File No. 33-57451
CIK #896970
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Van Kampen American Capital Equity
Opportunity Trust, Series 10
B. Name of Depositor: Van Kampen American Capital Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: An indefinite
number of Units of proportionate interest pursuant to Rule 24f-2
under the Investment Company Act of 1940
F. Proposed maximum offering price to the public of the securities
being registered: Indefinite
G. Amount of registration fee: $500 (previously paid)
H. Approximate date of proposed sale to the public:
As Soon As Practicable After the Effective Date of the
Registration Statement
/ X / Check box if it is proposed that this filing will become effective
on February 8, 1995 at 2:00 P.M. pursuant to Rule 487.
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
Van Kampen American Capital Equity Opportunity Trust
Series 10
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Fund Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Fund Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Fund
6. Execution and termination of ) The Fund
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Fund
trust's securities and ) Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Fund Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Fund
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolios
)
) Fund Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Fund Operating Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) *
underwriter, trustee or any ) Trust Portfolios
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Fund
underlying securities ) Rights of Unitholders
) Fund Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Fund Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Fund Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Fund Administration
20. Certain miscellaneous provisions ) Fund Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolios
) Fund Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Fund Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Fund Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Fund Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Fund Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Fund Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Fund Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Fund Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Fund Operating Expenses
50. Trustee's lien ) Fund Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Cover Page
securities ) Fund Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Fund Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Fund Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
Certified
1(c) to Form S-6) ) Public Accountants
) Statements of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
February 8, 1995
VAN KAMPEN AMERICAN CAPITAL
Van Kampen American Capital Equity Opportunity Trust, Series 10
Strategic Ten Trust
United States Portfolio, Series 3
United Kingdom Portfolio, Series 3
Hong Kong Portfolio, Series 3
The Fund. Van Kampen American Capital Equity Opportunity Trust, Series 10 (the
"Fund") is comprised of three underlying separate unit investment
trusts designated as Strategic Ten Trust United States Portfolio, Series 3
(the "United States Trust"), Strategic Ten Trust United Kingdom
Portfolio, Series 3 (the "United Kingdom Trust"), and Strategic Ten
Trust Hong Kong Portfolio, Series 3 (the "Hong Kong Trust"). The
various trusts are collectively referred to herein as the "Trusts" and
are individually referred to herein as a "Trust". The United Kingdom
and Hong Kong Trusts are sometimes collectively referred to herein as the
"Foreign Trusts". The Trusts offer investors the opportunity to purchase
Units representing proportionate interests in a fixed, diversified portfolio
of actively traded equity securities, including common stocks of foreign
issuers. The United States Trust consists of common stocks of the ten
companies in the Dow Jones Industrial Average* having the highest dividend
yield as of the close of business three days prior to the Initial Date of
Deposit. The United Kingdom Trust consists of common stocks of the ten
companies in the Financial Times Industrial Ordinary Share Index* (the "FT
Index") having the highest dividend yield as of the close of business
three days prior to the Initial Date of Deposit. The Hong Kong Trust consists
of common stocks of the ten companies in the Hang Seng Index* having the
highest dividend yield as of the close of business three days prior to the
Initial Date of Deposit (excluding those companies which were scheduled to be
removed from the Hang Seng Index as of such date). The publishers of these
indexes have not participated in any way in the creation of the Trusts or in
the selection of stocks included in the Trusts and have not approved any
information herein relating thereto. Unless terminated earlier, the Trusts
will terminate on March 11, 1996 and any securities then held will, within a
reasonable time thereafter, be liquidated or distributed by the Trustee. Any
Securities liquidated at termination will be sold at the then current market
value for such Securities; therefore, the amount distributable in cash to a
Unitholder upon termination may be more or less than the amount such
Unitholder paid for his Units. Upon liquidation, Unitholders may choose either
to reinvest their proceeds into the next Strategic Ten Series, if available,
at a reduced sales charge or to receive a cash distribution, or, in the case
of the United States Trust, to receive a pro rata distribution of the
securities then included in such Trust (if they own the requisite number of
Units).
Unless otherwise indicated, all amounts herein are stated in U.S. dollars. In
the case of the United Kingdom and Hong Kong Trusts, these amounts are
computed on the basis of the exchange rate for British pounds sterling or Hong
Kong dollars, as applicable, on the Initial Date of Deposit.
* The publishers of these indexes have not granted to the Fund or the Sponsor
a license to use these indexes and are not affiliated with the Sponsor.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Objective of the Fund. The objective of each Trust is to provide an above
average total return through a combination of potential capital appreciation
and dividend income, consistent with the preservation of invested capital, by
investing in a portfolio of actively traded equity securities having the
highest dividend yield in their respective stock exchange index as of the
close of business three days prior to the Initial Date of Deposit ("Equity
Securities"or "Securities") (excluding, in the case of the Hong
Kong Trust, those securities which were scheduled to be removed from the Hang
Seng Index as of such date). See "Portfolios."Each Trust seeks to
achieve better performance than the relevant index for such Trust. There is,
of course, no guarantee that the objective of the Fund will be achieved.
Public Offering Price. The Public Offering Price per Unit of each Trust is
equal to the aggregate underlying value of the Securities in such Trust plus
or minus cash, if any, in the Capital and Income Accounts of such Trust,
divided by the number of Units of such Trust outstanding, plus a sales charge
equal to 3.5% of the Public Offering Price which is equivalent to 3.627% of
the aggregate value of the Securities in such Trust. In the case of the United
Kingdom and Hong Kong Trusts, the Public Offering Price per Unit is based on
the aggregate value of the Securities computed on the basis of the offering
side value of the relevant currency exchange rate expressed in U.S. dollars
during the initial offering period and on the bid side value for the secondary
market transactions and includes the commissions and stamp taxes associated
with acquiring the Securities during the initial offering period and the
liquidation costs associated with selling Securities to meet redemptions or
upon Trust termination. During the initial offering period, the sales charge
is reduced on a graduated scale for sales involving at least 10,000 Units of a
Trust. If Units were available for purchase at the opening of business on the
Initial Date of Deposit (except for the United Kingdom Trust as of 11:30 a.m.
New York time on the Initial Date of Deposit), the Public Offering Price per
Unit for each Trust would have been that amount set forth under "Summary
of Essential Financial Information."The minimum purchase is 500 Units
(100 Units for a tax-sheltered retirement plan). See "Public Offering."
Additional Deposits. The Sponsor may, from time to time after the Initial Date
of Deposit, deposit additional Securities in the Trusts, provided it
maintains, as nearly as is practicable, the original proportionate
relationship of the Equity Securities in each Trust's portfolio. See "The
Fund."
Dividend and Capital Gains Distributions. Distributions of dividends and
realized capital gains, if any, received by a Trust will be paid in cash on
the applicable Distribution Date to Unitholders of record of such Trust on the
record date as set forth in the "Summary of Essential Financial
Information." The estimated distribution for each Trust will be $.19, $.24
and $.22 per Unit for the United States, United Kingdom and Hong Kong Trusts,
respectively, and will be made on August 31, 1995 to Unitholders of record on
August 15, 1995. Any distribution of income and/or capital gains for a Trust
will be net of the expenses of such Trust. See "Taxation."
Additionally, upon surrender of Units for redemption or termination of a
Trust, the Trustee will distribute to each Unitholder his pro rata share of
such Trust's assets, less expenses, in the manner set forth under "Rights
of Unitholders--Distributions of Income and Capital."
Secondary Market For Units. Although not obligated to do so, the Sponsor
currently intends to maintain a market for Units of the Trusts through August
7, 1995 and offer to repurchase such Units at prices which are based on the
aggregate underlying value of Equity Securities in the applicable Trust
(generally determined by the closing sale prices of the Securities) plus or
minus cash, if any, in the Capital and Income Accounts of such Trust. If a
secondary market is not maintained, a Unitholder may redeem Units at prices
based upon the aggregate underlying value of the Equity Securities in the
applicable Trust plus or minus a pro rata share of cash, if any, in the
Capital and Income Accounts of such Trust. See "Rights of
Unitholders--Redemption of Units."
A Unitholder in the United States Trust tendering 2,500 or more Units for
redemption may request a distribution of shares of Securities (reduced by
customary transfer and registration charges) in lieu of payment in cash. See
"Rights of Unitholders--Redemption of Units."
Termination. The Fund will terminate approximately one year after the Initial
Date of Deposit regardless of market conditions at that time. Commencing on
the Mandatory Termination Date, 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 sale of the Securities. Written notice of any
termination of the Trusts shall be given by the Trustee to each Unitholder at
his address appearing on the registration books of the Trusts maintained by
the Trustee. At least 30 days prior to the Mandatory Termination Date the
Trustee will provide written notice thereof to all Unitholders and in the case
of the United States Trust will include with such notice a form to enable
Unitholders of such Trust to elect a distribution of shares of the Securities
(reduced by customary transfer and registration charges) if such Unitholder
owns at least 2,500 Units of the United States Trust, rather than to receive
payment in cash for such Unitholder's pro rata share of the amounts realized
upon the disposition of such Securities. Unitholders will receive cash in lieu
of any fractional shares. To be effective, the election form, and any other
documentation required by the Trustee, must be returned to the Trustee at
least five business days prior to the Mandatory Termination Date. Unitholders
of each of the Trusts may elect to become Rollover Unitholders as described in
"Special Redemption and Rollover in New Fund"below. Rollover
Unitholders will not receive the final liquidation distribution but will
receive units of a new Series of the Strategic Ten Trust, if one is being
offered. Unitholders not electing the Rollover Option or a distribution of
shares of Securities (in the case of the United States Trust) will receive a
cash distribution from the sale of the remaining Securities within a
reasonable time after the Trusts are terminated. See "Fund
Administration--Amendment or Termination."
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into additional Units of the applicable Trust, if
Units are available at the time of reinvestment, or into an open-end
management investment company as described herein. See "Rights of
Unitholders-- Reinvestment Option."
Special Redemption and Rollover in New Fund. Unitholders will have the option,
subject to any necessary regulatory approval, of specifying by the Rollover
Notification Date stated in "Summary of Essential Financial
Information"to have all of their Units redeemed on the Rollover
Notification Date and the distributed Securities sold by the Trustee, in its
capacity as Distribution Agent, during the Special Redemption Period.
(Unitholders so electing are referred to herein as "Rollover
Unitholders.") The Distribution Agent will appoint the Sponsor as its
agent to determine the manner, timing and execution of sales of underlying
Securities. The proceeds of the redemption will then be invested in Units of a
new Series of the Strategic Ten Trust (the "1996 Fund"), if one is
offered, at a reduced sales charge (anticipated to be 1.9% of the public
offering price of the 1996 Fund). The Sponsor may, however, stop offering
units of the 1996 Fund at any time in its sole discretion without regard to
whether all the proceeds to be invested have been invested. Cash which has not
been invested on behalf of the Rollover Unitholders in the 1996 Fund will be
distributed at the end of the Special Redemption Period. However, the Sponsor
anticipates that sufficient Units will be available, although moneys in this
Fund may not be fully invested on the next business day. The portfolios of the
1996 Fund will contain the ten common stocks in each of the Dow Jones
Industrial Average, FT Index, and Hang Seng Index having the highest dividend
yield as of a day shortly prior to the initial date of deposit of the 1996
Fund. Rollover Unitholders will receive the amount of dividends in the
applicable Income Account of each Trust which will be included in the
reinvestment in units of the 1996 Fund.
Risk Factors. An investment in the Fund should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and currency fluctuations, the lack of adequate financial
information concerning an issuer and exchange control restrictions impacting
foreign issuers. For certain risk considerations related to the Trusts, 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.
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 10
Summary of Essential Financial Information
At the close of the relevant stock market on February 7, 1995
(for the United States Trust) and February 8, 1995
(for the United Kingdom and Hong Kong Trusts)
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor: Van Kampen American Capital Investment
Advisory Corp. (A subsidiary of the Sponsor)
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
United United Hong
States Kingdom Kong
GENERAL INFORMATION Trust Trust Trust
<S> <C> <C> <C>
Number of Units........................................................... 200,000 100,000 100,000
Fractional Undivided Interest in the Trust per Unit....................... 1/200,000 1/100,000 1/100,000
Public Offering Price: ...................................................
Aggregate Offering Price of Securities in Portfolio <F1>................. $ 1,930,106 $ 966,014 $ 984,290
Aggregate Offering Price of Securities per Unit.......................... $ 9.65 $ 9.66 $ 9.84
Sales Charge 3.5% (3.627% of the Aggregate Value of Securities per
Unit) <F2>................................................................ $ .35 $ .35 $ .36
Public Offering Price per Unit <F2><F3>.................................. $ 10.00 $ 10.01 $ 10.20
Redemption Price per Unit <F4>............................................ $ 9.65 $ 9.65 $ 9.81
Initial Secondary Market Repurchase Price per Unit ....................... $ 9.65 $ 9.66 $ 9.84
Excess of Public Offering Price per Unit over Redemption Price per Unit... $ .35 $ .36 $ .39
Calculation of Estimated Net Annual Dividends per Unit <F5>:..............
Estimated Gross Annual Dividends per Unit................................. $ .39858 $ .41813 $ .56158
Less: Estimated Annual Expense per Unit .................................. $ .01650 $ .01938 $ .02532
Estimated Net Annual Dividends per Unit .................................. $ .38208 $ .39875 $ .53626
Supervisor's Annual Supervisory Fee ...................................... Maximum of $.0025 per Unit
Evaluator's Annual Evaluation Fee......................................... Maximum of $.0025 per Unit
Rollover Notification Date ............................................... February 8, 1996
Special Redemption Period ................................................ Beginning on February 16, 1996 until no later than
March 8, 1996
Mandatory Termination Date ............................................... March 11, 1996
Minimum Termination Value................................................. Each Trust may be terminated if the net asset value of
such Trust is less than $500,000 unless the net asset
value of such Trust's deposits has exceeded
$15,000,000, then the Trust Agreement may be
terminated if the net asset value of the Trust is less
than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F6>........................$.008 per Unit
Income and Capital Account Distribution Record
Dates ..........................................August 15, 1995 and March 11, 1996
Income and Capital Account Distribution Dates....August 31, 1995 and March 20, 1996
Evaluation Time..................................Close of the relevant stock market (generally 4:00 P.M. New York time for the
United States Trust, 11:30 A.M. New York time for the United Kingdom Trust and
3:30 A.M. New York time for the Hong Kong Trust)
<FN>
<F1>Each Equity Security is valued at the closing sale price. The aggregate value
of Securities in each of the United Kingdom and Hong Kong Trusts represents
the U.S. dollar value based on the offering side value of the currency
exchange rates for the British pound sterling and the Hong Kong dollar, as
applicable, at the relevant Evaluation Time on the date of this "Summary
of Essential Financial Information"and includes the commissions and stamp
taxes associated with acquiring such Securities.
<F2>Effective on various dates the sales charge will decrease. See "Public
Offering--Offering Price."
<F3>On the Initial Date of Deposit there will be no cash in the Income or Capital
Accounts. Anyone ordering Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts. In the
case of the United Kingdom and Hong Kong Trusts, the Public Offering Price per
Unit is based on the aggregate value of the Securities computed on the basis
of the offering side value of the relevant currency exchange rate expressed in
U.S. dollars and includes the commissions and stamp taxes associated with
acquiring such Securities.
<F4>In the case of the United Kingdom and Hong Kong Trusts, the Redemption Price
per Unit is based on the aggregate value of the Securities computed on the
basis of the bid side value of the relevant currency exchange rate expressed
in U.S. dollars and includes each Trust's estimated costs of liquidating
Securities to meet redemptions ($0.01 and $0.03 per Unit for the United
Kingdom Trust and Hong Kong Trust, respectively).
<F5>Estimated annual dividends are based on the most recently paid dividends or,
in the case of the United Kingdom and Hong Kong Trusts, on the most recent
interim and final dividends paid.
<F6>In addition, in connection with the United Kingdom Trust and the Hong Kong
Trust the Trustee will receive additional annual compensation of $.30 per
$1,000 of market value and $.90 per $1,000 of market value of the United
Kingdom Trust and Hong Kong Trust, respectively.
</TABLE>
THE FUND
Van Kampen American Capital Equity Opportunity Trust, Series 10 is comprised
of three unit investment trusts: Strategic Ten Trust United States Portfolio,
Series 3, Strategic Ten Trust United Kingdom Portfolio, Series 3, and
Strategic Ten Trust Hong Kong Portfolio, Series 3. The Fund was created under
the laws of the State of New York pursuant to a Trust Indenture and Trust
Agreement (the "Trust Agreement"), dated the date of this Prospectus
(the "Initial Date of Deposit"), among Van Kampen American Capital
Distributors, Inc., as Sponsor, Van Kampen American Capital Investment
Advisory Corp., as Supervisor, The Bank of New York, as Trustee, and American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator.
The Fund offers investors the opportunity to purchase Units representing
proportionate interests in portfolios of actively traded equity securities
which are components of the Dow Jones Industrial Average, the FT Index, or the
Hang Seng Index. The Trusts consist of common stocks of the ten companies in
these indexes having the highest dividend yield as of the close of business
three days prior to the Initial Date of Deposit (excluding, in the case of the
Hong Kong Trust, those companies which were scheduled to be removed from the
Hang Seng Index as of such date). This yield is historical and there is no
assurance that any dividends will be declared or paid in the future on the
Securities in the Trusts. See "Risk Factors."The publishers of the
Dow Jones Industrial Average, FT Index, and Hang Seng Index have not
participated in any way in the creation of the Fund or in selection of the
stocks included in the Trusts and have not approved any information herein
relating thereto. The Fund may be an appropriate medium for investors who
desire to participate in portfolios of common stocks with greater
diversification than they might be able to acquire individually and who are
seeking to achieve a better performance than the related indexes through an
investment in the highest dividend yielding stocks of these indexes. An
investment in approximately equal values of such stocks each year has in most
instances provided a higher total return than investments in all of the stocks
which are components of the respective indexes. See "Trust Portfolios."
Unless terminated earlier, the Trusts will terminate on the Mandatory
Termination Date set forth under "Summary of Essential Financial
Information" and any securities then held will, within a reasonable time
thereafter, be liquidated or distributed by the Trustee. Any Securities
liquidated at termination will be sold at the then current market value for
such Securities; therefore, the amount distributable in cash to a Unitholder
upon termination may be more or less than the amount such Unitholder paid for
his Units. Upon liquidation, Unitholders may choose either to reinvest their
proceeds into their respective Series of a subsequent Series of Strategic Ten
Trust, if available, at a reduced sales charge, to receive, in the case of the
United States Trust, a pro rata distribution of the Securities then included
in such Trust (if they own the requisite minimum number of Units) or to
receive a cash distribution.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolios"herein, including delivery
statements relating to contracts for the purchase of certain such Securities
and an irrevocable letter of credit issued by a financial institution in the
amount required for such purchases. Thereafter, the Trustee, in exchange for
such Securities (and contracts) so deposited, delivered to the Sponsor
documentation evidencing the ownership of that number of Units of the Trusts
indicated in "Summary of Essential Financial Information." Unless
otherwise terminated as provided in the Trust Agreement, the Trusts will
terminate on the Mandatory Termination Date, and Securities then held will
within a reasonable time thereafter be liquidated or distributed by the
Trustee.
Additional Units of the Trusts may be issued at any time by depositing in the
Trusts additional Securities or contracts to purchase securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trusts as a result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trusts will be increased and the
fractional undivided interest in the Trusts represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Securities
into the Trusts following the Initial Date of Deposit, provided that such
additional deposits will be in amounts which will maintain, as nearly as
practicable, the original proportionate relationship of the Equity Securities
in each Trust's portfolio based on the number of shares of the Equity
Securities. Any deposit by the Sponsor of additional Equity Securities will
duplicate, as nearly as is practicable, this original proportionate
relationship and not the actual proportionate relationship on the subsequent
date of deposit, since the actual proportionate relationship may be different
than the original proportionate relationship. Any such difference may be due
to the sale, redemption or liquidation of any of the Equity Securities
deposited in the Trusts on the Initial, or any subsequent, Date of Deposit.
Each Unit of a Trust initially offered represents an undivided interest in
such Trust. To the extent that any Units are redeemed by the Trustee or
additional Units are issued as a result of additional Securities being
deposited by the Sponsor, the fractional undivided interest in a Trust
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in such Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor, or until the
termination of the Trust Agreement.
OBJECTIVE AND SECURITIES SELECTION
The objective of each Trust is to provide an above average total return
through a combination of potential capital appreciation and dividend income by
investing in a portfolio of common stocks of the ten companies in the Dow
Jones Industrial Average, FT Index, and Hang Seng Index, respectively, having
the highest dividend yield as of the close of business three days prior to the
Initial Date of Deposit (excluding, in the case of the Hong Kong Trust, those
companies which were scheduled to be removed from the Hang Seng Index as of
such date). The Fund will terminate approximately one year from the date of
this Prospectus. The companies represented in the Trusts are some of the most
well-known and highly capitalized companies in the United States, the United
Kingdom and Hong Kong. An investment in approximately equal values of the ten
highest yielding stocks in the Dow Jones Industrial Average for a period of
one year would have, in 14 of the last 20 years, yielded a higher total return
than an investment in all of the stocks comprising the Dow Jones Industrial
Average. A similar investment in the ten highest yielding stocks in the FT
Index for a period of one year would have, in 14 of the last 20 years, yielded
a higher total return than an investment in all of the stocks comprising the
FT Index. Furthermore, a similar investment in the ten highest yielding stocks
in the Hang Seng Index for a period of one year would have, in 11 of the last
17 years, yielded a higher total return than an investment in all of the
stocks comprising the Hang Seng Index. See the table entitled "Comparison
of Dividends, Appreciation and Total Return"for the applicable Trust
under "Trust Portfolios."It should be noted that the foregoing yield
comparisons do not take into account any expenses or sales commissions which
would arise from an investment in Units of the Trusts. The Trusts seek to
achieve better performances than the related indexes through similar
investment strategy. Investment in a number of companies having high dividends
relative to their stock prices (usually because their stock prices are
undervalued) is designed to increase each Trust's potential for higher
returns. There is, of course, no assurance that a Trust (which includes
expenses and sales charges) will achieve its objective.
Investors will be subject to taxation on the dividend income received by the
Trusts and on gains from the sale or liquidation of Securities. The tax
consequences affecting Unitholders will vary in each of the respective Trusts
(see "Taxation"). Investors should be aware that there is not any
guarantee that the objective of the Trusts will be achieved because it is
subject to the continuing ability of the respective issuers to declare and pay
dividends and because the market value of the Securities can be affected by a
variety of factors. Common stocks may be especially susceptible to general
stock market movements and to volatile increases and decreases of value as
market confidence in and perceptions of the issuers change. Investors should
be aware that there can be no assurance that the value of the underlying
Securities will increase or that the issuers of the Securities will pay
dividends on outstanding common shares. Any distribution of income will
generally depend upon the declaration of dividends by the issuers of the
Securities and the declaration of any dividends depends upon several factors
including the financial condition of the issuers and general economic
conditions. In addition, a decrease in the value of the British pound sterling
or Hong Kong dollar relative to the U.S. dollar will adversely affect the
value of the relevant Trust's assets and income and the value of the Units of
that Trust. See "Risk Factors."
Investors should note that the above criteria were applied to the Securities
for inclusion in the Trusts as of the Initial Date of Deposit. Subsequent to
the Initial Date of Deposit, the Securities may no longer be included in the
Dow Jones Industrial Average, FT Index, or Hang Seng Index or may not be
providing one of the ten highest dividend yields within these indexes. See
"Trust Portfolios--Hong Kong Trust."Should a Security no longer be
included in these indexes or not be one of the ten highest in dividend yield,
such Security will not as a result thereof be removed from a Trust portfolio.
