of each time period $35 $41 N/A N/A
The example assumes reinvestment of all dividends and distributions at the
end of each year and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations applicable to mutual funds. For
purpose of the example, the deferred sales charge imposed on reinvestment of
dividends is not reflected until the year following payment of the dividend; the
cumulative expenses would be higher if sales charges on reinvested dividends
were reflected in the year of reinvestment. The example should not be considered
as a representation of past or future expenses or annual rate of return; the
actual expenses and annual rate of return may be more or less than those assumed
for purposes of the example.
- --------------------------------------------------------------------------------
(1)The Initial Sales Charge is actually the difference between the Total Sales
Charge (3.25%) of the Public Offering Price and the Deferred Sales Charges
($0.225 per Unit) and would exceed 1.00% if the Public Offering Price exceeds
$10 per Unit.
(2)The actual deferred sales charge is $0.225 per Unit, irrespective of purchase
or redemption price. If a Unitholder sells or redeems Units before all of the
deferred sales charge payments have been deducted, the balance of the
remaining payments 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 2.25%; if Unit price is less than $10 per Unit, the
deferred portion of the sales charge will exceed 2.25%. 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.
(3)Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment. See "Rights of
Unitholders--Reinvestment Option".
</TABLE>
THE TRUST
- --------------------------------------------------------------------------------
Van Kampen American Capital Equity Opportunity Trust, Series 103 is comprised
of one unit investment trust, Financial Services Trust, Series 1. The Trust was
created under the laws of the State of New York pursuant to a Trust Indenture
and Agreement (the Agreement"), dated the date of this Prospectus (the "Initial
Date of Deposit"), among Van Kampen American Capital Distributors, Inc., as
Sponsor, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., as Evaluator, Van Kampen American
Capital Investment Advisory Corp., as Supervisor, and The Bank of New York, as
Trustee.
The Trust offers investors the opportunity to purchase Units representing
proportionate interests in a portfolio of actively traded equity securities
diversified within the financial services industry. Diversification of assets in
the Trust will not eliminate the risk of loss always inherent in the ownership
of securities.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio" herein, including delivery statements
relating to contracts for the purchase of certain such Securities and an
irrevocable letter of credit issued by a financial institution in the amount
required for such purchases. Thereafter, the Trustee, in exchange for such
Securities (and contracts) so deposited, delivered to the Sponsor documentation
evidencing the ownership of that number of Units of the Trust indicated in
"Summary of Essential Financial Information." Unless otherwise terminated as
provided in the Trust Agreement, the Trust will terminate on the Mandatory
Termination Date and Securities then held will within a reasonable time
thereafter be liquidated or distributed by the Trustee.
Additional Units of the Trust may be issued at any time by depositing in the
Trust (i) additional Securities, (ii) contracts to purchase securities together
with cash or irrevocable letters of credit or (iii) cash (or a letter of credit)
with instructions to purchase additional Securities. As additional Units are
issued by the Trust as a result of the deposit of additional Securities, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Securities or
cash with instructions to purchase Securities into the Trust following the
Initial Date of Deposit, provided that such additional deposits will be in
amounts which will maintain, as nearly as practicable, the same percentage
relationship among the number of shares of each Equity Security in the Trust's
portfolio that existed immediately prior to any such subsequent deposit,
however, for the first 90 days any such deposit shall replicate, as nearly as
practicable, the original proportionate relationship among the Equity securities
based on market value. Any deposit of additional Equity Securities will
duplicate, as nearly as is practicable, this actual proportionate relationship
and not the original proportionate relationship on the Initial Date of Deposit,
since the actual proportionate relationship may be different than the original
proportionate relationship. Any such difference may be due to the sale,
redemption or liquidation of any of the Equity Securities deposited in the Trust
on the Initial, or any subsequent, Date of Deposit. Existing and new investors
may experience a dilution of their investments and a reduction in their
anticipated income because of fluctuations in the prices of the Securities
between the time of the cash deposit and the purchase of the Securities and
because the Trust will pay the associated brokerage fees.
Each Unit of the Trust initially offered represents an undivided
interest in the Trust. To the extent that any Units are redeemed by the Trustee
or additional Units are issued as a result of additional Securities being
deposited by the Sponsor, the fractional undivided interest in the Trust
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor, or until the
termination of the Trust Agreement.
OBJECTIVE AND SECURITIES SELECTION
- --------------------------------------------------------------------------------
The objective of the Trust is to provide the potential for capital
appreciation. The portfolio is described under "Trust Portfolio" and in
"Portfolio". The Sponsor believes that the financial services industry is
attractive based on the following factors: The earnings per share growth rate
for financial services companies is above that for the Standard & Poor's 500
Index. The growth rate and return on equity for financial services companies are
currently higher than those of the Standard & Poor's 500 Index. In addition, the
possibility for mergers within the industry may allow for cost savings and
better pricing for certain companies. Despite the current growth and return on
equity, the Sponsor believes that many financial services stocks are relatively
undervalued compared to the Standard & Poor's 500 Index. Financial services
companies may also be less exposed to economic difficulties in Asia than certain
other issuers. A variety of industry factors may also contribute to future
growth in this sector such as an increased number of consolidations and mergers,
relatively stable interest rates, low inflation expectations, expansion of
lending products, consumer confidence, increased consumer spending, demand for
lending products, growth in credit cards, strong credit quality, growth in
electronic commerce and an increase in transaction volume due to technology
improvements. Of course, there can be no assurance that financial services
companies will continue to exhibit current growth rates or return on equity or
that they will outperform the Standard & Poor's 500 Index over any period.
A balanced investment portfolio includes investments with a diversification
of style and capitalization characteristics. The Sponsor considers the Trust to
be a large-cap value investment. The Sponsor offers unit investment trusts with
a variety of styles and capitalizations to meet the needs of investors. Style
characteristics (growth or value) are determined by the Sponsor based on the
criteria used in selecting a trust portfolio. Generally, a growth portfolio
includes companies in a growth phase of their business with increasing earnings
and a value portfolio includes companies with low relative price-earnings ratios
which the Sponsor believes are undervalued. Market capitalizations are
determined as follows based on the weighted median market capitalization of a
portfolio on the Initial Date of Deposit: small-cap-less than $1 billion;
mid-cap-$1 billion to $5 billion; and large-cap-over $5 billion. All style and
capitalization characteristics are determined as of the Initial Date of Deposit
and may vary thereafter. A Security will not be removed from the Trust as a
result of any change in characteristics after the Initial Date of Deposit.
An investment in common stocks may provide the potential for long-term
capital appreciation and income that can be used to supplement wages and help
offset the effects of inflation. When compared to other investment classes, the
long-term performance of stocks has historically outperformed investments such
as Treasury bills and long-term U.S. government bonds. Of course, past
performance is no guarantee of future results and the value of the Securities
may increase or decrease over the life of the Trust.
GENERAL. An investor will be subject to taxation on the dividend income
received from the Trust and on gains from the sale or liquidation of Securities
(see "Federal Taxation"). Investors should be aware that there is not any
guarantee that the objectives of the Trust will be achieved because they are
subject to the continuing ability of the respective Security issuers to continue
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 Equity Securities will pay
dividends on outstanding common shares. Any distributions 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.
Investors should note that the above criteria were applied to the Equity
Securities selected for inclusion in the Trust as of the Initial Date of
Deposit. Subsequent to the Initial Date of Deposit, the Securities may no longer
meet such criteria. Should an Equity Security no longer meet such criteria, such
Equity Security will not, simply as a result of such fact, be removed from the
portfolio of the Trust.
Investors should be aware that the Trust is not a "managed" fund and as
a result the adverse financial condition of a company will not result in its
elimination from the portfolio except under extraordinary circumstances (see
"Trust Administration--Portfolio Administration"). In addition, Securities will
not be sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Investors should note in particular that the
Securities were selected by the Sponsor as of the Initial Date of Deposit. The
Trust may continue to purchase or 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 Trust.
TRUST PORTFOLIO
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The Trust consists of 28 different issues of Equity Securities. All of the
Equity 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 included in the
Trust.
AFLAC, Inc. AFLAC, Inc. is an international holding company. The company,
through its principal subsidiary American Family Life Assurance Company,
provides supplemental insurance at the work site in the United States and Japan.
Allmerica Financial Corporation. Allmerica Financial Corporation, a holding
company, markets insurance and retirement savings products and services to
individual and institutional clients. The company also offers property and
casualty insurance products, primarily through independent agents. Allmerica's
risk management also includes a group managed health business that offers
employee benefit solutions.
Ambac Financial Group, Inc. Ambac Financial Group, Inc., a holding company,
provides financial guarantee insurance and financial management services. The
company, through its subsidiary Ambac Assurance Corporation, insures municipal
and structured finance obligations. Ambac provides investment agreements,
interest rate swaps, investment management advisory, cash management, fund
administration, and more.
Associates First Capital Corporation. Associates First Capital Corporation
provides finance, leasing, and related services to individual consumers and
businesses in the United States and internationally. The company offers both
consumer and commercial financing products and services.
Bear Stearns Companies, Inc. Bear Stearns Companies, Inc., through its
subsidiary Bear Stearns & Co. Inc., offers investment banking and securities
trading and brokerage services. The company's business includes corporate
finance and mergers and acquisitions, institutional equities and fixed income
sales and trading, private client services, and more. Clients include
governments, corporations, and individuals.
CIT Group, Inc. CIT Group, Inc. is a diversified finance organization
offering secured commercial and consumer financing to smaller, middle-market,
and larger businesses and to individuals through a nationwide distribution
network. The company operates business units that focus on specific industries,
asset types, and markets which are balanced by client and industry
diversification.
CMAC Investment Corporation. CMAC Investment Corporation is a holding company
for Commonwealth Mortgage Assurance Company, which provides private mortgage
insurance coverage. The coverage is provided to residential mortgage lenders,
including mortgage bankers, mortgage brokers, commercial banks, and savings
institutions throughout the United States.
