File No. 33-43547 CIK #880443
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
POST-EFFECTIVE AMENDMENT NO. 6 TO FORM S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
VAN KAMPEN MERRITT EQUITY OPPORTUNITY TRUST, SERIES 1
(Exact Name of Trust)
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. CHAPMAN AND CUTLER
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective on April
24, 1998 pursuant to paragraph (b) of Rule 485.
VAN KAMPEN MERRITT EQUITY OPPORTUNITY TRUST, SERIES 1
Van Kampen Merritt Select Equity Trust, Series 1
Van Kampen Merritt Select Equity and Treasury Trust, Series 1
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.Please retain both parts of this Prospectus for future reference.
THE TRUST
The above-named series of Van Kampen Merritt Equity Opportunity Trust, Series
1 (the "Trust" ) is comprised of two separate and distinct unit
investment trusts, Van Kampen Merritt Select Equity Trust (the "Select
Equity Trust" ) and Van Kampen Merritt Select Equity and Treasury Trust
(the "Select Equity and Treasury Trust" ). The Select Equity Trust
offers investors the opportunity to purchase Units representing proportionate
interests in a fixed, diversified portfolio of the 30 actively traded "
blue chip" equity securities which were components of the Dow Jones
Industrial Average as of the Initial Date of Deposit.* The Select Equity and
Treasury Trust offers investors the opportunity to purchase Units representing
proportionate interests in a portfolio consisting primarily of equity
securities which were components of the Dow Jones Industrial Average on the
Initial Date of Deposit plus "zero coupon" U.S. Treasury obligations.
Dow Jones & Company, Inc. has not participated in any way in the creation of
the Trust or in the selection of stocks included in either Trust and has not
approved any information herein relating thereto. Unless terminated earlier,
each Trust will terminate on May 15, 2002 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.
PUBLIC OFFERING PRICE
The Public Offering Price per Unit of each Trust is equal to the aggregate
underlying value of the Equity Securities in such Trust (plus, in the case of
the Select Equity and Treasury Trust, the aggregate bid price of the Treasury
Obligations) plus or minus cash, if any, in the Capital and Income Accounts,
divided by the number of Units outstanding, plus the applicable sales charge.
See "Summary of Essential Financial Information" .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
* The Dow Jones Industrial Average is the property of Dow Jones & Company,
Inc. Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
The Date of this Prospectus is April 24, 1998
Van Kampen American Capital
SELECT EQUITY TRUST, SERIES 1 AND SELECT EQUITY AND TREASURY TRUST, SERIES 1
Van Kampen Merritt Equity Opportunity Trust, Series 1
Summary of Essential Financial Information
As of March 5, 1998
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor: Van Kampen American Capital Investment Advisory Corp.
(An affiliate of the Sponsor)
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
Select
Equity
Select and
Equity Treasury
Trust Trust
------------- ---------------
<S> <C> <C>
General Information
Aggregate Maturity Value of Treasury Obligations Initially Deposited................................. -- 27,000,000
Number of Units...................................................................................... 250,602 1,544,563
Fractional Undivided Interest in Trust per Unit...................................................... 1/250,602 1/1,544,563
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>..................................................... $ 6,709,591 $ 31,184,000
Aggregate Value Securities per Unit (including accumulated dividends)............................... $ 26.84 $ 20.21
Sales charge 2.7% (2.775% of Aggregate Value of Securities excluding principal cash per Unit))<F3>.. $ .74 $ .56
Transaction Fees per Unit .......................................................................... $ .00 $ .00
Public Offering Price per Unit <F2><F3>............................................................. $ 27.58 $ 20.77
Redemption Price per Unit............................................................................ $ 26.84 $ 20.21
Secondary Market Repurchase Price per Unit........................................................... $ 26.84 $ 20.21
Excess of Public Offering Price per Unit over Redemption Price per Unit.............................. $ .74 $ .56
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee...Maximum of $.0025 per Unit
Evaluator's Annual Fee ...............Maximum of $.0025 per Unit
Evaluations for purpose of sale, purchase or redemption of Units are made as of 4:00 P.M.
Eastern time on days of trading on the New York Stock Exchange next following receipt of
an order for a sale or purchase of Units or receipt by The Bank of New York of Units
tendered for redemption.
Date of Deposit.......................November 21, 1991
Mandatory Termination Date............May 15, 2002
The Select Equity Trust may be terminated if the net asset value of such Trust is less than
$500,000 unless the net asset value of such Trust deposit has exceeded $15,000,000, then the
Trust Agreement may be terminated it the net asset value of such Trust is less than
Minimum Termination Value.............$3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Special Information......................................
Calculation of Estimated Net Annual Dividends per Unit...
Estimated Gross Annual Dividends per Unit............... $ .45955 $ .19643
Less: Estimated Expenses per Unit....................... $ .02332 $ .01823
Estimated Net Annual Dividends per Unit................. $ .43623 $ .17820
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee................$.008 per Unit
Income Distribution Record Date.....TENTH day of March, June, September, and December.
Income Distribution Date............TWENTY-FIFTH day of March, June, September and December.
Capital Account Record Date.........TENTH day of December.
Capital Account Distribution Date...TWENTY-FIFTH day of December.
- ----------
<F1>Equity Securities listed on a national securities exchange are valued at the
closing sale price, or if no such price exists, at the last available bid
prices. Treasury Obligations are valued at the last available bid price.
<F2>Anyone ordering units will have added to the Public Offering Price a pro rata
share of any cash in the Income and Capital Accounts.
<F3>Effective on each December 1, commencing December 1, 1992, the secondary sales
charge will decrease by .3 of 1% to a minimum sales charge of 1.5%. See "
Public Offering-Offering Price" in Part Two.
</TABLE>
PORTFOLIO
The Select Equity Trust consists of 31 different issues of Equity Securities,
which are primarily actively traded, blue-chip securities issued by large, well
established corporations. The original portfolio consisted of common stocks
which were components of the Dow Jones Industrial Average as of the Initial Date
of Deposit. Dow Jones & Company, Inc., owner of the Dow Jones Industrial
Average, has not granted to the Fund or the Sponsor a license to use the Dow
Jones Industrial Average. Units are not designed so that their prices will
parallel or correlate with movements in the Dow Jones Industrial Average, and it
is expected that their prices will not parallel or correlate with such
movements. Dow Jones & Company, Inc. has not participated in any way in the
creation of the Fund or in the selection of stocks included in either Trust and
has not approved any information herein relating thereto.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1991(1) 1992 1993
------------- ------------ -----------
<S> <C> <C> <C>
Net asset value per Unit at beginning of period............................................. $ 9.42 $ 10.19 $ 11.05
============= ============ ===========
Net asset value per Unit at end of period................................................... $ 10.19 $ 11.05 $ 12.74
============= ============ ===========
Distributions to Unitholders of investment income including accumulated
dividends paid on Units redeemed (average Units outstanding for entire period) ............. $ -- $ .33 $ .35
============= ============ ===========
Distributions to Unitholders from Equity Securities redemption proceeds
(average Units outstanding for entire period)............................................... $ -- $ -- $ --
============= ============ ===========
Unrealized appreciation (depreciation) of Equity Securities
(per Unit outstanding at end of period)..................................................... $ .75 $ .32 $ 1.12
============= ============ ===========
Units outstanding at end of period.......................................................... 150,000 675,000 462,635
- ----------
(1) For the period from November 21, 1991 (date of deposit) through December 31,
1991.
</TABLE>
PER UNIT INFORMATION (continued)
<TABLE>
<CAPTION>
1994 1995 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value per Unit at beginning of period.................................$ 12.74 $ 12.82 $ 16.73 $ 20.64
=========== =========== =========== ===========
Net asset value per Unit at end of period.......................................$ 12.82 $ 16.73 $ 20.64 $ 25.13
=========== =========== =========== ===========
Distributions to Unitholders of investment income including accumulated
dividends paid on Units redeemed (average Units outstanding for entire period) $ .33 $ .35 $ .38 $ .42
=========== =========== =========== ===========
Distributions to Unitholders from Equity Securities redemption proceeds
(average Units outstanding for entire period)..................................$ -- $ .29 $ .16 $ --
=========== =========== =========== ===========
Unrealized appreciation (depreciation) of Equity Securities
(per Unit outstanding at end of period)........................................ $ (.53) $ 3.79 $ 3.23 $ 4.04
=========== =========== =========== ===========
Units outstanding at end of period.............................................. 390,527 321,742 278,944 259,850
- ----------
(1) For the period from November 21, 1991 (date of deposit) through December 31,
1991.
</TABLE>
PORTFOLIO
The Select Equity and Treasury Trust consists of 34 different issues of
Equity Securities, which primarily are actively traded, blue-chip securities
issued by large, well established corporations and zero coupon U.S. Treasury
Obligations. Each issue of Equity Securities, as of the Initial Date of Deposit,
represented approximately the same dollar value of a portfolio since the Sponsor
utilized a dollar weighted average approach in acquiring such Equity Securities.
Dow Jones & Company, Inc., owner of the Dow Jones Industrial Average, has not
granted to the Fund or the Sponsor a license to use the Dow Jones Industrial
Average. Units are not designed so that their prices will parallel or correlate
with movements in the Dow Jones Industrial Average, and it is expected that
their prices will not parallel or correlate with such movements. Dow Jones &
Company, Inc. has not participated in any way in the creation of the Fund or in
the selection of stocks included in either Trust and has not approved any
information herein relating thereto.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1991 (1) 1992 1993
------------- ------------- --------------
<S> <C> <C> <C>
Net asset value per Unit at beginning of period......................................... $ 9.05 $ 9.75 $ 10.62
============= ============= ==============
Net asset value per Unit at end of period............................................... $ 9.75 $ 10.62 $ 12.41
============= ============= ==============
Distributions to Unitholders of investment income including accumulated dividends paid
on Units redeemed (average Units outstanding for entire period) ........................ $ -- $ .16 $ .14
============= ============= ==============
Distributions to Unitholders from Security redemption proceeds
(average Units outstanding for entire period)........................................... $ -- $ -- $ --
============= ============= ==============
Unrealized appreciation (depreciation) of Securities (per Unit
outstanding at end of period)........................................................... $ .70 $ .59 $ .95
============= ============= ==============
Units outstanding at end of period...................................................... 300,000 2,700,000 2,464,843
- ----------
(1) For the period from November 21, 1991 (date of deposit) through December 31,
1991.