Investors should be aware that the Fund is not a "managed" fund and as
a result the adverse financial condition of a company will not result in its
elimination from the portfolio except under extraordinary circumstances (see
"Fund Administration--Portfolio Administration"). In addition,
Securities will not be sold by a Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation. Investors should
note in particular that the Securities were selected by the Sponsor three days
prior to the date the Securities were purchased by the Trusts. The Trusts may
continue to hold Securities originally selected through this process even
though the evaluation of the attractiveness of the Securities may have changed
and, if the evaluation were performed again at that time, the Securities would
not be selected for the Trusts.
TRUST PORTFOLIOS
Each Trust consists of ten common stocks of the respective indices having the
highest dividend yield as of the close of business three days prior to the
Initial Date of Deposit (excluding, in the case of the Hong Kong Trust, those
companies which were scheduled to be removed from the Hang Seng Index as of
such date). In the case of the United States Trust, the yield for each Equity
Security was calculated by annualizing the last dividend paid and dividing the
result by the market value of the Equity Security as of the close of business
three days prior to the Initial Date of Deposit. In the case of the United
Kingdom Trust and the Hong Kong Trust, the yield for each Equity Security was
calculated by adding together the most recent interim dividend and the final
dividend paid* and dividing the result by the market value of the Equity
Security as of the close of business three days prior to the Initial Date of
Deposit. An investment in each Trust involves the purchase of a quality
portfolio of attractive equities with high dividend yields in one convenient
purchase.
Each Trust consists (a) of the Equity Securities (including contracts for the
purchase thereof) listed under the applicable "Portfolio"as may
continue to be held from time to time in such Trust, (b) any additional Equity
Securities acquired and held by such Trust pursuant to the provisions of the
Trust Agreement and (c) any cash held in the related Income and Capital
Accounts. Neither the Sponsor nor the Trustee shall be liable in any way for
any failure in any of the Equity Securities. However, should any contract for
the purchase of any of the Equity Securities initially deposited hereunder
fail, the Sponsor will, unless substantially all of the moneys held in such
Trust to cover such purchase are reinvested in substitute Equity Securities in
accordance with the Trust Agreement, refund the cash and sales charge
attributable to such failed contract to all Unitholders on or before the next
scheduled distribution date.
Investors should note that the above criteria were applied to the Equity
Securities selected for inclusion in each Trust portfolio as of the date
indicated above. Since the Sponsor may deposit additional Equity Securities
which were originally selected through this process, the Sponsor may continue
to sell Units of a Trust even though yields on these Equity Securities may
have changed subsequent to the Initial Date of Deposit or the Equity
Securities may no longer be included in the respective index, and therefore
the Equity Securities would no longer be chosen for deposit into a Trust if
the selection process were to be made again at a later time.
*Generally, United Kingdom and Hong Kong companies pay one interim and one
final dividend per fiscal year.
United States Trust
The Dow Jones Industrial Average. The Dow Jones Industrial Average
("DJIA") was first published in The Wall Street Journal in 1896. Initially
consisting of just 12 stocks, the DJIA expanded to 20 stocks in 1916 and its
present size of 30 stocks on October 1, 1928. The companies which make up the
DJIA have remained relatively constant over the life of the DJIA. Taking into
account name changes, 9 of the original DJIA companies are still in the DJIA
today. For two periods of 17 consecutive years, March 14, 1939-July 1956 and
June 1, 1959-August 6, 1976, there were no changes to the list. The following
is the list as it currently appears:
<TABLE>
<CAPTION>
<S> <C>
Allied Signal Goodyear Tire & Rubber Company
Aluminum Company of America International Business Machines Corporation
American Express Company International Paper Company
American Telephone & Telegraph Company McDonald's Corporation
Bethlehem Steel Corporation Merck & Company, Inc.
Boeing Company Minnesota Mining & Manufacturing Company
Caterpillar Inc. J.P. Morgan & Company, Inc.
Chevron Corporation Philip Morris Companies, Inc.
Coca-Cola Company Procter & Gamble Company
Walt Disney Company Sears, Roebuck and Company
E.I. du Pont de Nemours & Company Texaco, Inc.
Eastman Kodak Company Union Carbide Corporation
Exxon Corporation United Technologies Corporation
General Electric Company Westinghouse Electric Corporation
General Motors Woolworth Corporation
</TABLE>
United States Trust Portfolio
The United States Trust consists of common stocks of those ten companies in
the Dow Jones Industrial Average which had the highest dividend yield as of
the close of business three days prior to the Initial Date of Deposit. The
United States Trust consists of common stocks of the following ten companies:
Chevron Corporation. Chevron Corporation is an international oil company with
activities in the U.S. and abroad. The company is involved in worldwide,
integrated petroleum operations which consist of exploring for, developing and
producing petroleum liquids and natural gas as well as transporting the
products. The company is also active in the mineral and chemical industry.
E.I. du Pont de Nemours & Company. E.I. du Pont de Nemours & Company is a
diversified international company primarily involved in petroleum, coal and
other energy sources. The company is also a large chemical manufacturer with
interests in chemicals, fibers, transportation, construction, electronics,
health care and agriculture. DuPont Nylon, a company division, produces nylon
textiles, flooring, resins and specialties.
Eastman Kodak Company. Eastman Kodak Company's activities are divided into the
imaging, information, chemicals and health segments. The various segments
provide a number of products and services including cameras, photofinishing,
film, audiovisual equipment, chemicals, plastics and pharmaceutical and
consumer healthcare products. The company's products and services are offered
worldwide.
Exxon Corporation. Exxon Corporation explores for and produces crude oil and
natural gas and manufactures petroleum products. The company explores for and
mines coal and minerals, and transports/sells crude oil, natural gas and
petroleum products. Operations are both domestic and international, and
include a representative office in Almaty, Kazakhstan (former Soviet Union).
J.P. Morgan & Company, Inc. J. P. Morgan & Company, Inc., through
subsidiaries, offers financial services to corporations, governments,
financial institutions, institutional investors, professional firms,
privately-held companies and individuals. The company offers loans, advises on
mergers, acquisitions and privatizations, underwrites debt and equity issues
and deals in government-issued securities worldwide.
Minnesota Mining & Manufacturing Company. Minnesota Mining & Manufacturing
Company operates in the industrial and consumer, information, imaging and
electronic and life sciences business segments. The company manufactures
industrial, commercial, healthcare and consumer products, including adhesives,
abrasives, laser imagers and "Scotch Brand"products which are
marketed worldwide.
Philip Morris Companies, Inc. Philip Morris Companies, Inc. operates a large
international consumer goods company through its tobacco, food and beer
segments. The company's major subsidiaries include Philip Morris U.S.A.,
Philip Morris International, Inc., Kraft General Foods Group and the Miller
Brewing Company. Philip Morris is also involved in real estate and financial
services.
Sears, Roebuck and Company. Sears, Roebuck and Company operates in the retail
and financial services industries. The company's subsidiaries include Sears
which conducts merchandising and credit operations, and Allstate Insurance
Group which provides property-liability and life insurance services. Sears
operates more than 1,800 retail stores.
Texaco, Inc. Texaco, Inc. and its subsidiaries explore for, produce,
transport, refine and market crude oil, natural gas and petroleum products,
including petrochemicals, worldwide. The company owns, leases or has interests
in extensive production, manufacturing, marketing, transportation and other
facilities throughout the world.
Woolworth Corporation. Woolworth Corporation is a multinational retailer of
general merchandise, men's, women's and children's apparel, sporting goods,
and footwear and accessories through approximately 8,990 stores in the United
States and around the world. The company operates stores under the
"Woolworth", "Woolco", "Kinney", "Foot Locker",
"Lady Foot Locker" and other names.
The following table sets forth a comparison of the dividends, appreciation and
total return of the ten highest yielding DJIA common stocks (the "10
Highest Yielding DJIA Stocks") with those of all common stocks comprising
the DJIA. It should be noted that the common stocks comprising the 10 Highest
Yielding DJIA Stocks may not be the same stocks from year to year and may not
be the same common stocks as those included in the United States Trust.
<TABLE>
<CAPTION>
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN
10 Highest Yielding DJIA Stocks <F1>* Dow Jones Industrial Average*
Actual Actual
Appreciation Dividend Total Appreciation Dividend Total
Year <F2> Yield <F3> Return <F4> <F2> Yield <F3> Return <F4>
<S> <C> <C> <C> <C> <C> <C>
1975 50.70% 8.41% 59.11% 39.35% 4.39% 43.74%
1976 26.18 6.87 33.05 17.00 4.12 21.12
1977 (10.30) 6.03 (4.27) (17.27) 5.51 (11.76)
1978 (7.68) 7.35 (0.33) (3.15) 6.03 2.88
1979 4.25 8.29 12.54 4.19 6.08 10.27
1980 20.57 8.41 28.98 14.93 5.64 20.57
1981 (2.15) 8.05 5.90 (9.23) 6.42 (2.81)
1982 22.33 8.10 30.43 19.61 5.17 24.78
1983 31.17 7.72 38.89 20.27 4.47 24.74
1984 (3.46) 13.96 10.50 (3.74) 5.00 1.26
1985 18.64 6.83 25.47 27.66 4.01 31.67
1986 18.70 5.92 24.62 22.58 3.54 26.12
1987 5.60 4.71 10.31 2.26 3.67 5.93
1988 15.05 5.48 20.53 11.85 3.67 15.52
1989 26.19 6.95 33.14 26.96 3.74 30.70
1990 (12.28) 4.91 (7.37) (4.34) 3.94 (0.40)
1991 27.73 4.68 32.41 20.32 3.00 23.32
1992 0.32 4.58 4.90 4.17 3.05 7.22
1993 19.74 7.60 27.34 13.72 2.65 16.37
1994 (0.07) 4.08 4.01 2.14 2.75 4.89
* This data has been obtained from a variety of sources and is generally
considered reliable. However, reasonable assumptions were relied on where data
was either unavailable or only partially available and these assumptions could
have a material impact on the historical performance calculations.
<FN>
<F1>The 10 Highest Yielding DJIA Stocks for each period were identified by ranking
the dividend yield for each of the stocks in the DJIA by taking the last
dividend declared and multiplying it by four (annualizing the dividend) and
dividing the result by the stock's market value on the first trading day on
the New York Stock Exchange in the period.
<F2>The appreciation for each of the 10 Highest Yielding DJIA Stocks is calculated
by subtracting the market value of such stocks as of the first trading day on
the New York Stock Exchange in the period from the market value of such stocks
as of the last trading day in that period, and dividing that result by the
market value of such stocks as of the first trading day in that period. The
appreciation for the 10 Highest Yielding DJIA Stocks is calculated by summing
the appreciation for each of the 10 Highest Yielding DJIA Stocks and dividing
the summation by 10. The percentage appreciation for the DJIA is calculated by
subtracting the opening value of the DJIA as of the first trading day in the
period from the closing value of the DJIA as of the last trading day in that
period, and dividing that result by the opening value of the DJIA as of the
first trading day in the period.
<F3>The actual dividend yield for each of the 10 Highest Yielding DJIA Stocks is
calculated by adding together the total dividends paid on such stocks in the
period and dividing the result by the market value of such stocks as of the
first trading day in the period. Actual dividend yield for the DJIA was
obtained from Barron's.
<F4>Total return represents the sum of appreciation and actual dividend yield.
Total return does not take into consideration any sales charges, commissions,
expenses or taxes that will be incurred by the United States Trust. Total
return does not take into consideration any reinvestment of dividend income.
</TABLE>
The returns shown above represent past performance and are not guarantees of
future performance and should not be used as a predictor of returns to be
expected in connection with the United States Trust. Among other factors, both
stock prices (which may appreciate or depreciate) and dividends (which may be
increased, reduced or eliminated) will affect the returns. As indicated in the
above table, the 10 Highest Yielding DJIA Stocks underperformed the DJIA in 6
of the last 20 years and there can be no assurance that the United States
Trust will outperform the DJIA over the life of such Trust or over consecutive
rollover periods, if available. A Unitholder in the United States Trust would
not necessarily realize as high a total return on an investment in the stocks
upon which the returns shown above are based. The total return figures shown
above do not reflect sales charges, commissions, Trust expenses or taxes, and
such Trust may not be able to invest equally in the 10 Highest Yielding DJIA
Stocks and may not be fully invested at all times.
The chart below represents past performance of the DJIA and the 10 Highest
Yielding DJIA Stocks (but does not represent possible performance of the
United States Trust which, as indicated above, includes certain expenses and
commissions not included in the chart) and should not be considered indicative
of future results. Further, results are hypothetical. The chart assumes that
all dividends during a year are reinvested at the end of that year and does
not reflect sales charges, commissions, expenses or income taxes. Based on the
foregoing assumptions, the compound annual returns (which represent the
percentage return derived by taking the sum of the initial investment and all
appreciation and dividends for the specified investment period) during the
period referred to in the table were 18.4% and 14.0% for the 10 Highest
Yielding DJIA Stocks and the DJIA, respectively. There can be no assurance
that the United States Trust will outperform the DJIA over its one-year life
or over consecutive rollover periods, if available.
<TABLE>
<CAPTION>
Value of $10,000 Invested
January 1, 1975
10
Highest
Yielding
DJIA
Period Stocks DJIA
<S> <C> <C>
1975 $ 15,911 $ 14,374
1976 21,170 17,410
1977 20,266 15,362
1978 20,199 15,805
1979 22,732 17,428
1980 29,319 21,013
1981 31,049 20,422
1982 40,497 25,483
1983 56,247 31,788
1984 62,153 32,188
1985 77,983 42,382
1986 97,183 53,452
1987 107,202 56,622
1988 129,211 65,410
1989 172,031 85,491
1990 159,352 85,149
1991 210,999 105,006
1992 221,338 112,587
1993 281,851 131,017
1994 293,153 137,424
</TABLE>
United Kingdom Trust
The Financial Times Industrial Ordinary Share Index. The Financial Times
Industrial Ordinary Share Index (the "FT Index") is comprised of 30
common stocks chosen by the editors of The Financial Times as representative
of British industry and commerce. The FT Index began as the Financial News
Industrial Ordinary Share Index in London in 1935 and became the Financial
Times Industrial Ordinary Share Index in 1947. The following stocks are
currently represented in the FT Index:
<TABLE>
<CAPTION>
<S> <C> <C>
ASDA Group British Airways Imperial Chemical Industries Plc
Allied Domecq Plc Cadbury Schweppes Lucas Industries Plc
BICC Plc Courtaulds Marks & Spencer
BOC Group Forte National Westminster Bank
BTR Plc General Electric Plc Peninsular & Oriental Steam
Blue Circle Industries Plc Glaxo Holdings Navigation Company
Boots Co. Grand Metropolitan Reuters Holdings
British Gas Plc Guest Keen & Nettlefolds (GKN) Plc Royal Insurance Holdings
British Petroleum Guinness SmithKline Beecham
British Telecom Plc Hanson Plc Tate & Lyle
Thorn EMI
</TABLE>
United Kingdom Trust Portfolio
The United Kingdom Trust consists of common stocks of those ten companies in
the Financial Times Industrial Ordinary Share Index which had the highest
dividend yield as of the close of business three days prior to the Initial
Date of Deposit. The United Kingdom Trust consists of common stocks of the
following ten companies:
Allied Domecq Plc. Allied Domecq Plc is an international food, drink and
hospitality group. The company owns the "Baskin Robbins" ice cream and
"Dunkin' Donuts" food chains and "Firkin" pubs chain. Through
Hiram Walker, the company also produces a wide range of brands, including
"Ballantine's" scotch whiskey, "Canadian Club" Canadian whiskey,
"Kahlua", "Tia Maria", "Beefeater Gin" and other brands.
BICC Plc. BICC Plc manufactures cables and provides construction and
engineering services. The Company's construction and engineering activities
are primarily located in North America and Asia-Pacific while the cable
business is managed through regional operations based in Europe, North
America, Australia and Asia-Pacific. BICC serves the power, communications,
transport and building sectors.
BTR Plc. BTR Plc is a holding company with subsidiaries in industrial,
transportation, construction, control systems, electrical and consumer related
divisions. The company produces and sells building products, agricultural
equipment and aircraft equipment and distributes electrical, health care,
environmental control and paper and printing products.
Blue Circle Industries Plc. Blue Circle Industries Plc manufactures cement,
concrete, aggregates, bathroom fixtures and heating supplies. The company
produces cement, concrete and aggregates worldwide and manufactures and sells
furnaces, boilers, bathroom sinks, toilets and other fixtures in Europe. Blue
Circle also manages a 33,000 acre estate in the United Kingdom, develops real
estate and builds homes.
British Gas Plc. British Gas Plc's principal activity is the purchase,
transmission, distribution and supply of gas in Great Britain, supported by a
broad range of services to customers and the marketing of gas appliances. The
company is also active in the overseas gas supply market, principally through
a subsidiary of Canada, and has significant operations exploring for and
producing oil and gas in the United Kingdom and overseas.
British Telecom Plc. British Telecom Plc provides telecommunications services.
The company provides local and long-distance telephone call products and
services in the United Kingdom, telephone exchange lines to homes and
businesses, international telephone calls to and from the United Kingdom and
telecommunications equipment for customers' premises. The company has
operations internationally.
Glaxo Holdings. Glaxo Holdings is a holding company for pharmaceutical
manufacturers. The company derives more than 50% of its sales from "
Zantac", an antiulcer drug. In the United States, Glaxo researches,
develops and manufactures prescription medicines that treat gastrointestinal,
respiratory, infectious and cardiovascular diseases. The company markets its
products worldwide.
Hanson Plc. Hanson Plc is an industrial management company with operations in
the United Kingdom, the United States and to a lesser extent in Australia,
South Africa and other regions of the world. Some of the company's business
activities include the manufacture and sale of chemicals, building material
and consumer and recreational products, the mining of coal, house building and
the sale and distribution of propane.
National Westminster Bank. National Westminster Bank provides an extensive
range of banking and financial services to both the domestic and international
markets.
Peninsular & Oriental Steam Navigation Company. Peninsular and Oriental Steam
Navigation Company's primary activities include container and bulk shipping,
house building, property investment, construction and development and cruise,
ferry and transport services. Peninsular and Oriental operates worldwide.
The following table compares the actual performance of the FT Index and the
ten stocks in the FT Index having the highest dividend yield in each of the
past 20 years (the "10 Highest Yielding FT Index Stocks"), as of
December 31 in each of those years. The FT Index statistics are based on a
geometric, unweighted average of 30 companies, while the statistics for the 10
Highest Yielding FT Index Stocks are based on an approximately equal
distribution (based on market price) of each of the ten stocks. None of the
figures have been adjusted to take into account the effect of currency
exchange rate fluctuations of the U.S. dollar (i.e. returns are stated in
local currency terms). It should be noted that the common stocks comprising
the 10 Highest Yielding FT Index Stocks may not be the same stocks from year
to year and may not be the same common stocks as those included in the United
Kingdom Trust.
<TABLE>
<CAPTION>
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN*
Financial Times Industrial Ordinary Share Index
10 Highest Yielding FT Index Stocks <F1>* (FT Index)*
Actual Actual
Appreciation Dividend Total Appreciation Dividend Total
Year <F2> Yield <F3> Return <F4> <F2> Yield <F3> Return <F4>
<S> <C> <C> <C> <C> <C> <C>
1975 156.78% 18.66% 175.44% 145.15% 13.21% 158.36%
1976 (14.02) 10.39 (3.63) (4.39) 6.81 2.42
1977 43.81 11.24 55.05 26.96 6.43 33.39
1978 (5.31) 8.59 3.28 (3.81) 5.76 1.95
1979 (11.12) 7.34 (3.78) (5.75) 7.40 1.65
1980 7.69 11.37 19.06 12.71 7.21 19.92
1981 7.56 10.26 17.82 13.84 6.55 20.39
1982 14.76 8.60 23.36 16.31 5.37 21.68
1983 50.76 10.36 61.12 25.46 5.24 30.70
1984 27.56 7.57 35.13 13.25 5.26 18.51
1985 33.93 6.90 40.83 16.74 5.00 21.74
1986 17.72 6.27 23.99 14.27 4.17 18.44
1987 9.56 5.50 15.06 4.32 4.11 8.43
1988 11.32 6.01 17.33 7.02 4.95 11.97
1989 34.33 6.80 41.13 30.93 5.89 36.82
1990 (9.87) 5.97 (3.90) (13.39) 4.65 (8.74)
1991 5.40 7.00 12.40 21.02 5.25 26.27
1992 23.60 6.09 29.69 14.68 3.98 18.66
1993 34.15 5.31 39.46 14.84 3.82 18.66
1994 (8.29) 5.07 (3.22) (6.87) 4.50 (2.37)
* Source: Datastream International, Inc. and Extell Financial LTD. The Sponsor
has not independently verified this data but has no reason to believe that
this data is incorrect in any material respect. Reasonable assumptions were
relied on where data was either unavailable or only partially available and
these assumptions could have a material impact on the historical performance
calculations.
<FN>
<F1>The 10 Highest Yielding FT Index Stocks for each period were identified by
ranking the dividend yield for each of the stocks in the FT Index by adding
together the interim and final dividends paid in the prior period and dividing
the result by that stock's market value on the first trading day on the London
Stock Exchange in the then current period.
<F2>The percentage appreciation for each of the 10 Highest Yielding FT Index
Stocks is calculated by subtracting the market value of such stocks as of the
first trading day on the London Stock Exchange in the period from the market
value of such stocks as of the last trading day in that period, and dividing
that result by the market value of such stocks as of the first trading day in
that period. The percentage appreciation for the 10 Highest Yielding FT Index
Stocks is calculated by summing the percentage appreciation for each of the 10
Highest Yielding FT Index Stocks and dividing the summation by 10. The
percentage appreciation for the FT Index is calculated by subtracting the
opening value of the FT Index as of the first trading day in the period from
the closing value of the FT Index as of the last trading day in that period,
and dividing that result by the opening value of the FT Index as of the first
trading day in that period.
<F3>The actual dividend yield for each of the 10 Highest Yielding FT Index Stocks
is calculated by adding together the interim and final dividends paid on such
stocks in the period and dividing the result by the market value of such
stocks as of the first trading day in that period.
<F4>Total return represents the sum of the percentage appreciation and actual
dividend yield. Total return does not take into consideration any sales
charges, commissions, expenses or taxes that will be incurred by the United
Kingdom Trust. Total return does not take into consideration any reinvestment
of dividend income and all returns are stated in terms of the local currency.
</TABLE>
The returns shown above represent past performance and are not guarantees of
future performance and should not be used as a predictor of returns to be
expected in connection with the United Kingdom Trust. Among other factors,
both stock prices (which may appreciate or depreciate) and dividends (which
may be increased, reduced or eliminated) will affect the returns. As indicated
in the table above, the 10 Highest Yielding FT Index Stocks underperformed the
FT Index in 6 of the last 20 years and there can be no assurance that such
Trust will outperform the FT Index over the life of such Trust or over
consecutive rollover periods, if available. A Unitholder in the United Kingdom
Trust would not necessarily realize as high a total return on an investment in
the stocks upon which the returns shown above are based. The total return
figures shown above do not reflect sales charges, commissions, Trust expenses
or taxes, and such Trust may not be able to invest equally in the 10 Highest
Yielding FT Index Stocks and may not be fully invested at all times.
