EXHIBIT 1.1
VAN KAMPEN FOCUS PORTFOLIOS
SERIES 242
TRUST AGREEMENT
Dated: July 18, 2000
This Trust Agreement among Van Kampen Funds Inc., as Depositor,
American Portfolio Evaluation Services, a division of Van Kampen Investment
Advisory Corp., as Evaluator, Van Kampen 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 an amount the numerator of which is one and the
denominator of which is the amount set forth under "Summary of Essential
Financial Information - Initial Number of Units" 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 "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 "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.
6. Notwithstanding anything to the contrary in the Standard Terms and
Conditions of Trust and subject to the requirements set forth in this
paragraph, unless the Prospectus otherwise requires, the Sponsor may, on
any Business Day (the "Trade Date"), subscribe for additional Units as
follows:
(a) Prior to the Evaluation Time on such Business Day, the Sponsor shall
provide notice (the "Subscription Notice") to the Trustee, by telephone or
by written communication, of the Sponsor's intention to subscribe for
additional Units. The Subscription Notice shall identify the additional
Securities to be acquired (unless such additional Securities are a precise
replication of the then existing portfolio) and shall either (i) specify
the quantity of additional Securities to be deposited by the Sponsor on the
settlement date for such subscription or (ii) instruct the Trustee to
purchase additional Securities with an aggregate value as specified in the
Subscription Notice.
(b) Promptly following the Evaluation Time on such Business Day, the Sponsor
shall verify with the Trustee the number of additional Units to be created.
(c) Not later than the time on the settlement date for such subscription when
the Trustee is to deliver or assign the additional Units created hereby,
the Sponsor shall deposit with the Trustee (i) any additional Securities
specified in the Subscription Notice (or contracts to purchase such
additional Securities together with cash or a letter of credit in the
amount necessary to settle such contracts) or (ii) cash or a letter of
credit in an amount equal to the aggregate value of the additional
Securities specified in the Subscription Notice, and adding and subtracting
the amounts specified in the first and second sentences of Section 5.01,
computed as of the Evaluation Time on the Business Day preceding the Trade
Date divided by the number of Units outstanding as of the Evaluation Time
on the Business Day preceding the Trade Date, times the number of
additional Units to be created.
(d) On the settlement date for such subscription, the Trustee shall, in
exchange for the Securities and cash or letter of credit described above,
deliver to, or assign in the name of or on the order of, the Sponsor the
number of Units verified by the Sponsor with the Trustee.
7. Section 6.01(e) is hereby replaced with the following:
(e) (1) Subject to the provisions of subparagraph (2) of this paragraph, the
Trustee may employ agents, sub-custodians, attorneys, accountants and
auditors and shall not be answerable for the default or misconduct of any
such agents, sub-custodians, attorneys, accountants or auditors if such
agents, sub-custodians, attorneys, accountants or auditors shall have been
selected with reasonable care. The Trustee shall be fully protected in
respect of any action under this Indenture taken or suffered in good faith
by the Trustee in accordance with the opinion of counsel, which may be
counsel to the Depositor acceptable to the Trustee, provided, however that
this disclaimer of liability shall not excuse the Trustee from the
responsibilities specified in subparagraph (2) below. The fees and expenses
charged by such agents, sub-custodians, attorneys, accountants or auditors
shall constitute an expense of the Trust reimbursable from the Income and
Capital Accounts of the affected Trust as set forth in section 6.04 hereof.
(2) The Trustee may place and maintain in the care of an Eligible Foreign
Custodian (which is employed by the Trustee as a sub-custodian as
contemplated by subparagraph (1) of this paragraph (e) and which may be an
affiliate or subsidiary of the Trustee or any other entity in which the
Trustee may have an ownership interest) any investments (including foreign
currencies) for which the primary market is outside the United States, and
such cash and cash equivalents in amounts reasonably necessary to effect
the Trust's transactions in such investments, provided that:
(a) The Trustee shall perform all duties assigned to the Foreign Custody
Manager by Rule 17f-5 under the Investment Company Act of 1940 (17 CFR ss.