</TABLE>
PER UNIT INFORMATION (continued)
<TABLE>
<CAPTION>
1994 1995 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value per Unit at beginning of period......................$ 12.41 $ 11.82 $ 15.28 $ 16.89
============= ============= ============= =============
Net asset value per Unit at end of period............................$ 11.82 $ 15.28 $ 16.89 $ 19.45
============= ============= ============= =============
Distributions to Unitholders of investment income including
accumulated dividends paid on Units redeemed
(average Units outstanding for entire period) .......................$ .12 $ .11 $ .13 $ .16
============= ============= ============= =============
Distributions to Unitholders from Security
redemption proceeds (average Units outstanding for entire period)...$ -- $ -- $ -- $ --
============= ============= ============= =============
Unrealized appreciation (depreciation) of
Securities (per Unit outstanding at end of period)...................$ (1.73) $ 2.76 $ 1.00 $ 2.76
============= ============= ============= =============
Units outstanding at end of period................................... 2,152,345 1,907,877 1,734,737 1,564,800
</TABLE>
- ----------
(1) For the period from November 21, 1991 (date of deposit) through December
31, 1991.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen Merritt Equity Opportunity Trust, Series 1
(Select Equity and Select Equity and Treasury Trusts):
We have audited the accompanying statements of condition (including the
analyses of net assets) and the related portfolio of Van Kampen Merritt Equity
Opportunity Trust, Series 1 (Select Equity and Select Equity and Treasury
Trusts) as of December 31, 1997, and the related statements of operations and
changes in net assets for the three years ended December 31, 1997. These
statements are the responsibility of the Trustee and the Sponsor. Our
responsibility is to express an opinion on such 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 securities owned at December 31, 1997 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
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 Merritt Equity
Opportunity Trust, Series 1 (Select Equity and Select Equity and Treasury
Trusts) as of December 31, 1997, and the results of operations and changes in
net assets for the three years ended December 31, 1997, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
March 13, 1998
<TABLE>
VAN KAMPEN MERRITT
EQUITY OPPORTUNITY TRUST
SERIES 1
Statements of Condition
December 31, 1997
<CAPTION>
Select
Equity
Select and
Equity Treasury
Trust Trust
------------- --------------
<S> <C> <C>
Trust property
Cash................................................................................................. $ -- $ 15,036
Securities at market value, (cost $2,841,487 and $19,791,681, respectively) (note 1)................. 6,649,737 30,402,227
Accumulated dividends................................................................................ 10,016 26,618
Receivable for securities sold....................................................................... -- --
------------- --------------
$ 6,659,753 $ 30,443,881
============= ==============
Liabilities and interest to Unitholders
Cash overdraft....................................................................................... $ 24,380 $ --
Redemptions payable.................................................................................. 106,042 12,577
Interest to Unitholders.............................................................................. 6,529,331 30,431,304
------------- --------------
$ 6,659,753 $ 30,443,881
============= ==============
Analyses of Net Assets
Interest of Unitholders (259,850 and 1,564,800 Units, respectively of fractional undivided interest
outstanding)
Cost to original investors of 675,000 and 2,700,000 Units, respectively (note 1)..................... $ 7,448,262 $ 28,114,935
Less initial underwriting commission (note 3)........................................................ 339,996 1,275,163
------------- --------------
7,108,266 26,839,772
Less redemption of Units (415,150 and 1,135,200 Units, respectively)................................. 5,756,590 15,708,232
------------- --------------
1,351,676 11,131,540
Undistributed net investment income
Net investment income................................................................................ 809,969 9,169,068
Less distributions to Unitholders.................................................................... 822,764 1,617,748
------------- --------------
(12,795) 7,551,320
Realized gain (loss) on Security sale or redemption.................................................. 1,534,726 1,137,898
Unrealized appreciation (depreciation) of Securities (note 2)........................................ 3,808,250 10,610,546
Distributions to Unitholders of Security sale or redemption proceeds................................. (152,526) --
------------- --------------
Net asset value to Unitholders....................................................................... $ 6,529,331 $ 30,431,304
============= ==============
Net asset value per Unit (Units outstanding of 259,850 and 1,564,800, respectively)................... $ 25.13 $ 19.45
============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT
SELECT EQUITY TRUST, SERIES 1
Statements of Operations
Years ended
December 31,
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Investment income
Dividend income..................................................... $ 132,786 $ 123,193 $ 119,217
Expenses,
Trustee fees and expenses........................................... 5,183 4,583 4,522
Evaluator fees...................................................... 6,119 968 863
Supervisory fees.................................................... 228 853 780
------------- ------------- -------------
Total expenses...................................................... 11,530 6,404 6,165
------------- ------------- -------------
Net investment income............................................... 121,256 116,789 113,052
Realized gain (loss) from Security sale or redemption
Proceeds............................................................ 1,187,018 867,002 353,055
Cost................................................................ 858,870 525,116 171,628
------------- ------------- -------------
Realized gain (loss)................................................ 328,148 341,886 181,427
Net change in unrealized appreciation (depreciation) of Securities... 1,220,457 900,082 1,049,451
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $ 1,669,861 $ 1,358,757 $ 1,343,930
============= ============= =============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Years ended
December 31,
<CAPTION>
1995 1996 1997
--------------- ------------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................................................. $ 121,256 $ 116,789 $ 113,052
Realized gain (loss) on Security sale or redemption................... 328,148 341,886 181,427
Net change in unrealized appreciation (depreciation) of Securities.... 1,220,457 900,082 1,049,451
--------------- ------------- ------------
Net increase (decrease) in net assets resulting from operations....... 1,669,861 1,358,757 1,343,930
Distributions to Unitholders from:
Net investment income................................................. (127,249) (115,954) (112,976)
Securities sale or redemption proceeds................................ (104,014) (48,512) --
Redemption of Units (1,062,625) (819,400) (460,152)
--------------- ------------- ------------
Total increase (decrease)............................................. 375,973 374,891 770,802
Net asset value to Unitholders
Beginning of period................................................... 5,007,665 5,383,638 5,758,529
Additional Securities purchased from proceeds of Unit sales........... -- -- --
--------------- ------------- ------------
End of period (including undistributed (overdistributed) net
investment income of $(13,706), $(12,871) and $(12,795),
respectively)....................................................... $ 5,383,638 $ 5,758,529 $ 6,529,331
=============== ============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT SELECT EQUITY AND TREASURY TRUST, SERIES 1
Statements of Operations
Years ended December 31,
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Investment income
Dividend income...................................................... $ 266,235 $ 273,853 294,106
Interest income...................................................... 1,263,281 1,072,292 929,912
Expenses
Trustee fees and expenses............................................ 19,389 17,553 16,711
Evaluator fees....................................................... 1,113 5,703 5,342
Supervisory fees..................................................... 4,865 5,075 4,853
------------- ------------- -------------
Total expenses....................................................... 25,367 28,331 26,906
------------- ------------- -------------
Net investment income................................................ 1,504,149 1,317,814 1,197,112
Realized gain (loss) from Security sale or redemption
Proceeds............................................................. 3,316,532 2,698,239 3,092,868
Cost................................................................. 2,810,235 2,621,568 4,140,566
------------- ------------- -------------
Realized gain (loss)................................................. 506,297 76,671 (1,047,698)
Net change in unrealized appreciation (depreciation) of Securities... 5,259,718 1,732,509 4,314,175
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... $ 7,270,164 $ 3,126,994 4,463,589
============= ============= =============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Years ended
December 31,
<CAPTION>
1995 1996 1997
------------- ------------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................................................ $ 1,504,149 $ 1,317,814 $ 1,197,112
Realized gain (loss) on Security sale or redemption.................. 506,297 76,671 (1,047,698)
Net change in unrealized appreciation (depreciation) of Securities... 5,259,718 1,732,509 4,314,175
------------- ------------- ------------
Net increase (decrease) in net assets resulting from operations...... 7,270,164 3,126,994 4,463,589
Distributions to Unitholders from:
Net investment income................................................. (232,875) (237,042) (258,454)
Security sale or redemption proceeds................................. -- -- --
Redemption of Units................................................... (3,325,930) (2,738,503 (3,068,823)
------------- ------------- ------------
Total increase (decrease)............................................ 3,711,359 151,449 1,136,312
Net asset value to Unitholders
Beginning of period.................................................. 25,432,184 29,143,543 29,294,992
Additional Securities purchased from proceeds of Unit sales.......... -- -- --
------------- ------------- ------------
End of period (including undistributed net investment income of
$5,531,890, $6,612,662 and $7,551,320, respectively)................. $ 29,143,543 $ 29,294,992 $ 30,431,304
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT SELECT EQUITY TRUST, SERIES 1
PORTFOLIO as of December 31, 1997
<CAPTION>
Valuation of
Securities at
Number December 31,
of Market Value Per 1997
Shares Name of Issuer Share (Note 1)
- ----------- -------------------------------------------------- --------------------- ------------------
<S> <C> <C> <C>
5,882 Allied Signal, Incorporated $ 38.9375 $ 229,030
- -------------------------------------------------------------------------------------------------------
2,500 Aluminum Company of America (ALCOA) 70.3750 175,938
- -------------------------------------------------------------------------------------------------------
4,276 American Express Company 89.2500 381,633
- -------------------------------------------------------------------------------------------------------
2,728 American Telephone and Telegraph (AT&T) 61.2500 167,090
- -------------------------------------------------------------------------------------------------------
4,397 Bethlehem Steel Corporation 8.6250 37,924
- -------------------------------------------------------------------------------------------------------
4,532 The Boeing Company 48.9375 221,785
- -------------------------------------------------------------------------------------------------------
5,289 Caterpillar Incorporated 48.5625 256,847
- -------------------------------------------------------------------------------------------------------
5,715 CBS Corporation 29.4375 168,235
- -------------------------------------------------------------------------------------------------------
3,024 Chevron Corporation 77.0000 232,848
- -------------------------------------------------------------------------------------------------------
4,343 Coca-Cola Enterprises, Incorporated 66.6250 289,352
- -------------------------------------------------------------------------------------------------------
3,039 Walt Disney Company 99.0625 301,051
- -------------------------------------------------------------------------------------------------------
4,786 Du Pont (E.I) de Nemours & Company 60.0625 287,459
- -------------------------------------------------------------------------------------------------------
2,258 Eastman Kodak Company 60.8125 137,315
- -------------------------------------------------------------------------------------------------------
3,508 Exxon Corporation 61.1875 214,646
- -------------------------------------------------------------------------------------------------------
5,548 General Electric Company 73.3750 407,085
- -------------------------------------------------------------------------------------------------------
2,912 General Motors 60.6250 176,540
- -------------------------------------------------------------------------------------------------------
2,922 Goodyear Tire & Rubber Company 63.6250 185,912
- -------------------------------------------------------------------------------------------------------
2,931 International Business Machines (IBM) 104.5625 306,473
- -------------------------------------------------------------------------------------------------------
2,823 International Paper Company 43.1250 121,742
- -------------------------------------------------------------------------------------------------------
3,101 McDonald's Corporation 47.7500 148,073
- -------------------------------------------------------------------------------------------------------
2,234 Merck & Co., Incorporated 106.2500 237,363
- -------------------------------------------------------------------------------------------------------
2,403 Minnesota Mining and Manufacturing Company (3M) 82.0625 197,196
- -------------------------------------------------------------------------------------------------------
1,917 J.P. Morgan & Company, Incorporated 112.8750 216,381
- -------------------------------------------------------------------------------------------------------
5,006 Philip Morris Companies Incorporated 45.3125 226,834
- -------------------------------------------------------------------------------------------------------
5,012 The Procter & Gamble Company 79.8125 400,020
- -------------------------------------------------------------------------------------------------------
185 Ratheon Company 49.3125 9,123
- -------------------------------------------------------------------------------------------------------
2,709 Sears, Roebuck & Company 45.2500 122,582
- -------------------------------------------------------------------------------------------------------
4,168 Texaco, Incorporated 54.3750 226,635
- -------------------------------------------------------------------------------------------------------
4,695 Union Carbide Corporation 42.9375 201,592
- -------------------------------------------------------------------------------------------------------
4,011 United Technologies Corporation 72.8125 292,051
- -------------------------------------------------------------------------------------------------------
3,582 Woolworth Corp. 20.3750 72,982
- ----------- ------------------
112,436 $ 6,649,737
=========== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT SELECT EQUITY AND TREASURY TRUST, SERIES 1
PORTFOLIO as of December 31, 1997
<CAPTION>
Valuation of
Securities at
Number December 31,
of Market Value Per 1997
Shares Name of Issuer Share (Note 1)
- -------------- -------------------------------------------------------- --------------------- ------------------
<S> <C> <C> <C>
14,234 Allied Signal, Incorporated $ 38.9375 $ 554,236
- ----------------------------------------------------------------------------------------------------------------
5,799 Allstate Corporation 90.8750 526,984
- ----------------------------------------------------------------------------------------------------------------
6,565 Aluminum Company of America (ALCOA) 70.3750 462,012
- ----------------------------------------------------------------------------------------------------------------
8,629 American Express Company 89.2500 770,138
- ----------------------------------------------------------------------------------------------------------------
6,297 American Telephone and Telegraph (AT&T) 61.2500 385,691
- ----------------------------------------------------------------------------------------------------------------
7,785 Bethlehem Steel Corporation 8.6250 67,146
- ----------------------------------------------------------------------------------------------------------------
10,946 The Boeing Company 48.9375 535,670
- ----------------------------------------------------------------------------------------------------------------
11,300 Caterpillar Incorporated 48.5625 548,756
- ----------------------------------------------------------------------------------------------------------------
11,752 CBS Corporation 29.4375 345,949
- ----------------------------------------------------------------------------------------------------------------
6,782 Chevron Corporation 77.0000 522,214
- ----------------------------------------------------------------------------------------------------------------
11,064 Coca-Cola Enterprises, Incorporated 66.6250 737,139
- ----------------------------------------------------------------------------------------------------------------
6,528 Walt Disney Company 99.0625 646,680
- ----------------------------------------------------------------------------------------------------------------
10,427 Du Pont (E.I) de Nemours & Company 60.0625 626,272
- ----------------------------------------------------------------------------------------------------------------
5,715 Eastman Kodak Company 60.8125 347,543
- ----------------------------------------------------------------------------------------------------------------
10,140 Exxon Corporation 61.1875 620,441
- ----------------------------------------------------------------------------------------------------------------
11,935 General Electric Company 73.3750 875,731
- ----------------------------------------------------------------------------------------------------------------
7,308 General Motors 60.6250 443,048
- ----------------------------------------------------------------------------------------------------------------
8,415 Goodyear Tire & Rubber Company 63.6250 535,404
- ----------------------------------------------------------------------------------------------------------------
584 Imation Corporation 16.0000 9,344
- ----------------------------------------------------------------------------------------------------------------
7,922 International Business Machines (IBM) 104.5625 828,344
- ----------------------------------------------------------------------------------------------------------------
8,944 International Paper Company 43.1250 385,710
- ----------------------------------------------------------------------------------------------------------------
2,045 Lucent Technologies 79.8750 163,344
- ----------------------------------------------------------------------------------------------------------------
9,133 McDonald's Corporation 47.7500 436,101
- ----------------------------------------------------------------------------------------------------------------
6,565 Merck & Co., Incorporated 106.2500 697,531
- ----------------------------------------------------------------------------------------------------------------
5,779 Minnesota Mining and Manufacturing Company (3M) 82.0625 474,239
- ----------------------------------------------------------------------------------------------------------------
5,076 J.P. Morgan & Company, Incorporated 112.8750 572,954
- ----------------------------------------------------------------------------------------------------------------
14,395 Philip Morris Companies Incorporated 45.3125 652,273
- ----------------------------------------------------------------------------------------------------------------
10,154 The Procter & Gamble Company 79.8125 810,416
- ----------------------------------------------------------------------------------------------------------------
466 Ratheon Company 49.3125 22,980
- ----------------------------------------------------------------------------------------------------------------
6,447 Sears, Roebuck & Company 45.2500 291,727
- ----------------------------------------------------------------------------------------------------------------
10,594 Texaco, Incorporated 54.3750 576,049
- ----------------------------------------------------------------------------------------------------------------
8,672 Union Carbide Corporation 42.9375 372,354
- ----------------------------------------------------------------------------------------------------------------
9,026 United Technologies Corporation 72.8125 657,206
- ----------------------------------------------------------------------------------------------------------------
8,781 Woolworth Corp. 20.3750 178,913
- -------------- ------------------
276,204 16,680,539
============== ==================
Maturity
Value Name of Issuer and Title of Security
- -------------- ------------------------------------------------------------------------------ ------------------
$ 17,569,000 Zero Coupon U.S. Treasury bonds maturing May 15, 2002 13,721,688
============== ------------------
$ 30,402,227
==================
</TABLE>
The accompanying notes are an integral part of these statements.