The chart below represents past performance of the FT Index and the 10 Highest
Yielding FT Index Stocks (but not the United Kingdom Trust which as indicated
above includes certain expenses and commissions not included in the chart) and
should not be considered indicative of future results. Further, results are
hypothetical. The chart assumes that all dividends during a year are
reinvested at the end of that year and does not reflect commissions, custodial
fees or income taxes. The annual figures in the following table have been
adjusted to take into account the effect of currency exchange rate
fluctuations of the U.S. dollar as described in the footnotes below. Based on
the foregoing assumptions, the compound annual returns (which represent the
percentage return derived by taking the sum of the initial investment and all
appreciation and dividends for the specified investment period) during the
period referred to in the table were 23.17% and 17.5% for the 10 Highest
Yielding FT Index Stocks and the FT Index, respectively. There can be no
assurance that the United Kingdom Trust will outperform the FT Index over its
one-year life or over consecutive rollover periods, if available.
<TABLE>
<CAPTION>
Value of $10,000 Invested
January 1, 1975 <F1><F2>
10 Highest
Yielding
FT Index
Period Stocks FT Index
<S> <C> <C>
1975 $ 23,747 $ 22,275
1976 19,238 19,178
1977 33,616 28,830
1978 36,974 31,301
1979 38,661 34,576
1980 49,567 44,650
1981 46,813 43,089
1982 48,792 44,299
1983 70,524 51,941
1984 76,029 49,108
1985 133,608 74,602
1986 169,960 90,651
1987 248,781 125,046
1988 280,287 134,446
1989 352,212 163,787
1990 405,121 178,903
1991 441,365 218,960
1992 462,191 209,790
1993 630,489 243,498
1994 646,200 251,758
<FN>
<F1>The $10,000 initial investment was converted into British pounds sterling
using the opening exchange rate at the beginning of each period.
<F2>The year-end total in British pounds sterling was converted into U.S. dollars
using the ending exchange rate. This amount was then converted back into
British pounds sterling using the opening exchange rate at the beginning of
the next period.
</TABLE>
Hong Kong Trust
The Hang Seng Index. The Hang Seng Index, first published in 1969, consists of
33 of the 358 stocks currently listed on the Stock Exchange of Hong Kong Ltd.
(the "Hong Kong Exchange"). The Hang Seng Index, which is
representative of commerce and industry, finance, properties and utilities, is
comprised of the following companies:
<TABLE>
<CAPTION>
<S> <C> <C>
Amoy Properties Ltd. Henderson Land Development Co. Ltd. Johnson Electric Holdings
Bank of East Asia Hong Kong Aircraft Engineering Co. Ltd. *Mandarin Oriental Hotel Group
Cathay Pacific Airways Hong Kong and China Gas Miramar Hotel and Investment
Cheung Kong Hong Kong Electric Holdings Ltd. New World Development Co. Ltd.
China Light & Power *Hong Kong Land Holdings Ltd. Oriental Press Group
Citic Pacific Hong Kong and Shanghai Hotels Shun Tak Holdings Ltd.
*Dairy Farm International Holdings Ltd. Hong Kong Telecommunications Sun Hung Kai Properties Ltd.
Great Eagle Holdings Hopewell Holdings Swire Pacific (A)
Guangdong Investment HSBC Holdings Plc TV Broadcasts
Hang Lung Development Company Hutchison Whampoa Wharf Holdings
Hang Seng Bank Hysan Development Company Ltd. Wheelock & Co.
</TABLE>
*Effective February 28, 1995, these companies will no longer be included in
the Hang Seng Index.
Hong Kong Trust Portfolio
The Hong Kong Trust consists of common stocks of those ten companies in the
Hang Seng Index which had the highest dividend yield as of the close of
business three days prior to the Initial Date of Deposit (excluding those
companies which were scheduled to be removed from the Hang Seng Index as of
such date). The Hong Kong Trust consists of common stocks of the following ten
companies:
Amoy Properties Ltd. Amoy Properties Ltd. is a property investment company and
a subsidiary of Hang Lung Development Company Ltd. The company invests in
commercial, office, residential and industrial properties in Hong Kong. The
company is also involved in car park management and property management.
Hang Lung Development Company. Hang Lung Development Company is a property and
investment holding company with stakes in Amoy Properties, Grand Hotels and
Amoy Industries. The company invests in commercial, office, residential and
industrial properties in Hong Kong, Thailand and the People's Republic of
China.
Henderson Land Development Company Ltd. Henderson Land Development Company
Ltd. is a holding company whose main operations include property development
and investment, project management, construction, property management and
investment holding. The company holds a stake in Henderson, Hong Kong Ferry
and Hong Kong Gas. Henderson Land also participates in property development
joint ventures in China.
Hong Kong Aircraft Engineering Company Ltd. Hong Kong Aircraft Engineering
Company Ltd. maintains and overhauls commercial aircraft. The company performs
comprehensive checks, refurbishments and reconfigurations of airframes and
engines. Hong Kong Aircraft Engineering Company has contracts with several
airways.
Hong Kong Electric Holdings Ltd. Hong Kong Electric Holdings Ltd. generates
and provides electricity to commercial, industrial and domestic customers in
Hong Kong. The company also provides engineering consultancy and project
management.
Hopewell Holdings. Hopewell Holdings has operations in construction,
engineering and property investment. Projects include a superhighway, hotels
and commercial and office building sites.
Hysan Development Company Ltd. Hysan Development Company Ltd. is involved in
property investment and development. A majority of the company's profits come
from commercial rental income located in Causeway Bay, Hong Kong.
New World Development Company Ltd. New World Development Company Ltd. is an
investment holding company whose subsidiaries are involved in property
development and investment. The company also has hotel operations,
construction and civil engineering activities, and is involved in
telecommunication services, insurance, transportation and infrastructual
investment.
Oriental Press Group. Oriental Press Group publishes newspapers and magazines
and is involved in property investment and building management. Publication
titles include "Oriental Sunday", "Sun Racing Journal",
"Jade Magazine", "Eastweek" and "Eastern Express".
Shun Tak Holdings Ltd. Shun Tak Holdings Ltd. is involved in shipping,
property, restaurants, air transportation and hotels in the Asia-Pacific
region. The company operates jet-foil services, develops residential and
commercial properties in Hong Kong, Macau and Australia, has interests in
three restaurants and five hotels and operates air cargo services to nine
destinations in Europe and Asia.
The following table compares the actual performance of the Hang Seng Index and
the ten stocks in the Hang Seng Index having the highest dividend yield in
each of the past 17 years (the "10 Highest Yielding Hang Seng Index
Stocks"), as of December 31 in each of those years. The Hang Seng Index
statistics are based on a geometric, unweighted average of 33 companies, while
the statistics for the 10 Highest Yielding Hang Seng Index Stocks are based on
an approximately equal distribution (based on market price) of each of the ten
stocks. None of the figures have been adjusted to take into account the effect
of currency exchange rate fluctuations of the U.S. dollar (i.e. returns are
stated in local currency terms). It should be noted that the common stocks
comprising the 10 Highest Yielding Hang Seng Index Stocks may not be the same
stocks from year to year and may not be the same common stocks as those
included in the Hong Kong Trust.
<TABLE>
<CAPTION>
COMPARISON OF DIVIDENDS, APPRECIATION AND TOTAL RETURN*
10 Highest Yielding Hang Seng Index Stocks <F1>* Hang Seng Index*
Actual Actual
Appreciation Dividend Total Appreciation Dividend Total
Year <F2> Yield <F3> Return <F4> <F2> Yield <F3> Return <F4>
<S> <C> <C> <C> <C> <C> <C>
1978 14.14% 8.36% 22.50% 9.15% 5.79% 14.94%
1979 62.53 10.08 72.61 69.85 5.79 75.64
1980 36.18 6.86 43.04 51.29 3.20 54.49
1981 (2.95) 7.77 4.82 (6.29) 3.38 (2.91)
1982 (38.74) 8.48 (30.26) (50.21) 4.15 (46.06)
1983 5.64 10.51 16.15 0.50 7.07 7.57
1984 47.24 10.87 58.11 25.49 4.24 29.73
1985 35.63 7.48 43.11 42.31 3.95 46.26
1986 56.85 5.13 61.98 55.64 2.92 58.56
1987 (5.83) 4.25 (1.58) (13.72) 1.83 (11.89)
1988 37.24 6.81 44.05 25.73 4.91 30.64
1989 0.78 7.09 7.87 6.98 4.31 11.29
1990 (2.05) 7.96 5.91 (1.25) 4.87 3.62
1991 40.04 10.67 50.71 42.18 6.34 48.52
1992 31.32 6.81 38.13 29.35 4.77 34.12
1993 100.46 8.70 109.16 116.65 4.35 121.00
1994 (39.00) 3.49 (35.51) (33.07) 2.29 (30.78)
* Source: Datastream International, Inc. and The Hong Kong Stock Exchange. The
Sponsor has not independently verified this data but has no reason to believe
that this data is incorrect in any material respect. Reasonable assumptions
were relied on where data was either unavailable or only partially available
and these assumptions could have a material impact on the historical
performance calculations.
<FN>
<F1>The 10 Highest Yielding Hang Seng Index Stocks for each period were identified
by ranking the dividend yield for each of the stocks in the Hang Seng Index by
adding together the interim and final dividends paid in the prior period and
dividing the result by that stock's market value on the first trading day on
the Hong Kong Stock Exchange in the then current period.
<F2>The percentage appreciation for each of the 10 Highest Yielding Hang Seng
Index Stocks is calculated by subtracting the market value of such stocks as
of the first trading day on the Hong Kong Stock Exchange in the period from
the market value of such stocks as of the last trading day in that period, and
dividing the result by the market value of such stocks as of the first trading
day in that period. The percentage appreciation for the 10 Highest Yielding
Hang Seng Index Stocks is calculated by summing the percentage appreciation
for each of the 10 Highest Yielding Hang Seng Index Stocks and dividing the
summation by 10. The percentage appreciation for the Hang Seng Index is
calculated by subtracting the opening value of the Hang Seng Index as of the
first trading day in the period from the closing value of the Hang Seng Index
as of the last trading day in that period, and dividing that result by the
opening value of the Hang Seng Index as of the first trading day in that
period.
<F3>The actual dividend yield for each of the 10 Highest Yielding Hang Seng Index
Stocks is calculated by adding together the interim and final dividends paid
on such stocks in the period and dividing the result by the market value of
such stocks as of the first trading day in that period.
<F4>Total return represents the sum of percentage appreciation and actual dividend
yield. Total return does not take into consideration any sales charges,
commissions, expenses or taxes that will be incurred by the Hong Kong Trust.
Total return does not take into consideration any reinvestment of dividend
income and all returns are stated in terms of the local currency.
</TABLE>
The returns shown above represent past performance and are not guarantees of
future performance and should not be used as a predictor of returns to be
expected in connection with the Hong Kong Trust. Among other factors, both
stock prices (which may appreciate or depreciate) and dividends (which may be
increased, reduced or eliminated) will affect the returns. As indicated in the
table above, the 10 Highest Yielding Hang Seng Index Stocks underperformed the
Hang Seng Index in 6 of the last 17 years and there can be no assurance that
the Hong Kong Trust will outperform the Hang Seng Index over the life of such
Trust or over consecutive rollover periods, if available. A Unitholder in the
Hong Kong Trust would not necessarily realize as high a total return on an
investment in the 10 stocks upon which the returns shown above are based. The
total return figures shown above do not reflect sales charges, commissions,
Trust expenses or taxes, and such trust may not be able to invest equally in
the 10 Highest Yielding Hang Seng Index Stocks and may not be fully invested
at all times.
The chart below represents past performance of the Hang Seng Index and the 10
Highest Yielding Hang Seng Index Stocks (but not the Hong Kong Trust which as
indicated above includes certain expenses and commissions not included in the
chart) and should not be considered indicative of future results. Further,
results are hypothetical. The chart assumes that all dividends during a year
are reinvested at the end of that year and does not reflect commissions,
custodial fees or income taxes. The annual figures in the following table have
been adjusted to take into account the effect of currency exchange rate
fluctuations on the U.S. dollar as described in the footnotes below. Based on
the foregoing assumptions, the compound annual returns (which represent the
percentage return derived by taking the sum of the initial investment and all
appreciation and dividends for the specified investment period) during the
period referred to in the table were 21.0% and 16.15% for the 10 Highest
Yielding Hang Seng Index Stocks and the Hang Send Index, respectively. There
can be no assurance that the Hong Kong Trust will outperform the Hang Seng
Index over its one-year life or over consecutive rollover periods, if
available.
<TABLE>
<CAPTION>
Value of $10,000 Invested
January 1, 1978 <F1><F2>
10 Highest
Yielding
Hang Seng Hang Seng
Period Index Stocks Index
<S> <C> <C>
1978 $ 11,792 $ 11,065
1979 19,788 18,893
1980 27,314 28,166
1981 25,712 24,560
1982 15,745 11,633
1983 15,226 10,419
1984 23,959 13,452
1985 34,332 19,700
1986 55,739 31,309
1987 55,056 27,686
1988 78,863 35,965
1989 85,056 40,016
1990 90,176 41,511
1991 136,266 61,815
1992 189,126 83,304
1993 396,643 184,593
1994 255,310 127,533
<FN>
<F1>The $10,000 initial investment was converted into Hong Kong dollars using the
opening exchange rate at the beginning of each period.
<F2>The year-end total in Hong Kong dollars was converted into U.S. dollars using
the ending exchange rate. This amount was then converted back into Hong Kong
dollars using the opening exchange rate at the beginning of the next period.
</TABLE>
Combined Strategy
The following table compares the total returns (change in share prices plus
dividends reinvested at the end of each year) for various periods and
cumulative performance of hypothetical investments in the ten highest dividend
yielding stocks in each of the Dow Jones Industrial Average, the Financial
Times Industrial Ordinary Share Index and the Hang Seng Index with an
investment of equal amounts in all three (the "Combined Strategy").
These figures do not reflect commissions or taxes, nor the performance of the
Fund, which is subject to sales charges and expenses. This represents past
performance and should not be considered indicative of future results. Both
stock prices (which may appreciate or depreciate) and dividends (which may be
increased, reduced or eliminated) will affect the returns. Also, in the case
of the Foreign Trusts there are additional risks associated with investments
denominated in foreign currencies. However, it indicates that diversifying an
investment among the 10 highest dividend yielding stocks in each of these
three indexes would have produced a higher total return than the 10 highest
dividend yielding stocks in the DJIA while reducing the volatility in total
return of any of the three index investments individually. All figures in the
following table have been adjusted by taking into account currency exchange
rates for U.S. dollars as of the end of each period of time shown.
<TABLE>
<CAPTION>
Hang Seng Combined
DJIA Top Ten FT Top Ten Top Ten Strategy
Value of Value of Value of Value of
Year Investment Investment Investment Investment
<S> <C> <C> <C> <C>
$ 10,000 $ 10,000 $ 10,000 $ 30,000
1978 9,967 10,999 11,792 32,758
1979 11,217 11,501 19,788 42,506
1980 14,468 14,745 27,314 56,527
1981 15,321 13,926 25,712 54,959
1982 19,983 14,514 15,745 50,242
1983 27,755 20,979 15,226 63,960
1984 30,669 22,617 23,959 77,245
1985 38,480 39,745 34,332 112,557
1986 47,954 50,559 55,739 154,252
1987 52,898 74,006 55,056 181,960
1988 63,759 83,378 78,863 226,000
1989 84,888 104,774 85,056 274,718
1990 78,632 120,513 90,176 289,321
1991 104,116 131,295 136,266 371,677
1992 109,218 137,490 189,126 435,834
1993 139,078 187,555 396,643 723,276
1994 144,655 192,228 255,310 592,193
</TABLE>
The total returns from the three indices are taken from the previous $10,000
investment strategies charts. Therefore, all figures are presented in U.S.
dollars. For a complete computation of the information presented in this
table, investors are encouraged to review the tables entitled "Value of
$10,000 Invested".This data has been obtained from a variety of sources
(including Bloomberg LP, Barron's, The Wall Street Journal, Extell Financial
LTD, Datastream International, Inc., and the Hong Kong Stock Exchange) and is
generally considered reliable. However, reasonable assumptions were relied on
where data was either unavailable or only partially available and these
assumptions could have a material impact on the historical performance
calculations.
RISK FACTORS
General. An investment in Units of a Trust should be made with an
understanding of the risks which an investment in common stocks entails,
including the risk that the financial condition of the issuers of the Equity
Securities or the general condition of the common stock market may worsen and
the value of the Equity Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions are
based on unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or
banking crises. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate to
those of creditors of, or holders of debt obligations or preferred stocks of,
such issuers. Shareholders of common stocks of the type held by the Trusts
have a right to receive dividends only when and if, and in the amounts,
declared by each issuer's board of directors and have a right to participate
in amounts available for distribution by such issuer only after all other
claims on such issuer have been paid or provided for. Common stocks do not
represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock or the rights of holders of
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks is subject to market fluctuations for
as long as the common stocks remain outstanding, and thus the value of the
Equity Securities in a portfolio may be expected to fluctuate over the life of
a Trust to values higher or lower than those prevailing on the Initial Date of
Deposit.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, have
generally inferior rights to receive payments from the issuer in comparison
with the rights of creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Cumulative preferred stock dividends must be
paid before common stock dividends and any cumulative preferred stock dividend
omitted is added to future dividends payable to the holders of cumulative
preferred stock. Preferred stockholders are also generally entitled to rights
on liquidation which are senior to those of common stockholders.
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for the Equity Securities may depend on whether dealers will make a market in
the Equity Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity Securities
will be maintained or of the liquidity of the Equity Securities in any markets
made. In addition, the Trusts may be restricted under the Investment Company
Act of 1940 from selling Equity Securities to the Sponsor. The price at which
the Equity Securities may be sold to meet redemption, and the value of a
Trust, will be adversely affected if trading markets for the Equity Securities
are limited or absent.
Unitholders will be unable to dispose of any of the Equity Securities in a
Trust, as such, and will not be able to vote the Equity Securities. As the
holder of the Equity Securities, the Trustee will have the right to vote all
of the voting stocks in each Trust and will vote such stocks in accordance
with the instructions of the Sponsor.
Petroleum Companies. The Trusts may include securities which are issued by
companies engaged in refining and marketing oil and related products.
According to the U.S. Department of Commerce, the factors which will most
likely shape the industry to 1996 and beyond include the price and
availability of oil from the Middle East, changes in United States
environmental policies and the continued decline in U.S. production of crude
oil. Possible effects of these factors may be increased U.S. and world
dependence on oil from the Organization of Petroleum Exporting Countries
("OPEC") and highly uncertain and potentially more volatile oil prices.
Factors which the Sponsor believes may increase the profitability of oil and
petroleum operations include increasing demand for oil and petroleum products
as a result of the continued increases in annual miles driven and the
improvement in refinery operating margins caused by increases in average
domestic refinery utilization rates. The existence of surplus crude oil
production capacity and the willingness to adjust production levels are the
two principal requirements for stable crude oil markets. Without excess
capacity, supply disruptions in some countries cannot be compensated for by
others. Surplus capacity in Saudi Arabia and a few other countries and the
utilization of that capacity prevented during the Persian Gulf crisis, and
continue to prevent, severe market disruption. Although unused capacity
contributed to market stability in 1990 and 1991, it ordinarily creates
pressure to overproduce and contributes to market uncertainty. The likely
restoration of a large portion of Kuwait and Iraq's production and export
capacity over the next few years could lead to such a development in the
absence of substantial growth in world oil demand. Formerly, OPEC members
attempted to exercise control over production levels in each country through a
system of mandatory production quotas. Because of the crisis in the Middle
East, the mandatory system has since been replaced with a voluntary system.
Production under the new system has had to be curtailed on at least one
occasion as a result of weak prices, even in the absence of supplies from
Kuwait and Iraq. The pressure to deviate from mandatory quotas, if they are
reimposed, is likely to be substantial and could lead to a weakening of
prices. In the longer term, additional capacity and production will be
required to accommodate the expected large increases in world oil demand and
to compensate for expected sharp drops in U.S. crude oil production and
exports from the Soviet Union. Only a few OPEC countries, particularly Saudi
Arabia, have the petroleum reserves that will allow the required increase in
production capacity to be attained. Given the large-scale financing that is
required, the prospect that such expansion will occur enough to meet the
increased demand is uncertain.
Declining U.S. crude oil production will likely lead to increased dependence
on OPEC oil, putting refiners at risk of continued and unpredictable supply
disruptions. Increasing sensitivity to environmental concerns will also pose
serious challenges to the industry over the coming decade. Refiners are likely
to be required to make heavy capital investments and make major production
adjustments to the Clean Air Act. If the cost of these changes is substantial
enough to cut deeply into profits, smaller refiners may be forced out of the
industry entirely. Moreover, lower consumer demand due to increases in energy
efficiency and conservation, due to gasoline reformulations that call for less
crude oil, due to warmer winters or due to a general slowdown in economic
growth in this country and abroad could negatively affect the price of oil and
the profitability of oil companies. No assurance can be given that the demand
for or prices of oil will increase or that any increases will not be marked by
great volatility. Some oil companies may incur large cleanup and litigation
costs relating to oil spills and other environmental damage. Oil production
and refining operations are subject to extensive federal, state and local
environmental laws and regulations governing air emissions and the disposal of
hazardous materials. Increasingly stringent environmental laws and regulations
are expected to require companies with oil production and refining operations
to devote significant financial and managerial resources to pollution control.
General problems of the oil and petroleum products industry include the
ability of a few influential producers significantly to affect production, the
concomitant volatility of crude oil prices and increasing public and
governmental concern over air emissions, waste product disposal, fuel quality
and the environmental effects of fossil-fuel use in general.
In addition, any future scientific advances concerning new sources of energy
and fuels or legislative changes relating to the energy industry or the
environment could have a negative impact on the petroleum products industry.
While legislation has been enacted to deregulate certain aspects of the oil
industry, no assurances can be given that new or additional regulations will
not be adopted. Each of the problems referred to could adversely affect the
financial stability of the issuers of any petroleum industry stocks in the
Trusts. The Trusts may also include securities which are issued by companies
engaged in the exploration for and mining of various minerals, including coal,
and/or the manufacture, transportation, or marketing of chemical products and
plastics. The problems faced by such companies are similar to those discussed
with regard to petroleum companies.
Other Equity Risks. Since the Equity Securities included in the United Kingdom
Trust and the Hong Kong Trust (the "Foreign Trusts") consist of
securities of foreign issuers, an investment in these Trusts involves certain
investment risks that are different in some respects from an investment in the
United States Trust which invests entirely in the securities of domestic
issuers. These investment risks include future political or governmental
restrictions which might adversely affect the payment or receipt of payment of
dividends on the relevant Equity Securities, the possibility that the
financial condition of the issuers of the Equity Securities may become
impaired or that the general condition of the relevant stock market may worsen
(both of which would contribute directly to a decrease in the value of the
Equity Securities and thus in the value of the Units), the limited liquidity
and relatively small market capitalization of the relevant securities market,
expropriation or confiscatory taxation, economic uncertainties and foreign
currency devaluations and fluctuations. In addition, for foreign issuers that
are not subject to the reporting requirements of the Securities Exchange Act
of 1934, there may be less publicly available information than is available
from a domestic issuer. Also, foreign issuers are not necessarily subject to
uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic issuers. The
securities of many foreign issuers are less liquid and their prices more
volatile than securities of comparable domestic issuers. In addition, fixed
brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States and there is
generally less government supervision and regulation of exchanges, brokers and
issuers in foreign countries than there is in the United States. However, due
to the nature of the issuers of the Equity Securities selected for the Foreign
Trusts, the Sponsor believes that adequate information will be available to
allow the Supervisor to provide portfolio surveillance for each Trust.