Conseco, Inc. Conseco, Inc., a financial services holding company, develops,
markets, and administers supplemental health insurance, annuity, life insurance,
individual and group major medical insurance, and other insurance products. The
company's insurance products are marketed in all 50 states, the District of
Columbia, and certain protectorates of the United States.
Everest Reinsurance Holdings, Inc. Everest Reinsurance Holdings, Inc.,
through its wholly owned subsidiary, Everest Reinsurance Company, provides
treaty and facultative reinsurance to property and casualty insurance companies
in the United States and selected international markets.
Fannie Mae. Fannie Mae buys and holds mortgages, and issues and sells
guaranteed mortgage-backed securities to facilitate housing ownership for low-
to middle-income Americans. The company was chartered by the United States
Congress, but went public in 1970.
Financial Security Assurance Holdings, Ltd. Financial Security Assurance
Holdings Ltd., through its wholly-owned subsidiary Financial Security Assurance
Inc., provides financial guaranty insurance on asset-backed and municipal
obligations. The company operates throughout the entire United States and Puerto
Rico. Financial Security Assurance, through its other subsidiaries, provides
insurance and manages investment portfolios.
Freddie Mac. Freddie Mac is a stockholder owned corporation established by
the United States Congress to facilitate funds availability to mortgage lenders.
The company buys mortgages from lenders throughout the United States, and then
pools and packages them as securities to sell to investors.
Frontier Insurance Group, Inc. Frontier Insurance Group, Inc. is an insurance
holding company. The company, through its subsidiaries, is a national
underwriter and creator of specialty insurance products serving the needs of the
insured in niche markets.
Hartford Life, Inc. Hartford Life, Inc. is an insurance and financial
services company. The company provides annuity products, life insurance, and
employee benefits products such as group life and group disability insurance.
Hartford operates in the United States.
LandAmerica Financial Group, Inc. LandAmerica Financial Group, Inc. is the
holding company for Commonwealth Land Title Insurance Company, Lawyers Title
Insurance Corporation, and Transnation Title Insurance Company. The company
offers a full line of title insurance services to residential and commercial
customers in the United States, Canada, and the Caribbean.
Liberty Financial Companies, Inc. Liberty Financial Companies, Inc. is an
integrated asset accumulation and management organization. The company manages
assets on behalf of investors worldwide through an array of fixed, variable, and
indexed annuities; private and institutional accounts; and 75 mutual funds.
Loews Corporation. Loews Corporation is a holding company which, through its
subsidiaries, produces, sells and distributes cigarettes, watches and clocks.
The company is also involved in insurance and the operation of hotels and
offshore oil and gas rigs.
MBIA, Inc. MBIA, Inc. is the holding company for MBIA Insurance Corporation,
a financial guarantor. The company's primary business is insuring municipal
bonds issued by governmental units to finance public services. In addition, MBIA
guarantees structured asset-backed and mortgage-backed transactions, selected
corporate bonds, and offers investment management products and services to the
public.
MGIC Investment Corporation. MGIC Investment Corporation, through its
subsidiary, provides private mortgage insurance coverage in the United States.
The company's customers include thrifts, mortgage bankers and brokers,
commercial banks, credit unions, and other lending institutions. The company
also provides, through other subsidiaries, underwriting and contract services
related to home mortgage lending.
Nationwide Financial Services, Inc. Nationwide Financial Services, Inc. is
the holding company for the long-term savings operations of Nationwide Insurance
Enterprise. Nationwide Insurance is a diversified financial services
organization led by Nationwide Mutual, which owns 81.5% of Nationwide Financial.
Through its primary subsidiary, the company provides retirement and long-term
savings insurance products in the United States.
Old Republic International Corporation. Old Republic International
Corporation is an insurance holding company whose subsidiaries market,
underwrite, and provide risk management and reinsurance services for a variety
of coverages in the property and liability, mortgage guaranty, title, life, and
health fields.
Providian Financial Corporation. Providian Financial Corporation provides
lending and deposit products to customers nationwide. The company serves a
broad, diversified market with loan products including credit cards, home loans
and secured credit cards.
ReliaStar Financial Corporation. ReliaStar Financial Corporation is a holding
company that specializes in life insurance and related financial services
businesses. Through its subsidiaries, the company provides and distributes
individual life insurance and annuities, employee benefit products and services,
life and health insurance, retirement plans, mutual funds, residential
mortgages, and personal finance education.
Stewart Information Services Corporation. Stewart Information Services
Corporation, through its subsidiaries, writes title insurance. The company
issues insurance policies through approximately 3,800 locations throughout the
United States and several international markets. Stewart also markets real
estate information services and products and outsourcing to the real estate and
mortgage industry.
Torchmark Corporation. Torchmark Corporation is an insurance and financial
services holding company. The company's subsidiaries offer life and health
insurance, personal financial planning, and mutual fund management through its
Waddell and Reed subsidiary. Torchmark is licensed to sell insurance in all 50
states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, New
Zealand, and Canada.
Travelers Group, Inc. Travelers Group, Inc. is a diversified financial
services holding company that provides investment services, including asset
management; consumer finance services; property and casualty insurance services;
and life insurance services. The company's subsidiaries include Salomon Smith
Barney Holdings Inc., Commercial Credit Company, Travelers Property & Casualty
Corp., and other companies.
United Asset Management Corporation. United Asset Management Corporation is a
holding company which acquires and owns institutional investment management
firms. The company's affiliates manage investment portfolios for corporate
benefit plans, mutual funds, government and union benefit plans, individuals,
endowments, and foundations. United Asset provides its services to customers in
the United States and internationally.
UNUM Corporation. UNUM Corporation, through its subsidiaries, offers group
long term disability insurance in North America and the United Kingdom. The
corporation also provides other employee benefits, including group life
insurance, short term disability, long term care insurance, and payroll-deducted
voluntary benefits. UNUM has offices in the United States, Canada, the United
Kingdom, the Pacific Rim, Europe, and South America.
GENERAL. The Trust consists of (a) the Securities listed under "Portfolio" as
may continue to be held from time to time in the Trust, (b) any additional
Securities acquired and held by the Trust pursuant to the provisions of the
Trust Agreement and (c) any cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way for any failure
in any of the Securities. However, should any contract for the purchase of any
of the Securities initially deposited hereunder fail, the Sponsor will, unless
substantially all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Securities in accordance with the Trust Agreement,
refund the cash and sales charge attributable to such failed contract to all
Unitholders on the next distribution date.
Because certain of the Equity Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from such
events will in most cases be distributed to Unitholders and will not be
reinvested, no assurance can be given that the Trust will retain for any length
of time its present size and composition. Although the portfolio is not managed,
the Sponsor may instruct the Trustee to sell Equity Securities under certain
limited circumstances. See "Trust Administration--Portfolio Administration."
Equity Securities, however, will not be sold by the Trust to take advantage of
market fluctuations or changes in anticipated rates of appreciation or
depreciation.
RISK FACTORS
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An investment in Units 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, global or
regional political, economic or banking crises. Shareholders of common stocks
have rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or preferred stocks of, such issuers. Shareholders of common stocks of the type
held by the Trust have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and have a right to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. Common stocks do not
represent an obligation of the issuer and, therefore, do not offer any assurance
of income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends which could
adversely affect the ability and inclination of the issuer to declare or pay
dividends on its common stock or the rights of holders of common stock with
respect to assets of the issuer upon liquidation or bankruptcy. The value of
common stocks is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Equity Securities in the portfolio
may be expected to fluctuate over the life of the Trust to values higher or
lower than those prevailing on the Initial Date of Deposit or at the time a
Unitholder purchases Units.
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 Trust 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 redemptions, and the value of the Trust, will be
adversely affected if trading markets for the Equity Securities are limited or
absent.
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
(or 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 "Trust Operating Expenses," all of
the expenses of the Trust will be paid from the sale of Securities from the
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 and 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 "Federal Taxation."
Unitholders will be unable to dispose of any of the Equity Securities in the
portfolio, as such, and will not be able to vote the Equity Securities. As the
holder of the Equity Securities, the Trustee will have the right to vote all of
the voting stocks in the Trust and will vote such stocks in accordance with the
instructions of the Sponsor. 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 shares held by owners other than the Trust.
Like other investment companies, financial and business organizations and
individuals around the world, the Trust could be adversely affected if the
computer systems used by the Sponsor, Evaluator, Supervisor or Trustee or other
service providers to the Trust 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
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 Trust.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of Equity Securities contained in the Trust, 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 Trust.
FINANCIAL SERVICES ISSUERS. The Trust is concentrated in issuers within the
financial services industry. A portfolio concentrated in a single industry may
present more risk than a portfolio broadly diversified over several industries.
The Trust, and therefore Unitholders, may be particularly susceptible to a
negative impact resulting from adverse market conditions or other factors
affecting financial services issuers because any negative impact on the
financial services industry will not be diversified among issuers within other
unrelated industries. Accordingly, an investment in Units should be made with an
understanding of the characteristics of the financial services industry and the
risks which such an investment may entail.
An investment in Units should be made with an understanding of the problems
and risks inherent in the insurance sector. Companies involved in the insurance
industry are engaged in underwriting, reinsuring, selling, distribution or
placing of property and casualty, life or health insurance. Other growth areas
within the insurance industry include brokerage, reciprocals, claims processors
and multiline insurance companies. Multiline insurance companies provide
property and casualty coverage, as well as life and health insurance. The Trust
may also invest in diversified financial companies with subsidiaries (including
insurance brokerage, reciprocals and claims processors) engaged in underwriting,
reinsuring, selling, distributing or placing insurance with independent third
parties.
Insurance company profits are affected by interest rate levels, general
economic conditions, and price and marketing competition. Property and casualty
insurance profits may also be affected by weather catastrophes and other
disasters. Life and health insurance profits may be affected by morality and
morbidity rates. Individual companies may be exposed to material risks including
reserve inadequacy and the inability to collect from reinsurance carriers.