270.17f-5) ("Rule 17f-5"), as now in effect or as such rule may be amended
in the future. The Trustee shall not delegate such duties.
(b) The Trustee shall exercise reasonable care, prudence and diligence such as
a person having responsibility for the safekeeping of Trust assets would
exercise, and shall be liable to the Trust for any loss occurring as a
result of its failure to do so.
(c) The Trustee shall indemnify the Trust and hold the Trust harmless from and
against any risk of loss of Trust assets held in accordance with the
foreign custody contract.
(d) The Trustee shall maintain and keep current written records regarding the
basis for the choice or continued use of a particular Eligible Foreign
Custodian pursuant to this subparagraph for a period of not less than six
years from the end of the fiscal year in which the Trust was terminated,
the first two years in an easily accessible place. Such records shall be
available for inspection by Unitholders and the Securities and Exchange
Commission at the Trustee's offices at all reasonable times during its
usual business hours.
(3) "Eligible Foreign Custodian" shall have the meaning assigned to it in Rule
17f-5.
(4) "Foreign Custody Manager" shall have the meaning assigned to it in Rule
17f-5.
8. Section 1.01 (1), (3) and (4) shall be replaced in their entirety by the
following:
(1) "Depositor" shall mean Van Kampen Funds Inc. and its succesors in interest,
or any successor depositor appointed as hereinafter provided.
(3) "Evaluator" shall mean American Portfolio Evaluation Services (a division
of a Van Kampen Investment Advisory Corp.) and its successors in interest,
or any successor evaluator appointed as hereinafter provided.
(4) "Supervisory Servicer" shall mean Van Kampen Investment Advisory Corp. and
its successors in interest, or any successor portfolio supervisor appointed
as hereinafter provided.
9. Section 3.15 of the Standard Terms and Conditions of Trust is hereby
replaced in its entirety by the following:
Section 3.15. Deferred Sales Charge. If the Prospectus related to
the Trust specifies a deferred sale charge, the Trustee shall, on each
Deferred Sales Charge Payment Date and as permitted by such Prospectus,
withdraw from the Capital Account an amount per Unit equal to the Deferred
Sales Charge Payment and credit such amount to a special non-Trust account
maintained at the Trustee out of which the deferred sales charge will be
distributed to the Depositor. If the balance in the Capital Account is
insufficient to make any such withdrawal, the Trustee shall, as directed
by the Depositor, either advance funds in an amount equal to the proposed
withdrawal and be entitled to reimbursement of such advance upon the
deposit of additional moneys in the Capital Account, sell Securities and
credit the proceeds thereof to such special Depositor's account or credit
(if permitted by law) Securities in kind to such special Depositor's
Account. If a Unitholder redeems Units prior to full payment of the
deferred sales charge, the Trustee shall, if so provided in the related
Prospectus, on the Redemption Date, withhold from the Redemption Price
payable to such Unitholder an amount equal to the unpaid portion of the
deferred sales charge and distribute such amount to such special
Depositor's Account. The Depositor may at any time instruct the Trustee in
writing to distribute to the Depositor cash or Securities previously
credited to the special Depositor's account. Amounts to be credited to the
special Depositor's account with respect to each Deferred Sales Charge
Payment are due and payable to the Depositor on the related Deferred Sales
Charge Payment Date.
The term "Deferred Sales Charge Payment Dates" shall mean the
10th day of each month beginning November 10, 2000 and continuing through
March 10, 2001. If any Deferred Sales Charge Payment Date is not a
Business Day, that Deferred Sales Charge Payment Date shall be deemed to
be the next business day. The term "Deferred Sales Charge Payment" shall
mean a fraction of the total maximum deferred sales charge specified in
the Prospectus, the numerator of which is one and the denominator of which
is equal to the total number of Deferred Sales Charge Payment Dates.
10. Section 3.07(a) of the Standard Terms and Conditions of Trust is hereby
amended by adding the following Section 3.07(a)(x) immediately after
Section 3.07(a)(ix):
"(x) that there has been a public tender offer made for a
Security or a merger or acquisition is announced affecting a Security, and
that in the opinion of the Supervisory Servicer the sale or tender of the
Security is in the best interest of the Unitholders."