Equity securities issued by non-U.S. issuers generally pay dividends in
foreign currencies and are principally traded in foreign currencies.
Therefore, there is a risk that the United States dollar value of these
securities will vary with fluctuations in the U.S. dollar foreign exchange
rates for the various Equity Securities. See "Exchange Rate" below.
On the basis of the best information available to the Sponsor at the present
time, none of the Equity Securities in either the United Kingdom or Hong Kong
Trusts are subject to exchange control restrictions under existing law which
would materially interfere with payment to the Trusts of dividends due on, or
proceeds from the sale of, the Equity Securities. However, there can be no
assurance that exchange control regulations might not be adopted in the future
which might adversely affect payment to either Trust. In addition, the
adoption of exchange control regulations and other legal restrictions could
have an adverse impact on the marketability of international securities in the
Foreign Trusts and on the ability of such Trusts to satisfy their obligation
to redeem Units tendered to the Trustee for redemption.
Investors should be aware that it may not be possible to buy all Equity
Securities at the same time because of the unavailability of any Equity
Security, and restrictions applicable to the Trusts relating to the purchase
of an Equity Security by reason of the federal securities laws or otherwise.
Foreign securities generally have not been registered under the Securities Act
of 1933 and may not be exempt from the registration requirements of such Act.
Sales of non-exempt Equity Securities by a Trust in the United States
securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these Equity Securities by a Trust will
generally be effected only in foreign securities markets. Although the Sponsor
does not believe that a Trust will encounter obstacles in disposing of the
Equity Securities, investors should realize that the Equity Securities may be
traded in foreign countries where the securities markets are not as developed
or efficient and may not be as liquid as those in the United States. The value
of the Equity Securities will be adversely affected if trading markets for the
Equity Securities are limited or absent.
Foreign Trust Information. The information provided below details certain
important factors which impact the economies of both the United Kingdom and
Hong Kong. This information has been extracted from various governmental and
private publications, but no representation can be made as to its accuracy;
furthermore, no representation is made that any correlation exists between the
economies of the United Kingdom and Hong Kong and the value of the Equity
Securities held by the United Kingdom and Hong Kong Trusts, respectively.
United Kingdom. The emphasis of United Kingdom's economy is in the private
services sector, which includes the wholesale and retail sector, banking,
finance, insurance, and tourism. Services as a whole account for a majority of
the United Kingdom's gross national product and makes a significant
contribution to the country's balance of payments. The economy of the United
Kingdom is in the midst of a recovery which, by historical standards, will
remain slow, reflecting economic weakness in continental Europe and tightening
fiscal policy. Economic growth of 2.4% is expected for 1994 resulting from
lower interest rates and a weaker British pound, made possible by the
government's decision to leave the European Community's Exchange Rate
Mechanism (ERM). Economic growth will be adversely affected by the negative
economic impact of increased taxes and sluggish exports to continental Europe,
due to its lingering recession. Approximately 60% of British exports are sold
to continental Europe. The negative economic impact of tax increases will be
partially offset by a decision of the Bank of England to ease monetary policy
due to low inflation rates.
The United Kingdom Base Rate has recently dropped from 6% to 5.5%, and is
expected to be maintained at that level. British inflation fell from 9.5% in
1990 to a 30-year low of 1.2% in mid-1993. Inflation has since increased to
approximately 2%. Unemployment, while relatively high at 10.3%, is stable and
expected to gradually decline. The United Kingdom is a member of the European
Union (the "EU"), formerly known as the European Economic Community
(the "EEC"). The EU was created through the formation of the
Maastricht Treaty on European Union in late 1993. It is expected that the new
Treaty will have the effect of eliminating most remaining trade barriers
between the 12 member nations and make Europe one of the largest common
markets in the world. The EU has the potential to become a powerful trade bloc
with a population of over 350 million people and an annual gross national
product of more than $4 trillion. However, the effective implementation of the
Treaty provisions and the rate at which trade barriers are eliminated is
uncertain at this time. Furthermore, the recent rapid political and social
change throughout Europe make the extent and nature of future economic
development in the United Kingdom and Europe and the impact of such
development upon the value of the Equity Securities in the United Kingdom
Trust impossible to predict. Volatility in oil prices could slow economic
development throughout Western Europe. Moreover, it is not possible to
accurately predict the effect of the current political and economic situation
upon long-term inflation and balance of trade cycles and how these changes
would affect the currency exchange rate between the U.S. dollar and the
British pound sterling.
Hong Kong. Hong Kong, established as a British colony in the 1840's, is
currently ruled by the British Government through an appointed Governor. The
Hong Kong government generally follows a laissez-faire policy towards
industry. There are no major import, export or foreign exchange restrictions.
Regulation of business is generally minimal with certain exceptions, including
regulated entry into certain sectors of the economy and a fixed exchange rate
regime by which the Hong Kong dollar has been pegged to the U.S. dollar. Over
the ten year period between 1982 and 1992, real gross domestic product
increased at an average annual rate of approximately 6%, with real gross
domestic product increasing 5.4% in 1993.
In December, 1984, Great Britain and China signed an agreement (the
"Sino-British Accord") under which Hong Kong will revert to Chinese
sovereignty effective July 1, 1997. Although China has committed by treaty to
preserve for 50 years the economic and social freedoms currently enjoyed in
Hong Kong, the continuation of the economic system in Hong Kong after the
reversion will be dependent on the Chinese government. China has declared that
all contracts negotiated by the current Hong Kong government with the private
sector would be void upon the reversion to Chinese sovereignty, unless
specifically approved by China. In 1991 the Chinese government obtained a
"memorandum of understanding" from Britain which allows China veto power
over all public work and industrial projects sponsored by the Colony which are
scheduled for completion in 1997 or beyond. This veto power has allowed China
to stall construction of Hong Kong's new $20 billion airport facility,
resulting in substantial costs to the British, in order to win additional
concessions prior to the British departure. Any increase in uncertainty as to
the future economic status of Hong Kong could have a materially adverse effect
on the value of the Equity Securities in the Hong Kong Trust.
China currently enjoys a most favored nation status ("MFN Status")
with the United States. MFN status is subject to annual review by the
President of the United States. On June 2, 1994, President Clinton signed an
executive order renewing China's MFN status for another year. Revocation of
the MFN Status would have a severe effect on China's trade. Every year since
1989, when pro-democracy demonstrators were crushed in Beijing, the United
States has threatened to end China's trade privileges unless the government
made significant human rights reforms. In the past, minimal human rights
improvements were sufficient to maintain MFN Status. The loss of MFN Status
for China would adversely affect Hong Kong in several important ways. As the
main processor of China's external trade, Hong Kong's domestic economy would
suffer a substantial loss of income by virtue of reduced trade between China
and the United States. Additionally, Hong Kong would lose from the effects of
slower growth in China resulting in lower incomes for Hong Kong's companies on
the mainland.
Securities prices on the Hong Kong Exchange and, specifically the Hang Seng
Index, can be highly volatile and are sensitive to developments in Hong Kong
and China, as well as other world markets. For example, in 1989, the Hang Seng
Index dropped 1,216 points (approximately 58%) in early June following the
events at Tiananmen Square. The Hang Seng Index gradually climbed in
subsequent months but fell by 181 points on October 13, 1989 (approximately
6.5%) following a substantial fall in the U.S. stock markets. Despite these
events, the Hang Seng 1989 year-end closing price of 2,837 was ahead of its
1988 year-end level. The Hong Kong Trust is considered to be concentrated in
common stocks of companies engaged in real estate asset management,
development, leasing, property sale and other related activities. Investment
in securities issued by these real estate companies should be made with an
understanding of the many factors which may have an adverse impact on the
equity securities of a particular company or industry. Generally, these
include economic recession, the cyclical nature of real estate markets,
competitive overbuilding, unusually adverse weather conditions, changing
demographics, changes in governmental regulations (including tax laws and
environmental, building, zoning and sales regulation), increases in real
estate taxes or costs of material and labor, the inability to secure
performance guarantees or insurance as required, the unavailability of
investment capital and the inability to obtain construction financing or
mortgage loans at rates acceptable to builders and purchasers of real estate.
With recent Chinese economic development and reform, certain Hong Kong real
estate companies and other investors began purchasing and developing real
estate in southern China. By 1992, however, southern China began to experience
a rise in real estate prices and construction costs, a growing supply of real
estate and a tightening of credit markets. Any worsening of these conditions
could affect the profitability and financial condition of Hong Kong real
estate companies and could have a materially adverse effect on the value of
the Hong Kong Trust.
Exchange Rate. The Foreign Trusts are comprised of Equity Securities that are
principally traded in foreign currencies and as such involve investment risks
that are substantially different from an investment in a fund which invests in
securities that are principally traded in United States dollars. The United
States dollar value of a portfolio (and hence of the Units) and of the
distributions from the portfolio will vary with fluctuations in the United
States dollar foreign exchange rates for the relevant currencies. Most foreign
currencies have fluctuated widely in value against the United States dollar
for many reasons, including supply and demand of the respective currency, the
rate of inflation in the respective economies compared to the United States,
the impact of interest rate differentials between different currencies on the
movement of foreign currency rates, the balance of imports and exports of
goods and services, the soundness of the world economy and the strength of the
respective economy as compared to the economies of the United States and other
countries.
The post-World War II international monetary system was, until 1973, dominated
by the Bretton Woods Treaty, which established a system of fixed exchange
rates and the convertibility of the United States dollar into gold through
foreign central banks. Starting in 1971, growing volatility in the foreign
exchange markets caused the United States to abandon gold convertibility and
to effect a small devaluation of the United States dollar. In 1973, the system
of fixed exchange rates between a number of the most important industrial
countries of the world, among them the United States and most Western European
countries, was completely abandoned. Subsequently, major industrialized
countries have adopted "floating"exchange rates, under which daily
currency valuations depend on supply and demand in a freely fluctuating
international market. Many smaller or developing countries have continued to
"peg"their currencies to the United States dollar although there has
been some interest in recent years in "pegging"currencies to "
baskets"of other currencies or to a Special Drawing Right administered by
the International Monetary Fund. Since 1983, the Hong Kong dollar has been
pegged to the U.S. dollar. In Europe a European Currency Unit ("ECU")
has been developed. Currencies are generally traded by leading international
commercial banks and institutional investors (including corporate treasurers,
money managers, pension funds and insurance companies). From time to time,
central banks in a number of countries also are major buyers and sellers of
foreign currencies, mostly for the purpose of preventing or reducing
substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of actual
and proposed government policies on the value of currencies, interest rate
differentials between the currencies and the balance of imports and exports of
goods and services and transfers of income and capital from one country to
another. These economic factors are influenced primarily by a particular
country's monetary and fiscal policies (although the perceived political
situation in a particular country may have an influence as well--particularly
with respect to transfers of capital). Investor psychology may also be an
important determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative strength or
weakness of a particular currency may sometimes exercise considerable
speculative influence on currency exchange rates by purchasing or selling
large amounts of the same currency or currencies. However, over the long term,
the currency of a country with a low rate of inflation and a favorable balance
of trade should increase in value relative to the currency of a country with a
high rate of inflation and deficits in the balance of trade.
The following tables set forth, for the periods indicated, the range of
fluctuation concerning the equivalent U.S. dollar rates of exchange and end of
month equivalent U.S. dollar rates of exchange for the United Kingdom pound
sterling and the Hong Kong dollar:
<TABLE>
<CAPTION>
FOREIGN EXCHANGE RATES
Range of Fluctuations in
Foreign Currencies
United Kingdom
Annual Pound Sterling/ Hong Kong/
Period U.S. Dollar U.S. Dollar
<S> <C> <C>
1983 0.616-0.707 6.480-8.700
1984 0.670-0.864 7.774-8.050
1985 0.672-0.951 7.729-7.990
1986 0.643-0.726 7.768-7.819
1987 0.530-0.680 7.751-7.822
1988 0.525-0.601 7.764-7.912
1989 0.548-0.661 7.775-7.817
1990 0.504-0.627 7.740-7.817
1991 0.499-0.624 7.716-7.803
1992 0.499-0.667 7.697-7.781
1993 0.630-0.705 7.722-7.766
1994 0.610-0.682 7.723-7.750
</TABLE>
Source: Bloomberg L.P.
<TABLE>
<CAPTION>
End of Month Exchange Rates
for Foreign Currencies
United Kingdom Hong
Monthly Pound Sterling/ Kong/U.S.
Period U.S. Dollar Dollar
<S> <C> <C>
1991
December .535 7.781
1992
January .559 7.762
February .569 7.761
March .576 7.740
April .563 7.757
May .546 7.749
June .525 7.731
July .519 7.732
August .503 7.729
September .563 7.724
October .641 7.736
November .659 7.742
December .662 7.744
1993
January .673 7.734
February .701 7.734
March .660 7.731
April .635 7.730
May .640 7.724
June .671 7.743
July .674 7.761
August .670 7.755
September .668 7.734
October .676 7.733
November .673 7.725
December .677 7.723
1994
January .664 7.724
February .673 7.727
March .674 7.737
April .659 7.725
May .662 7.726
June .648 7.730
July .648 7.725
August .652 7.728
September .634 7.727
October .611 7.724
November .639 7.731
December .639 7.738
1995
January .633 7.732
</TABLE>
Source: Bloomberg L.P.
The Evaluator will estimate current exchange rates for the relevant currencies
based on activity in the various currency exchange markets. However, since
these markets are volatile and are constantly changing, depending on the
activity at any particular time of the large international commercial banks,
various central banks, large multi-national corporations, speculators and
other buyers and sellers of foreign currencies, and since actual foreign
currency transactions may not be instantly reported, the exchange rates
estimated by the Evaluator may not be indicative of the amount in United
States dollars a Trust would receive had the Trustee sold any particular
currency in the market. The foreign exchange transactions of a Trust will be
concluded by the Trustee with foreign exchange dealers acting as principals on
a spot (i.e., cash) buying basis. Although foreign exchange dealers trade on a
net basis, they do realize a profit based upon the difference between the
price at which they are willing to buy a particular currency (bid price) and
the price at which they are willing to sell the currency (offer price).
TAXATION
United States Federal Taxation
General. The following is a general discussion of certain of the federal
income tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as capital
assets (generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986 (the "Code"). Unitholders
should consult their tax advisers in determining the federal, state, local and
any other tax consequences of the purchase, ownership and disposition of Units
in a Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. Each Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro
rata portion of the assets of a Trust under the Code; and the income of each
Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from each Security when such income is received by a Trust.
2. Each Unitholder will have a taxable event when a Trust disposes of a
Security (whether by sale, exchange, redemption, or otherwise) or upon the
sale or redemption of Units by such Unitholder. The price a Unitholder pays
for his Units, including sales charges, is allocated among his pro rata
portion of each Security held by a Trust (in proportion to the fair market
values thereof on the date the Unitholder purchases his Units) in order to
determine his initial cost for his pro rata portion of each Security held by a
Trust. For federal income tax purposes, a Unitholder's pro rata portion of
dividends as defined by Section 316 of the Code paid with respect to a
Security held by a Trust is taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits."A
Unitholder's pro rata portion of dividends paid on such Security which exceed
such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Security shall generally be treated as
capital gain. In general, any such capital gain will be short-term unless a
Unitholder has held his Units for more than one year.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by a Trust will generally be
considered a capital gain except in the case of a dealer or a financial
institution and, will be long-term if the Unitholder has held his Units for
more than one year (the date on which the Units are acquired (i.e., the
"trade date") is excluded for purposes of determining whether the Units
have been held for more than one year). A Unitholder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of Securities
held by a 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. However, a Rollover
Unitholder's loss, if any, incurred in connection with the exchange of Units
for units in the next new series of the Strategic Ten Trust (the "1996
Fund") will generally be disallowed with respect to the disposition of any
Securities pursuant to such exchange to the extent that such Unitholder is
considered the owner of substantially identical securities under the wash sale
provisions of the Code taking into account such Unitholder's deemed ownership
of the securities underlying the Units in the 1996 Fund in the manner
described above, if such substantially identical securities were acquired
within a period beginning 30 days before and ending 30 days after such
disposition. However, any gains incurred in connection with such an exchange
by a Rollover Unitholder would be recognized. Unitholders should consult their
tax advisers regarding the recognition of gains and losses for federal income
tax purposes.
4. The Code provides that "miscellaneous itemized deductions" are
allowable only to the extent that they exceed two percent of an individual
taxpayer's adjusted gross income. Miscellaneous itemized deductions subject to
this limitation under present law include a Unitholder's pro rata share of
expenses paid by a Trust, including fees of the Trustee and the Sponsor.
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such
Unitholder's pro rata portion of dividends received by a Trust (to the extent
such dividends are taxable as ordinary income, as discussed above, and are
attributable to domestic corporations) in the same manner as if such
corporation directly owned the Securities paying such dividends (other than
corporate shareholders, 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). Proposed regulations have been issued which address
special rules that must be considered in determining whether the 46 day
holding period requirement is met. Moreover, the allowable percentage of the
deduction will be reduced from 70% if a corporate Unitholder owns certain
stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. Unitholders should consult with their tax advisers with
respect to the limitations on and possible modifications to the dividends
received deduction.
To the extent dividends received by a Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by a Trust
or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by a Trust or if the
Unitholder disposes of a Unit (although losses incurred by Rollover
Unitholders may be subject to disallowance, as discussed above). For taxpayers
other than corporations, net capital gains are subject to a maximum marginal
stated tax rate of 28%. However, it should be noted that legislative proposals
are introduced from time to time that affect tax rates and could affect
relative differences at which ordinary income and capital gains are taxed.
"The Revenue Reconciliation Act of 1993"(the "Tax Act")
raised tax rates on ordinary income while capital gains remain subject to a
28% maximum stated rate. Because some or all capital gains are taxed at a
comparatively lower rate under the Tax Act, the Tax Act includes a provision
that recharacterizes capital gains as ordinary income in the case of certain
financial transactions that are "conversion transactions"effective
for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of the United States Trust. As discussed in "Rights of
Unitholders--Redemption of Units,"under certain circumstances a
Unitholder in the United States Trust tendering Units for redemption may
request an In Kind Distribution. A Unitholder in the United States Trust may
also under certain circumstances request an In Kind Distribution upon the
termination of such Trust. See "Rights of Unitholders--Redemption of
Units."The Unitholder requesting an In Kind Distribution will be liable
for expenses related thereto (the "Distribution Expenses") and the
amount of such In Kind Distribution will be reduced by the amount of the
Distribution Expenses. See "Rights of Unitholders--Redemption of
Units."As previously discussed, prior to the redemption of Units or the
termination of such Trust, a Unitholder is considered as owning a pro rata
portion of each of such Trust assets for federal income tax purposes. The
receipt of an In Kind Distribution would be deemed an exchange of such
Unitholder's pro rata portion of each of the shares of stock and other assets
held by the United States Trust in exchange for an undivided interest in whole
shares of stock plus, possibly, cash.
There are generally three different potential tax consequences which may occur
under an In Kind Distribution with respect to each Security owned by the
United States Trust. A "Security"for this purpose is a particular
class of stock issued by a particular corporation. If the Unitholder receives
only whole shares of a Security in exchange for his or her pro rata portion in
each share of such Security held by the United States Trust, there is no
taxable gain or loss recognized upon such deemed exchange pursuant to Section
1036 of the Code. If the Unitholder receives whole shares of a particular
Security plus cash in lieu of a fractional share of such Security, and if the
fair market value of the Unitholder's pro rata portion of the shares of such
Security exceeds his tax basis in his pro rata portion of such Security,
taxable gain would be recognized in an amount not to exceed the amount of such
cash received, pursuant to Section 1031(b) of the Code. No taxable loss would
be recognized upon such an exchange pursuant to Section 1031(c) of the Code,
whether or not cash is received in lieu of a fractional share. Under either of
these circumstances, special rules will be applied under Section 1031(d) of
the Code to determine the Unitholder's tax basis in the shares of such
particular Security which he receives as part of the In Kind Distribution.
Finally, if a Unitholder's pro rata interest in a Security does not equal a
whole share, he may receive entirely cash in exchange for his pro rata portion
of a particular Security. In such case, taxable gain or loss is measured by
comparing the amount of cash received by the Unitholder with his tax basis in
such Security.
Because the United States Trust will own many Securities, a Unitholder who
requests an In Kind Distribution will have to analyze the tax consequences
with respect to each Security owned by the United States Trust. In analyzing
the tax consequences with respect to each Security, such Unitholder may
allocate the Distribution Expenses among the Securities (the "Allocable
Expenses"). The Allocable Expenses will reduce the amount realized with
respect to each Security so that the fair market value of the shares of such
Security received (if any) and cash received in lieu thereof (as a result of
any fractional shares) by such Unitholder should equal the amount realized for
purposes of determining the applicable tax consequences in connection with an
In Kind Distribution. A Unitholder's tax basis in shares of such Security
received will be increased by the Allocable Expenses relating to such
Security. The amount of taxable gain (or loss) recognized upon such exchange
will generally equal the sum of the gain (or loss) recognized under the rules
described above by such Unitholder with respect to each Security owned by such
Trust. Unitholders who request an In Kind Distribution are advised to consult
their tax advisers in this regard.
As discussed in "Rights of Unitholders--Special Redemption and Rollover in
New Fund," a Unitholder may elect to become a Rollover Unitholder. To the
extent a Rollover Unitholder exchanges his Units for Units of the 1995 Fund in
a taxable transaction, such Unitholder will recognize gains, if any, but
generally will not be entitled to a deduction for any losses recognized upon
the disposition of any Securities pursuant to such exchange to the extent that
such Unitholder is considered the owner of substantially identical securities
under the wash sale provisions of the Code taking into account such
Unitholder's deemed ownership of the securities underlying the Units in the
1996 Fund in the manner described above, if such substantially identical
securities were acquired within a period beginning 30 days before and ending
30 days after such disposition under the wash sale provisions contained in
Section 1091 of the Code. In the event a loss is disallowed under the wash
sale provisions, special rules contained in Section 1091(d) of the Code apply
to determine the Unitholder's tax basis in the securities acquired. Rollover
Unitholders are advised to consult their tax advisers.
Other Matters. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by a
Trust to such Unitholder (including amounts received upon the redemption of
Units) will be subject to back-up withholding. Distributions by a Trust (other
than those that are not treated as United States source income, if any) will
generally be subject to United States income taxation and withholding in the
case of Units held by non-resident alien individuals, foreign corporations or
other non-United States persons. Such persons should consult their tax
advisers.
It should be noted that payments to the Trusts 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 Trusts. Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unitholders. Because, under the
grantor trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax purposes
with respect to such taxes. Investors should consult their tax advisers with
respect to foreign withholding taxes and foreign tax credits.
At the termination of a Trust, the Trustee will furnish to each Unitholder of
such Trust a statement containing information relating to the dividends
received by such Trust on the Securities, the gross proceeds received by such
Trust from the disposition of any Security (resulting from redemption or the
sale of any Security), and the fees and expenses paid by such Trust. The
Trustee will also furnish annual information returns to Unitholders and to the
Internal Revenue Service.
Dividend income and long-term capital gains may also be subject to state and
local taxes. Investors should consult their tax advisers for specific
information on the tax consequences of particular types of distributions.