Insurance companies are subject to extensive governmental regulation, including
the imposition of maximum rate levels, which may not be adequate for some lines
of business. Proposed or potential tax law changes may also adversely affect
insurance companies' policy sales, tax obligations, and profitability. In
addition to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressures to compete globally.
In addition to the normal risks of business, companies involved in the
insurance industry are subject to significant risk factors, including those
applicable to regulated insurance companies, such as: (i) the inherent
uncertainty in the process of establishing property-liability loss reserves,
particularly reserves for the cost of environmental, asbestos and mass tort
claims, and the fact that ultimate losses could materially exceed established
loss reserves which could have a material adverse effect on results of
operations and financial condition; (ii) the fact that insurance companies have
experienced, and can be expected in the future to experience, catastrophe losses
which could have a material adverse impact on their financial condition, results
of operations and cash flow; (iii) the inherent uncertainty in the process of
establishing property-liability loss reserves due to changes in loss payment
patterns caused by new claims settlement practices; (iv) the need for insurance
companies and their subsidiaries to maintain appropriate levels of statutory
capital and surplus, particularly in light of continuing scrutiny by rating
organizations and state insurance regulatory authorities, and in order to
maintain acceptable financial strength or claims-paying ability rating; (v) the
extensive regulation and supervision to which insurance companies' subsidiaries
are subject, various regulatory initiatives that may affect insurance companies,
and regulatory and other legal actions; (vi) the adverse impact that increases
in interest rates could have on the value of an insurance company's investment
portfolio and on the attractiveness of certain of its products; (vii) the need
to adjust the effective duration of the assets and liabilities of life insurance
operations in order to meet the anticipated cash flow requirements of its
policyholder obligations; and (viii) the uncertainty involved in estimating the
availability of reinsurance and the collectibility of reinsurance recoverables.
The state insurance regulatory framework has, during recent years, come under
increased federal scrutiny, and certain state legislatures have considered or
enacted laws that alter and, in many cases, increase state authority to regulate
insurance companies and insurance holding company systems. Further, the National
Association of Insurance Commissioners ("NAIC") and state insurance regulators
are re-examining existing laws and regulations, specifically focusing on
insurance companies, interpretations of existing laws and the development of new
laws. In addition, Congress and certain federal agencies have investigated the
condition of the insurance industry in the United States to determine whether to
promulgate additional federal regulation. The Sponsor is unable to predict
whether any state or federal legislation will be enacted to change the nature or
scope of regulation of the insurance industry, or what effect, if any, such
legislation would have on the industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the amount of
investments in certain investment categories. Failure to comply with these laws
and regulations would cause non-conforming investments to be treated as
non-admitted assets for purposes of measuring statutory surplus and, in some
instances, would require divestiture. Environmental pollution clean-up is the
subject of both federal and state regulation. By some estimates, there are
thousands of potential waste sites subject to clean up. The insurance industry
is involved in extensive ligation regarding coverage issues. The Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("Superfund") and
comparable state statutes ("mini-Superfund") govern the clean-up and restoration
by "Potentially Responsible Parties" ("PRP's"). Superfund and the
mini-Superfunds ("Environmental Clean-up Laws or "ECLs") establish a mechanism
to pay for clean-up of waste sites if PRP's fail to do so, and to assign
liability to PRP's. The extent of liability to be allocated to PRP is dependent
on a variety of factors. Further, the number of waste sites subject to clean-up
is unknown. Very few sites have been subject to clean-up to date. The extent of
clean-up necessary and the assignment of liability has not been established. The
insurance industry is disrupting many such claims. Key coverage issues include
whether Superfund response costs are considered damages under the policies, when
and how coverage is triggered, applicability of pollution exclusions, the
potential for joint and several liability and definition of an occurrence.
Similar coverage issues exist for clean up and waste sites not covered under
Superfund. To date, courts have been inconsistent in their rulings on these
issues. An insurer's exposure to liability with regard to its insureds which
have been, or may be, named as PRPs is uncertain. Superfund reform proposals
have been introduced in Congress, but none have been enacted. There can be no
assurance that any Superfund reform legislation will be enacted or that any such
legislation will provide for a fair, effective and cost-efficient system for
settlement of Superfund related claims.
Proposed federal legislation which would permit banks greater participation
in the insurance business could, if enacted, present an increased level of
competition for the sale of insurance products. In addition, while current
federal income tax law permits the tax-deferred accumulation of earnings on the
premiums paid by an annuity owner and holders of certain savings-oriented life
insurance products, no assurance can be given that future tax law will continue
to allow such tax deferrals. If such deferrals were not allowed, consumer demand
for the affected products would be substantially reduced. In addition, proposals
to lower the federal income tax rates through a form of flat tax or otherwise
could have, if enacted, a negative impact on the demand for such products.
An investment in Units should also be made with an understanding of the
problems and risks of companies engaged in investment banking/brokerage and
investment management. Such companies include brokerage firms, broker/dealers,
investment banks, finance companies and mutual fund companies. Earnings and
share prices of companies in this industry are quite volatile, and often exceed
the volatility levels of the market as a whole. Recently, ongoing consolidation
in the industry and the strong stock market has benefited stocks which investors
believe will benefit from greater investor and issuer activity. Major
determinants of future earnings of these companies are the direction of the
stock market, investor confidence, equity transaction volume, the level and
direction of long-term and short-term interest rates, and the outlook for
emerging markets. Negative trends in any of these earnings determinants could
have a serious adverse effect on the financial stability, as well as the stock
prices, of these companies. Furthermore, there can be no assurance that the
issuers of the Equity Securities will be able to respond in a timely manner to
compete in the rapidly developing marketplace. In addition to the foregoing,
profit margins of these companies continue to shrink due to the commoditization
of traditional businesses, new competitors, capital expenditures on new
technology and the pressures to compete globally.
FEDERAL TAXATION
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The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986 (the "Code"). Unitholders should consult their
tax advisers in determining the federal, state, local and any other tax
consequences of the purchase, ownership and disposition of Units in the Trust.
For purposes of the following discussion and opinions, it is assumed that each
Equity Security is equity for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of the
Trust will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his pro rata share of income
derived from each Trust asset when such income is considered to be received by
the Trust.
2. A Unitholder will be considered to have received all of the dividends paid
on his pro rata portion of
each Equity Security when such dividends are considered to be received by the
Trust regardless of whether such dividends are used to pay a portion of the
deferred sales charge. Unitholders will be taxed in this manner regardless of
whether distributions from the Trust are actually received by the Unitholder or
are automatically reinvested.
3. Each Unitholder will have a taxable event when the Trust disposes of an
Equity 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 as
described below). The price a Unitholder pays for his Units, generally including
sales charges, is allocated among his or her pro rata portion of each Equity
Security held by the Trust (in proportion to the fair market values thereof on
the valuation date nearest the date the Unitholder purchase his Units) in order
to determine his or her tax basis for his or her pro rata portion of each Equity
Security held by the 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 dividends, as defined by Section 316 of the
Code, paid by a corporation with respect to an Equity Security held by the Trust
are taxable as ordinary income to the extent of such corporation's current and
accumulated "earnings and profits". A Unitholder's pro rata portion of dividends
paid on such Equity Security which exceeds such current and accumulated earnings
and profits will first reduce a Unitholder's tax basis in such Equity Security,
and to the extent that such dividends exceed a Unitholder's tax basis in such
Equity Security shall 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 Equity Securities held by the Trust will generally
be considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholderportion of loss, if any, upon the sale or redemption
of Units or the disposition of Equity Securities held by the 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 such capital 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 Trust 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 the deferred sales
charge.
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 the 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 Equity 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 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. To the extent dividends received by
the Trust are attributable to foreign corporations, a corporation that owns
Units will not be entitled to the dividends received deduction with respect to
its pro rata portion of such dividends, since the dividends received deduction
is generally available only with respect to dividends paid by domestic
corporations. 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.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income. Unitholders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Unitholders should consult with their tax advisers regarding the deductibility
of Trust expenses.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF EQUITY SECURITIES BY
THE TRUST OR DISPOSITION OF UNITS. As discussed above, a Unitholder may
recognize taxable gain (or loss) when an Equity Security is disposed of by the
Trust or if the Unitholder disposes of a Unit. 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. Note that the date on which a Unit is
acquired (i.e., the "trade date") is excluded for purposes of determining the
holding period of the Unit. 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 including his pro rata
portion of all Equity Securities represented by a Unit. The Taxpayer Relief Act
of 1997 (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, off-setting notional 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 THE 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. A Unitholder may also under certain
circumstances request an In Kind Distribution upon the termination of the Trust.
See "Rights of Unitholders--Redemption of Units." As previously discussed, prior
to the redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust 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 Equity Security owned by the Trust will depend on whether
or not a Unitholder receives cash in addition to Equity Securities. An "Equity
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 Equity Securities in exchange for his or her pro rata portion in the
Equity Securities held by the Trust. However, if a Unitholder also receives cash
in exchange for a fractional share of an Equity Security held by the 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 an Equity Security held by the Trust.
Because the Trust will own many Equity Securities, a Unitholder who requests
an In Kind Distribution will have to analyze the tax consequences with respect
to each Equity Security owned by the 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 Equity Security owned by the Trust. Unitholders who request an In Kind
Distribution are advised to consult their tax advisers in this regard.
COMPUTATION OF THE UNITHOLDER'S TAX BASIS. Initially, a Unitholder's tax
basis in his or her Units will generally equal the price paid by such Unitholder
of his or her Units. The cost of the Units is allocated among the Equity
Securities held in the Trust in accordance with the proportion of the fair
market values of such Equity 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 Equity Security.
A Unitholder's tax basis in his Units and his or her pro rata portion of an
Equity Security held by the Trust will be reduced to the extent dividends paid
with respect to such Equity Security are received by the Trust which are not
taxable as ordinary income as described above.