VAN KAMPEN MERRITT EQUITY OPPORTUNITY TRUST SERIES 1
Notes to Financial Statements
December 31, 1995, 1996 and 1997
- --------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the last closing sales price or, if not so listed, at the closing
bid price. Treasury obligations are valued at the closing bid price.
Security Cost - The original cost to the Trust of the Securities was based,
for Securities listed on a national securities exchange, on the closing sale
prices on the exchange. The original cost of the Treasury obligations was
based on the closing bid price. In each case, the costs were determined on the
day of the various Dates of Deposit.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal income taxes.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an identified cost basis. Since the date of deposit, in the Treasury
Trust, undistributed net investment income includes $6,566,247 of accreted
interest.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Select
Select Equity and
Equity Treasury
Trust Trust
----------------- ------------------
<S> <C> <C>
Unrealized Appreciation $ 3,862,689 $ 10,731,640
Unrealized Depreciation (54,439) (121,094)
----------------- ------------------
$ 3,808,250 $ 10,610,546
================= ==================
</TABLE>
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Sponsor intends to
maintain a market for Units and to continuously offer to purchase Units at
prices, subject to change at any time, based upon the value of the Securities
in the portfolio of the Trust valued as described in Note 1, plus accumulated
dividends to the date of settlement. If the supply of Units exceeds demand, or
for other business reasons, the Sponsor may discontinue purchases of Units at
such prices. In the event that a market is not maintained for the Units, a
Unitholder desiring to dispose of his Units may be able to do so only by
tendering such Units to the Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the underlying
value of the Securities per Unit on the date of an investor's purchase, plus a
sales charge of 4.5% of the public offering price which is equivalent to
4.712% of the aggregate offering price of the Securities. The secondary market
cost to investors is based on the determination of the underlying value of the
Securities per Unit on the date of an investor's purchase plus a sales charge
of 4.5% of the public offering price which is 4.712% of the underlying value
of the Securities. Effective on each December 1, commencing December 1, 1992,
the secondary sales charge will decrease by .3 of 1% to a minimum sales charge
of 1.5%.
Compensation of Evaluator and Supervisor - The Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.0025 per Unit, not
to exceed the aggregate cost of the Supervisor for providing such services to
all applicable Trusts). The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. Both fees may be adjusted for increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index.
NOTE 4 - REDEMPTION OF UNITS
Units were presented for redemption as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Select Equity Trust 68,785 42,798 19,094
Select Equity and Treasury Trust 244,468 173,140 169,937
</TABLE>
SELECT EQUITY AND TREASURY TRUST
AND
BLUE CHIP OPPORTUNITY AND TREASURY TRUST
PROSPECTUS PART TWO
- --------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital Equity Opportunity Trust or Van Kampen
Merritt Equity Opportunity Trust (the "Fund") are comprised of separate and
distinct unit investment trusts including the Select Equity and Treasury Trust
(the "Select Equity and Treasury Trust") and the Blue Chip Opportunity and
Treasury Trust (the "Blue Chip Opportunity and Treasury Trust"). The Select
Equity and Treasury Trust and the Blue Chip Opportunity and Treasury Trust each
offer investors the opportunity to purchase Units representing proportionate
interests in a fixed, diversified portfolio primarily consisting of the 30
actively traded "blue chip" equity securities which were components of the Dow
Jones Industrial Average on the original date of creation of the Trust plus
"zero coupon" U.S. Treasury obligations. Dow Jones & Company, Inc. has not
participated in any way in the creation of the Fund or in the selection of
stocks included in the Trusts and has not approved any information herein
relating thereto. Unless terminated earlier, each Trust will terminate on the
Mandatory Termination Date stated under "Summary of Essential Financial
Information" in Part One of this Prospectus 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.
OBJECTIVES OF THE TRUSTS. The objectives of the Select Equity and Treasury
Trust and the Blue Chip Opportunity and Treasury Trust are to protect
Unitholders' capital and provide the potential for capital appreciation and
income by investing a portion of its portfolio in "zero coupon" U.S. Treasury
obligations ("Treasury Obligations") and the remainder of the Trust's portfolio
primarily consisting of actively traded, New York Stock Exchange listed equity
securities which were components of the Dow Jones Industrial Average on the
original date of creation of the Trust ("Equity Securities"). Collectively, the
Treasury Obligations and the Equity Securities are referred to herein as the
"Securities." See "Portfolio" in Part One of this Prospectus. Units are not
designed so that their prices will parallel or correlate with movements in the
Dow Jones Industrial Average, and it is expected that their prices will not
parallel or correlate with such movements. The Treasury Obligations in the
Select Equity and Treasury Trust and the Blue Chip Opportunity and Treasury
Trust evidence the right to receive a fixed payment at a future date from the
U.S. Government and are backed by the full faith and credit of the U.S.
Government. The guarantee of the U.S. Government does not apply to the market
value of the Treasury Obligations of the Units of the Select Equity and Treasury
Trust or the Blue Chip Opportunity and Treasury Trust, whose net asset value
will fluctuate and, prior to maturity, may be worth more or less than a
purchaser's acquisition cost. There is, of course, no guarantee that the
objectives of the Trusts will be achieved.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of the
Trust will include the aggregate underlying value of the Securities in the
Trust, the applicable sales charge as described herein, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. See "Public Offering".
ESTIMATED ANNUAL DISTRIBUTIONS. The estimated annual dividend distributions
per unit will vary with changes in fees and expenses of a Trust, with changes in
dividends received and with the sale or liquidation of Securities; therefore,
there is no assurance that the annual dividend distribution will be realized in
the future.
PRINCIPAL PROTECTION. The Select Equity and Treasury Trust and the Blue Chip
Opportunity and Treasury Trust were both organized so that purchasers of Units
should receive, at the termination of such Trusts, an amount per Unit at least
equal to $10.00 ($11.00 for Blue Chip Opportunity and Treasury Trust, Series 5
and subsequent series) (which is equal to the per Unit value upon maturity of
the Treasury Obligations), even if the respective Trust never paid a dividend
and the value of the Equity Securities were to decrease to zero, which the
Sponsor considers highly unlikely. This feature of the Select Equity and
Treasury Trust and the Blue Chip Opportunity and Treasury Trust provides
Unitholders who purchase Units at the price of $10.00 ($11.00 for Blue Chip
Opportunity and Treasury Trust, Series 5 and subsequent series) or less per Unit
with total principal protection, including any sales charges paid, although they
might forego any earnings on the amount invested. To the extent that Units are
purchased at a lower price, this feature may also provide a potential for
capital appreciation. It should be remembered, however, that the value of the
Treasury Obligations may fluctuate before maturity due to fluctuations in
interest rates.
Units of the Fund are not deposits or obligations of, and are not guaranteed
or endorsed by, any bank, and are not federally insured or otherwise protected
by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency, and involve investment risk, including the possible loss of
principal.
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
BOTH PARTS OF THIS PROSPECTUS SHOULD
BE RETAINED FOR FUTURE REFERENCE. This Prospectus is
dated as of the date of the Prospectus Part I
accompanying this Prospectus Part II.
- --------------------------------------------------------------------------------
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.
DISTRIBUTIONS. Distributions of dividends received, and capital, if any,
received by each 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" in Part One of this Prospectus. INCOME WITH
RESPECT TO THE AMORTIZATION OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY
OBLIGATIONS IN THE SELECT EQUITY AND TREASURY TRUST AND THE BLUE CHIP
OPPORTUNITY AND TREASURY TRUST WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNITHOLDERS WILL BE SUBJECT TO INCOME TAX AT ORDINARY INCOME RATES AS IF A
DISTRIBUTION HAD OCCURRED. Any distribution of income and/or capital will be net
of the expenses of the applicable Trust. See "Federal Taxation." Additionally,
upon termination of each Trust, the Trustee will distribute, upon surrender of
Units for redemption, to each Unitholder his pro rata share of each Trust's
assets, less expenses, in the manner set forth under "Rights of
Unitholders--Distributions of Income and Capital".
TERMINATION. Commencing on the Mandatory Termination Date as specified in
Part One for each Trust, Equity Securities will begin to be sold in connection
with the termination of a Trust. The Sponsor will determine the manner, timing
and execution of the sale of the Equity Securities. Written notice of any
termination of a 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 for the respective Trusts 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 the required number of Units of a 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 and cash representing their pro
rata portion of the Treasury Obligations, if any. 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 terminated. See "Trust Administration--Reinvestment Option."
REINVESTMENT OPTION. Unitholders of any Van Kampen American Capital-sponsored
unit investment trust may utilized 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 have the opportunity to have their distributions reinvested
into an open-end, management investment company as described herein. See "Rights
of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in a Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and currency fluctuations, the lack of adequate financial
information concerning an issuer and exchange control restrictions impacting
foreign issuers. See "Risk Factors".