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 Tanner Propp & Farber, special counsel to the Fund for New
York tax matters, each Trust is not an association taxable as a corporation
and the income of the Trusts will be treated as the income of the Unitholders
under the existing income tax laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S. Unitholders
("U.S. Unitholders") with regard to federal and certain aspects of New
York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers
in this regard. As used herein, the term "U.S. Unitholder"means an
owner of a Unit in one of the Trusts that (a) is (i) for United States federal
income tax purposes a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or (iii) an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source or (b) does not qualify as a U.S. Unitholder
in paragraph (a) but whose income from a Unit is effectively connected with
such Unitholder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and gain on
the Units will be taxable.
United Kingdom Taxation
Tax Consequences of Ownership of Ordinary Shares. In the opinion of Linklaters
& Paines, London special counsel to the Sponsor, based on the terms of the
United Kingdom Trust as described in the Prospectus and on certain
representations made by special U.S. counsel to the Sponsor, the following
summary accurately describes the U.K. tax consequences to certain U.S.
Unitholders who beneficially hold Units of the United Kingdom Trust as capital
assets. This summary is based upon current U.S. law, U.K. law and Inland
Revenue practice in the U.K., the U.S./U.K. convention relating to income and
capital gains ("the Treaty"), and the U.S./U.K. convention relating to
estate and gift taxes (the "Estate Tax Treaty"). The summary is a
general guide only and is subject to any changes in U.K. or U.S. law, or the
practice relating thereto and in the Treaty or Estate Tax Treaty occurring
after the date of this Prospectus which may affect (including possibly on a
retroactive basis) the tax consequences described herein. Accordingly,
Unitholders should consult their own tax advisers as to the U.K. tax
consequences applicable to their particular circumstances of ownership of the
Units of the United Kingdom Trust.
Taxation of Dividends. Where a U.K. resident receives a dividend from a U.K.
corporation (other than a foreign income dividend (see below)), such resident
is generally entitled to a tax credit, which may be offset against such
resident's U.K. taxes, or, in certain circumstances, repaid. Under the Treaty,
a U.S. Unitholder, who is resident in the U.S. for the purposes of the Treaty,
may, in appropriate circumstances, be entitled to a repayment of that tax
credit, but any such repayment is subject to U.K. withholding tax at the rate
of 15% of the sum of the dividend and the credit. The tax credit, before such
withholding, is equal to one quarter of the dividend (the "Tax Credit
Amount"). Although such a U.S. Unitholder who is resident in the U.S. for
the purposes of the Treaty and who held shares directly in a corporation
resident in the U.K. for the purposes of the Treaty, could generally claim a
refund of a portion of the Tax Credit Amount attributable to the dividend (a
"Treaty Payment") pursuant to the terms of the Treaty, the ability of
a U.S. Unitholder of Units in the United Kingdom Trust to claim such a Treaty
Payment is unclear where dividend payments are made directly to an entity such
as the United Kingdom Trust. Any claim for such a Treaty Payment would have to
be supported by evidence of such U.S. Unitholder's entitlement to the relevant
dividend. There is no established procedure for proving such entitlement where
the U.K. corporation pays the dividend to a person such as the United Kingdom
Trust unless a specific procedure is negotiated in advance with the U.K.
Inland Revenue. The Trustee has determined that it is impracticable to claim
such Treaty Payments on behalf of Unitholders and will not incur any further
expenses in assisting Unitholders in this respect. Therefore, in the absence
of the Trustee's cooperation, Unitholders who are U.S. persons may not in
practice be able to claim a Treaty Payment from the U.K. Inland Revenue.
Certain U.K. corporations which themselves receive income from other
jurisdictions which is subject to withholding of tax at source may elect to
pay some or all of their distributions as foreign income dividends. If a
company the shares of which are held in the United Kingdom Trust pays a
foreign income dividend, no tax credit will be attributable to such dividend.
Accordingly, a U.S. Unitholder would not be entitled to any repayment of a tax
credit under the Treaty.
Taxation of Capital Gains. U.S. Unitholders who are not resident nor
ordinarily resident for tax purposes in the U.K. will not be liable for U.K.
tax on capital gains realized on the disposal of their Units unless such Units
are used, held or acquired for the purposes of a trade, profession or vocation
carried on in the U.K. through a branch or agency or for the purposes of such
branch or agency.
U.K. Inheritance Tax. An individual Unitholder who is domiciled in the U.S.
for the purposes of the Estate Tax Treaty and who is not a national of the
U.K. for the purposes of the Estate Tax Treaty will generally not be subject
to U.K. inheritance tax in respect of Units in the United Kingdom Trust on the
individual's death or on a gift or other non-arm's length transfer of such
Units during the individual's lifetime provided that any applicable U.S.
federal gift or estate tax liability is paid, unless the Units are part of the
business property of a permanent establishment of the individual in the U.K.
or pertain to a fixed base in the U.K. used by an individual for the
performance of independent personal services. Where the Units have been placed
in trust by a settlor, the Units will generally not be subject to U.K.
inheritance tax if the settlor, at the time of settlement, was domiciled in
the U.S. for the purposes of the Estate Tax Treaty and was not a U.K.
national, provided that any applicable U.S. federal gift or estate tax
liability is paid. In the exceptional case where the Units are subject both to
U.K. inheritance tax and to U.S. federal gift or estate tax, the Estate Tax
Treaty generally provides for the tax paid in the U.K. to be credited against
tax paid in the U.S. or for tax paid in the U.S. to be credited against tax
payable in the U.K. based on priority rules set out in that Treaty.
Stamp Tax. In connection with a transfer of Securities in the United Kingdom
Trust, there is generally imposed a U.K. stamp duty or stamp duty reserve tax
payable upon transfer, which tax is usually imposed on the purchaser of such
Securities. Upon acquisition of the Securities in the United Kingdom Trust,
the Trust paid such tax. It is anticipated that upon the sale of such
Securities such tax will be paid by the purchaser thereof and not by the
United Kingdom Trust.
Hong Kong Taxation
The Sponsor has been advised that the following summary accurately describes
the Hong Kong tax consequences under existing law to U.S. Unitholders of Units
of the Hong Kong Trust. This discussion is for general purposes only and
assumes that such Unitholder is not carrying on a trade, profession or
business in Hong Kong and has no profits sourced in Hong Kong arising from the
carrying on of such trade, profession or business. Unitholders should consult
their tax advisers as to the Hong Kong tax consequences of ownership of the
Units of the Hong Kong Trust applicable to their particular circumstances.
Taxation of Dividends. Amounts in respect of dividends paid to Unitholders of
the Hong Kong Trust are not taxable and therefore will not be subject to the
deduction of any withholding tax.
Profits Tax. A Unitholder of the Hong Kong Trust (other than a person carrying
on a trade, profession or business in Hong Kong) will not be subject to
profits tax on any gain or profits made on the realization or other disposal
of his units.
Hong Kong Estate Duty. Units of the Hong Kong Trust will not give rise to a
liability to Hong Kong estate duty.
FUND OPERATING EXPENSES
Initial Costs. All costs and expenses incurred in creating and establishing
the Fund, including the cost of the initial preparation, printing and
execution of the Trust Agreement and the certificates, legal and accounting
expenses, advertising and selling expenses, expenses of the Trustee, initial
fees of an evaluator and other out-of-pocket expenses, including brokerage
fees incurred in acquiring Securities for the United States Trust, have been
borne by the Sponsor at no cost to the Fund.
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Fund. However, Van Kampen
American Capital Investment Advisory Corp., which is a wholly owned subsidiary
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", for providing portfolio supervisory
services for the Fund. Such fee (which is based on the number of Units of each
Trust outstanding at the end of the month of such calculation until January 1,
1996 at which time such calculation is based on the number of Units of each
Trust outstanding on such date) may exceed the actual costs of providing such
supervisory services for these Trusts, but at no time will the total amount
received for portfolio supervisory services rendered to Series 1 and
subsequent series of Van Kampen American Capital Equity Opportunity Trust and
to any other unit investment trusts sponsored by the Sponsor for which the
Supervisor provides portfolio supervisory services in any calendar year exceed
the aggregate cost to the Supervisor of supplying such services in such year.
In addition, American Portfolio Evaluation Services, which is a division of
Van Kampen American Capital Investment Advisory Corp., shall receive for
regularly providing evaluation services to the Fund the annual per Unit
evaluation fee, payable in monthly installments, set forth under "Summary
of Essential Financial Information"(which is based on the number of Units
of each Trust outstanding on January 1 of each year for which such
compensation relates except during the initial offering period in which event
the calculation is based on the number of Units of each Trust outstanding at
the end of the month of such calculation) for regularly evaluating the Fund
portfolios. Both of the foregoing fees may be increased without approval of
the Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter"in the Consumer Price
Index published by the United States Department of Labor or, if such category
is no longer published, in a comparable category. The Sponsor will receive
sales commissions and may realize other profits (or losses) in connection with
the sale of Units and the deposit of the Securities as described under
"Public Offering--Sponsor and Other Compensation".
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from each Trust set forth under "Summary of Essential Financial
Information"(which is based on the number of Units of each Trust
outstanding at the end of the month of such calculation until January 1, 1996
at which time such calculation is based on the number of Units of each Trust
outstanding on such date) and in connection with the Foreign Trusts the
additional amounts set forth in footnote (6) in the "Summary of Essential
Financial Information."The Trustee's fees are payable in monthly
installments on or before the fifteenth day of each month from the Income
Account of each Trust to the extent funds are available and then from the
Capital Account of each Trust. 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 each Trust is expected to result
from the use of these funds. Such fees may be increased without approval of
the Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter"in the Consumer Price
Index published by the United States Department of Labor or, if such category
is no longer published, in a comparable category. For a discussion of the
services rendered by the Trustee pursuant to its obligations under the Trust
Agreement, see "Rights of Unitholders--Reports Provided"and "Fund
Administration."
Miscellaneous Expenses. The following additional charges are or may be
incurred by a Trust: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of such
Trust, (b) fees of the Trustee for extraordinary services, (c) expenses of the
Trustee (including legal and auditing expenses) and of counsel designated by
the Sponsor, (d) various governmental charges, (e) expenses and costs of any
action taken by the Trustee to protect a Trust and the rights and interests of
Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of a Trust without negligence, bad
faith or wilful misconduct on its part, (g) foreign custodial and transaction
fees and (h) expenditures incurred in contacting Unitholders upon termination
of a Trust. The fees and expenses set forth herein are payable out of each
Trust. When such fees and expenses are paid by or owing to the Trustee, they
are secured by a lien on such Trust's portfolio. Since the Equity Securities
are all common stocks, and the income stream produced by dividend payments is
unpredictable, the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of 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 Equity Securities to pay such
amounts. These sales may result in capital gains or losses to Unitholders. See
"Taxation."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price (which is based on the
aggregate underlying value of the Equity Securities and includes a sales
charge of 3.5% of the Public Offering Price--which charge is equivalent to
3.627% of the aggregate underlying value of the Securities). Such underlying
value shall include the proportionate share of any undistributed cash held in
the Capital and Income Accounts of a Trust. In the case of the United Kingdom
and Hong Kong Trusts, such underlying value is based on the aggregate value of
the Securities computed on the basis of the offering side value of the
relevant currency exchange rate expressed in U.S. dollars as of the Evaluation
Time during the initial offering period and on the bid side value for
secondary market transactions and in each case includes the estimated costs of
acquiring or liquidating the Securities, as the case may be. The sales charge
applicable to quantity purchases is, during the initial offering period,
reduced on a graduated basis to any person acquiring 10,000 or more Units as
follows:
<TABLE>
<CAPTION>
Aggregate Number Of U.S. Dollar Amount Of Sales
Units Purchased Charge Reduction Per Unit
<S> <C>
10,000-24,999 $0.03
25,000-49,999 $0.05
50,000-99,999 $0.07
100,000 or more $0.09
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
broker, dealer or agent. This reduced sales charge structure will apply on all
purchases by the same person from any one dealer of units of Van Kampen
American Capital-sponsored unit investment trusts which are being offered in
the initial offering period (a) on any one day (the "Initial Purchase
Date") or (b) on any day subsequent to the Initial Purchase Date if (I)
the units purchased are of a unit investment trust purchased on the Initial
Purchase Date, and (2) the person purchasing the units purchased a sufficient
amount of units on the Initial Purchase Date to qualify for a reduced sales
charge on such date. In the event units of more than one trust are purchased
on the Initial Purchase Date, the aggregate dollar amount of such purchases
will be used to determine whether purchasers are eligible for a reduced sales
charge. Such aggregate dollar amount will be divided by the public offering
price per unit (on the day preceding the date of purchase) of each respective
trust purchased to determine the total number of units which such amount could
have purchased of each individual trust. Purchasers must then consult the
applicable trust's prospectus to determine whether the total number of units
which could have been purchased of a specific trust would have qualified for a
reduced sales charge and, if so qualified, the amount of such reduction.
Assuming a purchased qualified for a sales charge reduction or reductions, to
determine the applicable sales charge reduction or reductions it is necessary
to accumulate all purchases made on the Initial Purchase Date and all
purchases made in accordance with (b) above. Units purchased in the name of
the spouse of a purchaser or in the name of a child of such purchaser under 21
years of age will be deemed for the purposes of calculating the applicable
sales charge to be additional purchases by the purchaser. The reduced sales
charges will also be applicable to a trustee or other fiduciary purchasing
securities for one or more trust estate or fiduciary accounts.
Employees of Van Kampen American Capital Distributors, Inc. and its
subsidiaries may purchase Units of the Trusts at the current Public Offering
Price less the underwriting commission during the initial offering period, and
less the dealer's concession for secondary market transactions. Registered
representatives of selling Underwriters may purchase Units of the Trusts at
the current Public Offering Price less the underwriting commission during the
initial offering period, and less the dealer's concession for secondary market
transactions. Registered representatives of selling brokers, dealers, or
agents may purchase Units of the Trusts at the current Public Offering Price
less the dealer's concession during the initial offering period and for
secondary market transactions.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information"in
accordance with fluctuations in the prices of the underlying Securities in the
Trusts. In the case of the United Kingdom and Hong Kong Trusts, the Public
Offering Price per Unit is based on the aggregate value of the Securities
computed on the basis of the offering side or bid side value of the relevant
currency exchange rate expressed in U.S. dollars during the initial offering
period or secondary market, respectively, and in each case includes the
estimated costs of acquiring or liquidating the Securities.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities in each
Trust an amount equal to 3.627% of such value and dividing the sum so obtained
by the number of Units in each Trust outstanding. Such underlying value shall
include the proportionate share of any cash held in the Income and Capital
Accounts in each Trust. This computation produced a gross underwriting profit
equal to 3.5% of the Public Offering Price. Such price determination as of the
close of the relevant stock market on February 7, 1995 (for the United States
Trust) and February 8, 1995 (for the United Kingdom and Hong Kong Trusts) was
made on the basis of an evaluation of the Securities in the Trusts prepared by
Interactive Data Services, Inc., a firm regularly engaged in the business of
evaluating, quoting or appraising comparable securities. Thereafter, the
Evaluator on each business day will appraise or cause to be appraised the
value of the underlying Securities in the applicable Trust as of the relevant
Evaluation Time and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be effective
for all orders received prior to the Evaluation Time on each such day. Orders
received by the Trustee or Sponsor for purchases, sales or redemptions after
that time, or on a day which is not a business day for the related Trust, will
be held until the next determination of price. The term "business day"
, as used herein and under "Rights of Unitholders--Redemption of Units"
, shall exclude Saturdays, Sundays and the following holidays as observed by
the New York Stock Exchange, Inc.: New Year's Day, Washington's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day. In addition, for the United Kingdom Trust, "business day"shall
exclude the following U.K. holidays: Easter Monday, May Day, Spring Bank
Holiday, Summer Bank Holiday, and Boxing Day, and for the Hong Kong Trust
"business day" shall exclude the following Hong Kong holidays: Lunar New
Year's Day and the following day, Ching Ming Festival, Easter Monday, Queen's
Birthday and the following Monday, Tuen Ng Festival, Summer Bank Holiday,
Liberation Day, Chinese Mid-Autumn Festival and the following day, Chang Yeung
Festival and the two weekdays following Christmas Day. Effective on the
following dates the sales charge (as a percentage of the Public Offering
Price) will be reduced to the following amounts: April 8, 1995--3.00%; May 8,
1995--2.75%; June 8, 1995--2.50%; and July 8, 1995--2.25%. The Sponsor
currently does not intend to maintain a secondary market after August 7, 1995.
The value of the Equity Securities during the initial offering period is
determined on each business day by the Evaluator in the following manner: if
the Equity Securities are listed on a national securities exchange or the
NASDAQ National Market System, this evaluation is generally based on the
closing sale prices on that exchange or that system (unless it is determined
that these prices are inappropriate as a basis for valuation) or, if there is
no closing sale price on that exchange or system, at the closing ask prices.
If the Equity Securities are not so listed or, if so listed and the principal
market therefore is other than on the exchange, the evaluation shall generally
be based on the current ask price on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for evaluation). If
current ask prices are unavailable, the evaluation is generally determined (a)
on the basis of current ask prices for comparable securities, (b) by
appraising the value of the Equity Securities on the ask side of the market or
(c) by any combination of the above. In the case of the United Kingdom and
Hong Kong Trusts, the value of the Equity Securities during the initial
offering period is based on the aggregate value of the Securities computed on
the basis of the offering side value of the relevant currency exchange rate
expressed in U.S. dollars as of the Evaluation Time and includes the costs of
acquiring the Securities.
In offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities in the Trusts
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Sponsor, broker-dealers and others at the
Public Offering Price. Upon the completion of the initial offering period,
Units repurchased in the secondary market, if any, may be offered by this
Prospectus at the secondary market Public Offering Price in the manner
described above.
The Sponsor intends to qualify the Units for sale in a number of states.
Except as indicated under "Sponsor and Other Compensation"below,
brokers, dealers and others will be allowed a concession or agency commission
in connection with the distribution of Units during the initial offering
period of 2.0% per Unit. In addition, any firm acquiring from the Sponsor
10,000 to 99,999 Units of the Fund during the initial offering period (net of
any Units repurchased by the Sponsor from such firm) will be allowed a
concession or agency commission of 2.3% per Unit for all Units such firm so
acquires during such period. Further, any firm acquiring from the Sponsor
during such period 100,000 to 299,999 net Units or more than 300,000 net Units
will be allowed a concession or agency commission of 2.4% per Unit or 2.5% per
Unit, respectively, for all such Units so acquired during such period. Such
concession or agency commission will be paid by the Sponsor retroactively in
connection with previously sold Units upon attaining the applicable Unit sales
level. Any quantity discount provided to investors will be borne by the
selling dealer or agent as indicated under "General"above. For
secondary market transactions, such concession or agency commission will
amount to 2.0% per Unit (70% of the applicable sales charge on and after April
8, 1995).
Certain commercial banks are making Units of the Trusts available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 500 Units (100 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. Brokers and dealers of a Trust, banks and/or others are eligible to
participate in a program in which such firms receive from the Sponsor a
nominal award for each of their registered representatives who have sold a
minimum number of units of unit investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the sales forces of brokers, dealers,
banks and/or others may be eligible to win other nominal awards for certain
sales efforts, or under which the Sponsor will reallow to any such brokers,
dealers, banks and/or others that sponsor sales contests or recognition
programs conforming to criteria established by the Sponsor, or participate in
sales programs sponsored by the Sponsor, an amount not exceeding the total
applicable sales charges on the sales generated by such person at the public
offering price during such programs. Also, the Sponsor in its discretion may
from time to time pursuant to objective criteria established by the Sponsor
pay fees to qualifying brokers, dealers, banks and/or others for certain
services or activities which are primarily intended to result in sales of
Units of the Fund. Such payments are made by the Sponsor out of its own assets
and not out of the assets of the Fund. These programs will not change the
price Unitholders pay for their Units or the amount that a Trust will receive
from the Units sold.
Sponsor and Other Compensation. The Sponsor will receive the gross sales
commission equal to 3.5% of the Public Offering Price of the Units, less any
reduced sales charge for quantity purchases as described under
"General" above. Any such quantity discount provided to investors will be
borne by the selling dealer or agent.
In addition, the Sponsor will realize a profit or will sustain a loss, as the
case may be, as a result of the difference between the price paid for the
Securities by the Sponsor and the cost of such Securities to each Trust on the
Initial Date of Deposit as well as on subsequent deposits. See
"Portfolios." The Sponsor has not participated as sole underwriter or as
manager or as a member of the underwriting syndicates or as an agent in a
private placement for any of the Securities in the Fund portfolios. The
Sponsor may further realize additional profit or loss during the initial
offering period as a result of the possible fluctuations in the market value
of the Securities in the Trusts after a date of deposit, since all proceeds
received from purchasers of Units (excluding dealer concessions and agency
commissions allowed, if any) will be retained by the Sponsor. Brokers, dealers
or others (each "a distributor") who distribute 1,000,000 or more
Units of a combination of Trusts during the initial offering period will
receive additional compensation from the Sponsor, after the close of the
initial offering period, of $0.005 for each Unit of that Trust it distributes;
or each distributor who distributes 2,000,000 or more Units of a single Trust
will receive additional compensation of $0.01 for each Unit of that Trust it
distributes; or each distributor who distributes 3,000,000 or more Units of a
single Trust will receive additional compensation of $0.015 for each Unit of
that Trust it distributes; or each distributor of 4,000,000 or more Units of a
single Trust will receive additional compensation of $0.02 for each Unit of
that Trust it distributes. However, if a Trust exceeds 10,000,000 Units at the
close of the initial offering period, in lieu of the additional compensation
referred to in the last clause of the preceding sentence, each distributor of
4,000,000 or more Units of such Trust will receive additional compensation
from the Sponsor of $0.025 for each Unit of such Trust it distributes; or each
distributor who distributes 5,000,000 or more Units will receive additional
compensation of $0.035 for each Unit of such Trust it distributes.
Cash, if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor currently intends
to maintain a secondary market for Units of the Trusts for the period
indicated. In so maintaining a market, the Sponsor will also realize profits
or sustain losses in the amount of any difference between the price at which
Units are purchased and the price at which Units are resold (which price
includes the applicable sales charge). In addition, the Sponsor will also
realize profits or sustain losses resulting from a redemption of such
repurchased Units at a price above or below the purchase price for such Units,
respectively.
Public Market. Although it is not obligated to do so, the Sponsor currently
intends to maintain a market for the Units offered hereby through August 7,
1995 and offer continuously to purchase Units at prices, subject to change at
any time, based upon the aggregate underlying value of the Equity Securities
in the Trusts (computed as indicated under "Offering Price"above and
"Rights of Unitholders--Redemption of Units"). In the case of the
United Kingdom and Hong Kong Trusts, the aggregate underlying value of the
Equity Securities is computed on the basis of the bid side value of the
relevant currency exchange rate (offer side during the initial offering
period) expressed in U.S. dollars. If the supply of Units exceeds demand or if
some other business reason warrants it, the Sponsor may either discontinue all
purchases of Units or discontinue purchases of Units at such prices. In the
event that a market is not maintained for the Units and the Unitholder cannot
find another purchaser, a Unitholder desiring to dispose of his Units will be
able to dispose of such Units by tendering them to the Trustee for redemption
at the Redemption Price. See "Rights of Unitholders--Redemption of
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 the individuals, Simplified Employee
Pension Plans for employees, qualified plans for self-employed individuals,
and qualified corporate pension and profit sharing plans for employees. The
purchase of Units of the Trusts may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-sheltered retirement plan is 100 Units.