GENERAL. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the Unitholder
has not been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the 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 the Trust.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof will
nevertheless be treated as income to the Unitholders. Because, under the grantor
trust rules, an investor is deemed to have paid directly his share of foreign
taxes that have been paid or accrued, if any, an investor may be entitled to a
foreign tax credit or deduction for United States tax purposes with respect to
such taxes. 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 the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the Equity Securities, the gross proceeds received by
the Trust from the disposition of any Equity Security (resulting from redemption
or the sale of any Equity Security), and the fees and expenses paid by the
Trust. The Trustee will also furnish annual information returns to Unitholders
and to the Internal Revenue Service.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal and certain aspects of
New York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers in
this regard. As used herein, the term "U.S. Unitholder" means an owner of a Unit
of the Trust that (a) is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unitholder in paragraph (a) but whose
income from a Unit is effectively connected with such Unitholder's conduct of a
United States trade or business. The term also includes certain former citizens
of the United States whose income and gain on the Units will be taxable.
Unitholders should consult their tax advisers regarding potential foreign, state
or local taxation with respect to the Units.
TRUST OPERATING EXPENSES
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COMPENSATION OF SPONSOR, SUPERVISOR AND EVALUATOR. The Sponsor will not
receive any fees in connection with its activities relating to the Trust. The
Supervisor 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 Trust. Such fee (which is based
on the number of Units outstanding on January 1 of each year for which such
compensation relates except during the initial offering period in which event
the calculation is based on the number of Units outstanding at the end of the
month of such calculation) may exceed the actual costs of providing such
supervisory services for this Trust, but at no time will the total amount
received for portfolio supervisory services rendered to all unit investment
trusts by the Supervisor in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. In addition, the Evaluator,
which is a division of Van Kampen American Capital Investment Advisory Corp.,
shall receive the annual per Unit evaluation fee set forth under "Summary of
Essential Financial Information" (which amount is based on the number of Units
outstanding on January 1 of each year for which such compensation relates except
during the initial offering period in which event the calculation is based on
the number of Units outstanding at the end of the month of such calculation) for
regularly evaluating the Trust portfolio. The foregoing fees are payable as
described under "General" below. Both of the foregoing fees may be increased
without approval of the Unitholders by amounts not exceeding proportionate
increases under the category "All Services Less Rent of Shelter" in the Consumer
Price Index published by the United States Department of Labor or, if such
category is no longer published, in a comparable category. The Sponsor 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 Compensation."
TRUSTEE'S FEE. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial Information"
(which amount is based on the number of Units outstanding on January 1 of each
year for which such compensation relates except during the initial offering
period in which event the calculation is based on the number of Units
outstanding at the end of the month of such calculation). 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 the Trust is expected to
result from the use of these funds. Such fees may be increased without approval
of the Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor or, if such category is no
longer published, in a comparable category. For a discussion of the services
rendered by the Trustee pursuant to its obligations under the Trust Agreement,
see "Rights of Unitholders--Reports Provided" and "Trust Administration."
MISCELLANEOUS EXPENSES. Expenses incurred in establishing the Trust,
including the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), 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 the Trust and amortized over the life of the Trust.
The following additional charges are or may be incurred by the Trust: (a) normal
expenses (including the cost of mailing reports to Unitholders) incurred in
connection with the operation of the Trust, (b) fees of the Trustee for
extraordinary services, (c) expenses of the Trustee (including legal and
auditing expenses) and of counsel designated by the Sponsor, (d) various
governmental charges, (e) expenses and costs of any action taken by the Trustee
to protect the Trust and the rights and interests of Unitholders, (f)
indemnification of the Trustee for any loss, liability or expenses incurred in
the administration of the Trust without negligence, bad faith or wilful
misconduct on its part, (g) accrual of costs associated with liquidating the
securities and (h) expenditures incurred in contacting Unitholders upon
termination of the Trust. The expenses set forth herein are payable as described
under "General" below.
GENERAL. During the initial offering period of the Trust, all of the fees and
expenses will accrue on a daily basis and will be charged to the Trust, in
arrears, at the end of the initial offering period. After the initial offering
period of the Trust, all of the fees and expenses of the Trust will accrue on a
daily basis and will be charged to the Trust, in arrears, on a monthly basis as
of the tenth day of each month. The fees and expenses are payable out of the
Capital Account. When such fees and expenses are paid by or owing to the
Trustee, they are secured by a lien on the Trust's portfolio. It is expected
that the balance in the Capital Account will be insufficient to provide for
amounts payable by the Trust and that Equity Securities will be sold from the
Trust to pay such amounts.
These sales will result in capital gains or losses to Unitholders. See "Federal
Taxation".
PUBLIC OFFERING
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GENERAL. Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate underlying value of the Securities in the
Trust's portfolio, the initial sales charge described below and cash, if any, in
the Income and Capital Accounts held or owned by the Trust. The initial sales
charge is equal to the difference between the total sales charge (3.25% of the
Public Offering Price) and the amount of the deferred sales charge ($0.225 per
Unit). Unitholders will also be subject to a deferred sales charge equal to
$0.225 per Unit. The monthly deferred sales charge will begin accruing on a
daily basis on October 16, 1998 and will continue to accrue through June 15,
1999 and will be charged, in arrears, commencing November 16, 1998 and will be
charged on the 16th day of each month thereafter through June 16, 1999. If any
deferred sales charge payment date is not a business day, the payment will be
charged on the next business day. Unitholders will be assess only that portion
of the deferred sales charge accrued from the time they became Unitholders of
record. Units purchased subsequent to the initial deferred sales charge payment
will be subject only to that portion the deferred sales charge payments not yet
collected. These deferred sales charge payments will be paid from funds in the
Capital Account, if sufficient, or from the periodic sales of Securities. The
sales charge applicable to quantity purchases is, during the initial offering
period, reduced on a graduated basis as follows:
AGGREGATE DOLLAR AMOUNT SALES
OF UNITS PURCHASED * CHARGE
------------------------- ----------------------------
$100,000-$249,999 3.00%
$250,000-$499,999 2.75
$500,000-$999,999 2.50
$1,000,000 or more 2.00
- --------------------------------------------------------------------------------
*The breakpoint sales charges are also applied on a 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. This reduced sales charge structure will 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 qualifies 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.
During the initial offering period of the Trust, unitholders of any Van
Kampen American Capital-sponsored unit investment trust may utilize their
redemption or termination proceeds to purchase Units of this Trust at the Public
Offering Price less 1%.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law and trustees, custodians or fiduciaries for the
benefit of such persons) of 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.
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 American
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.
OFFERING PRICE. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in accordance
with fluctuations in the prices of the underlying Securities in the Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
equal to the initial sales charge and dividing the sum so obtained by the number
of Units outstanding. The Public Offering Price shall also include the
proportionate share of any cash held in the Capital Account. Such price
determination as of the close of business on the day before the Initial Date of
Deposit was made on the basis of an evaluation of the Securities in the Trust
prepared by Interactive Data Corporation, a firm regularly engaged in the
business of evaluating, quoting or appraising comparable securities. After the
close of business on the day before the Initial Date of Deposit, the Evaluator
will appraise or cause to be appraised daily the value of the underlying
Securities as of the Evaluation Time on days the New York Stock Exchange is open
and will adjust the Public Offering Price of the Units commensurate with such
valuation. Such Public Offering Price will be effective for all orders received
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 when
the New York Stock Exchange is closed, will be held until the next determination
of price. Unitholders will pay an initial sales charge equal to the difference
between the total sales charge and the deferred sales charge ($0.225 per Unit)
and will be assessed a deferred sales charge of $0.225 per Unit as set forth in
"Public Offering--General". Commencing on June 16, 1999, the secondary market
sales charge will not include a deferred sales charge but will instead include
only a one-time sales charge of 2.75% of the Public Offering Price.
The value of the Equity Securities during the initial offering period is
determined on each business day by the Evaluator in the following manner: If the
Equity Securities are listed on a securities exchange this evaluation is
generally based on the closing sale prices on that exchange (unless it is
determined that these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange, at the closing ask prices. If
the Equity Securities are not so listed or, if so listed and the principal
market therefor 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 offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities in the Trust
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by the 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.
<TABLE>
INITIAL OFFERING PERIOD CONCESSION OR
AGGREGATE NUMBER OF UNITS PER TRUST PURCHASED* AGENCY COMMISSION PER UNIT
--------------------------------------------------- ------------------------------------
<S> <C> <C>
1-9,999 2.25%
10,000-24,999 2.00
25,000-49,999 1.90
50,000-99,999 1.75
100,000 or more 1.40
</TABLE>
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*The breakpoint concessions, agency commissions or additional payments are
also applied on a dollar 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 breakpoints will be adjusted to take into
consideration purchase orders stated in dollars which cannot be completely
fulfilled due to the requirement that only whole Units be issued.
In addition to the amounts set forth above, any firm that distributes a total
of 500,000-999,999 Units of a Trust during the initial offering period will be
paid additional compensation by the Sponsor of $0.005 per Unit distributed; or
any firm that distributes a total of 1,000,000 - 1,999,999 Units of a Trust
during the initial offering period will be paid additional compensation by the
Sponsor of $0.01 per Unit distributed; or any firm that distributes a total of
2,000,000 - 2,999,999 Units of a Trust during the initial offering period will
be paid additional compensation by the Sponsor of $0.015 per Unit distributed;
or any firm that distributes a total of 3,000,000 or more Units of a Trust
during the initial offering period will be paid additional compensation by the
Sponsor of $.02 per Unit distributed. Such additional compensation will be paid
at the end of the initial offering period of a Trust.
Any discount provided to investors will be borne by the selling dealer or
agent as indicated under "General" above. However, for transactions involving
unitholders of any Van Kampen American Capital-sponsored unit investment trust
who purchase Units during the initial offering period with redemption or
termination proceeds from such trust, the concession or agency commission will
be 1.50% per Unit. For secondary market transactions, the concession or agency
commission will amount to 70% of the sales charge applicable to the transaction.