THE TRUSTS
The Fund was created under the laws of the State of New York pursuant to a
Trust Indenture and Agreement (the "Trust Agreement"), 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 Select Equity and Treasury Trust and the Blue Chip Opportunity and
Treasury Trust may be appropriate mediums for investors who desire to
participate in a portfolio of equity securities and zero-coupon U.S. Treasury
obligations with greater diversification with regard to the equity securities
than they might be able to acquire individually. Diversification of assets in
the Trusts will not eliminate the risk of loss always inherent in the ownership
of securities. For a breakdown of the portfolio see "Portfolio" in Part One of
this Prospectus.
Each Unit represents a fractional undivided interest in the Trust involved.
To the extent that any Units are redeemed by the Trustee, the fractional
undivided interest in a Trust represented by each unredeemed Unit will increase
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.
OBJECTIVES AND SECURITIES SELECTION
The objectives of the Select Equity and Treasury Trust and the Blue Chip
Opportunity and Treasury Trust are to protect Unitholders' capital and provide
investors with the potential for capital appreciation and income. The portfolio
of each Trust is described under "Trust Portfolios" herein and under "Portfolio"
in Part One of this Prospectus. An investor will be subjected to taxation on the
dividend income received from the Fund and on gains from the sale or liquidation
of Securities (see "Federal TaxationInvestors should be aware that there is not
any guarantee that the objectives of any of the Trusts 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. The Select
Equity and Treasury Trust and the Blue Chip Opportunity and Treasury Trust,
however, were both organized so that investors should receive, at termination of
such Trusts, an amount per Unit at least equal to $10.00 )$11.00 for Blue Chip
Opportunity and Treasury Trust, Series 5 and subsequent series) (which is equal
to the per Unit value upon maturity of the Treasury Obligations), even if such
Trusts never paid a distribution and the value of the Equity Securities were to
decrease to zero, which the Sponsor considers highly unlikely. 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.
In selecting Securities for the Select Equity and Treasury Trust and the Blue
Chip Opportunity and Treasury Trust, the following factors, among others, were
considered by the Sponsor: (a) for the portion of the Securities that are Equity
Securities, the Sponsor selected those Equity Securities that were, at the date
of creation of the Fund, components of the Dow Jones Industrial Average and the
dollar value of the shares of such securities with the intent to have
approximately equal dollar amounts invested in each such security, and (b) for
the portion of the Securities that are Treasury Obligations, the evidence of the
right to receive a fixed payment at a future date from the U.S. Government,
backed by the full faith credit of the U.S. Government.
Investors should note that the above criteria were applied to the Securities
selected for inclusion in the Trusts as of the date the Trusts were created.
Subsequent thereto, the Equity Securities may no longer meet such criteria.
Should an Equity Security no longer meet such criteria, such Equity Security
will not as a result thereof be removed from the portfolio of a Trust.
Investors should be aware that the Fund is not a "managed" trust 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 a Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Investors should note in particular that the
securities were selected by the Sponsor as of the date the Securities were
purchased by the Trust involved. Each 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 such
Trust.
TRUST PORTFOLIOS
Each Trust consists of a number of different issues of Equity Securities, all
of which are actively traded, blue-chip securities issued by large, well
established corporations and all of which, taken together, were components of
the Dow Jones Industrial Average on the date of creation of such Trust plus
zero-coupon U.S. Treasury Obligations. Each Equity Security, as of such date,
represented approximately the same dollar value of a portfolio since the Sponsor
utilized a dollar weighted average approach in acquiring such Equity Securities.
Consistent with the Trust's investment objective, a change in components of the
Dow Jones Industrial Average will not result in a change to the Trust portfolio.
Dow Jones & Company, Inc., owner of the Dow Jones Industrial Average, has not
granted to the Fund or the Sponsor a license to use the Dow Jones Industrial
Average. Units are not designed so that their prices will parallel or correlate
with movements in the Dow Jones Industrial Average, and it is expected that
their prices will not parallel or correlate with such movements. Dow Jones &
Company, Inc. has not participated in any way in the creation of the Fund or in
the selection of stocks included in any of the Trusts and has not approved any
information herein relating thereto.
The Dow Jones Industrial Average is composed of 30 common stocks chosen by
the editors of The Wall Street Journal, a publication of Dow Jones & Company,
Inc. The companies are major factors in their industries and their stocks are
widely held by individuals and institutional investors. Changes in the
components are made entirely by the editors of The Wall Street Journal without
consultation with the companies, the stock exchange or any official agency. Dow
Jones & Company, Inc. expressly reserves the right to change the components of
the Dow Jones Industrial Average at any time for any reason. Any changes in the
components of the Dow Jones Industrial Average after the date the Fund was
created will not cause a change in the identity of the common stocks included in
any of the Trusts.
The Trusts consist of such of the Securities listed under "Portfolio" in Part
One of this Prospectus as may continue to be held from time to time in the
Trusts together with 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.
Because certain of the Securities from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
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 Securities under certain limited circumstances. 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
EQUITY SECURITIES. 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, and global or regional political, economic or banking crises.
Shareholders of common stocks have rights to receive payments from the issuers
of those common stocks that are generally subordinate to those of creditors of
or holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Fund 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 may be expected to fluctuate over the life of the Fund to values
higher or lower than those prevailing on the date of purchase by a Unitholder.
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.
TREASURY OBLIGATIONS. The Treasury Obligations deposited in the Select Equity
and Treasury Trust and the Blue Chip Opportunity and Treasury Trust consist of
U.S. Treasury bonds which have been stripped of their unmatured interest
coupons. The Treasury Obligations evidence the right to receive a fixed payment
at a future date from the U.S. Government and are backed by the full faith and
credit of the U.S. Government. Treasury Obligations are purchased at a deep
discount because the buyer obtains only the right to a fixed payment at a fixed
date in the future and does not receive any periodic interest payments. The
effect of owning deep discount bonds which do not make current interest payments
(such as the Treasury Obligations) is that a fixed yield is earned not only on
the original investment, but also, in effect, on all earnings during the life of
the discount obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such obligations
at a rate as high as the implicit yield on the discount obligation, but at the
same time eliminates the holder's ability to reinvest at higher rates in the
future. For this reason, the Treasury Obligations are subject to substantially
greater price fluctuations during periods of changing interest rates than are
securities of comparable quality which make regular interest payments. The
effect of being able to acquire the Treasury Obligations at a lower price is to
permit more of such Trusts' portfolio to be invested in Equity Securities.
GENERAL. Each Trust consists of such of the Securities listed under
"Portfolio" as may continue to be held from time to time in such Trust in Part
One of this Prospectus together with 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.
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 be distributed to Unitholders and will not be reinvested, no
assurance can be given that a Trust will retain for any length of time its
present size and composition. Although the portfolios are not managed, the
Sponsor may instruct the Trustee to sell Equity Securities under certain limited
circumstances. See "Trust Administration." Equity Securities, however, will not
be sold by a Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Equity Securities 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 a Trust and will vote such stocks in accordance with the instructions
of the Sponsor. Actions required to be taken with respect to the Treasury
Obligations will be in accordance with the instruction of the Sponsor.
Unitholders of the Trusts may, however, be able upon request to receive an "in
kind" distribution of these Securities evidenced by the Units (see "Rights of
Unitholders--Redemption of Units").
FEDERAL TAXATION
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 discussions and opinions, it is assumed that
interest on the Treasury Obligations is included in gross income for Federal
income tax purposes and that the Treasury Obligations are debt for Federal
income tax purposes and that the Equity Securities are 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. Each 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. 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 a
Security (whether by sale, exchange, liquidation, redemption, or payment at
maturity) or upon the sale or redemption of Units by such Unitholder (except to
the extent of an In-Kind distribution of stocks is received by such Unitholder
as described below). The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata portion of each
Security held by the Trust (in proportion to the fair market values thereof on
the valuation date nearest to the date the Unitholder purchases his Units) in
order to determine his initial tax basis for his pro rata portion of each
Security held by the Trust. A Unitholder's tax basis in his Units will equal his
tax basis in his pro rata portion of all the assets of the Trust. Such basis is
determined (before adjustments described below) by apportioning the tax basis
for the Units among each of the Trust's assets, according to the value as of the
valuation date nearest the date of acquisition of the Units. It should be noted
that certain legislative proposals have been made which could effect the
calculation of basis for Unitholders holding securities that are substantially
identical to the Securities. Unitholders should consult their own tax advisors
with regard to calculation of basis. The Treasury Obligations are treated as
stripped bonds and may be treated as bonds issued at an original issue discount
as of the date a Unitholder purchases his Units. Because the Treasury
Obligations represent interests in "stripped" U.S. Treasury bonds, a
Unitholder's initial cost for his pro rata portion of each Treasury Obligation
held by the Trust shall be treated as its "purchase price" by the Unitholder.
Original issue discount is effectively treated as interest for federal income
tax purposes and the amount of original issue discount in this case is generally
the difference between the bond's purchase price and its stated redemption price
at maturity. A Unitholder will be required to include in gross income for each
taxable year the sum of his daily portions of original issue discount
attributable to the Treasury Obligations held by the Trust as such original
issue discount accrues and will in general be subject to federal income tax with
respect to the total amount of such original issue discount that accrues for
such year even though the income is not distributed to the Unitholders during
such year to the extent it is not less than a "de minimis" amount as determined
under a Treasury Regulation issued on December 28, 1992 relating to stripped
bonds. To the extent the amount of such discount is less than the respective "de
minimis" amount, such discount shall be treated as zero. In general, original
issue discount accrues daily under a constant interest rate method which takes
into account the semiannual compounding of accrued interest. In the case of the
Treasury Obligations, this method will generally result in an increasing amount
of income to the Unitholders each year. Unitholders should consult their tax
advisers regarding the federal income tax consequences and accretion of original
issue discount under the stripped bond rules. For federal income tax purposes, a
Unitholder's pro rata portion of dividends as defined by Section 316 of the Code
paid with respect to 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 exceed 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 of such capital gain will be determined by the period of time a
Unitholder has held his Units for more than one year.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss (except in the case of a dealer or a
financial institution) and, in general, will be long-term if the Unitholder has
held his Units for more than one year. Unitholders should consult their tax
advisers regarding the recognition of such capital gains and losses for federal
income tax purposes.
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 period requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. Unitholders should consult with their tax advisers with respect
to the limitations on and possible modifications to the dividends received
deductions. To the extent dividends received by the Trust are attributable to
foreign corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income. Unitholders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF SECURITIES BY A TRUST
OR DISPOSITION OF UNITS. As discussed above, a Unitholder may recognize taxable
gain (or loss) when a Security is disposed of by the Trust or if the Unitholder
disposes of a Unit. For taxpayers other than corporations, net capital 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
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.
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. The Internal Revenue Service has released preliminary
guidance which provides that, in general, pass-through entities may designate
their capital gain dividends as either a 20% rate gain distribution or a 28%
rate gain distribution, depending on the nature of the gain received by the
pass-through entity. Unitholders should consult their own tax advisers as to the
tax rate applicable to capital gain dividends.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated rate
for taxpayers other than corporations. Because some or all capital gains are
taxed at a comparatively lower rate under the Act, the Act includes a provision
that recharacterizes capital gains as ordinary income in the case of certain
financial transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the potential effect
of this provision on their investment in Units.
If the Unitholder disposes of a Unit, he or she is deemed thereby to have
disposed of his or her entire pro rata interest in all assets of the Trust
involved, including his or her pro rata portion of all the Securities
represented by the Unit. Legislative proposals have been made that would treat
certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain as constructive sales for purposes of recognition of gain
(but not loss). Unitholders should consult their own tax advisers with regard to
any such constructive sales rules.