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 Trusts will be evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee that ownership be in book entry. Units are transferable
by making a written request to the Trustee and, in the case of Units evidenced
by a certificate, by presentation and surrender of such certificate to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. A Unitholder must sign such written request, and such
certificate or transfer instrument, exactly as his name appears on the records
of the Trustee and on the face of any certificate representing the Units to be
transferred with the signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP") or such other signature
guarantee program in addition to, or in substitution for, STAMP as may be
accepted by the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Certificates will be issued in
denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Income and Capital. Any dividends received by a Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account of such Trust. Other receipts (e.g., capital gains, proceeds
from the sale of Securities, etc.) are credited to the Capital Account of such
Trust. In the case of the United Kingdom and Hong Kong Trusts, dividends to be
credited to such accounts are first converted into U.S. dollars at the
applicable exchange rate.
The Trustee will distribute any net income received with respect to any of the
Securities in a Trust on or about the Income Distribution Dates to Unitholders
of record on the preceding Income Record Dates. See "Summary of Essential
Financial Information."Proceeds received on the sale of any Securities in
a Trust, to the extent not used to meet redemptions of Units or pay expenses,
will be distributed annually on the Capital Account Distribution Date to
Unitholders of record on the preceding Capital Account Record Date. Proceeds
received from the disposition of any of the Securities after a record date and
prior to the following distribution date will be held in the Capital Account
of the appropriate Trust and not distributed until the next distribution date
applicable to such Capital Account. The Trustee is not required to pay
interest on funds held in the Capital or Income Accounts (but may itself earn
interest thereon and therefore benefits from the use of such funds).
The distribution to Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income Account after deducting
estimated expenses. Because dividends are not received by a Trust at a
constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate from distribution to distribution. Persons who purchase
Units will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business such
notice is provided by the selling broker-dealer.
As of the fifteenth day of each month, the Trustee will deduct from the Income
Account and, to the extent funds are not sufficient therein, from the Capital
Account of the appropriate Trust amounts necessary to pay the expenses of such
Trust (as determined on the basis set forth under "Fund 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 each Trust. Amounts so withdrawn shall not be
considered a part of such Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the appropriate accounts. In
addition, the Trustee may withdraw from the Income and Capital Accounts of the
appropriate Trust such amounts as may be necessary to cover redemptions of
Units.
Reinvestment Option. Unitholders of a Trust may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in additional Units of such Trust without a sales
charge (to the extent Units may be lawfully offered for sale in the state in
which the Unitholder resides). To participate in the reinvestment plan, a
Unitholder may either contact his or her broker or agent or file with the
Trustee a written notice of election at least ten days prior to the Record
Date for which the first distribution is to apply. A Unitholder's election to
participate in the reinvestment plan will apply to all Units of a Trust owned
by such Unitholder and such election will remain in effect until changed by
the Unitholder.
Reinvestment plan distributions may be reinvested in Units already held in
inventory by the Sponsor (see "Public Offering--Public Market") or,
until such time as additional Units cease to be issued by a Trust (see "
The Fund"), distributions may be reinvested in such additional Units. If
Units are unavailable in the secondary market, distributions which would
otherwise have been reinvested shall be paid in cash to the Unitholder on the
applicable Distribution Date.
Purchases of additional Units made pursuant to the reinvestment plan will be
made without a sales charge at the net asset value for Units of a Trust as of
the Evaluation Time on the related Income or Capital Distribution Dates. Under
the reinvestment plan, a Trust will pay the Unitholder's distributions to the
Trustee which in turn will purchase for such Unitholder full and fractional
Units of a Trust and will send such Unitholder a statement reflecting the
reinvestment.
Unitholders of a Trust may also elect to have each distribution of interest
income, capital gains and/or principal on their Units automatically reinvested
in shares of any of the mutual funds (except for B shares) listed under
"Fund Administration--Sponsor" 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, plus a sales charge of $1.00 per $100 of reinvestment
except if the participant selects the Van Kampen Merritt Money Market Fund or
the Van Kampen Merritt Tax Free Money Fund in which case no sales charge
applies. A minimum of one-half of such sales charge would be paid to Van
Kampen American Capital Distributors, Inc. for all Reinvestment Funds.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next succeeding
distribution date, by so notifying the Trustee in writing, elect to terminate
his or her reinvestment plan and receive future distributions on his or her
Units in cash. There will be no charge or other penalty for such termination.
The Sponsor, each Reinvestment Fund, and its investment adviser shall have the
right to suspend or terminate the reinvestment plan at any time.
Reports Provided. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of income and the
amount of other receipts (received since the preceding distribution), if any,
being distributed, expressed in each case as a dollar amount representing the
pro rata share of each Unit of a Trust outstanding. Within a reasonable period
of time after the end of each calendar year, the Trustee shall furnish to each
person who at any time during the calendar year was a registered Unitholder of
a Trust a statement (i) as to the Income Account: income received, deductions
for applicable taxes and for fees and expenses of such Trust, for redemptions
of Units, if any, and the balance remaining after such distributions and
deductions, expressed in each case both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (ii) as to the Capital Account: the
dates of disposition of any Securities and the net proceeds received
therefrom, deductions for payment of applicable taxes, fees and expenses of
such Trust held for distribution to Unitholders of record as of a date prior
to the determination and the balance remaining after such distributions and
deductions expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (iii) a list of the Securities held by such Trust
and the number of Units of such Trust outstanding on the last business day of
such calendar year; (iv) the Redemption Price per Unit of such Trust based
upon the last computation thereof made during such calendar year; and (v)
amounts actually distributed during such calendar year from the Income and
Capital Accounts of such Trust, separately stated, expressed as total dollar
amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in a Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its corporate trust office at 101 Barclay Street,
20th Floor, New York, New York 10286 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, duly endorsed or
accompanied by proper instruments of transfer with signature guaranteed as
described above (or by providing satisfactory indemnity, as in connection with
lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. No redemption fee will be charged. On the
seventh calendar day following such tender, or if the seventh calendar day is
not a business day, on the first business day prior thereto, the Unitholder
will be entitled to receive in cash (unless the redeeming Unitholder in the
United States Trust elects an In Kind Distribution as described below) an
amount for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units and in the case of the
Foreign Trusts converted into U.S. dollars as of the Evaluation Time set forth
under "Summary of Essential Financial Information". The "date of
tender"is deemed to be the date on which Units are received by the
Trustee, except that with respect to Units received after the applicable
Evaluation Time the date of tender is the next business day as defined under
"Public Offering--Offering Price"and such Units will be deemed to
have been tendered to the Trustee on such day for redemption at the redemption
price computed on that day. The London Stock Exchange and the Hong Kong
Exchange are open for trading on certain days which are U.S. holidays on which
the Fund will not transact business. The Securities will continue to trade on
those days and thus the value of the United Kingdom and Hong Kong Trusts may
be significantly affected on days when a Unitholder cannot sell or redeem his
Units.
The Trustee is empowered to sell Securities of a Trust in order to make funds
available for redemption if funds are not otherwise available in the Capital
and Income Accounts of such Trust to meet redemptions. The Securities to be
sold will be selected by the Trustee from those designated on a current list
provided by the Supervisor for this purpose. Units so redeemed shall be
cancelled.
Unitholders in the United States Trust tendering 2,500 or more Units for
redemption may request from the Trustee in lieu of a cash redemption an in
kind distribution ("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 United States Trust portfolio and cash from the Capital Account
equal to the fractional shares to which the tendering Unitholder is entitled.
The Trustee may adjust the number of shares of any issue of Securities
included in a Unitholder's In Kind Distribution to facilitate the distribution
of whole shares, such adjustment to be made on the basis of the value of
Securities on the date of tender. If funds in the Capital Account are
insufficient to cover the required cash distribution to the tendering
Unitholder, the Trustee may sell Securities according to the criteria
discussed above.
To the extent that Securities are redeemed in kind or sold, the size of a
Trust will be, and the diversity of such Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result
in lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the portfolio at the time of
redemption. Special U.S. federal income tax consequences will result if a
Unitholder in the United States Trust requests an In Kind Distribution. See
"Taxation."
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the aggregate underlying value of
the Equity Securities in each Trust, plus or minus cash, if any, in the Income
and Capital Accounts of such Trust (net of applicable commissions and stamp
taxes in the case of the Foreign Trusts). On the Initial Date of Deposit, the
Public Offering Price per Unit (which includes the sales charge) exceeded the
values at which Units could have been redeemed by the amounts shown under "
Summary of Essential Financial Information."The Redemption Price per Unit
is the pro rata share of each Unit in each Trust determined on the basis of
(i) the cash on hand in such Trust, (ii) the value of the Securities in such
Trust and (iii) dividends receivable on the Equity Securities of such Trust
trading ex-dividend as of the date of computation, less (a) amounts
representing taxes or other governmental charges payable out of such Trust and
(b) the accrued expenses of such Trust. The Evaluator may determine the value
of the Equity Securities in a Trust in the following manner: if the Equity
Securities are listed on a national securities exchange or the NASDAQ National
Market System, this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that these prices are
inappropriate as a basis for valuation) or, if there is no closing sale price
on that exchange or system, at the closing bid prices. If the Equity
Securities of a Trust are not so listed or, if so listed and the principal
market therefore is other than on the exchange, the evaluation shall generally
be based on the current bid price on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the value of
the Equity Securities of such Trust on the bid side of the market or (c) by
any combination of the above. In the case of the United Kingdom and Hong Kong
Trusts, the value of the Equity Securities in the secondary market is based on
the aggregate value of the Securities computed on the basis of the bid side
value of the relevant currency exchange rate expressed in U.S. dollars as of
the Evaluation Time.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in a Trust is not reasonably practicable, or for such other periods
as the Securities and Exchange Commission may by order permit.
Special Redemption and Rollover in New Fund. It is expected that a special
redemption will be made of all Units of each Trust held by any Unitholder (a
"Rollover Unitholder") who affirmatively notifies the Trustee in
writing that he desires to rollover his Units by the Rollover Notification
Date specified in the "Summary of Essential Financial Information."
All Units of Rollover Unitholders will be redeemed on the first day of the
Special Redemption Period and the underlying Securities will be distributed to
the Distribution Agent on behalf of the Rollover Unitholders. During the
Special Redemption Period (as set forth in "Summary of Essential Financial
Information"), the Distribution Agent will be required to sell all of the
underlying Securities on behalf of Rollover Unitholders. The sales proceeds
will be net of brokerage fees, governmental charges or any expenses involved
in the sales.
The Distribution Agent will attempt to sell the Securities as quickly as is
practicable during the Special Redemption Period. The Sponsor does not
anticipate that the period will be longer than 10 business days, and it could
be as short as one day, given that the Securities are usually highly liquid.
However, certain of the factors discussed under "Risk Factors"could
affect the ability of the Sponsor to sell the Securities of the United Kingdom
or Hong Kong Trusts and thereby affect the length of the sale period somewhat.
The liquidity of any Security depends on the daily trading volume of the
Security and the amount that the Sponsor has available for sale on any
particular day.
It is expected (but not required) that the Distribution Agent will generally
follow the following guidelines in selling the Securities: for highly liquid
Securities, the Securities will generally be sold on the first day of the
Special Redemption Period; for less liquid Securities, on each of the first
two days of the Special Redemption Period, the amount of any underlying
Securities will generally be sold at a price no less than 1/2 of one point
under the closing sale price of those Securities on the preceding day.
Thereafter, the Distribution Agent intends to sell without any price
restrictions at least a portion of the remaining underlying Securities, the
numerator of which is one and the denominator of which is the total number of
days remaining (including that day) in the Special Redemption Period.
The Rollover Unitholders' proceeds will be invested in the next subsequent
series of the Strategic Ten Trust (the "1996 Fund"), if then being
offered, the portfolios of which will contain the ten highest yielding stocks
in the Dow Jones Industrial Average, FT Index, and Hong Kong Index,
respectively, as of a day closely preceding the initial date of deposit of the
1996 Fund. The proceeds of redemption available on each day will be used to
buy 1996 Fund units in the appropriate portfolio as the proceeds become
available.
The Sponsor intends to create the 1996 Fund as quickly as possible after the
commencement of the Special Redemption Period, dependent upon the availability
and reasonably favorable prices of the Securities included in the 1996 Fund
portfolios, and it is intended that Rollover Unitholders will be given first
priority to purchase the 1996 Fund units. There can be no assurance, however,
as to the exact timing of the creation of the 1996 Fund units or the aggregate
number of 1996 Fund units in each trust portfolio which the Sponsor will
create. The Sponsor may, in its sole discretion, stop creating new units in
each trust portfolio at any time it chooses, regardless of whether all
proceeds of the Special Redemption have been invested on behalf of Rollover
Unitholders. Cash which has not been invested on behalf of the Rollover
Unitholders in 1996 Fund units will be distributed at the end of the Special
Redemption Period.
Any Rollover Unitholder may thus be redeemed out of the Fund and become a
holder of an entirely different unit investment trust in the 1996 Fund with a
different portfolio of Securities. The Rollover Unitholders' Units will be
redeemed and the distributed Securities shall be sold during the Special
Redemption Period. In accordance with the Rollover Unitholders' offer to
purchase the 1996 Fund units, the proceeds of the sales (and any other cash
distributed upon redemption) will be invested in the 1996 Fund in the
appropriate portfolio at the public offering price, including the applicable
sales charge per Unit (which for Rollover Unitholders is currently expected to
be 1.9% of the Public Offering Price of the 1996 Fund units).
This process of redemption and rollover into a new trust is intended to allow
for the fact that the portfolios selected by the Sponsor are chosen on the
basis of growth and income potential only for a year, at which point a new
portfolio is chosen. It is contemplated that a similar process of redemption
and rollover in new unit investment trusts will be available for the 1996 Fund
and each subsequent series of the Fund, approximately a year after that
Series' creation.
The Sponsor believes that the gradual redemption and rollover in the Strategic
Ten Trust will help mitigate any negative market price consequences stemming
from the trading of large volumes of securities and of the underlying
Securities in the Strategic Ten Trust in a short, publicized period of time.
The above procedures may, however, be insufficient or unsuccessful in avoiding
such price consequences. In fact, market price trends may make it advantageous
to sell or buy more quickly or more slowly than permitted by these procedures.
Rollover Unitholders could then receive a less favorable average unit price
than if they bought all their units of the 1996 Fund on any given day of the
period.
It should also be noted that Rollover Unitholders may realize taxable capital
gains on the Special Redemption and Rollover but, in certain circumstances,
will not be entitled to a reduction for certain capital losses and, due to the
procedures for investing in the subsequent Strategic Ten Trust, no cash would
be distributed at that time to pay any taxes. Included in the cash for the
Special Redemption and Rollover will be an amount of cash attributable to the
last distribution of dividend income; accordingly, Rollover Unitholders also
will not have such cash distributed to pay any taxes. See "Taxation."
In addition, during this period a Unitholder will be at risk to the extent
that the Securities are not sold and will not have the benefit of any stock
appreciation to the extent that moneys have not been invested; for this
reason, the Sponsor will be inclined to sell and purchase the Securities in as
short a period as they can without materially adversely affecting the price of
the Securities.
Unitholders who do not inform the Distribution Agent that they wish to have
their Units so redeemed and liquidated ("Remaining Unitholders") will
continue to hold Units of their Trust as described in this Prospectus until
such Trust is terminated or until the Mandatory Termination Date listed in the
"Summary of Essential Financial Information", whichever occurs first.
These Remaining Unitholders will not realize capital gains or losses due to
the Special Redemption and Rollover and will not be charged any additional
sales charge. If a large percentage of Unitholders become Rollover
Unitholders, the aggregate size of a Trust will be sharply reduced and, as a
consequence, expenses might constitute a higher percentage amount per Unit of
such Trust than prior to such Special Redemption and Rollover. A Trust might
also reduce to the Minimum Termination Value set forth in the "Summary of
Essential Financial Information"because of the lesser number of Units in
such Trust, and possibly also due to a value reduction, however temporary, in
Units caused by the Sponsor's sales of Securities; if so, the Sponsor could
then choose to liquidate such Trust without the consent of the remaining
Unitholders. See "Fund Administration--Amendment or Termination."The
Securities remaining in a Trust after the Special Redemption Period will be
sold by the Sponsor as quickly as possible without, in its judgment,
materially adversely affecting the market price of the Securities.
The Sponsor may for any reason, in its sole discretion, decide not to sponsor
the 1996 Fund or any subsequent series of the Fund, without penalty or
incurring liability to any Unitholder. If the Sponsor so decides, the Sponsor
shall notify the Unitholders before the Special Redemption Period would have
commenced. All Unitholders will then be Remaining Unitholders, with rights to
ordinary redemption as before. The Sponsor may modify the terms of the 1996
Fund or any subsequent series of the Fund. The Sponsor may also modify the
terms of the Special Redemption and Rollover in the 1996 Fund upon notice to
the Unitholders prior to the Rollover Notification Date specified in the
related "Summary of Essential Financial Information."
Investors should be aware that the staff of the Division of Investment
Management of the Securities and Exchange Commission is of the view that the
Rollover Option described in this Prospectus constitutes an "exchange
offer"for the purposes of Section 11(c) of the Investment Company Act of
1940 and would therefore be prohibited absent an exemptive order. The Sponsor
has applied for an exemptive order under Section 11(c) which would permit it
to offer the Rollover Option, but no assurance can be given that the SEC will
issue such an order.
FUND ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any Units
tendered for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the next
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord with
the Public Offering Price described in the then currently effective prospectus
describing such Units. Any profit resulting from the resale of such Units will
belong to the Sponsor which likewise will bear any loss resulting from a lower
offering or redemption price subsequent to its acquisition of such Units.
Portfolio Administration. The portfolios of the Fund are not "managed"
by the Sponsor, Supervisor or the Trustee; their activities described herein
are governed solely by the provisions of the Trust Agreement. Traditional
methods of investment management for a managed fund typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. The Fund, however, will not be managed. The Trust Agreement,
however, provides that the Sponsor may (but need not) direct the Trustee to
dispose of an Equity Security in certain events such as the issuer having
defaulted on the payment on any of its outstanding obligations or the price of
an Equity Security has declined to such an extent or other such credit factors
exist so that in the opinion of the Sponsor the retention of such Securities
would be detrimental to a Trust. Pursuant to the Trust Agreement and with
limited exceptions, the Trustee may sell any securities or other properties
acquired in exchange for Equity Securities such as those acquired in
connection with a merger or other transaction. If offered such new or
exchanged securities or property, the Trustee shall reject the offer. However,
in the event such securities or property are nonetheless acquired by a Trust,
they may be accepted for deposit in such Trust and either sold by the Trustee
or held in such Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Supervisor). Proceeds from the sale of Securities (or any
securities or other property received by the Fund in exchange for Equity
Securities) are credited to the Capital Account for distribution to
Unitholders or to meet redemptions. Except as stated under "Trust
Portfolios"for failed securities and as provided in this paragraph, the
acquisition by a Trust of any securities other than the Securities is
prohibited.
As indicated under "Rights of Unitholders--Redemption of Units"above,
the Trustee may also sell Securities designated by the Supervisor, or if no
such designation has been made, in its own discretion, for the purpose of
redeeming Units of a Trust tendered for redemption and the payment of expenses.
The Supervisor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares of
individual issues of Equity Securities in a Trust. To the extent this is not
practicable, the composition and diversity of the Equity Securities in such
Trust may be altered. In order to obtain the best price for a Trust, it may be
necessary for the Supervisor to specify minimum amounts (generally 100 shares)
in which blocks of Equity Securities are to be sold.
Amendment or Termination. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders (1) to cure any
ambiguity or to correct or supplement any provision thereof which may be
defective or inconsistent, or (2) to make such other provisions as shall not
adversely affect the Unitholders (as determined in good faith by the Sponsor
and the Trustee), provided, however, that the Trust Agreement may not be
amended to increase the number of Units (except as provided in the Trust
Agreement). The Trust Agreement may also be amended in any respect by the
Trustee and Sponsor, or any of the provisions thereof may be waived, with the
consent of the holders representing 51% of the Units of a Trust then
outstanding, provided that no such amendment or waiver will reduce the
interest in such Trust of any Unitholder without the consent of such
Unitholder or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Unitholders. The Trustee shall
advise the Unitholders of any amendment promptly after execution thereof.
A Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of such Trust then outstanding. A Trust will be
liquidated by the Trustee in the event that a sufficient number of Units of
such Trust not yet sold are tendered for redemption by the Underwriters,
including the Sponsor, so that the net worth of such Trust would be reduced to
less than 40% of the value of the Securities at the time they were deposited
in such Trust. If a Trust is liquidated because of the redemption of unsold
Units by the Sponsor and/or the other Underwriters, the Sponsor will refund to
each purchaser of Units the entire sales charge paid by such purchaser. The
Trust Agreement will terminate upon the sale or other disposition of the last
Security held thereunder, but in no event will it continue beyond the
Mandatory Termination Date stated under "Summary of Essential Financial
Information."
Commencing on the Mandatory Termination Date, Equity Securities will begin to
be sold in connection with the termination of the Fund. The Sponsor will
determine the manner, timing and execution of the sales of the Equity
Securities. At least 30 days before the Mandatory Termination Date the Trustee
will provide written notice of any termination to all Unitholders of the
appropriate Trust and in the case of the United States Trust will include with
such notice a form to enable Unitholders owning 2,500 or more Units to request
an In Kind Distribution rather than payment in cash upon the termination of
such 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 Securities in the United States Trust 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 Securities will be paid in cash. Unitholders with less than 2,500 Units,
Unitholders in the United States Trust with 2,500 or more Units not requesting
an In Kind Distribution and Unitholders who do not elect the Rollover Option
will receive a cash distribution from the sale of the remaining Securities
within a reasonable time following the Mandatory Termination Date. Regardless
of the distribution involved, the Trustee will deduct from the funds of the
appropriate Trust any accrued costs, expenses, advances or indemnities
provided by the Trust Agreement, including estimated compensation of the
Trustee, costs of liquidation and any amounts required as a reserve to provide
for payment of any applicable taxes or other governmental charges. Any sale of
Securities in a Trust upon termination may result in a lower amount than might
otherwise be realized if such sale were not required at such time. The Trustee
will then distribute to each Unitholder of each Trust his pro rata share of
the balance of the Income and Capital Accounts of such Trust.
The Sponsor currently intends to, but is not obligated to, offer for sale
units of a subsequent series of the Strategic Ten Trust pursuant to the
Rollover Option (see "Rights of Unitholders--Special Redemption and
Rollover in New Fund"). There is, however, no assurance that units of any
new series of such Fund will be offered for sale at that time, or if offered,
that there will be sufficient units available for sale to meet the requests of
any or all Unitholders.
Within 60 days of the final distribution Unitholders will be furnished a final
distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and the
Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence 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. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Effective
December 20, 1994, the parent of Van Kampen Merritt Inc. acquired American
Capital Management & Research, Inc. As a result, Van Kampen Merritt Inc., has
changed its name to Van Kampen American Capital Distributors, Inc. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 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, Seattle and Tampa. As of
December 31, 1993 the total stockholders' equity of Van Kampen Merritt Inc.
was $122,167,000 (audited). (This paragraph relates only to the Sponsor and
not to the Insured Municipals Income Trust or to any Insured Multi-Series
thereof or to any other Underwriter. 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, 1994, and without giving effect to the merger, the Sponsor
and its affiliates managed or supervised approximately $35.4 billion of
investment products, of which over $23 billion is invested in municipal
securities. The Sponsor and its affiliates managed $22 billion of assets,
consisting of $7.7 billion for 20 open end mutual funds, $8.0 billion for 34
closed-end funds and $6.1 billion for 65 institutional accounts. The Sponsor
has also deposited approximately $24.5 billion of unit investment trusts.