The breakpoint concessions or agency commissions are applied on either a Unit or
dollar basis utilizing a breakpoint equivalent of $10 per Unit and will be
applied on whichever basis is more favorable to the broker-dealer.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the agency
commission referred to above) is retained by or remitted to the banks. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions and the banking
regulators have not indicated that these particular agency transactions are not
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 100 Units (25 Units for qualified
retirement plans) and 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.
SPONSOR COMPENSATION. The Sponsor will receive a gross sales commission equal
to 3.25% of the Public Offering Price of the Units (equivalent to 3.359% of the
aggregate value of Securities less the deferred sales charge), less any reduced
sales charge for purchases (as described under "General" above). Any discount
provided to investors will be borne by the selling broker, dealer or agent as
indicated under "General" above.
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 such Securities to the Trust on the
Initial Date of Deposit. See "Notes to Portfolio." 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 Trust portfolio. 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 Trust after a date of
deposit, since all proceeds received from purchasers of Units (excluding dealer
concessions and agency commissions allowed, if any) will be retained by the
Sponsor.
Broker-dealers of the Trust, 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
Trust. Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trust. These programs will not change the price Unitholders
pay for their Units or the amount that the Trust will receive from the Units
sold.
A person will become the owner of Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used in the Sponsor's
business and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor intends to maintain a
secondary market for Units of the Trust. 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 intends to
maintain a market for the Units offered hereby and offer continuously to
purchase Units at prices, subject to change at any time, based upon the
aggregate underlying value of the Equity Securities in the Trust (computed as
indicated under "Offering Price" above and "Rights of Unitholders--Redemption of
Units"). 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 may be able to dispose of such Units
only by tendering them to the Trustee for redemption at the Redemption Price.
See "Rights of Unitholders--Redemption of Units." A Unitholder who wishes to
dispose of his Units should inquire of his broker as to current market prices in
order to determine whether there is in existence any price in excess of the
Redemption Price and, if so, the amount thereof. Units sold 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.
TAX-SHELTERED RETIREMENT PLANS. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for individuals, Simplified Employee Pension
Plans for employees, qualified plans for self-employed individuals, and
qualified corporate pension and profit sharing plans for employees. The purchase
of Units of the Trust may be limited by the plans' provisions and does not
itself establish such plans. The minimum purchase for qualified retirement plans
is 25 Units and 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 Trust 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 the Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, etc.) are credited to the Capital Account of the Trust. Proceeds
from the sale of Securities to meet redemptions of Units shall be segregated
within the Capital Account from proceeds from the sale of Securities made to
satisfy the fees, expenses and charges of the Trust.
The Trustee will distribute any income received with respect to any of the
Securities in the Trust on or about the Income Distribution Dates to Unitholders
of record on the preceding Income Record Dates. See "Summary of Essential
Financial Information." Proceeds received on the sale of any Securities in the
Trust, to the extent not used to meet redemptions of Units, pay the deferred
sales charge or pay fees and expenses, will be distributed annually on the
Capital Account Distribution Date to Unitholders of record on the preceding
Capital Account Record Date. Proceeds received from the disposition of any of
the Securities after a record date and prior to the following distribution date
will be held in the Capital Account 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. Because dividends
are not received by the Trust at a constant rate throughout the year, such
distributions to Unitholders are expected to fluctuate from distribution to
distribution. Persons who purchase Units will commence receiving distributions
only after such person becomes a record owner. Notification to the Trustee of
the transfer of Units is the responsibility of the purchaser, but in the normal
course of business such notice is provided by the selling broker-dealer.
At the end of the initial offering period and as of the tenth day of each
month thereafter, the Trustee will deduct from the Capital Account amounts
necessary to pay the expenses of the Trust (as determined on the basis set forth
under "Trust Operating Expenses"). The Trustee also may withdraw from the Income
and Capital Accounts such amounts, if any, as it deems necessary to establish a
reserve for any governmental charges payable out of the Trust. Amounts so
withdrawn shall not be considered a part of the Trust's assets until such time
as the Trustee shall return all or any part of such amounts to the appropriate
accounts. In addition, the Trustee may withdraw from the Income and Capital
Accounts such amounts as may be necessary to cover redemptions of Units.
REINVESTMENT OPTION. Unitholders of the Trust may elect to have each
distribution of income, capital gains and/or capital on their Units
automatically reinvested in additional Units of the Trust subject only to any
remaining deferred sales charge, pursuant to the "Automatic Reinvestment Option"
(to the extent Units may be lawfully offered for sale in the state in which the
Unitholder resides). To participate in the reinvestment plan, a Unitholder may
either contact his or her broker or agent or file with the Trustee a written
notice of election at least five days prior to the Record Date for which the
first distribution is to apply. A Unitholder's election to participate in the
reinvestment plan will apply to all Units of the Trust owned by such Unitholder
and such election will remain in effect until changed by the Unitholder.
Reinvestment plan distributions may be reinvested in Units already held in
inventory by the Sponsor (see "Public Offering--Public Market") or, until such
time as additional Units cease to be issued by the Trust (see "The Trust"),
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
made based on the net asset value for Units of the Trust as of the Evaluation
Time on the related Distribution Dates. Under the reinvestment plan, the Trust
will pay the Unitholder's distributions to the Trustee which in turn will
purchase for such Unitholder full and fractional Units of the Trust and will
send such Unitholder a statement reflecting the reinvestment.
Unitholders may also elect to have each distribution of income, capital gains
and/or capital on their Units automatically reinvested in shares of certain 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 Trust. 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
income, capital gains and/or capital 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 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 outstanding. For as long as the Sponsor deems it to be in the best
interest of the Unitholders, the accounts of the Trust shall be audited, not
less frequently than annually, by independent certified public accountants, and
the report of such accountants shall be furnished by the Trustee to Unitholders
upon request. 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 (i) a statement as to the Income
Account: income received, deductions for applicable taxes and for fees and
expenses of the Trust, for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata share
of each Unit outstanding on the last business day of such calendar year; (ii) a
statement as to the Capital Account: the dates of disposition of any Securities
and the net proceeds received therefrom, deductions for payment of applicable
taxes, fees and expenses of the Trust held for distribution to Unitholders of
record as of a date prior to the determination and the balance remaining after
such distributions and deductions expressed both as a total dollar amount and as
a dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held and
the number of Units outstanding on the last business day of such calendar year;
(iv) the Redemption Price per Unit 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, separately stated, expressed
as total dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay Street,
20th Floor, New York, New York 10286 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, duly endorsed or
accompanied by proper instruments of transfer with signature guaranteed (or by
providing satisfactory indemnity, as in connection with lost, stolen or
destroyed certificates) and by payment of applicable governmental charges, if
any. No redemption fee will be charged. On the third business day following such
tender, the Unitholder will be entitled to receive in cash an amount for each
Unit equal to the Redemption Price per Unit next computed after receipt by the
Trustee of such tender of Units. The "date of tender" is deemed to be the date
on which Units are received by the Trustee, except that as regards Units
received after the Evaluation Time the date of tender is the next day on which
the New York Stock Exchange is open for trading and such Units will be deemed to
have been tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units redeemed 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.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts 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.
Unitholders tendering 1,000 Units or more for redemption may request from the
Trustee a distribution in kind ("In Kind Distribution") of an amount and value
of Securities per Unit 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 Securities in book-entry form to the account of the Unitholder's bank or
broker-dealer at Depository Trust Company. The tendering Unitholder will receive
his pro rata number of whole shares of each of the Securities comprising the
portfolio and cash from the Capital Account equal to the fractional shares to
which the tendering Unitholder is entitled. In implementing these redemption
procedures, the Trustee shall make any adjustments necessary to reflect
differences between the Redemption Price of the Securities distributed in kind
as of the date of tender. If funds in the Capital Account are insufficient to
cover the required cash distribution to the tendering Unitholder, the Trustee
may sell Securities according to the criteria discussed above. For the tax
consequences related to an In Kind Distribution see "Federal Taxation."
To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be, and the diversity of the 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.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the aggregate underlying
value of the Equity Securities in the Trust, plus or minus cash, if any, in the
Income and Capital Accounts. 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." While the Trustee has the power to determine the
Redemption Price per Unit when Units are tendered for redemption, such authority
has been delegated to the Evaluator which determines the price per Unit on a
daily basis. The Redemption Price per Unit is the pro rata share of each Unit in
the Trust determined on the basis of (i) the cash on hand in the Trust, (ii) the
value of the Securities in the Trust and (iii) dividends receivable on the
Equity Securities trading ex-dividend as of the date of computation, less (a)
amounts representing taxes or other governmental charges payable out of the
Trust and (b) the accrued expenses or sales charge of the Trust. The Evaluator
may determine the value of the Equity Securities in the Trust in the following
manner: if the Equity Securities are listed on a national securities exchange
this evaluation is generally based on the closing sale prices on that exchange
(unless it is determined that these prices are inappropriate as a basis for
valuation) or, if there is no closing sale price on that exchange, at the
closing bid prices. If the Equity Securities are not so listed or, if so listed
and the principal market therefore is other than on the exchange, the evaluation
shall generally be based on the current bid price on the over-the-counter market
(unless these prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined (a) on the
basis of current bid prices for comparable securities, (b) by appraising the
value of the Equity Securities on the bid side of the market or (c) by any
combination of the above.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Securities
in the Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
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SPONSOR PURCHASES OF UNITS. The Trustee shall notify the Sponsor of any
tender of Units 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 portfolio of the Trust is not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. Traditional methods of
investment management for a managed fund typically involve frequent changes in a
portfolio of securities on the basis of economic, financial and market analyses.
The Trust, 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
the Trust. Pursuant to the Trust Agreement and with limited exceptions, the
Trustee may sell any securities or other properties acquired in exchange for
Equity Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property, the
Trustee shall reject the offer. However, in the event such securities or
property are nonetheless acquired by the Trust, they may be accepted for deposit
in the Trust and either sold by the Trustee or held in the Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Supervisor).