SPECIAL TAX CONSEQUENCES OF IN KIND DISTRIBUTIONS UPON REDEMPTION OF UNITS OR
TERMINATION OF A TRUST. As discussed in "Rights of Unitholders--Redemption of
Units," under certain circumstances a Unitholder tendering Units for redemption
may request an In Kind Distribution. 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." Treasury Obligations will not
be distributed to a Unitholder as part of an In Kind Distribution. The tax
consequences relating to the sale of Treasury Obligations are discussed above.
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
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 (and does not include the Treasury
Obligations). A Unitholder will not recognize gain or loss with respect to the
Equity Securities if a Unitholder only receives Equity Securities in exchange
for his or her pro rata portion in each share of 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
the Equity Security held by the Trust. In either case, a Unitholder who receives
cash in exchange for his interest in the Treasury Obligations will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in the Treasury Obligations for the
Treasury Obligations.
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 Units will generally equal the price paid by such Unitholder for his
Units. The cost of the Units is allocated among his pro rata portion of the
Securities held in the Trust in accordance with the proportion of the fair
market values of such Securities on the valuation date nearest the date the
Units are purchased in order to determine such Unitholder's tax basis for his
pro rata portion of each Security.
A Unitholder's tax basis in his Units and his pro rata portion of an Equity
Security will be reduced to the extent dividends paid with respect to such
Security are received by the Trust which are not taxable as ordinary income as
described above. A Unitholder's tax basis in his Units and his pro rata portion
of a Treasury Obligation is increased by the amount of original issue discount
thereon property included in the Unitholder's gross income for federal income
tax purposes.
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 by the Internal Revenue Service 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 (accrual of
original issue discount on the Treasury Obligations may not be subject to
taxation or withholding provided certain requirements are met). 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 corporation may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof will
nevertheless be treated as income to the Unitholders. Because, under the grantor
trust rules, an investor is deemed to have paid directly his share of foreign
taxes that have been paid or accrued, if any, an investor may be entitled to a
foreign tax credit or deduction for United States tax purposes with respect to
such taxes. Investors should consult their tax advisers with respect to foreign
withholding taxes and foreign tax credits.
Unitholders will be notified annually of the amounts of original issue
discount, dividend income and long-term capital gain distributions includable in
the Unitholder's gross income and amounts of Trust expenses which may be claimed
as itemized deductions.
Unitholders desiring to purchase Units for tax-deferred plans and Eras should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of special counsel to the 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 with regard to federal and certain aspects of New York State and
City income taxes. Unitholders may be subject to state and local taxation in
other jurisdictions. Unitholders should consult their tax advisers regarding
potential foreign, state or local taxation with respect to the Units. The term
U.S. Unitholder means an owner of a Unit of the Trust that is (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.
TRUST OPERATING EXPENSES
COMPENSATION OF SPONSOR AND EVALUATOR. The Sponsor will not receive any fees
in connection with its activities relating to the Trusts. However, Van Kampen
American Capital Investment Advisory Corp., which is an affiliate of the
Sponsor, will receive an annual supervisory fee, payable in monthly
installments, which is not to exceed the amount set forth under "Summary of
Essential Financial Information" in Part One of this Prospectus, for providing
portfolio supervisory services for each Trust. Such fee (which is based on the
number of Units outstanding on January 1 of each year) may exceed the actual
costs of providing such supervisory services for this Fund, but at no time will
the total amount received for portfolio supervisory services rendered to Series
1 and subsequent series of the Fund 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 Distributors Inc.,
shall receive as an annual per Unit evaluation fee, payable in monthly
installments, for regularly evaluating each Trust's portfolio that amount set
forth under "Summary of Essential Financial Information" in Part One of this
Prospectus (which is based on the outstanding number of Units on January 1 of
each year). Both of the foregoing fees may be increased without approval of the
Unitholders by amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index published by the
United States Department of Labor or, if such category is no longer published,
in a comparable category. The Sponsor and dealers will receive sales commissions
and may realize other profits (or losses) in connection with the sale of Units
as described under "Public Offering--Sponsor and Dealer Compensation".
TRUSTEE'S FEE. For its services the Trustee will receive as an annual per
Unit fee from the Trusts that amount set forth under "Summary of Essential
Information" in Part One of this Prospectus (which is based on the outstanding
number of units on January 1 of each year). The Trustee's fees are payable
monthly on or before the twenty-fifth day of each month from the Income Account
to the extent funds are available and then from the Capital Account. 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 and the amounts earned by the Trustee are retained by
the Trustee. Part of the Trustee's compensation for its services to a 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 a 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 ("organizational costs"), may be paid by the Trust and amortized over a
five year period or over the life of the Trust if less than five years. The
following additional charges are or may be incurred by a Trust: (a) normal
expenses (including the cost of mailing reports to Unitholders) incurred in
connection with the operation of a Trust, (b) fees of the Trustee for
extraordinary services, (c) expenses of the Trustee (including legal and
auditing expenses) and of counsel designated by the Sponsor, (d) various
governmental charges, (e) expenses and costs of any action taken by the Trustee
to protect a Trust and the rights and interests of Unitholders, (f)
indemnification of the Trustee for any loss, liability or expenses incurred in
the administration of a Trust without negligence, bad faith or wilful misconduct
on its part and (g) expenditures incurred in contacting Unitholders upon
termination of the Trusts.
The fees and expenses set forth herein are payable out of each Trust. When
such fees and expenses are paid by or owning to the Trustee, they are secured by
a lien on the portfolio of each Trust. Since the Securities are all common
stocks, and the income stream produced by dividend payments is unpredictable,
the Sponsor cannot provide any assurance that dividends will be sufficient to
meet any or all expenses of a Trust. If the balances in the Income and Capital
Accounts are insufficient to provide for amounts payable by a Trust, the Trustee
has the power to sell Securities to pay such amounts. These sales may result in
capital gains or losses to Unitholders. See "Federal Taxation".
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price. The secondary market
Public Offering Price is based on the aggregate underlying value of the
Securities in the Trust, an applicable sales charge, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. The current sales charge
applicable to Units is described in Part One of this Prospectus under "Summary
of Essential Financial Information".
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law and trustees, custodians or fiduciaries for the
benefit of such persons) of 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.
Units may be purchased in the 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 "Trust Administration--General--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 services, 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 spouses or children 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 Part One of
this Prospectus in accordance with fluctuations in the prices of the underlying
Securities in a Trust.
The price of the Units as of the opening of business on the date stated in
the "Summary of Essential Financial Information" in Part One of this Prospectus
was established by adding to the determination of the aggregate underlying value
of the Securities an amount equal to the original sales charge and dividing the
sum so obtained by the number of Units outstanding. The Public Offering Price
shall include the proportionate share of any cash held in the Capital Account.
The Evaluator will appraise or cause to be appraised daily the value of the
underlying Securities as of the close of trading on the New York Stock Exchange
(which is presently 4:00 P.M. New York 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 at or prior to the close of trading on the New York Stock Exchange on
each such day. Orders received by the Trustee, Sponsor or any dealer 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.
The value of the Equity Securities is determined on each business day by the
Evaluator based on the closing sale prices on the day the valuation is made for
Securities listed on a national stock exchange or, if no such price exists, at
the bid prices on the day the valuation is made. The Treasury Obligations will
be valued on the bid prices thereof.
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. 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.
Broker-dealers or others will be allowed a concession or agency commission of
70% of the sale charge in connection with the distribution of Units.
Certain commercial banks are making Units of each 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 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 and 25 Units for a
tax-sheltered retirement plan. 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 AND DEALER COMPENSATION. The Sponsor and dealers will receive the
gross sales commission as described under "Public Offering--General" above.
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, and certain
dealers maintain a secondary market for Units of each Trust. In so maintaining a
market, the Sponsor and any such dealers 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. In addition, the Sponsor and
any such dealers 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 its 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 each Trust plus, in the case of the
Select Equity and Treasury Trust and the Blue Chip Opportunity and Treasury
Trust, the aggregate bid price of the Treasury Obligations. 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.
TAX-SHELTERED RETIREMENT PLANS. Units of the Trusts are available for
purchase in connection with certain types of tax-sheltered retirement plans,
including Individual Retirement Accounts for 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 a Trust may be limited by the plans' provisions and does not itself
establish such plans. The minimum purchase in connection with a tax-sheltered
retirement plan is 25 Units of an individual Trust.
RIGHTS OF UNITHOLDERS
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 each Trust is evidenced by separate registered
certificates executed by the Trustee and the Sponsor. Certificates are
transferable by presentation and surrender to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unitholder
must sign exactly as his name appears on the face of the certificate 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 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 each 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, return of principal, etc.) are credited to the Capital Account. The
Trustee will distribute any net income other than accreted interest 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" in Part One of the
Prospectus. Proceeds received on the sale of any Securities in the Trust, to the
extent not used to meet redemptions of Units or pay expenses, will be
distributed annually on the Capital Account Distribution Date to Unitholders of
record on the preceding Capital Account Record Date. Income with respect to the
original issue discount on the Treasury Obligations will not be distributed
currently, although Unitholders in the Trust will be subject to federal income
tax as if a distribution had occurred. See "Federal Taxation." 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 the Unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the Unitholders' pro rata share of
the cash in the Income Account after deducting estimated expenses. Because
dividends are not received by the Trusts 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. A person will become the owner of
Units, and thereby a Unitholder of record, on the date of settlement provided
payment has been received. Notification to the Trustee of the transfer of Units
is the responsibility of the purchaser, but in the normal course of business
such notice is provided by the selling broker-dealer.
On or before the tenth day of each month, the Trustee will deduct from the
Income Account and, to the extent funds are not sufficient therein, from the
Capital Account amounts necessary to pay the expenses of each Trust (as
determined on the basis set forth under "Trust Operating Expenses"). The Trustee
also may withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of a Trust.
Amounts so withdrawn shall not be considered a part of a 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 all unit investment trusts sponsored by
Van Kampen American Capital Distributors, Inc., may elect to have each
distribution of interest income, capital gains and/or principal 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 Trusts. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. Texas residents who desire to reinvest may request that a broker-dealer
registered in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units will,
on the applicable distribution date, automatically be applied, as directed by
such person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such date.
Unitholders with an existing Guaranteed Reinvestment Option (GRO) Program
account (whereby a sales charge is imposed on distribution reinvestments) may
transfer their existing account into a new GRO account which allows purchases of
Reinvestment Fund shares at net asset value as described above.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund. A participant may at
any time prior to five days preceding the next succeeding distribution date, by
so notifying the Trustee in writing, elect to terminate his or her reinvestment
plan and receive future distributions of his or her Units in cash. There will be
no charge or other penalty for such termination. Each Reinvestment Fund, its
sponsor and investment adviser shall have the right to terminate at any time the
reinvestment plan relating to such fund.
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 a 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 a statement (i) as to the Income Account:
income received (including amortization of original issue discount with respect
to the Treasury Obligations in Select Equity and Treasury Trust and Blue Chip
Opportunity and Treasury Trust), deductions for applicable taxes and for fees
and expenses of a Trust, for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata share
of each Unit outstanding on the last business day of such calendar year; (ii) as
to the Capital Account: the dates of disposition of any Securities (other than
pursuant to In Kind Distributions) and the net proceeds received therefrom, the
results of In Kind Distributions in connection with redemptions of Units, if
any, deductions for payment of applicable taxes and fees and expenses of the
related 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 a Trust furnished to it by the Evaluator.
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay Street,
20th Floor, New York, New York 10286 of the certificates representing the Units
to be redeemed, 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 (unless the redeeming Unitholder elects an In Kind Distribution
as indicated below) an amount for each Unit equal to the Redemption Price per
Unit next computed after receipt by the Trustee of such tender of Units. 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 close of trading on the
New York Stock Exchange (which is currently 4:00 P.M. New York time) the date of
tender is the next day on which such 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.
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 portfolio
supervisor for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering 1,000 Units or more for redemption may request from the
Trustee in lieu of a cash redemption 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 (and in the case of the Select
Equity and Treasury Trust and the Blue Chip Opportunity and Treasury Trust the
pro rata portion of the Treasury Obligations) 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.