11. Sections 4.01(b) and (c) of the Standard Terms and Conditions of Trust are
hereby replaced in their entirety by the following:
(b) During the initial offering period such Evaluation shall be made in
the following manner: if the Securities are listed on a national or foreign
securities exchange or traded on the Nasdaq Stock Market, Inc., such Evaluation
shall generally be based on the last available closing sale price on or
immediately prior to the Evaluation Time on the exchange or market which is the
principal market therefor, which shall be deemed to be the New York Stock
Exchange if the Securities are listed thereon (unless the Evaluator deems such
price inappropriate as a basis for evaluation) or, if there is no such available
closing sale price on such exchange or market at the last available asked price
of the Equity Securities. If the Securities are not listed such an exchange or
traded on the Nasdaq Stock Market, Inc. or, if so listed and the principal
market therefor is other than on such exchange or market, or there is no such
available sale price on such exchange or market, such Evaluation shall generally
be based on the following methods or any combination thereof whichever the
Evaluator deems appropriate: (i) in the case of Equity Securities, on the basis
of the current asked price on the over-the-counter market (unless the Evaluator
deems such price inappropriate as a basis for evaluation), (ii) on the basis of
current offering prices for the Zero Coupon Obligations as obtained from
investment dealers or brokers who customarily deal in securities comparable to
those held by the Fund, (iii) if offering prices are not available for the Zero
Coupon Obligations or the Equity Securities, on the basis of offering or asked
price for comparable securities, (iv) by determining the valuation of the Zero
Coupon Obligations or the Equity Securities on the offering or asked side of the
market by appraisal or (v) by any combination of the above. If the Trust holds
Securities denominated in a currency other than U.S. dollars, the Evaluation of
such Security shall be converted to U.S. dollars based on current offering side
exchange rates (unless the Evaluator deems such prices inappropriate as a basis
for valuation). The Evaluator may add to the Evaluation of each Security which
is principally traded outside of the United States the amount of any commissions
and relevant taxes associated with the acquisition of the Security. As used
herein, the closing sale price is deemed to mean the most recent closing sale
price on the relevant securities exchange immediately prior to the Evaluation
time. For each Evaluation, the Evaluator shall also confirm and furnish to the
Trustee and the Depositor, on the basis of the information furnished to the
Evaluator by the Trustee as to the value of all Trust assets other than
Securities, the calculation of the Trust Evaluation to be computed pursuant to
Section 5.01.
(c) For purposes of the Trust Evaluations required by Section 5.01 in
determining Redemption Value and Unit Value, Evaluation of the Securities
shall be made in the manner described in Section 4.01(b), on the basis of
current bid prices for the Zero Coupon Obligations, the bid side value of
the relevant currency exchange rate expressed in U.S. dollars and, except
in those cases in which the Equity Securities are listed on a national or
foreign securities exchange or traded on the Nasdaq Stock Market, Inc. and
the last available sale prices are utilized, on the basis of the last
available bid price of the Equity Securities. In addition, the Evaluator
(i) shall not make the addition specified in the fourth sentence of Section
4.01(b) and (ii) may reduce the Evaluation of each Security which is
principally traded outside of the United States by the amount of any
liquidation costs and any capital gains or other taxes which would be
incurred by the Trust upon the sale of such Security, such taxes being
computed as if the Security were sold on the date of the Evaluation.
IN WITNESS WHEREOF, the undersigned have caused this Trust Agreement to
be executed and their corporate seals to be hereto affixed and attested; all as
of the day, month and year first above written.
Van Kampen Funds Inc.
By James J. Boyne
-----------------------------------------
Senior Vice President
American Portfolio Evaluation Services,
a division of Van Kampen Investment Advisory Corp.
By James J. Boyne
-------------------------------------
Senior Vice President
Van Kampen Investment Advisory Corp.
By James J. Boyne
---------------------------------------
Senior Vice President
The Bank of New York
By Linda Bommer
----------------------------
Vice President
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SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 242
(Note: Incorporated herein and made a part hereof is each "Portfolio" as set
forth in the Prospectus.)