Therefore, except as stated under "Trust Portfolio" for failed securities and as
provided in this paragraph, the acquisition by the Trust of any securities other
than the Securities is prohibited. Proceeds from the sale of Securities (or any
securities or other property received by the Trust in exchange for Equity
Securities) are credited to the Capital Account for distribution to Unitholders
or to pay fees and expenses of the Trust.
As indicated under "Rights of Unitholders--Redemption of Units" above, the
Trustee may also sell Securities designated by the Supervisor, or if not so
directed, in its own discretion, for the purpose of redeeming Units of the 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. To the extent this is not practicable, the composition and
diversity of the Equity Securities may be altered. In order to obtain the best
price for the Trust, it may be necessary for the Supervisor to specify minimum
amounts (generally 100 shares) in which blocks of Equity Securities are to be
sold. 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 of unit investment
trusts which it 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
of 51% of the Units then outstanding, provided that no such amendment or waiver
will reduce the interest in the Trust of any Unitholder without the consent of
such Unitholder or reduce the percentage of Units required to consent to any
such amendment or waiver without the consent of all Unitholders. The Trustee
shall advise the Unitholders of any amendment promptly after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders
representing 66 2/3% of the Trust Units then outstanding or by the Trustee when
the value of the Trust, as shown by any evaluation, is less than that amount set
forth under Minimum Termination Value in "Summary of Essential Financial
Information." The Trust will be liquidated by the Trustee in the event that a
sufficient number of Units not yet sold are tendered for redemption by the
Sponsor so that the net worth of the Trust would be reduced to less than 40% of
the value of the Securities at the time they were deposited in the Trust. If the
Trust is liquidated because of the redemption of unsold Units the Sponsor will
refund to each purchaser of Units the entire sales charge paid by such
purchaser. The Trust Agreement will terminate upon the sale or other disposition
of the last Security held thereunder, but in no event will it continue beyond
the Mandatory Termination Date stated under "Summary of Essential Financial
Information."
Commencing on the Mandatory Termination Date, Equity Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor will
determine the manner, timing and execution of the sales of the Equity
Securities. The Sponsor shall direct the liquidation of 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. Written notice of any termination specifying the time or times at
which Unitholders may surrender their certificates for cancellation, if any are
then issued and outstanding, shall be given by the Trustee to each Unitholder so
holding a certificate at his address appearing on the registration books of the
Trust maintained by the Trustee. At least 30 days before 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
owning 1,000 or more Units to request an In Kind Distribution rather than
payment in cash upon the termination of the Trust. 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 each of the Equity Securities in
the portfolio to the account of the broker-dealer or bank designated by the
Unitholder at Depository Trust Company. The value of the Unitholder's fractional
shares of the Equity Securities will be paid in cash. Unitholders with less than
1,000 Units and those not requesting an In Kind Distribution will receive a cash
distribution from the sale of the remaining Equity Securities within a
reasonable time following the Mandatory Termination Date. Regardless of the
distribution involved, the Trustee will deduct from the funds of the Trust any
accrued costs, expenses, advances or indemnities provided by the Trust
Agreement, including estimated compensation of the Trustee, costs of liquidation
and any amounts required as a reserve to provide for payment of any applicable
taxes or other governmental charges. Any sale of Equity Securities in the Trust
upon termination may result in a lower amount than might otherwise be realized
if such sale were not required at such time. The Trustee will then distribute to
each Unitholder his pro rata share of the balance of the Income and Capital
Accounts.
Within 60 days of the final distribution, Unitholders will be furnished a
final distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the Trustee
in its sole discretion will determine that any amounts held in reserve are no
longer necessary, it will make distribution thereof to Unitholders in the same
manner.
LIMITATIONS ON LIABILITIES. The Sponsor, the Evaluator, the Supervisor and
the Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Securities. In the event of the failure of the Sponsor to act under
the Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Trust
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee, Sponsor
or Unitholders for errors in judgment. This provision shall not protect the
Evaluator in any case of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
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, 1997, the
total stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$132,381,000 (audited). (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 46
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 Trust 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 portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the 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 the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
- --------------------------------------------------------------------------------
LEGAL OPINIONS. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Winston & Strawn has acted as counsel for the Trustee.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report in this Prospectus, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 103.
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Equity Opportunity Trust, Series 103 as
of June 16, 1998. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase securities
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 103, as of June 16, 1998, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
June 16, 1998
<TABLE>
<CAPTION>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST,
SERIES 103
STATEMENT OF CONDITION
AS OF JUNE 16, 1998
INVESTMENT IN SECURITIES:
<S> <C>
Contracts to purchase securities (1) $ 146,563
Organizational costs (2) 49,638
-------------
$ 196,201
=============
LIABILITIES AND INTEREST OF UNITHOLDERS:
Liabilities--
Accrued organizational costs (2) $ 49,638
Deferred sales charge liability (3) 3,331
Interest of Unitholders--
Cost to investors (4) 148,050
Less: Gross underwriting commission (4) (5) 4,818
-------------
Net interest to Unitholders (4) 143,232
-------------
Total $ 196,201
=============
</TABLE>
- --------------------------------------------------------------------------------
(1)The aggregate value of the Securities listed under "Portfolio" and their
cost to the Trust are the same. The value of the Securities is determined by
Interactive Data Corporation on the bases set forth under "Public
Offering--Offering Price". The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $146,563 which has been
deposited with the Trustee.
(2)The Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over the life of the Trust. Organizational costs
have been estimated based on a projected trust size of $20,000,000. To the
extent the Trust is larger or smaller, the estimate will vary.
(3)Represents the amount of mandatory distributions from the Trust on the bases
set forth under "Public Offering".
(4)The aggregate public offering price and the aggregate initial sales charge
are computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor Compensation" and assume all single
transactions involve less than 10,000 Units. For single transactions
involving 10,000 or more Units, the sales charge is reduced (see "Public
Offering--General") resulting in an equal reduction in both the Cost to
investors and the Gross underwriting commission while the Net interest to
Unitholders remains unchanged.
(5) Assumes the maximum sales charge.
<TABLE>
<CAPTION>
FINANCIAL SERVICES TRUST, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 103)
AS OF THE INITIAL DATE OF DEPOSIT: JUNE 16, 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>
155 AFLAC, Inc. $29.000 $0.26 $4,495.00
69 Allmerica Financial Corporation 62.750 0.20 4,329.75
110 Ambac Financial Group, Inc. 54.063 0.36 5,946.88
79 Associates First Capital Corporation 73.813 0.40 5,831.19
111 Bear Stearns Companies, Inc. 52.375 0.60 5,813.63
91 CIT Group, Inc. 32.000 0.00 2,912.00
101 CMAC Investment Corporation 58.000 0.12 5,858.00
133 Conseco, Inc. 43.938 0.50 5,843.69
158 Everest Reinsurance Holdings, Inc. 37.563 0.20 5,934.88
49 Fannie Mae 59.750 0.96 2,927.75
104 Financial Security Assurance Holdings, Ltd. 56.125 0.43 5,837.00
98 Freddie Mac 44.125 0.48 4,324.25
258 Frontier Insurance Group, Inc. 22.813 0.28 5,885.63
94 Hartford Life, Inc. 46.938 0.36 4,412.13
116 LandAmerica Financial Group, Inc. 51.000 0.20 5,916.00
175 Liberty Financial Companies, Inc. 33.750 0.40 5,906.25
68 Loews Corporation 87.438 1.00 5,945.75
83 MBIA, Inc. 69.563 0.78 5,773.69
76 MGIC Investment Corporation 58.500 0.10 4,446.00
136 Nationwide Financial Services, Inc. 43.313 0.32 5,890.50
208 Old Republic International Corporation 27.938 0.40 5,811.00
85 Providian Financial Corporation 68.563 0.20 5,827.81
135 ReliaStar Financial Corporation 42.813 0.74 5,779.69
114 Stewart Information Services Corporation 38.313 0.28 4,367.63
142 Torchmark Corporation 40.938 0.60 5,813.13
49 Travelers Group, Inc. 59.875 0.50 2,933.88
232 United Asset Management Corporation 25.375 0.80 5,887.00
108 UNUM Corporation 54.750 0.59 5,913.00
- --------- ------------
3,337 $146,563.11
========= ============
</TABLE>
NOTES TO PORTFOLIO
- --------------------------------------------------------------------------------
(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, Securities may have been
delivered to the Sponsor pursuant to certain of these contracts; the Sponsor
has assigned to the Trustee all of its right, title and interest in and to
such Securities. Contracts to acquire Securities were entered into on June
15, 1998 and are expected to settle on June 18, 1998 (see "The Trust").
(2) The market value of each of the Securities is based on the closing sale
price of each listed Security on the applicable exchange, or if not so
listed, on the ask price on the day prior to the Initial Date of Deposit.
Estimated annual dividends are based on annualizing the most recently
declared dividends. Other information regarding the Securities in the Trust,
as of the Initial Date of Deposit, is as follows:
PROFIT ESTIMATED
COST TO (LOSS) TO ANNUAL
SPONSOR SPONSOR DIVIDENDS
-------------- -------------- --------------
$ 146,563 $ -- $ 1,415
-------------------------------------------------
An affiliate of the Sponsor may have participated as issuer, sole
underwriter, managing underwriter or member of an underwriting syndicate in a
public offering of one or more of the stocks in the Trust. An affiliate of the
Sponsor may serve as a specialist in the stocks in the Trust on one or more
stock exchanges and may have a long or short position in any of these stocks or
in options on any of these stocks, and may be on the opposite side of public
orders executed on the floor of an exchange where such stocks are listed. An
officer, director or employee of the Sponsor or an affiliate may be an officer
or director of one or more of the issuers of the stocks in the Trust. An
affiliate of the Sponsor may trade for its own account as an odd-lot dealer,
market maker, block positioner and/or arbitrageur in any stocks or options
relating thereto. The Sponsor, its affiliates, directors, elected officers and
employee benefit programs may have either a long or short position in any stock
or option of the issuers.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the 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........................... 3
Fee Table................................... 5
The Trust................................... 6
Objective and Securities Selection.......... 7
Trust Portfolio............................. 8
Risk Factors................................ 11
Federal Taxation............................ 14
Trust Operating Expenses.................... 18
Public Offering............................. 20
Rights of Unitholders....................... 25
Trust Administration........................ 29
Other Matters............................... 33
Report of Independent Certified
Public Accountants.................... 34
Statement of Condition ..................... 35
Portfolio................................... 36
Notes to Portfolio.......................... 37
- --------------
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
PROSPECTUS
-----------------------------
JUNE 16, 1998
VAN KAMPEN
AMERICAN CAPITAL
EQUITY OPPORTUNITY
TRUST, SERIES 103
FINANCIAL SERVICES
TRUST, SERIES 1
------ 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.