To the extent that Securities are redeemed in kind or sold, the size of a
Trust will be, and the diversity of such Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result in
lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder depending
on the value of the Securities in the portfolio at the time of redemption.
Special federal income tax consequences will result if a Unitholder requests an
In Kind Distribution. See "Federal Taxation".
The Redemption Price per Unit will be determined on the basis of the
aggregate underlying value of the Equity Securities in each Trust plus the bid
price of the Treasury Obligations, plus or minus cash, if any, in the Income and
Capital Accounts. 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 a Trust
determined on the basis of (i) the cash on hand in such Trust or monies in the
process of being collected and (ii) the value of the Securities in such Trust,
less (a) amounts representing taxes or other governmental charges payable out of
such Trust, (b) any amount owing to the Trustee for its advances and (c) the
accrued expenses of such Trust. The Evaluator may determine the value of a
Securities in a Trust in the following manner: if the Securities are listed on a
national securities exchange, the evaluation will generally be based on the last
available sale price on the exchange (unless the Evaluator deems the price
inappropriate as a basis for evaluation) or, if there is no last available sale
price on the exchange, at the bid prices. See "Public Offering" for a
description of the method of evaluating the Treasury Obligations in the Select
Equity and Treasury Trust and the Blue Chip Opportunity and Treasury Trust.
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size and the diversity of the Trust will be reduced.
Such sales may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Securities
in a Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
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 portfolios of the Fund are not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. The Trust Agreement
provides that the Sponsor may (but need not) direct the Trustee to dispose of an
Equity Security in the event that an issuer defaults in the payment of a
dividend that has been declared, that any action or proceeding has been
instituted restraining the payment of dividends or there exists any legal
question or impediment affecting such Equity Security, that the issuer of the
Equity Security has breached a covenant which would affect the payments of
dividends, the credit standing of the issuer or otherwise impair the sound
investment character of the Equity Security, that the issuer has defaulted on
the payment on any other of its outstanding obligations, that the price of the
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 Equity
Securities would be detrimental to a Trust. Treasury Obligations may be sold by
the Trustee only pursuant to the liquidation of a Trust or to meet redemption
requests. Except as stated under "Trust Portfolios -- General" for failed
securities, the acquisition by the Fund of any securities other than the
Securities is prohibited. Pursuant to the Trust Agreement and with limited
exceptions, the Trustee may sell any securities or other properties acquired in
exchange for Equity Securities such as those acquired in connection with a
merger or other transaction. If offered such new or exchanged securities or
property, the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by a Trust, they may be accepted
for deposit in such Trust and either sold by the Trustee or held in such Trust
pursuant to the direction of the Sponsor (who may rely on the advice of the
Supervisor). Proceeds from the sale of Securities (or any securities or other
property received by the Fund in exchange for Equity Securities) are credited to
the applicable Capital Account for distribution to Unitholders or to meet
redemptions.
As indicated under "Rights of Unitholders" 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 a Trust tendered for
redemption and the payment of expenses; provided, however, that in the case of
Securities sold to meet redemption requests, Treasury Obligations may only be
sold if the Select Equity and Treasury Trust and the Blue Chip Opportunity and
Treasury Trust is assured of retaining a sufficient principal amount of Treasury
Obligations to provide funds upon maturity of such Trust at least equal to
$10.00 per Unit. ($11.00 per Unit for Blue Chip Opportunity and Treasury Trust,
Series 5 and subsequent series).
The Supervisor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent practicable,
the proportionate relationship among the number of shares of individual issues
of Equity Securities. 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 a Trust, it may be necessary for the Supervisor to specify minimum
amounts (generally 100 shares) in which blocks of Equity Securities are to be
sold.
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. 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 a 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.
A Trust may be liquidated (1) at any time by consent of Unitholders
representing 100% of the Units then outstanding or (2) by the Trustee when the
value of such Trust, as shown by any evaluation, is less than that indicated
under "Summary of Essential Financial Information" in Part One of the
Prospectus. 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" in Part One of this Prospectus.
Commencing on the Mandatory Termination Date, Equity Securities will begin to
be sold in connection with the termination of the Trusts. The Sponsor will
determine the manner, timing and execution of the sales of the Equity
Securities. 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
Fund 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 the applicable number of Units of a Trust to request an In Kind
Distribution rather than payment in cash upon the termination of the related
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 related 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 and the pro rata portion of the Treasury Obligations will be paid in
cash. Unitholders not requesting an In Kind Distribution will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
following the Mandatory Termination Date. Regardless of the distribution
involved, the Trustee will deduct from the funds of each 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 a Trust upon
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time. The Trustee will then distribute to
each Unitholder 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 a Trust
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee, Sponsor
or Unitholders for errors in judgment. This provision shall not protect the
Evaluator in any case of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
SPONSOR. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect subsidiary
of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM
Holdings II, Inc., which in turn is a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization of
more than $21 billion which was created by the merger of Morgan Stanley Group
Inc. with and into Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in a
wide range of financial services through three primary businesses: securities,
asset management and credit services. These principal businesses include
securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange commodities and swaps (involving foreign exchange,
commodities, indices and interest rating and investing; global custody,
securities clearance services and securities lending; and credit card services.
As of June 2, 1997, MSDWD, together with its affiliated investment advisory
companies, had approximately $270 billion of assets under management,
supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the
underwriting and distribution of unit investment trusts and mutual funds with
roots in money management dating back to 1926. The Sponsor is a member of the
National Association of Securities Dealers, Inc. and has offices at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak
Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco and Seattle. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not to
the Trusts or to any other Series thereof. The information is included herein
only for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
As of September 30, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $65.3 billion of investment
products, of which over $10.85 billion is invested in municipal securities. The
Sponsor and its Van Kampen American Capital affiliates managed $54 billion of
assets, consisting of $34.3 billion for 55 open-end mutual funds (of which 45
are distributed by Van Kampen American Capital Distributors, Inc.) $14.2 billion
for 37 closed-end funds and $5.5 billion for 106 institutional accounts. The
Sponsor has also deposited approximately $26 billion of unit investment trusts.
All of Van Kampen American Capital's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, New York, New York 10286 (800) 221-7668.
The Bank of New York is subject to supervision and examination by the
Superintendent of the Banks of the State of New York and the Board of Governors
of the Federal Reserve System, and its deposits are insured by the Federal
Deposit Insurance Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the trust portfolios.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of such Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Securities held in each Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus, and undivided
profits of not less than $5,000,000.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition and the
related securities portfolio included in Part One of this Prospectus have been
audited by Grant Thornton LLP, independent certified public accountants, as set
forth in their report in Part One of this Prospectus, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Trust,
the Sponsor or dealers. This Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, securities in any state to any persons to
whom it is not lawful to make such offer in such state.
Table of Contents Page
----------------- ------
The Trusts 2
Objectives and Securities Selection 2
Trust Portfolios 3
Risk Factors 3
Federal Taxation 4
Trust Operating Expenses 6
Public Offering 6
Rights of Unitholders 8
Trust Administration 9
Other Matters 11
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.
SELECT EQUITY AND
TREASURY TRUST
AND
BLUE CHIP OPPORTUNITY
AND TREASURY TRUST
PROSPECTUS
PART TWO
NOTE: THIS PROSPECTUS MAY BE USED ONLY
WHEN ACCOMPANIED BY PART ONE. BOTH
PARTS OF THIS PROSPECTUS SHOULD BE
RETAINED FOR FUTURE REFERENCE.
DATED AS OF THE DATE
OF THE PROSPECTUS
PART ONE ACCOMPANYING
THIS PROSPECTUS
PART TWO.
Sponsor:
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
VAN KAMPEN MERRITT
SELECT EQUITY TRUST
PROSPECTUS PART TWO
- --------------------------------------------------------------------------------
INTRODUCTION
THE FUND. Van Kampen Merritt Equity Opportunity Trust, Series 1 (the "Fund")
is comprised of separate and distinct unit investment trusts including Van
Kampen Merritt Select Equity Trust (the "Select Equity Trust" or the "Trust").
The Select Equity Trust offers investors the opportunity to purchase Units
representing proportionate interests in a fixed, diversified portfolio
consisting primarily of the 30 actively traded "blue chip" equity securities
which were components of the Dow Jones Industrial Average on the original date
of creation of the Trust. Dow Jones & Company, Inc. has not participated in any
way in the creation of the Fund or in the selection of stocks included in the
Trust and has not approved any information herein relating thereto. Unless
terminated earlier, the Trust will terminate on the Mandatory Termination Date
stated under "Summary of Essential Financial Information" in Part One of this
Prospectus 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.
OBJECTIVES OF THE TRUSTS. The objectives of the Select Equity Trust are to
provide the potential for capital appreciation and income by investing in a
portfolio of actively traded, New York Stock Exchange listed equity securities
which were components of the Dow Jones Industrial Average on the original date
of creation of the Trust ("Equity Securities"). See "Portfolio" in Part One of
this Prospectus. Units are not designed so that their prices will parallel or
correlate with movements in the Dow Jones Industrial Average, and it is expected
that their prices will not parallel or correlate with such movements. There is,
of course, no guarantee that the objective of the Trust will be achieved.
PUBLIC OFFERING PRICE. The secondary market Public Offering Price of the
Trust will include the aggregate underlying value of the Securities in the
Trust, the applicable sales charge as described herein, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. See "Public Offering".
ESTIMATED ANNUAL DISTRIBUTIONS. The estimated annual dividend distributions
per unit will vary with changes in fees and expenses of a Trust, with changes in
dividends received and with the sale or liquidation of Securities; therefore,
there is no assurance that the annual dividend distribution will be realized in
the future.
DISTRIBUTIONS. Distributions of dividends received, and capital, if any,
received by each 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" in Part One of this Prospectus. Any
distribution of income and/or capital will be net of the expenses of the
applicable Trust. See "Federal Taxation." Additionally, upon termination of each
Trust, the Trustee will distribute, upon surrender of Units for redemption, to
each Unitholder his pro rata share of each Trust's assets, less expenses, in the
manner set forth under "Rights of Unitholders--Distributions of Income and
Capital".
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
BOTH PARTS OF THIS PROSPECTUS SHOULD
BE RETAINED FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
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.
This Prospectus is dated as of the date of the
Prospectus Part I accompanying this Prospectus Part II.
VAN KAMPEN AMERICAN CAPITAL
TERMINATION. Commencing on the Mandatory Termination Date as specified in
Part One, 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 for the respective Trusts 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 5,000 Units 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. 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 in terminated.
See "Trust Administration--Reinvestment Option."
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 have the opportunity to have their distributions reinvested
into an open-end, management investment company as described herein. See "Rights
of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in a Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and currency fluctuations, the lack of adequate financial
information concerning an issuer and exchange control restrictions impacting
foreign issuers. See "Risk Factors". Units of the Fund are not deposits or
obligations of, and are not guaranteed or endorsed by, any bank, and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency, and involve
investment risk, including the possible loss of principal.
THE TRUST
Van Kampen Merritt Equity Opportunity Trust, Series 1 (the "Fund") is
comprised of separate and distinct unit investment trusts including Van Kampen
Merritt Select Equity Trust. The Fund was created under the laws of the State of
New York pursuant to a Trust Indenture and Agreement (the "Trust Agreement"),
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 may be an appropriate medium for investors who desire to
participate in a portfolio of equity securities with greater diversification
than they might be able to acquire individually. Diversification of assets in
the Trust will not eliminate the risk of loss always inherent in the ownership
of securities. For a breakdown of the portfolio, see "Portfolio" in Part One of
this Prospectus.
Each Unit represents a fractional undivided interest in the Trust. To the
extent that any Units are redeemed by the Trustee, the fractional undivided
interest in a Trust represented by each unredeemed Unit will increase
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.
OBJECTIVES AND SECURITIES SELECTION
The objective of the Select Equity Trust is to provide investors with the
potential for capital appreciation and income. The portfolio of the Trust is
described under "Trust Portfolio" herein and under "Portfolio" in Part One of
this Prospectus. An investor will be subjected to taxation on the dividend
income received from the Fund 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 objective 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.