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 one million retail investor
accounts, opened through retail distribution firms. Van Kampen American
Capital Distributors, Inc. is the sponsor of the various series of the trusts
listed below and the distributor of the mutual funds and closed-end funds
listed below. Unitholders may only invest in the trusts, mutual funds and
closed-end funds which are registered for sale in the state of residence of
such Unitholder. In order for a Unitholder to invest in the trusts, mutual
funds and closed-end funds listed below, such Unitholder must obtain a
prospectus relating to the trust or fund involved. A prospectus is the only
means by which an offer can be delivered to investors.
<TABLE>
<CAPTION>
Name of Trust Trust Investment Objective
<S> <C>
Insured Municipals Income Trust............................ Tax-exempt income by investing in insured municipal securities
California Insured Municipals Income Trust................. Double tax-exemption for California residents by investing
in insured California municipal securities
New York Insured Municipals Income Trust................... Double and in certain cases triple tax-exemption for New York
residents by investing in insured New York municipal securities
Pennsylvania Insured Municipals Income Trust............... Double and in certain cases triple tax-exemption for
Pennsylvania residents by investing in insured Pennsylvania
municipal securities
Insured Municipals Income Trust, Insured Multi-Series...... Tax-exempt income by investing in insured municipal securities;
(Premium Bond Series, National, Limited Maturity,
Intermediate, all issuers of bonds in a state trust are located in such state
Short Intermediate, Discount, Alabama, Arizona, Arkansas, or in territories or possessions of the United States--
California, California Intermediate, California
Intermediate providing exemptions from all state income tax for residents of
Laddered Maturity, California Premium, Colorado,
Connecticut, such state (except for the Oklahoma IM-IT Trust where a portion
Florida, Florida Intermediate, Florida Intermediate
Laddered Maturity, of the income of the Trust may be subject to the Oklahoma state
Georgia, Louisiana, Massachusetts, Massachusetts Premium, income tax)
Michigan, Michigan Intermediate, Michigan Intermediate
Laddered Maturity, Michigan Premium, Minnesota, Missouri,
Missouri Intermediate Laddered Maturity, Missouri Premium,
New Jersey, New Jersey Intermediate Laddered Maturity,
New Mexico, New York, New York Intermediate, New York
Intermediate Laddered Maturity, New York Limited Maturity,
Ohio, Ohio Intermediate, Ohio Intermediate Laddered
Maturity,
Ohio Premium, Oklahoma, Pennsylvania, Pennsylvania
Intermediate,
Pennsylvania Intermediate Laddered Maturity, Pennsylvania
Premium, Tennessee, Texas, Texas Intermediate Laddered
Maturity, Washington, West Virginia
Insured Tax Free Bond Trust................................ Tax-exempt income by investing in insured municipal securities
Insured Tax Free Bond Trust, Insured Multi-Series.......... Tax-exempt income by investing in insured municipal securities;
(National, Limited Maturity, New York) all issuers of bonds in a state trust are located in such state--
providing exemptions from state income tax for residents
of such state
Investors' Quality Tax-Exempt Trust........................ Tax-exempt income by investing in municipal securities
Investors' Quality Tax-Exempt Trust, Multi-Series ......... Tax-exempt income by investing in municipal securities; all
(National, National AMT, Intermediate, Alabama, Arizona, issuers of bonds in a state trust are located in such state or in
Arkansas, California, Colorado, Connecticut, Delaware, territories or possessions of the United States--providing
Florida, Georgia, Hawaii, Kansas, Kentucky, Maine,
Maryland, exemptions from state income tax for residents of such state
Massachusetts, Michigan, Minnesota, Missouri, Nebraska,
New Jersey, New York, North Carolina, Ohio, Oregon,
Pennsylvania, South Carolina, Virginia)
Investors' Quality Municipals Trust, AMT Series............ Tax-exempt income for investors not subject to the alternative
minimum tax by investing in municipal securities, some or all of
which are subject to the Federal alternative minimum tax
Investors' Corporate Income Trust.......................... Taxable income by investing in corporate bonds
Investors' Governmental Securities--Income Trust........... Taxable income by investing in government-backed GNMA securities
Van Kampen Merritt International Bond Income Trust......... High current income through an investment in a diversified
portfolio of foreign currency denominated corporate debt
obligations
Van Kampen Merritt Insured Income Trust.................... High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of insured,
long-term or intermediate-term corporate debt securities
Van Kampen American Capital Insured Income Trust........... High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of insured,
long-term or intermediate-term corporate debt securities
Van Kampen Merritt Utility Income Trust.................... High dividend income and capital appreciation by investing in
common stock of electric utilities
Van Kampen Merritt Select Equity Trust..................... Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of
the Dow Jones Industrial Average*
Van Kampen Merritt Select Equity and Treasury Trust........ 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 and
the remainder of the trust's portfolio in actively traded,
New York Stock Exchange listed equity securities which
at the time of the creation of the trust were components
of the Dow Jones Industrial Average*
Van Kampen Merritt Blue Chip Opportunity Trust............. Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of the
Dow Jones Industrial Average*
Van Kampen Merritt Blue Chip Opportunity and Treasury Trust Protect Unitholders' capital and provide the potential for
capital appreciation and income by investing a portion of its
capital in "zero coupon"U.S. Treasury obligations and
the remainder of the trust's portfolio in actively traded,
New York Stock Exchange listed equity securities which at
the time of the creation of the trust were components of the
Dow Jones Industrial Average*
Van Kampen Merritt Emerging Markets Income Trust........... High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio primarily
consisting of Brady Bonds of emerging market countries that
have restructured sovereign debt pursuant to the framework of
the Brady Plan
Van Kampen Merritt Global Telecommunications Trust......... Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities which provide
equipment for or services to the telecommunications industry
Van Kampen Merritt Global Energy Trust..................... Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by the
energy industry investing in a portfolio of equity securities
diversified within the energy industry
Strategic Ten Trust........................................ Provide an above average total return through a combination of
(United States, United Kingdom, and Hong Kong Portfolios) potential capital appreciation and dividend income, consistent
with preservation of invested capital, by investing in a portfolio
of common stocks of the ten companies in a recognized stock
exchange index having the highest dividend yields
Van Kampen Merritt Brand Name Equity Trust................. Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities diversified within
the non-durable consumer products industry
____________________
*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
</TABLE>
<TABLE>
<CAPTION>
Name of Mutual Fund Fund Investment Objective
<S> <C>
Van Kampen Merritt U.S. Government Fund................... High current income by investing in U.S. Government securities
Van Kampen Merritt Insured Tax Free Income Fund........... High current income exempt from Federal income taxes
by investing in insured municipal securities
Van Kampen Merritt Municipal Income Fund.................. High level of current income exempt from Federal income tax,
consistent with preservation of capital
Van Kampen Merritt Tax Free High Income Fund.............. High current income exempt from Federal income taxes by
investing in medium and lower grade municipal securities
Van Kampen Merritt California Insured Tax Free Fund....... High current income exempt from Federal and California income
taxes by investing in insured California municipal securities
Van Kampen Merritt High Yield Fund........................ Provide a high level of current income by investing in
medium and lower grade domestic and foreign
government and corporate debt securities. The Fund will
seek capital appreciation as a secondary objective
Van Kampen Merritt Growth and Income Fund................. Long-term growth of both capital and dividend income
by investing in dividend paying common stocks
Van Kampen Merritt Pennsylvania Tax Free Income Fund...... High current income exempt from Federal and
Pennsylvania state and local income taxes by investing in
medium and lower grade Pennsylvania municipal securities
Van Kampen Merritt Money Market Fund...................... High current income by investing in a broad range of
money market instruments that will mature within twelve months
Van Kampen Merritt Tax Free Money Fund.................... High current income exempt from Federal income taxes
by investing in a broad range of municipal securities that
will mature within twelve months
Van Kampen Merritt Short-Term Global Income Fund.......... High current income by investing in a global portfolio of high
quality debt securities denominated in various currencies
having remaining maturities of not more than three years
Van Kampen Merritt Adjustable Rate U.S. Government Fund... High level of current income with a relatively stable net
asset value investing in U.S. Government securities
Van Kampen Merritt Limited Term Municipal Income Fund..... High level of current income exempt from Federal income tax,
consistent with preservation of capital
Van Kampen Merritt Utility Fund........................... Provide capital appreciation and current income by investing
in a diversified portfolio of common stocks and income
securities issued by companies engaged in the utilities
industry
Van Kampen Merritt Strategic Income Fund.................. Provide shareholders with high current income. The Fund will
seek capital appreciation as a secondary objective
Van Kampen Merritt Florida Insured Tax Free Income Fund... High level of current income exempt from Federal income tax
and Florida intangible personal property taxes consistent
with preservation of capital
Van Kampen Merritt New Jersey Tax Free Income Fund........ High level of current income exempt from Federal income tax
and New Jersey gross income tax consistent with
preservation of capital
Van Kampen Merritt New York Income Fund................... High level of current income exempt from Federal as well as
New York State and New York City income taxes, consistent
with preservation of capital
</TABLE>
<TABLE>
<CAPTION>
Name of Closed-end Fund Fund Investment Objective
<S> <C>
Van Kampen Merritt Municipal Income Trust....................... High current income exempt from Federal income taxes with
safety of principal by investing in a diversified portfolio of
investment grade municipal securities
Van Kampen Merritt California Municipal Trust................... High current income exempt from Federal and California income
taxes with safety of principal by investing in a diversified
portfolio of investment grade California municipal securities
Van Kampen Merritt Intermediate Term High Income Trust.......... High current income while seeking to preserve shareholders'
capital by investing in a diversified portfolio of high yield
fixed income securities
Van Kampen Merritt Limited Term High Income Trust............... High current income while seeking to preserve shareholders'
capital by investing in a diversified portfolio of high
yield fixed income securities
Van Kampen Merritt Prime Rate Income Trust...................... High current income, consistent with preservation of capital
by investing in interests in floating or variable rate senior
loans
Van Kampen Merritt Investment Grade Municipal Trust............. High current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt Municipal Trust.............................. High level of current income exempt from Federal income tax,
consistent with preservation of capital
Van Kampen Merritt California Quality Municipal Trust........... High current income exempt from Federal and California income
taxes with safety of principal by investing in a diversified
portfolio of investment grade California municipal securities
Van Kampen Merritt Florida Quality Municipal Trust.............. High current income exempt from Federal income taxes and
Florida intangible personal property taxes with safety of
principal by investing in a diversified portfolio of investment
grade Florida municipal securities
Van Kampen Merritt New York Quality Municipal Trust............. High current income exempt from Federal as well as New York
State and New York City income taxes with safety of
principal by investing in a diversified portfolio of investment
grade New York municipal securities
Van Kampen Merritt Ohio Quality Municipal Trust................. High current income exempt from Federal and Ohio income
taxes with safety of principal by investing in a diversified
portfolio of investment grade Ohio municipal securities
Van Kampen Merritt Pennsylvania Quality Municipal Trust......... High current income exempt from Federal and Pennsylvania
income taxes with safety of principal by investing in a
diversified portfolio of investment grade Pennsylvania
municipal securities
Van Kampen Merritt Trust for Investment Grade Municipals........ High level of current income exempt from Federal income tax,
consistent with preservation of capital
Van Kampen Merritt Trust for Insured Municipals................. High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a
diversified portfolio of municipal securities which are
covered by insurance with respect to timely payment of
principal and interest
Van Kampen Merritt Trust for Investment Grade CA Municipals..... High level of current income exempt from Federal and
California income taxes, consistent with preservation of
capital by investing in a diversified portfolio of California
municipal securities
Van Kampen Merritt Trust for Investment Grade FL Municipals..... High level of current income exempt from Federal income
taxes, consistent with preservation of capital. The Fund
also seeks to offer its Shareholders the opportunity to
own securities exempt from Florida intangible personal
property taxes
Van Kampen Merritt Trust for Investment Grade NJ Municipals..... High level of current income exempt from Federal income
taxes and New Jersey gross income taxes, consistent
with preservation of capital
Van Kampen Merritt Trust for Investment Grade NY Municipals..... High level of current income exempt from Federal as well as
from New York State and New York City income taxes,
consistent with preservation of capital
Van Kampen Merritt Trust for Investment Grade PA Municipals..... High level of current income exempt from Federal and
Pennsylvania income taxes and, where possible under
local law, local income and property taxes, consistent
with preservation of capital
Van Kampen Merritt Municipal Opportunity Trust.................. High level of current income exempt from Federal income
tax, consistent with preservation of capital by
investing in a diversified portfolio of municipal securities
Van Kampen Merritt Advantage Municipal Income Trust............. High level of current income exempt from Federal income
tax, consistent with preservation of capital by investing
in a diversified portfolio of municipal securities
Van Kampen Merritt Advantage Pennsylvania Municipal Income Trust High level of current income exempt from Federal and
Pennsylvania income taxes and, where possible under
local law, local income and property taxes, consistent
with preservation of capital
Van Kampen Merritt Strategic Sector Municipal Trust............. Provide common shareholders with a high level of current
income exempt from Federal income taxes, consistent
with preservation of capital
Van Kampen Merritt Value Municipal Income Trust................. High level of current income exempt from Federal income
taxes, consistent with preservation of capital
Van Kampen Merritt California Value Municipal Income Trust...... High level of current income exempt from Federal and
California income taxes, consistent with preservation of
capital
Van Kampen Merritt Massachusetts Value Municipal Income Trust... High level of current income exempt from Federal income taxes
and Massachusetts personal income taxes, consistent with
preservation of capital
Van Kampen Merritt New Jersey Value Municipal Income Trust...... High level of current income exempt from Federal income
taxes and New Jersey gross income tax, consistent with
preservation of capital
Van Kampen Merritt New York Value Municipal Income Trust........ High level of current income exempt from Federal as well as
New York State and New York City income taxes,
consistent with preservation of capital
Van Kampen Merritt Ohio Value Municipal Income Trust............ High level of current income exempt from Federal and Ohio
income taxes, consistent with preservation of capital
Van Kampen Merritt Pennsylvania Value Municipal Income Trust.... High level of current income exempt from Federal and
Pennsylvania income taxes, consistent with preservation
of capital
Van Kampen Merritt Municipal Opportunity Trust II............... High level of current income exempt from Federal income tax,
consistent with preservation of capital
Van Kampen Merritt Florida Municipal Opportunity Trust ......... High level of current income exempt from Federal income tax,
consistent with preservation of capital. The Fund seeks
to offer its common shareholders the opportunity to own
securities exempt from Florida intangible personal property
taxes
Van Kampen Merritt Advantage Municipal Income Trust II.......... Provide common shareholders with a high level of current
income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt Select Sector Municipal Trust................ To provide common shareholders with a high level of current
income exempt from Federal income tax, consistent with
preservation of capital
</TABLE>
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolios.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for each Trust. Such
records shall include the name and address of, and the number of Units of each
Trust held by, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided").
The Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in each Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp & Farber has acted as counsel for the
Trustee.
Independent Certified Public Accountants. The statements of condition and the
related securities portfolios at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 10 (Strategic Ten Trust):
We have audited the accompanying statements of condition and the related
portfolios of Van Kampen American Capital Equity Opportunity Trust, Series 10
(Strategic Ten United States, Strategic Ten United Kingdom and Strategic Ten
Hong Kong) as of February 8, 1995. The statements of condition and portfolios
are the responsibility of the Sponsor. Our responsibility is to express an
opinion on such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of irrevocable letters of credit deposited to
purchase securities by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 10 (Strategic Ten United States, Strategic
Ten United Kingdom and Strategic Ten Hong Kong) as of February 8, 1995, in
conformity with generally accepted accounting principles.
Chicago, Illinois
February 8, 1995 GRANT THORNTON LLP
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST
SERIES 10
STATEMENTS OF CONDITION
As of February 8, 1995
<CAPTION>
United United Hong
INVESTMENT IN SECURITIES States Kingdom Kong
Trust Trust Trust
<S> <C> <C> <C>
Contracts to purchase Securities <F1>................. $ 1,930,106 $ 966,014 $ 984,290
Total................................................. $ 1,930,106 $ 966,014 $ 984,290
INTEREST OF UNITHOLDERS
Interest of Unitholders--
Units of fractional undivided interest outstanding:...
Cost to investors <F2>................................ $ 2,000,000 $ 1,001,000 $ 1,020,000
Less: Gross underwriting commission <F2>.............. $ 69,894 $ 34,986 $ 35,710
Net interest to Unitholders <F2>...................... $ 1,930,106 $ 966,014 $ 984,290
<FN>
<F1>The aggregate value of the Securities listed under "Portfolios"herein
and their cost to each Trust are the same. The value of the Securities is
determined by Interactive Data Services, Inc. on the bases set forth under
"Public Offering--Offering Price."The contracts to purchase
Securities are collateralized by three separate irrevocable letters of credit
of $1,930,106, $966,014 and $984,290 which have been deposited with the
Trustee with respect to the United States, United Kingdom and Hong Kong
Trusts, respectively.
<F2>The aggregate public offering price and the aggregate sales charge of 3.5% are
computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor and Other Compensation"and assume all
single transactions involve less than 10,000 Units. For single transactions
involving 10,000 or more Units, the sales charge is reduced (see "Public
Offering--General") resulting in an equal reduction in both the Cost to
investors and the Gross underwriting commission while the Net interest to
Unitholders remains unchanged.
</TABLE>
<TABLE>
STRATEGIC TEN TRUST UNITED STATES PORTFOLIO, SERIES 3
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 10)
as of the Initial Date of Deposit: February 8, 1995
<CAPTION>
Estimated
Annual Cost of
Number Market Value Dividends Securities
of Shares Name of Issuer <F1> per Share <F2> per Share <F2> to Trust <F2>
<S> <C> <C> <C> <C>
4,139 Chevron Corporation $ 46.500 $ 1.85 $ 192,463.50
3,558 E.I. du Pont de Nemours & Company 55.000 1.88 195,690.00
3,929 Eastman Kodak Company 49.625 1.60 194,976.63
3,107 Exxon Corporation 62.375 3.00 193,799.13
3,720 Minnesota Mining & Manufacturing Company 52.250 1.76 194,370.00
3,022 J.P. Morgan & Company, Inc. 63.500 3.00 191,897.00
3,145 Philip Morris Companies, Inc. 61.375 3.30 193,024.38
4,139 Sears, Roebuck and Company 45.750 1.60 189,359.25
3,132 Texaco, Inc. 61.625 3.20 193,009.50
11,877 Woolworth Corporation 16.125 0.60 191,516.63
43,768 $ 1,930,106.02
</TABLE>
<TABLE>
STRATEGIC TEN TRUST UNITED KINGDOM PORTFOLIO, SERIES 3
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 10)
as of the Initial Date of Deposit: February 8, 1995
<CAPTION>
Estimated
Annual Cost of
Number Market Value Dividends Securities
of Shares Name of Issuer <F1> per Share <F2> per Share <F2> to Trust <F2>
<S> <C> <C> <C> <C>
11,969 Allied Domecq Plc $ 8.030 $ .34 $ 96,110.14
19,084 BICC Plc 5.093 .30 97,195.97
20,079 BTR Plc 4.905 .19 98,487.40
21,781 Blue Circle Industries Plc 4.390 .17 95,619.34
19,949 British Gas Plc 4.827 .23 96,299.21
15,239 British Telecom Plc 6.187 .26 94,284.58
9,498 Glaxo Holdings 10.217 .42 97,041.40
26,119 Hanson Plc 3.718 .18 97,114.07
12,736 National Westminster Bank 7.608 .30 96,895.85
10,665 Peninsular and Oriental Steam Navigation Company 9.092 .31 96,965.69
167,119 $ 966,013.65
</TABLE>
<TABLE>
STRATEGIC TEN TRUST HONG KONG PORTFOLIO, SERIES 3
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 10)
as of the Initial Date of Deposit: February 8, 1995
<CAPTION>
Estimated
Annual Cost of
Number Market Value Dividends Securities
of Shares Name of Issuer <F1> per Share <F2> per Share <F2> to Trust <F2>
<S> <C> <C> <C> <C>
104,000 Amoy Properties Ltd. $ .910 $ .05 $ 94,604.37
70,000 Hang Lung Development Company 1.364 .08 95,510.40
24,000 Henderson Land Development Company Ltd. 4.795 .21 115,080.36
32,800 Hong Kong Aircraft Engineering Company Ltd. 2.963 .13 97,177.59
37,000 Hong Kong Electric Holdings Ltd. 2.969 .12 109,864.84
122,000 Hopewell Holdings .767 .05 93,540.52
48,000 Hysan Development Company Ltd. 1.962 .12 94,185.80
40,000 New World Development Company Ltd. 2.404 .14 96,167.85
196,000 Oriental Press Group .491 .04 96,146.55
160,000 Shun Tak Holdings Ltd. .575 .04 92,011.48
833,800 $ 984,289.76
</TABLE>
NOTES TO PORTFOLIOS
(1) All of the Securities are represented by "regular way"contracts for
the performance of which an irrevocable letter of credit has been deposited
with the Trustee. At the Initial Date of Deposit, the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into on February 7, 1995 and are
expected to settle on February 10, 1995, February 14, 1995 and February 22,
1995. (see "The Fund").
(2) The market value of each of the Equity Securities is based on the closing
sale price of each Security on the applicable exchange (converted into U.S.
dollars at the offer side of the exchange rate at the Evaluation Time and
includes the commissions and stamp taxes associated with acquiring the
Securities in the case of the United Kingdom and Hong Kong Trusts) on the
day prior to the Initial Date of Deposit for the United States Trust and
on the Initial Date of Deposit for the United Kingdom Trust and the Hong
Kong Trust. Estimated annual dividends are based on the most recently paid
dividends or, in the case of the United Kingdom and Hong Kong Trusts, on
the most recent interim and final dividends paid (converted into U.S.
dollars at the offer side of the exchange rate at the Evaluation Time).
Other information regarding the Securities in the Fund, as of the Initial
Date of Deposit (converted into U.S. dollars at the offer side of the
exchange rate at the Evaluation Time in the case of the United Kingdom
and Hong Kong Trusts), is as follows:
<TABLE>
<CAPTION>
Aggregate
Cost To Profit (Loss) Estimated Annual
Sponsor To Sponsor Dividends
<S> <C> <C> <C>
United States Trust $ 1,930,106 $ -- $ 79,716
United Kingdom Trust $ 968,461 $ (2,447) $ 37,712
Hong Kong Trust $ 985,687 $ (1,397) $ 56,158
</TABLE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Fund, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 4
The Fund 6
Objective and Securities Selection 7
Trust Portfolios 8
Risk Factors 23
Taxation 30
Fund Operating Expenses 35
Public Offering 36
Rights of Unitholders 39
Fund Administration 45
Other Matters 53
Report of Independent Certified Public
Accountants 53
Statements of Condition 54
Portfolios 55
Notes to Portfolios 57
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
February 8, 1995
Van Kampen American Capital
Equity OpportunityTrust, Series 10
Strategic Ten Trust
United States Portfolio,Series 3
United Kingdom Portfolio,Series 3
Hong Kong Portfolio,Series 3
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to the Federal income tax status of securities
being registered.
3.3 Opinion and consent of counsel as to New York tax status of
securities being registrered.