S-1
CONTENTS OF REGISTRATION STATEMENT
This Amendment No. 1 of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of Counsel as to the Federal Income tax status of securities being
registered.
3.3 Opinion and consent of counsel as to New York tax status of securites being
registered.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Independent Certified Public Acountants.
EX-27 Financial Data Schedule.
<PAGE>
SIGNATURES
The Registrant, Van Kampen American Capital Equity Opportunity Trust,
Series 103, hereby identifies Van Kampen Merritt Equity Opportunity Trust,
Series 1, Series 2, Series 4 and Series 7 and Van Kampen American Capital Equity
Opportunity Trust, Series 13, Series 14, Series 57 and Series 89 for purposes of
the representations required by Rule 487 and represents the following: (1) that
the portfolio securities deposited in the series as to the securities of which
this Registration Statement is being filed do not differ materially in type or
quality from those deposited in such previous series; (2) that, except to the
extent necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect to the
securities of which this Registration Statement is being filed, this
Registration Statement does not contain disclosures that differ in any material
respect from those contained in the registration statements for such previous
series as to which the effective date was determined by the Commission or the
staff; and (3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series 103 has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Chicago
and State of Illinois on the 16th day of June, 1998.
Van Kampen American Capital Equity Opportunity Trust, Series 103
By Van Kampen American Capital Distributors, Inc.
By GINA M. COSTELLO
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed below on June 16,
1998 by the following persons who constitute a majority of the Board of
Directors of Van Kampen American Capital Distributors, Inc.
SIGNATURE TITLE
Don G. Powell Chairman and Chief Executive )
Officer )
John H. Zimmerman President and Chief Operating )
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Executive Vice President and )
Chief Financial Officer )
GINA M. COSTELLO
(Attorney-in-fact*)
- --------------------------------------------------------------------------------
*An executed copy of each of the related powers of attorney is filed
herewith or was filed with the Securities and Exchange Commission in connection
with the Registration Statement on Form S-6 of Van Kampen American Capital
Equity Opportunity Trust, Series 64 (File No. 333-33087) and Van Kampen American
Capital Equity Opportunity Trust, Series 87 (File No. 333-44581) and the same
are hereby incorporated herein by this reference.
EXHIBIT 1.1
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST
SERIES 103
TRUST AGREEMENT
Dated: June 16, 1998
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of Van
Kampen American Capital Investment Advisory Corp., as Evaluator, Van Kampen
American Capital Investment Advisory Corp., as Supervisory Servicer, and The
Bank of New York, as Trustee, sets forth certain provisions in full and
incorporates other provisions by reference to the document entitled "Van Kampen
American Capital Equity Opportunity Trust, Series 87 and Subsequent Series,
Standard Terms and Conditions of Trust, Effective January 27, 1998" (herein
called the "Standard Terms and Conditions of Trust") and such provisions as are
set forth in full and such provisions as are incorporated by reference
constitute a single instrument. All references herein to Articles and Sections
are to Articles and Sections of the Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee agree as
follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(24), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of
each Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus. Such fractional
undivided interest may be (a) increased by the number of any additional
Units issued pursuant to Section 2.03, (b) increased or decreased in
connection with an adjustment to the number of Units pursuant to
Section 2.03, or (c) decreased by the number of Units redeemed pursuant
to Section 5.02.
3. The terms "Capital Account Record Date" and "Income Account
Record Date" shall mean the "Income and Capital Account Record Dates" set forth
under "Summary of Essential Financial Information" in the Prospectus.
4. The terms "Capital Account Distribution Date" and "Income Account
Distribution Date" shall mean the "Income and Capital Account Distribution
Dates" set forth under "Summary of Essential Financial Information" in the
Prospectus.
5. The term "Mandatory Termination Date" shall mean the "Mandatory
Termination Date" set forth under "Summary of Essential Financial Information"
in the Prospectus.
<PAGE>
IN WITNESS WHEREOF, Van Kampen American Capital Distributors, Inc. has
caused this Trust Agreement to be executed by one of its Vice Presidents or
Assistant Vice Presidents and its corporate seal to be hereto affixed and
attested by its Secretary or one of its Vice Presidents or Assistant
Secretaries, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., and Van Kampen American Capital
Investment Advisory Corp., have each caused this Trust Indenture and Agreement
to be executed by their respective President or one of their respective Vice
Presidents and the corporate seal of each to be hereto affixed and attested to
by the Secretary, Assistant Secretary or one of their respective Vice Presidents
or Assistant Vice Presidents and The Bank of New York, has caused this Trust
Agreement to be executed by one of its Vice Presidents and its corporate seal to
be hereto affixed and attested to by one of its Assistant Treasurers all as of
the day, month and year first above written.
Van Kampen American Capital Distributors, Inc.
By JAMES J. BOYNE
Vice President, Associate General Counsel
and Assistant Secretary
Attest:
By CATHY NAPOLI
Assistant Secretary
American Portfolio Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp.
By DENNIS J. MCDONNELL
President
Attest
By JAMES J. BOYNE
Assistant Secretary
Van Kampen American Capital Investment Advisory Corp.
By DENNIS J. MCDONNELL
President
Attest
By JAMES J. BOYNE
Assistant Secretary
The Bank of New York
By JEFFREY BIESELIN
Vice President
Attest
By JEFFREY COHEN
Assistant Treasurer
<PAGE>
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 103
(Note: Incorporated herein and made a part hereof is the "Portfolio" as set
forth in the Prospectus.)
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
June 16, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 103
----------------------------------------------------------------
Gentlemen:
We have served as counsel for Van Kampen American Capital Distributors,
Inc. as Sponsor and Depositor of Van Kampen American Capital Equity Opportunity
Trust, Series 103 (hereinafter referred to as the "Trust"), in connection with
the preparation, execution and delivery of a Trust Agreement dated June 16,
1998, among Van Kampen American Capital Distributors, Inc., as Depositor,
American Portfolio Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp., as Evaluator, Van Kampen American Capital
Investment Advisory Corp., as Supervisory Servicer, and The Bank of New York, as
Trustee, pursuant to which the Depositor has delivered to and deposited the
Securities listed in the Schedule to the Trust Agreement with the Trustee and
pursuant to which the Trustee has provided to or on the order of the Depositor
documentation evidencing ownership of Units of fractional undivided interest in
and ownership of the Trust (hereinafter referred to as the "Units"), created
under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the Units in the
Trust have been duly authorized; and
2. The certificates evidencing the Units in the Trust, when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will constitute
valid and binding obligations of such Trust and the Depositor in
accordance with the terms thereof.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-55931) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
June 16, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 103
----------------------------------------------------------------
Gentlemen:
We have acted as counsel for Van Kampen American Capital Distributors,
Inc., Depositor of Van Kampen American Capital Equity Opportunity Trust, Series
103 (the "Fund"), in connection with the issuance of Units of fractional
undivided interest in the Fund, under a Trust Agreement dated June 16, 1998 (the
"Indenture") among Van Kampen American Capital Distributors, Inc., as Depositor,
Van Kampen American Capital Investment Advisory Corp., as Evaluator, Van Kampen
American Capital Investment Advisory Corp., as Supervisory Servicer, and The
Bank of New York, as Trustee. The Fund is comprised of one unit investment
trust, Financial Services Trust, Series 1 (the "Trust").
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we have
deemed pertinent.
The assets of the Trust will consist of a portfolio of equity
securities (the "Equity Securities") as set forth in the Prospectus. For
purposes of this opinion, it is assumed that each Equity Security is equity for
federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
United States Federal income tax law:
(i) The Trust is not an association taxable as a corporation
for Federal income tax purposes but will be governed by the provisions
of subchapter J (relating to Trusts) of chapter 1, Internal Revenue
Code of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata
share of each asset of the Trust in the proportion that the number of
Units held by him bears to the total number of Units outstanding. Under
subpart E, subchapter J of chapter 1 of the Code, income of the Trust
will be treated as income of each Unitholder in the proportion
described, and an item of Trust income will have the same character in
the hands of a Unitholder as it would have in the hands of the Trustee.
Each Unitholder will be considered to have received his pro rata share
of income derived from each Trust asset when such income is considered
to be received by the Trust. A Unitholder's pro rata portion of
distributions of cash or property by a corporation with respect to an
Equity Security ("dividends" as defined by Section 316 of the Code )
are taxable as ordinary income to the extent of such corporation's
current and accumulated "earnings and profits." A Unitholder's pro rata
portion of dividends which exceed such current and accumulated earnings
and profits will first reduce the Unitholder's tax basis in such Equity
Security, and to the extent that such dividends exceed a Unitholder's
tax basis in such Equity Security, shall be treated as gain from the
sale or exchange of property.
(iii) The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata portion of
each Equity Security held by 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 Equity Security held by the Trust.
(iv) Gain or loss will be recognized to a Unitholder (subject
to various nonrecognition provisions under the Code) upon redemption or
sale of his Units, except to the extent an in kind distribution of
stock is received by such Unitholder from the Trust as discussed below.