In determining Equity Securities for deposit in the Select Equity Trust and
the percentage of the portfolio represented by each such Equity Security, the
Sponsor selected those Equity Securities that were, at the date of creation of
the Fund, components of the Dow Jones Industrial Average and the dollar value of
the shares of such securities with the intent to have approximately equal dollar
amounts invested in each such security.
Investors should note that the above criteria were applied to the Securities
selected for inclusion in the Trust as of the date the Trust were created.
Subsequent thereto, the Equity Securities may no longer meet such criteria.
Should an Equity Security no longer meet such criteria, such Equity Security
will not as a result thereof be removed from the portfolio of the Trust.
Investors should be aware that the Fund is not a "managed" trust 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 a Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Investors should note in particular that the
securities were selected by the Sponsor as of the date the Securities were
purchased by the Trust. 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 such
Trust.
TRUST PORTFOLIO
The Select Equity Trust consists of a number of different issues of Equity
Securities, which are primarily actively traded, blue-chip securities issued by
large, well established corporations and which were components of the Dow Jones
Industrial Average on the date of creation of such Trust. Each issue, as of such
date, represented approximately the same dollar value of a portfolio since the
Sponsor utilized a dollar weighted average approach in acquiring such Equity
Securities. On March 12, 1997, Dow Jones and Co. Inc. announced that
Hewlett-Packard Co., Travelers Group Inc., Johnson & Johnson Inc. and Wal-Mart
Stores Inc. would replace Westinghouse Electric Corp., Texaco Inc., Woolworth
Corp. and Bethlehem Steel Corp. in the Dow Jones Industrial Average as of March
17, 1997. Consistent with the Trust's investment objective, neither this nor any
other change in components of the Dow Jones Industrial Average will result in a
change in the Trust portfolio. Dow Jones & Company, Inc., owner of the Dow Jones
Industrial Average, has not granted to the Fund or the Sponsor a license to use
the Dow Jones Industrial Average. Units are not designed so that their prices
will parallel or correlate with movements in the Dow Jones Industrial Average,
and it is expected that their prices will not parallel or correlate with such
movements. Dow Jones & Company, Inc. has not participated in any way in the
creation of the Fund or in the selection of stocks included in any Trust and has
not approved any information herein relating thereto.
The Dow Jones Industrial Average is composed of 30 common stocks chosen by
the editors of The Wall Street Journal, a publication of Dow Jones & Company,
Inc. The companies are major factors in their industries and their stocks are
widely held by individuals and institutional investors. Changes in the
components are made entirely by the editors of The Wall Street Journal without
consultation with the companies, the stock exchange or any official agency. Dow
Jones & Company, Inc. expressly reserves the right to change the components of
the Dow Jones Industrial Average at any time for any reason. Any changes in the
components of the Dow Jones Industrial Average after the date the Fund was
created will not cause a change in the identity of the common stocks included in
the Trust.
The Trust consists of such of the Securities listed under "Portfolio" in Part
One of this Prospectus as may continue to be held from time to time in the Trust
together with 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.
Because certain of the Securities from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
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 Securities under certain limited circumstances. 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
EQUITY SECURITIES. 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, and global or regional political, economic or banking crises.
Shareholders of common stocks have rights to receive payments from the issuers
of those common stocks that are generally subordinate to those of creditors of
or holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Fund 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 may be expected to fluctuate over the life of the Fund to values
higher or lower than those prevailing on the date of purchase by a Unitholder.
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.
GENERAL. The Trust consists of such of the Securities listed under
"Portfolio" as may continue to be held from time to time in such Trust in Part
One of this Prospectus together with 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.
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 be distributed to Unitholders and will not be reinvested, no
assurance can be given that a Trust will retain for any length of time its
present size and composition. Although the portfolio is not managed, the Sponsor
may instruct the Trustee to sell Equity Securities under certain limited
circumstances. See "Trust Administration." Equity Securities, however, will not
be sold by a Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Equity Securities 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 a Trust and will vote such stocks in accordance with the instructions
of the Sponsor. Unitholders of the Trust may, however, be able upon request to
receive an "in kind" distribution of these Securities evidenced by the Units
(see "Rights of Unitholders--Redemption of Units").
FEDERAL TAXATION
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 opinion, 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. 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 available and received by such
Unitholder from the Trust, as described below). The price a Unitholder pays for
his Units, generally including sales charges, is allocated among his pro rata
portion of each Equity Security held by the 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. Unitholders should consult
their own tax advisors with regard to calculation of basis.
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 received by
the Trust. Unitholders will be taxed in this manner regardless of whether
distributions from the Trust are actually received by the Unitholder or are
automatically reinvested. For federal income tax purposes, a Unitholder's pro
rata portion of the dividends, as defined by Section 316 of the Code, paid with
respect to 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 exceed 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.
3. 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 Unitholder's portion 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.
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 period requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. Unitholders should consult with their tax advisers with respect
to the limitations on and possible modifications to the dividends received
deduction.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income. Unitholders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF SECURITIES BY A 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. The Taxpayer Relief Act of 1997 (the "1997 Act")
provides that for taxpayers other than corporations, net capital gain (which is
defined as net long-term capital gain over net short-term capital loss for the
taxable year) is subject to a maximum marginal stated tax rate of either 28% or
20%, depending upon the holding periods of the capital assets. Capital gain or
loss is long-term if the holding period for the asset is more than one year, and
is short-term if the holding period for the asset is one year or less. The date
on which a Unit is acquired (i.e., the "trade date") is excluded for purposes of
determining the holding period of the 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 advisors regarding the potential effect of this provision on their
investment in Units.
If the Unitholder disposes of a Unit, he or she is deemed thereby to have
disposed of his or her entire pro rata interest in all assets of the Trust
including his or her pro rata portion of all the Equity Securities represented
by the Unit. The 1997 Act includes provisions that treat certain transactions
designed to reduce or eliminate risk of loss and opportunities for gain (e.g.,
short sales, offsetting 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 OR
TERMINATION OF THE TRUST. Under certain circumstances, a Unitholder tendering
Units for redemption may be able to request an In-Kind Distribution. In-Kind
Distributions are not available, however, of foreign securities held by the
Trust. A Unitholder may also under certain circumstances be able to 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
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 Units will generally equal the price paid by such Unitholder for
his 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 closest to 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 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 person. 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 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 such 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.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of special counsel to the 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
in 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.
TRUST OPERATING EXPENSES
COMPENSATION OF SPONSOR AND EVALUATOR. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, Van Kampen
American Capital Investment Advisory Corp., which is an affiliate of the
Sponsor, will receive an annual supervisory fee, payable in monthly
installments, which is not to exceed the amount set forth under "Summary of
Essential Financial Information" in Part One of this Prospectus, 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) may exceed the actual
costs of providing such supervisory services for this Fund, but at no time will
the total amount received for portfolio supervisory services rendered to all
Series the Fund 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 Distributors Inc., shall receive as an
annual per Unit evaluation fee, payable in monthly installments, for regularly
evaluating each Trust's portfolio that amount set forth under "Summary of
Essential Financial Information" in Part One of this Prospectus (which is based
on the outstanding number of Units on January 1 of each year). Both of the
foregoing fees may be increased without approval of the Unitholders by amounts
not exceeding proportionate increases under the category "All Services Less Rent
of Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a comparable
category. The Sponsor and dealers will receive sales commissions and may realize
other profits (or losses) in connection with the sale of Units as described
under "Public Offering--Sponsor and Dealer Compensation".
TRUSTEE'S FEE. For its services the Trustee will receive as an annual per
Unit fee from the Trust that amount set forth under "Summary of Essential
Information" in Part One of this Prospectus (which is based on the outstanding
number of units on January 1 of each year). The Trustee's fees are payable
monthly on or before the twenty-fifth day of each month from the Income Account
to the extent funds are available and then from the Capital Account. 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 and the amounts earned by the Trustee are retained by
the Trustee. Part of the Trustee's compensation for its services to the Trust is
expected to result from the use of these funds. Such fees may be increased
without approval of the Unitholders by amounts not exceeding proportionate
increases under the category "All Services Less Rent of Shelter" in the Consumer
Price Index published by the United States Department of Labor or, if such
category is no longer published, in a comparable category. For a discussion of
the services rendered by the Trustee pursuant to its obligations under the Trust
Agreement, see "Rights of Unitholders--Reports Provided" and "Trust
Administration".
MISCELLANEOUS EXPENSES. The following additional charges are or may be
incurred by the Trust: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of a Trust,
(b) fees of the Trustee for extraordinary services, (c) expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (d) various governmental charges, (e) expenses and costs of any action
taken by the Trustee to protect a Trust and the rights and interests of
Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of the Trust without negligence, bad
faith or wilful misconduct on its part and (g) expenditures incurred in
contacting Unitholders upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When
such fees and expenses are paid by or owning to the Trustee, they are secured by
a lien on the portfolio of the Trust. Since the Securities are all common
stocks, and the income stream produced by dividend payments is unpredictable,
the Sponsor cannot provide any assurance that dividends will be sufficient to
meet any or all expenses of the Trust. If the balances in the Income and Capital
Accounts are insufficient to provide for amounts payable by the Trust, the
Trustee has the power to sell Securities to pay such amounts. These sales may
result in capital gains or losses to Unitholders. See "Federal Taxation".
PUBLIC OFFERING
GENERAL. Units are offered at the Public Offering Price. The secondary market
Public Offering Price is based on the aggregate underlying value of the
Securities in the Trust, an applicable sales charge (which will be reduced
annually by .3 of 1% to a minimum sales charge of 1.5%), and cash, if any, in
the Income and Capital Accounts held or owned by the Trust. Such underlying
value shall include the proportionate share of any undistributed cash held in
the Capital and Income Accounts.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law and trustees, custodians or fiduciaries for the
benefit of such persons) of 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.
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 spouses or children 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 Unites
through this program will not receive sales charge reductions for quantity
business.
OFFERING PRICE. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Part One of
this Prospectus in accordance with fluctuations in the prices of the underlying
Securities in the Trust.
The price of the Units as of the opening of business on the date stated in
the "Summary of Essential Financial Information" in Part One of this Prospectus
was established by adding to the determination of the aggregate underlying value
of the Securities an amount initially equal to 4.712% of such value and dividing
the sum so obtained by the number of Units outstanding. The Public Offering
Price shall include the proportionate share of any cash held in the Capital
Account. This computation produced a gross sales commission (as of the opening
of business on the date stated in the "Summary of Essential Financial
Information" in Part One of this Prospectus) initially equal to 4.5% of the
Public Offering Price. The Evaluator will appraise or cause to be appraised
daily the value of the underlying Securities as of the close of trading on the
New York Stock Exchange (which is presently 4:00 P.M. New York 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 at or prior to the close of trading on the New
York Stock Exchange on each such day. Orders received by the Trustee, Sponsor or
any dealer 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. Such sales charge will be reduced annually, as set forth in "Summary
of Essential Financial Information" in Part One of this Prospectus, by .3 of 1%
to a minimum sales charge of 1.5%.
The value of the Equity Securities is determined on each business day by the
Evaluator based on the closing sale prices on the day the valuation is made for
Securities listed on a national stock exchange or, if no such price exists, at
the bid prices on the day the valuation is made.
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. 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.
Broker-dealers or others will be allowed a concession or agency commission of
60% of the sale charge in connection with the distribution of Units.
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 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 and 25 Units for a
tax-sheltered retirement plan. 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 AND DEALER COMPENSATION. The Sponsor and dealers will receive the
gross sales commission as described under "Public Offering--General" above.
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, and certain
dealers maintain a secondary market for Units of each Trust. In so maintaining a
market, the Sponsor and any such dealers 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. In addition, the Sponsor and
any such dealers 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 each Trust. 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.