Such gain or loss is measured by comparing the proceeds of such
redemption or sale with the adjusted basis of his Units. Before
adjustment, such basis would normally be cost if the Unitholder had
acquired his Units by purchase. Such basis will be reduced, but not
below zero, by the Unitholder's pro rata portion of dividends with
respect to each Equity Security which are not taxable as ordinary
income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, liquidation, redemption, payment on maturity or
otherwise) gain or loss will be recognized to the Unitholder (subject
to various nonrecognition provisions under the Code) and the amount
thereof will be measured by comparing the Unitholder's aliquot share of
the total proceeds from the transaction with his basis for his
fractional interest in the asset disposed of. Such basis is ascertained
by apportioning the tax basis for his Units (as of the date on which
his Units were acquired) among each of the Trust assets (as of the date
on which his Units were acquired) ratably according to their values as
of the valuation date nearest the date on which he purchased such
Units. A Unitholder's basis in his Units and of his fractional interest
in each Trust asset must be reduced, but not below zero, by the
Unitholder's pro rata portion of dividends with respect to the Equity
Security which is not taxable as ordinary income.
(vi) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in kind
distribution of Equity Securities upon the redemption of Units or upon
the termination of the Trust. As previously discussed, prior to the
redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust's assets.
The receipt of an in kind distribution will result in a Unitholder
receiving an undivided interest in whole shares of stock and possibly
cash. The potential federal income tax consequences which may occur
under an in kind distribution with respect to each Equity Security
owned by the Trust will depend upon whether or not a Unitholder
receives cash in addition to Equity Securities. An "Equity 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 Equity Securities in exchange for his or her
pro rata portion in the Equity Securities held by the Trust. However,
if a Unitholder also receives cash in exchange for a fractional share
of an Equity Security held by the 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 an Equity Security held by the Trust. The total amount of
taxable gains (or losses) recognized upon such redemption will
generally equal the sum of the gain (or loss) recognized under the
rules described above by the redeeming Unitholder with respect to each
Equity Security owned by the Trust.
A domestic corporation owning Units in the Trust may be eligible for
the 70% dividends received deduction pursuant to Section 243(a) of the Code with
respect to such Unitholder's pro rata portion of dividends received by the Trust
(to the extent such dividends are taxable as ordinary income and are
attributable to domestic corporations), subject to the limitations imposed by
Sections 246 and 246A of the Code.
To the extent dividends received by the Trust are attributable to
foreign corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
Section 67 of the Code provides that certain itemized deductions, such
as investment expenses, tax return preparation fees and employee business
expenses will be deductible by individuals only to the extent they exceed 2% of
such individual's adjusted gross income. Unitholders may be required to treat
some or all of the expenses of the Trust as miscellaneous itemized deductions
subject to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of
his pro rata interest in an Equity Security is either sold by the Trust or
redeemed or when a Unitholder disposes of his Units in a taxable transaction, in
each case for an amount greater (or less) than his tax basis therefor, subject
to various non-recognition provisions of the Code.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof will
nevertheless be treated as income to the Unitholders. Because under the grantor
trust rules, an investor is deemed to have paid directly his share of foreign
taxes that have been paid or accrued, if any, an investor may be entitled to a
foreign tax credit or deduction for United States tax purposes with respect to
such taxes. A required holding period is imposed for such credits.
Any gain or loss recognized on a sale or exchange will, under current
law, generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
Very truly yours
CHAPMAN AND CUTLER
EXHIBIT 3.3
June 15, 1998
WINSTON & STRAWN
200 Park Avenue
New York, New York 10166-4193
June 16, 1998
Van Kampen American Capital Equity
Opportunity Trust, Series 103
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 103 (the "Fund") consisting of Financial
Services Trust, Series 1, (individually a "Trust" and, in the aggregate, the
"Trusts") for purposes of determining the applicability of certain New York
taxes under the circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"),
dated as of today (the "Date of Deposit") among Van Kampen American Capital
Distributors, Inc. (the "Depositor"), American Portfolio Evaluation Services, a
division of an affiliate of Depositor, as Evaluator, Van Kampen American Capital
Investment Advisory Corp., as Supervisory Servicer (the "Supervisory Servicer"),
and The Bank of New York, as trustee (the "Trustee"). As described in the
prospectus relating to the Fund dated today to be filed as Amendment No. 1 to a
registration statement heretofore filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Prospectus") (File
number 333-49591), the objectives of the Fund are to provide the potential for
dividend income and capital appreciation through investment in a fixed portfolio
of actively traded equity securities of companies engaged in, providing services
to companies in, the industry identified in Trust's name, or are the type of
securities identified in the name of the Trust. It is noted that no opinion is
expressed herein with regard to the Federal tax aspects of the securities, the
Trusts, units of the Trusts (the "Units"), or any interest, gains or losses in
respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trust the securities and/or contracts and cash for the
purchase thereof together with an irrevocable letter of credit in the amount
required for the purchase price of the securities comprising the corpus of the
Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities to
be deposited in the Trusts, and, upon the receipt thereof, will deliver to the
Depositor a registered certificate for the number of Units representing the
entire capital of the Trusts as more fully set forth in the Prospectus. The
Units, which are represented by certificates ("Certificates"), will be offered
to the public upon the effectiveness of the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash dividends
received by the Fund and with the proceeds from the disposition of securities
held in the Fund and the proceeds of the treasury obligation on maturity and the
distribution of such cash dividends and proceeds to the Unit holders. The
Trustee will also maintain records of the registered holders of Certificates
representing an interest in the Fund and administer the redemption of Units by
such Certificate holders and may perform certain administrative functions with
respect to an automatic reinvestment option.
Generally, equity securities held in the Trust may be removed therefrom
by the Trustee at the direction of the Depositor upon the occurrence of certain
specified events which adversely affect the sound investment character of the
Fund, such as default by the issuer in payment of declared dividends or of
interest or principal on one or more of its debt obligations.
Prior to the termination of the Fund, the Trustee is empowered to sell
equity securities designated by the Supervisor Servicer only for the purpose of
redeeming Units tendered to it and of paying expenses for which funds are not
available. The Trustee does not have the power to vary the investment of any
Unit holder in the Fund, and under no circumstances may the proceeds of sale of
any equity securities held by the Fund be used to purchase new equity securities
to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on business
corporations, and, for purposes of that Article, Section 208(l) defines the term
"corporation" to include, among other things, "any business conducted by a
trustee or trustees wherein interest or ownership is evidenced by certificate or
other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in which
interest or ownership is evidenced by certificate or other
written instrument includes, but is not limited to, an
association commonly referred to as a "business trust" or
"Massachusetts trust". In determining whether a trustee or
trustees are conducting a business, the form of the agreement
is of significance but is not controlling. The actual
activities of the trustee or trustees, not their purposes and
powers, will be regarded as decisive factors in determining
whether a trust is subject to tax under Article 9-A. The mere
investment of funds and the collection of income therefrom,
with incidental replacement of securities and reinvestment of
funds, does not constitute the conduct of a business in the
case of a business conducted by a trustee or trustees.
20 NYCRR 1-2.5(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that where a
trustee merely invests funds and collects and distributes the income therefrom,
the trust is not engaged in business and is not subject to the franchise tax.
BURRELL V. LYNCH, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept. 1948), ORDER
RESETTLED, 274 A.D. 1083, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an Opinion of the Attorney General of the State of New York, 47 N.Y.
Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making up
the trust only upon the happening of certain specified events or the existence
of certain specified conditions, the trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to, and we
assume will not, sell equity securities contained in the corpus of the Fund and
reinvest the proceeds therefrom. Further, the power to sell such equity
securities is limited to circumstances in which the credit-worthiness or
soundness of the issuer of such equity security is in question or in which cash
is needed to pay redeeming Unit holders or to pay expenses, or where the Fund is
liquidated subsequent to the termination of the Indenture. In substance, the
Trustee will merely collect and distribute income and will not reinvest any
income or proceeds, and the Trustee has no power to vary the investment of any
Unit holder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust will be
deemed to be the owner of the trust under certain circumstances, and therefore
taxable on his proportionate interest in the income thereof. Where this Federal
tax rule applies, the income attributed to the grantor will also be income to
him for New York income tax purposes. See TSB-M-78(9)(c), New York Department of
Taxation and Finance, June 23, 1978.
By letter dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be considered as
owning a share of each asset of the Trust in the proportion that the number of
Units held by such holder bears to the total number of Units outstanding and the
income of a Trust will be treated as the income of each Unit holder in said
proportion pursuant to Subpart E of Part I, Subchapter J of Chapter 1 of the
Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we specifically rely,
we are of the opinion that under existing laws, rulings, and court decisions
interpreting the laws of the State and City of New York:
1. Each of the Trusts will not constitute an association
taxable as a corporation under New York law, and, accordingly, will not
be subject to tax on its income under the New York State franchise tax
or the New York City general corporation tax;
2. The income of the Trusts will be treated as the income of
the Unit holders under the income tax laws of the State and City of
New York; and
3. Unit holders who are not residents of the State of New
York are not subject to the income tax laws thereof with respect to any
interest or gain derived from the Fund or any gain from the sale or
other disposition of the Units, except to the extent that such interest
or gain is from property employed in a business, trade, profession or
occupation carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and the
reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
WINSTON & STRAWN
EXHIBIT 4.1
June 15, 1998
Interactive Data
14 West Street
New York, NY 10005
June 15, 1998
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Financial Services Trust, Series 1,
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 333-55931
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation, as the
Evaluator, and to the use of the obligations prepared by us which are referred
to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
EXHIBIT 4.2
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We have issued our report dated June 16, 1998 on the statement of
condition and related securities portfolio of Van Kampen American Capital Equity
Opportunity Trust, Series 103 as of June 16, 1998 contained in the Registration
Statement on Form S-6 and Prospectus. We consent to the use of our report in the
Registration Statement and Prospectus and to the use of our name as it appears
under the caption "Other Matters-Independent Certified Public Accountants."
GRANT THORNTON LLP
Chicago, Illinois
June 16, 1998
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This report reflects the current time period taken from 487 on June 16, 1998
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