TAX-SHELTERED RETIREMENT PLANS. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for individuals, Simplified Employee Pension
Plans for employees, qualified plans for self-employed individuals, and
qualified corporate pension and profit sharing plans for employees. The purchase
of Units of the Trust may be limited by the plans' provisions and does not
itself establish such plans. The minimum purchase in connection with a
tax-sheltered retirement plan is 25 Units of the Trust.
RIGHTS OF UNITHOLDERS
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 is evidenced by separate registered certificates
executed by the Trustee and the Sponsor. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or accompanied by a
written instrument or instruments of transfer. A Unitholder must sign exactly as
his name appears on the face of the certificate 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 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, return of principal, etc.) are credited to the Capital Account. The
Trustee will distribute any net income other than accreted interest 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" in Part One of the
Prospectus. Proceeds received on the sale of any Securities in the Trust, to the
extent not used to meet redemptions of Units or pay expenses, will be
distributed annually on the Capital Account Distribution Date to Unitholders of
record on the preceding Capital Account Record Date. Proceeds received from the
disposition of any of the Securities after a record date and prior to the
following distribution date will be held in the Capital Account 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 the Unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the Unitholders' pro rata share of
the cash in the Income Account after deducting estimated expenses. Because
dividends are not received by the Trust at a constant rate throughout the year,
such distributions to Unitholders are expected to fluctuate from distribution to
distribution. Persons who purchase Units will commence receiving distributions
only after such person becomes a record owner. A person will become the owner of
Units, and thereby a Unitholder of record, on the date of settlement provided
payment has been received. Notification to the Trustee of the transfer of Units
is the responsibility of the purchaser, but in the normal course of business
such notice is provided by the selling broker-dealer.
On or before the tenth day of each month, the Trustee will deduct from the
Income Account and, to the extent funds are not sufficient therein, from the
Capital Account amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating Expenses"). The Trustee
also may withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of the Trust.
Amounts so withdrawn shall not be considered a part of a 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 all unit investment trusts sponsored by
Van Kampen American Capital Distributors, Inc., may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any Van Kampen American Capital mutual
funds (except for B shares) which are registered in the Unitholder's state of
residence. Such mutual funds are hereinafter collectively refereed to as the
"Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. Texas residents who desire to reinvest may request that a broker-dealer
registered in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units will,
on the applicable distribution date, automatically be applied, as directed by
such person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such date.
Unitholders with an existing Guaranteed Reinvestment Option (GRO) Program
account (whereby a sales charge is imposed on distribution reinvestments) may
transfer their existing account into a new GRO account which allows purchases of
Reinvestment Fund shares at net asset value as described above.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund. A participant may at
any time prior to five days preceding the next succeeding distribution date, by
so notifying the Trustee in writing, elect to terminate his or her reinvestment
plan and received future distributions of his or her Units in cash. Their will
be no charge or other penalty for such termination. Each Reinvestment Fund, its
sponsor and investment adviser shall have the right to terminate at any time the
reinvestment plan relating to such fund.
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 a statement (i) as to the Income
Account: income received, deductions for applicable taxes and for fees and
expenses of the Trust, for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata share
of each Unit outstanding on the last business day of such calendar year; (ii) as
to the Capital Account: the dates of disposition of any Securities (other than
pursuant to In Kind Distributions) and the net proceeds received therefrom, the
results of In Kind Distributions in connection with redemptions of Units, if
any, deductions for payment of applicable taxes and 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 a Trust furnished to it by the Evaluator.
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay Street,
20th Floor, New York, New York 10286 of the certificates representing the Units
to be redeemed, 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 (unless the redeeming Unitholder elects an In Kind Distribution
as indicated below) an amount for each Unit equal to the Redemption Price per
Unit next computed after receipt by the Trustee of such tender of Units. 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 close of trading on the
New York Stock Exchange (which is currently 4:00 P.M. New York time) the date of
tender is the next day on which such 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.
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 portfolio
supervisor for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering 5,000 Units or more for redemption may request from the
Trustee in lieu of a cash redemption 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.
To the extent that Securities are redeemed in kind or sold, the size of a
Trust will be, and the diversity of such Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result in
lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder depending
on the value of the Securities in the portfolio at the time of redemption.
Special federal income tax consequences will result if a Unitholder requests an
In Kind Distribution. See "Federal Taxation".
The Redemption Price per Unit will be determined on the basis of the
aggregate underlying value of the Equity Securities in each Trust plus or minus
cash, if any, in the Income and Capital Accounts. 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 such Trust or monies in the process of being collected and (ii) the
value of the Securities in such Trust, less (a) amounts representing taxes or
other governmental charges payable out of such Trust, (b) any amount owing to
the Trustee for its advances and (c) the accrued expenses of such Trust. The
Evaluator may determine the value of a Securities in the Trust in the following
manner: if the Securities are listed on a national securities exchange, the
evaluation will generally be based on the last available sale price on the
exchange (unless the Evaluator deems the price inappropriate as a basis for
evaluation) or, if there is no last available sale price on the exchange, at the
mean between the last available bid and offer prices.
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size and the diversity of the Trust will be reduced.
Such sales may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
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
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 Fund are not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. The Trust Agreement
provides that the Sponsor may (but need not) direct the Trustee to dispose of an
Equity Security in the event that an issuer defaults in the payment of a
dividend that has been declared, that any action or proceeding has been
instituted restraining the payment of dividends or there exists any legal
question or impediment affecting such Equity Security, that the issuer of the
Equity Security has breached a covenant which would affect the payments of
dividends, the credit standing of the issuer or otherwise impair the sound
investment character of the Equity Security, that the issuer has defaulted on
the payment on any other of its outstanding obligations, that the price of the
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 Equity
Securities would be detrimental to a Trust. Pursuant to the Trust Agreement and
with limited exceptions, the Trustee may sell any securities or other properties
acquired in exchange for Equity Securities such as those acquired in connection
with a merger or other transaction. If offered such new or exchanged securities
or property, the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by a Trust, they may be accepted
for deposit in such Trust and either sold by the Trustee or held in such Trust
pursuant to the direction of the Sponsor (who may rely on the advice of the
Supervisor). Proceeds from the sale of Securities (or any securities or other
property received by the Fund in exchange for Equity Securities) are credited to
the applicable Capital Account for distribution to Unitholders or to meet
redemptions.
As indicated under "Rights of Unitholders" 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 a Trust tendered for
redemption and the payment of expenses.
The Supervisor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent practicable,
the proportionate relationship among the number of shares of individual issues
of Equity Securities. 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.
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. 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.
A Trust may be liquidated (1) at any time by consent of Unitholders
representing 51% of the Units of the Select Equity Trust then outstanding or (2)
by the Trustee when the value of the Trust, as shown by any evaluation, is less
than that indicated under of Essential Financial Information" in Part One of the
Prospectus. 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" in Part One of this Prospectus.
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. 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
Fund 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 5,000 or more Units of the Trust 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 5,000 Units, those not requesting an In Kind
Distribution will receive a cash distribution from the sale of the remaining
Securities within a reasonable time following the Mandatory Termination Date.
Regardless of the distribution involved, the Trustee will deduct from the funds
of the 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 negligence (gross negligence in the case of
the Sponsor) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Securities. In the event of the failure of the Sponsor to act under
the Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of a Trust
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee, Sponsor
or Unitholders for errors in judgment. This provision shall not protect the
Evaluator in any case of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
SPONSOR. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect subsidiary
of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM
Holdings II, Inc., which in turn is a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization of
more than $21 billion which was created by the merger of Morgan Stanley Group
Inc. with and into Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in a
wide range of financial services through three primary businesses: securities,
asset management and credit services. These principal businesses include
securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange commodities and swaps (involving foreign exchange,
commodities, indices and interest rating and investing; global custody,
securities clearance services and securities lending; and credit card services.
As of June 2, 1997, MSDWD, together with its affiliated investment advisory
companies, had approximately $270 billion of assets under management,
supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the
underwriting and distribution of unit investment trusts and mutual funds with
roots in money management dating back to 1926. The Sponsor is a member of the
National Association of Securities Dealers, Inc. and has offices at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak
Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco and Seattle. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not to
the Trusts or to any other Series thereof. The information is included herein
only for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
As of September 30, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $65.3 billion of investment
products, of which over $10.85 billion is invested in municipal securities. The
Sponsor and its Van Kampen American Capital affiliates managed $54 billion of
assets, consisting of $34.3 billion for 55 open-end mutual funds (of which 45
are distributed by Van Kampen American Capital Distributors, Inc.) $14.2 billion
for 37 closed-end funds and $5.5 billion for 106 institutional accounts. The
Sponsor has also deposited approximately $26 billion of unit investment trusts.
All of Van Kampen American Capital's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
All costs and expenses incurred in creating and establishing the Series 1,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses, advertising
and selling expenses, expenses of the Trustee, initial evaluation fees and other
out-of-pocket expenses have been borne by the Sponsor at no cost to such Trust.
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 the 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 such Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus, and undivided
profits of not less than $5,000,000.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 the 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 such Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus, and undivided
profits of not less than $5,000,000.
OTHER MATTERS
LEGAL OPINIONS. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition and the
related securities portfolio included in Part One of this Prospectus have been
audited by Grant Thornton LLP, independent certified public accountants, as set
forth in their report in Part One of this Prospectus, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Trust,
the Sponsor or dealers. This Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, securities in any state to any persons to
whom it is not lawful to make such offer in such state.
Table of Contents Page
----------------- ------
Introduction 1
The Trust 2
Objectives and Securities Selection 2
Trust Portfolio 2
Risk Factors 3
Equity Securities 3
General 3
Federal Taxation 3
Trust Operating Expenses 5
Compensation of Sponsor and Evaluator 5
Trustee's Fee 5
Miscellaneous Expenses 6
Public Offering 6
General 6
Offering Price 6
Sponsor and Dealer Compensation 7
Public Market 7
Tax-Sheltered Retirement Plans 7
Rights of Unitholders 7
Certificates 7
Distributions of Income and Capital 7
Reinvestment Options 7
Reports Provided 8
Redemption of Units 8
Trust Administration 9
Sponsor Purchases of Units 9
Portfolio Administration 9
Amendment or Termination 9
Limitation on Liabilities 9
Sponsor 10
Trustee 10
Other Matters 11
Legal Opinions 11
Independent Certified Public Accounts 11
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.
VAN KAMPEN MERRITT
EQUITY OPPORTUNITY
TRUST
PROSPECTUS
PART TWO
NOTE: THIS PROSPECTUS MAY BE USED ONLY
WHEN ACCOMPANIED BY PART ONE. BOTH
PARTS OF THIS PROSPECTUS SHOULD BE
RETAINED FOR FUTURE REFERENCE.
DATED AS OF THE DATE
OF THE PROSPECTUS
PART ONE ACCOMPANYING
THIS PROSPECTUS
PART TWO.
Sponsor:
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
------ A Wealth of Knowledge o Knowledge of Wealth(sm) ------
VAN KAMPEN AMERICAN CAPITAL
CONTENTS OF POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement comprises the
following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Van Kampen Merritt Equity Opportunity Trust, Series 1, certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, and its seal to be hereunto
affixed and attested, all in the City of Chicago and State of Illinois on the
24th day of April, 1998.
VAN KAMPEN MERRITT EQUITY OPPORTUNITY TRUST, SERIES 1
(Registrant)
By VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(Depositor)
By: Gina Costello
Assistant Secretary
(SEAL)
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on April 24, 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 Senior Vice President and )
Chief Financial Officer )
Gina Costello_______
(Attorney in Fact)*
____________________
* An executed copy of each of the related powers of attorney was filed with
the Securities and Exchange Commission in connection with the Registration
Statement on Form S-6 of 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.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 13, 1998 accompanying the financial
statements of Van Kampen Merritt Equity Opportunity Trust, Series 1 as of
December 31, 1997, and for the period then ended, contained in this
Post-Effective Amendment No. 6 to Form S-6.
We consent to the use of the aforementioned report in the Post-Effective
Amendment and to the use of our name as it appears under the caption "Auditors".
Grant THORNTON LLP
Chicago, Illinois
April 24, 1998
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