3.4 Opinion and consent of counsel as to certain United Kingdom Trust
matters.
4.1 Consent of Interactive Data Services, Inc.
4.2 Consent of Independent Certified Public Acountants.
4.3 Financial Data Schedule.
Signatures
The Registrant, Van Kampen American Captial Equity Opportunity
Trust, Series 10, hereby identifies Van Kampen Merritt Equity Opportunity
Trust, Series 7 for purposes of the representations required by Rule 487
and represents the following: (1) that the portfolio securities deposited
in the series as to the securities of which this Registration Statement
is being filed do not differ materially in type or quality from those
deposited in such previous series; (2) that, except to the extent
necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect
to the securities of which this Registration Statement is being filed,
this Registration Statement does not contain disclosures that differ in
any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined by
the Commission or the staff; and (3) that it has complied with Rule 460
under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
10 has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 8th day of February,
1995.
Van Kampen American Capital Equity
Opportunity Trust, Series 10
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities indicated and on February 8, 1995.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trtust, Multi-Series 203 (File No. 33-
65744) and with the Registration Statement on Form S-6 of Insured
Municipals Income trust, 170th Insured Multi-Series (File No. 33-55891)
and the same are hereby incorporated herein by this reference.
Exhibit 1.1
Van Kampen American Capital Equity Opportunity Trust
Series 10
Trust Agreement
Dated: February 8, 1995
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of
Van Kampen American Capital Investment Advisory Corp., as Evaluator, Van
Kampen American Capital Investment Advisory Corp., as Supervisory
Servicer, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Van Kampen Merritt Equity Opportunity Trust, Series 1
and Subsequent Series, Standard Terms and Conditions of Trust, Effective
November 21, 1991" (herein called the "Standard Terms and Conditions of
Trust") and such provisions as are set forth in full and such provisions
as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections
of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee
agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(22), listed in the
Schedules hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trusts represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
3. Section 1.01(19) will be inapplicable for this Trust.
4. "Van Kampen Merritt Equity Opportunity Trust" will replace
"Select Equity Trust" in Section 1.01(23).
5. The second sentence of Section 2.03(b) is hereby deleted
and replaced by the following: "Units will be held in certificated
form unless a Unitholder requests that his or her Units be held in
uncertificated form."
6. The second sentence in the second paragraph of Section
3.11 shall be revised as follows: "However, should any issuance,
exchange or substitution be effected notwithstanding such rejection
or without an initial offer, any securities, cash and/or property
received shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee unless the Depositor advises
the Trustee to keep such securities, cash or properties."
7. Reference to In Kind Distributions in Sections 5.02 and
8.02 shall apply only to the United States Portfolios and not to the
other Portfolios, and the requisite number of Units needed to be
tendered to exercise an In Kind Distribution shall be that number
set forth in the Prospectus for the Trust.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., and Van Kampen American Capital Investment Advisory Corp., have
each caused this Trust Indenture and Agreement to be executed by their
respective President or one of their respective Vice Presidents and the
corporate seal of Van Kampen American Capital Investment Advisory Corp.
to be hereto affixed and attested to by the Secretary, Assistant
Secretary or one of the Assistant Vice Presidents of Van Kampen American
Capital Investment Advisory Corp. and The Bank of New York, has caused
this Trust Agreement to be executed by one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by one of its
Assistant Treasurers all as of the day, month and year first above
written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation Service
s, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
Van Kampen American Capital Investment
Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
The Bank of New York
By Jeffrey Bieselin
Vice President
Attest
By Norbert Loney
Assistant Treasurer
Schedule A to Trust Agreement
Securities Initially Deposited
in
Van Kampen American Capital Equity Opportunity Trust, Series 10
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
February 8, 1995
Van Kampen Merritt Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Van Kampen American Capital Equity Opportunity Trust, Series 10
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc. as Sponsor and Depositor of Van Kampen American
Capital Equity Opportunity Trust, Series 10 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated February 8, 1995, among Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., as Evaluator, Van Kampen American Capital Investment Advisory
Corp., as Supervisory Servicer, and The Bank of New York, as Trustee,
pursuant to which the Depositor has delivered to and deposited the
Securities listed in the Schedule to the Trust Agreement with the Trustee
and pursuant to which the Trustee has provided to or on the order of the
Depositor documentation evidencing ownership of Units of fractional
undivided interest in and ownership of the Trust (hereinafter referred to
as the "Units"), created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Trust have been duly authorized; and
2. The certificates evidencing the Units in the Trust,
when duly executed and delivered by the Depositor and the
Trustee in accordance with the aforementioned Trust Agreement,
will constitute valid and binding obligations of such Trust and
the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-57451) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
said Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/ch
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
February 8, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re:Van Kampen American Capital Equity Opportunity Trust, Series 10
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 10 (the "Fund"), in connection with the
issuance of Units of fractional undivided interest in the Fund, under a
Trust Agreement dated February 8, 1995 (the "Indenture") among Van Kampen
American Capital Distributors, Inc., as Depositor, Van Kampen American
Capital Investment Advisory Corp., as Evaluator, Van Kampen American
Capital Investment Advisory Corp., as Supervisory Servicer, and The Bank
of New York, as Trustee. The Fund is comprised of three separate unit
investment trusts, Strategic Ten Trust United States Portfolio, Series 3,
Strategic Ten Trust United Kingdom Portfolio, Series 3, and Strategic Ten
Trust Hong Kong Portfolio, Series 3.
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of each Trust will consist of a portfolio of equity
securities (the "Equity Securities") as set forth in the Prospectus.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) Each Trust is not an association taxable as a
corporation but will be governed by the provisions of
subchapter J (relating to Trusts) of chapter 1, Internal
Revenue Code of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata
share of each asset of the particular Trust in the proportion
that the number of Units held by him bears to the total number
of Units outstanding. Under subpart E, subchapter J of chapter
1 of the Code, income of a Trust will be treated as income of
each Unitholder in the proportion described, and an item of
Trust income will have the same character in the hands of a
Unitholder as it would have in the hands of the Trustee. Each
Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income
is received by a Trust. A Unitholder's pro rata portion of
distributions of cash or property by a corporation with respect
to an Equity Security ("dividends" as defined by Section 316 of
the Code ) are taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits."
A Unitholder's pro rata portion of dividends which exceed such
current and accumulated earnings and profits will first reduce
the Unitholder's tax basis in such Equity Security, and to the
extent that such dividends exceed a Unitholder's tax basis in
such Equity Security, shall be treated as gain from the sale or
exchange of property.
(iii) The price a Unitholder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Security held by a Trust (in the proportion to the fair market
values thereof on the date the Unitholder purchases his Units),
in order to determine his initial cost for his pro rata portion
of each Security held by a Trust.
(iv) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units, except to the extent an in
kind distribution of stock is received by such Unitholder from
a Trust as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the
adjusted basis of his Units. Before adjustment, such basis
would normally be cost if the Unitholder had acquired his units
by purchase. Such basis will be reduced, but not below zero,
by the Unitholder's pro rata portion of dividends with respect
to each Equity Security which are not taxable as ordinary
income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, redemption, payment on maturity or otherwise)
gain or loss will be recognized to the Unitholder and the
amount thereof will be measured by comparing the Unitholder's
aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of.
Such basis is ascertained by apportioning the tax basis for his
Units (as of the date on which his Units were acquired) among
each of the Trust assets of such Trust (as of the date on which
his Units were acquired) ratably according to their values as
of the valuation date nearest the date on which he purchased
such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced, but
not below zero, by the Unitholder's pro rata portion of
dividends with respect to each Security which are not taxable
as ordinary income.
(vi) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in
kind distribution of Securities upon the redemption of Units or
upon the termination of the Trust. As previously discussed,
prior to the redemption of Units or the termination of a Trust,
a Unitholder is considered as owning a pro rata portion of each
of the particular Trust's assets. The receipt of an in kind
distribution would be deemed an exchange of such Unitholder's
pro rata portion of each of the shares of stock and other
assets held by a Trust in exchange for an undivided interest in
whole shares of stock and possibly cash. In general, there are
three different potential federal income tax consequences which
may occur under an in kind distribution with respect to each
Security owned by a Trust. A "Security" for this purpose is a
particular class of stock issued by a particular corporation.
If the Unitholder receives only whole shares of a Security in
exchange for his pro rata portion in each share of such
Security held by a Trust, there is no taxable gain or loss
recognized upon such deemed exchange pursuant to Section 1036
of the Code. If the Unitholder receives whole shares of a
particular Security plus cash in lieu of a fractional share of
such Security, and if the fair market value of the Unitholder's
pro rata portion of the shares of such Security plus the cash
received exceeds his tax basis in his pro rata portion of such
Security, taxable gain would be recognized in an amount not to
exceed the amount of such cash received, pursuant to Section
1031(b) of the Code. No taxable loss would be recognized upon
such an exchange pursuant to Section 1031(c) of the Code,
whether or not cash is received in lieu of a fractional share.
Under either of these circumstances, special rules will be
applied under Section 1031(d) of the Code to determine the
Unitholder's tax basis in the shares of such particular
Security which he receives as part of the in kind distribution.
Finally, if a Unitholder's pro rata interest in a Security does
not equal a whole share, he may receive entirely cash in
exchange for his pro rata portion of a particular Security. In
such case, taxable gain or loss is measured by comparing the
amount of cash received by the Unitholder with his tax basis in
such Security. The total amount of taxable gains (or losses)
recognized upon such redemption will generally equal the sum of
the gain (or loss) recognized under the rules described above
by the redeeming Unitholder with respect to each Security owned
by a Trust.
Dividends received by a Trust which are attributable to a
corporation owning Units in a Trust and which are taxable as ordinary
income may be eligible for the 70% dividends received deduction pursuant
to Section 243(a) of the Code, subject to the limitations imposed by
Sections 246 and 246A of the Code. It should be noted that various
legislative proposals that would affect the dividend received deduction
have been introduced.
Section 67 of the Code provides that certain itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by individuals only to the extent
they exceed 2% of such individual's adjusted gross income. Temporary
regulations have been issued which require Unitholders to treat certain
expenses of a Trust as miscellaneous itemized deductions subject to this
limitation.
A Unitholder will recognize taxable gain (or loss) when all or part
of the pro rata interest in a Security is either sold by the Trust or
redeemed or when a Unitholder disposes of his Units in a taxable
transaction, in each case for an amount greater (or less) than his tax
basis therefor.
Any gain recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set
forth herein, and, except as expressly set forth above, we express no
opinion with respect to any other taxes, including state or local taxes
or collateral tax consequences with respect to the purchase, ownership
and disposition of Units.
Very truly yours
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Tanner Propp & Farber
99 Park Avenue
New York, NY 10016
February 8, 1995
Van Kampen American Capital Equity
Opportunity Trust, Series 10
c/o The Bank of New York,
as Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 10 (the "Fund") consisting of Strategic
Ten Trust United States Portfolio, Series 3, Strategic Ten Trust United
Kingdom Portfolio, Series 3 and Strategic Ten Trust Hong Kong Portfolio,
Series 3 (individually a "Trust" and in the aggregate the "Trusts") for
purposes of determining the applicability of certain New York taxes under
the circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"),
dated as of today (the "Date of Deposit") among Van Kampen American
Capital Distributors, Inc. (the "Depositor"), American Portfolio
Evaluation Services, a division of a subsidiary of Depositor, as
Evaluator, Van Kampen American Capital Investment Advisory Corp., as
Supervisory Servicer (the "Supervisory Servicer"), and The Bank of New
York, as trustee (the "Trustee"). As described in the prospectus
relating to the Fund dated today to be filed as an amendment to a
registration statement heretofore filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the
"Prospectus") (File number 33-57451), the objectives of the Fund are to
provide the potential for dividend income and capital appreciation
through investment in a fixed portfolio of actively traded New York Stock
Exchange listed equity securities and in the case of the Trust
denominated "Treasury" also to protect capital by investing a portion of
the portfolio in "zero coupon" U.S. Treasury obligations. It is noted
that no opinion is expressed herein with regard to the Federal tax
aspects of the securities, the Trust, units of Trust (the "Units"), or
any interest, gains or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trust the securities and/or contracts and cash for
the purchase thereof together with an irrevocable letter of credit in the
amount required for the purchase price of the securities comprising the
corpus of the Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities
to be deposited in the Trust, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of the Trust as more fully set forth in
the Prospectus. The Units, which are represented by certificates
("Certificates"), will be offered to the public upon the effectiveness of
the registration statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash
dividends received by the Fund and with the proceeds from the disposition
of securities held in the Fund and the proceeds of the treasury
obligation on maturity and the distribution of such cash dividends and
proceeds to the Unit holders. The Trustee will also maintain records of
the registered holders of Certificates representing an interest in the
Fund and administer the redemption of Units by such Certificate holders
and may perform certain administrative functions with respect to an
automatic reinvestment option.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations.
Prior to the termination of the Fund, the Trustee is empowered to
sell equity securities designated by the Supervisory Servicer only for
the purpose of redeeming Units tendered to it and of paying expenses for
which funds are not available. The Trustee does not have the power to
vary the investment of any Unit holder in the Fund, and under no
circumstances may the proceeds of sale of any equity securities held by
the Fund be used to purchase new equity securities to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(1)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument"
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in which interest or
ownership is evidenced by certificate or other written instrument
includes, but is not limited to, an association commonly referred to
as a "business trust" or "Massachusetts trust". In determining
whether a trustee or trustees are conducting a business, the form of
the agreement is of significance but is not controlling. The actual
activities of the trustee or trustee, not their purposes and powers,
will be regarded as decisive factors in determining whether a trust
is subject to tax under Article 9-A. The mere investment of funds
and the collection of income therefrom, which incidental replacement
of securities and reinvestment of funds, does not constitute the
conduct of a business in the case of a business conducted by a
trustee or trustees. 20 NYCRR 1-2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1083, 85 N.Y.S.2d 705 (3rd
Dept. 1949).
In an Opinion of the Attorney General of the State of New York, 47
N.Y. Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the
trustee of an unincorporated investment trust was without authority to
reinvest amounts received upon the sales of securities and could dispose
of securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell
securities contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such securities is limited to
circumstances in which the credit-worthiness or soundness of the issuer
of such equity security is in question or in which cash is needed to pay
redeeming Unit holders or to pay expenses, or where the Fund is
liquidated subsequent to the termination of the Indenture. In substance,
the Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to vary the
investment of any Unit holder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance, June 23,
1978.
By letter dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be
considered as owning a share of each asset of a Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income
of each Unit holder in said proportion pursuant to Subpart E of Part I,
Subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings, and court decisions interpreting the laws of the State and City
of New York:
1. Each Trust will not constitute an association taxable as a
corporation under New York law, and, accordingly, will not be
subject to tax on its income under the New York State franchise tax
or the New York City general corporation tax;
2. The income of the Trust will be treated as the income of
the Unit holders under the income tax laws of the State and City of
New York; and
3. Unit holders who are not residents of the State of New
York are not subject to the income tax laws thereof with respect to
any interest or gain derived from the Fund or any gain from the sale
or other disposition of the Units, except to the extent that such
interest or gain is from property employed in a business, trade,
profession or occupation carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
MNS:mw
Exhibit 3.4
Linklaters & Paines
885 Third Avenue, Suite 2600
New York, NY 10022
February 8, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Dear Sirs:
Van Kampen American Capital Equity Opportunity Trust, Series 10 (the
"Fund")
1. We have acted as special United Kingdom ("UK") taxation
advisers in connection with the issue of units ("Units") in the above
Fund on the basis of directions given to us by Chapman and Cutler,
counsel to yourselves.
2. This opinion is limited to UK taxation law as applied in
practice on the date hereof by the Inland Revenue and is given on the
basis that it will be governed by and construed in accordance with
English law as enacted.
3. For the purpose of this opinion, the only documentation which
we have examined is the prospectus for the Van Kampen Merritt Equity
Opportunity Trust, Series 9 ("the Series 9 Fund") dated 25 October 1994
(the "Prospectus"). We have been advised by Chapman and Cutler that the
structure of the Fund will be substantially the same as that of the
Series 9 Fund and, in particular, that the only material difference
between the Fund and the Series 9 Fund relates to the securities to be
constituted in the Portfolio.
4. We have assumed for the purposes of this opinion that:-
4.1 a holder of Units ("Unitholder") is, under the terms of
the Trust Agreement governing the United Kingdom Trust (the "Trust")
entitled to have paid to him (subject to a deduction for annual
expenses, including total applicable custodial fees and certain
other costs associated with foreign trading and annual Trustee's,
Sponsor's and administrative fees and expenses), his pro rata share
of all the income which arises to the Trust from the investments in
the United Kingdom Portfolio, and that, under the governing law of
the Trust Agreement, this is a right as against the assets of the
Trust rather than a right enforceable in damages only against the
Trustee;
4.2 for taxation purposes the Trustee is not a UK resident, is
a US resident; the general administration of the Fund will be
carried out only in the US; and no Units are registered in a
register kept in the UK by or on behalf of the Trustee;
4.3 the Trust is not treated as a corporation for US tax
purposes;
4.4 the structure, including the investment strategy of the
Fund will be substantially the same as that set out in relation to
the Series 9 Fund in the Prospectus; and
4.5 each Unitholder is neither resident nor ordinarily
resident in the UK, nor is that Unitholder carrying on a trade in
the UK through a branch or agency.
5. We understand that the Fund will consist of three unit
investment trusts: the United States Trust, the Trust and the Hong Kong
Trust; that the United Kingdom Portfolio will contain the ten common
stocks in the Financial Times Industrial Ordinary Share Index having the
highest dividend yield three business days prior to the Initial Date of
Deposit; and, that the Trust will hold the UK common stocks for about one
year, after which time the Trust will terminate and the stocks will be
sold. We address UK tax issues in relation only to the Trust.
6. Where a dividend which carries a tax credit as distinct from a
foreign income divided (in relation to which, see 7 below) is paid by a
UK-resident company to a qualifying US resident which (either alone or
together with one or more associated corporations) controls directly or
indirectly less than 10% of the voting stock of that UK company, the
qualifying US resident is entitled, on making a claim to the UK Inland
Revenue, to the payment of a tax credit currently equal to a quarter of
the dividend less a withholding of 15% of the aggregate amount of the tax
credit and the dividend. Thus, on payment by a UK company of a dividend
of 80, a tax credit of 20 arises and so a qualifying US resident will
be entitled on making such a claim to a payment from the UK Inland
Revenue of 5 (being 20 less 15% of (20 + 80)).
A person will be a qualifying US resident for these purposes if:-
6.1 that person is a resident of the US for the purposes of
the double tax treaty between the US and the UK (the "Treaty"). The
Trustee will be a resident of the US for these purposes if it is
resident in the US for the purposes of US tax. However, it will
only be a resident of the US for Treaty purposes to the extent that
the income derived by the Trust is subject to US tax as the income
of a US resident either in the hands of the Trust itself or in the
hands of its beneficiaries.
We have assumed that the Trust will not be subject to US tax on its
income and that such income will be treated as income of the
beneficiaries of the Trust for US purposes. Accordingly, the Trust
would be a US resident for the purposes of the Treaty only to the
extent that the beneficiaries would be taxable in the US on such
income or treated as so taxable by agreement between the relevant
authorities. The provisions of the Treaty have been extended to
grant resident status to tax exempt charitable trusts and pension
funds. We understand that this is confirmed on the US Treasury side
by its "Technical Explanation" of the Treaty issued on 9 March 1977;
6.2 the dividend is paid to that person. We believe that the
payment of a dividend to the Trustee and onward payment by the
Trustee should qualify as the payment of the dividend to the
Unitholder for these purposes. The position is however not
completely free from doubt, but this appears to be present Inland
Revenue practice;
6.3 the beneficial owner of the dividend is a resident of the
US for the purposes of the Treaty. The Trust will not be the
beneficial owner of any dividend for these purposes. Whether the
Unitholder is beneficial owner will depend upon the circumstances of
his ownership of the Units;
6.4 that person satisfies the other requirements of the Treaty
including the following:-
6.4.1 that the dividend is not received in connection with
a UK permanent establishment or fixed base of that person;
6.4.2 subject to certain exemptions, that person is not a
US corporation:
(a) 25% or more of whose capital is owned directly
or indirectly by persons other than individual residents
or nationals of the US; and
(b) which suffers US tax on the dividend at a rate
substantially less than that which is generally imposed on
corporate profits or which is an 80:20 corporation for the
purposes of the US Internal Revenue Code of 1954, section
861;
6.4.3 that person is not a corporation resident in both the
US and the UK; and
6.4.4 that person is not exempt from US tax in a case where
(a) that person's interest in the UK company is not acquired
for bona fide commercial reasons and (b) if the recipient of
the dividend were a resident of the UK and exempt from UK tax,
the UK exemption would be limited or removed.
Therefore, although the position is not free from doubt, a Unitholder,
where the requirements set out above are satisfied, should, on making an
appropriate claim, be entitled to repayment of part of the UK tax credit.
However, since the UK Inland Revenue normally require claims to be made
by the beneficial owner of a dividend, the Trustee will not, in the
absence of arrangements with the UK Inland Revenue and the Unitholders,
be able to claim any such repayment.
Moreover, in order to make a claim for repayment, the Unitholder
will need to produce evidence of the payment of the dividend and of his
interest in it. Normally this is achieved by submitting to the Inland
Revenue tax vouchers which derive directly from the UK company paying a
dividend, or which are prepared by the Trustee and evidence to the
satisfaction of the Inland Revenue the entitlement of the Unitholder to
that dividend. Where the Trustee provides neither of these, it will
in practice be difficult for the Unitholder to establish his interest in
any dividend payment and accordingly his entitlement to any tax credit.
7. Since July 1, 1994, it is possible for a UK-resident company to
elect to treat a cash dividend paid by it as a "foreign income dividend"
("FID"). If a company makes an effective election to pay a FID in
respect of shares which are held in the Portfolio of the Trust, there
will be no entitlement to a refundable tax credit in respect of that FID,
notwithstanding 6 above. A limited number of FIDs have now been declared
and experience to date suggests that, due to the benefits to the payers
which can result, the amounts so declared can be materially greater than
would have been the case if the company had not taken advantage of the
provisions governing the payment of FIDs.
8. The Trust may be held to be trading in stock rather than
holding stock for investment purposes by virtue, inter alia, of the
length of the time for which the stock is held. If the stock is
purchased through a UK-resident agent, then if the Trust is held to be
trading in such stock, profits made on its subsequent disposal may be
liable to United Kingdom tax on income under current law unless the agent
is unconnected with Unitholders and providers investment management
services to a number of clients and the transactions are carried out in
the ordinary course of that business and for the customary rate of
remuneration.
However, where stock is purchased and sold through a UK broker in
the ordinary course of a bona fide broking business carried on in the UK,
and the remuneration which the broker receives for the transactions is at
a rate which is no less than that which is customary for that class of
business, then any charge to UK tax on such profits cannot be collected
from that broker. Further, unless a Unitholder is UK-resident or, being
non-UK resident, has a presence in the UK (other than through the broker
acting in the manner described above) in connection with which the Units
are held, UK tax will not in practice be collected from that Unitholder.
9. We understand that the Trustee has a branch in the UK and a
wholly-owned UK-resident subsidiary. Where the Trustee has a presence in
the UK then it is technically possible that income or gains of the Fund
could be assessed upon the Trustee, whether arising from securities or
from dealings in those securities. However, we consider that any such
risk should be remote provided that:
9.1 Any income derived by the Trustee will be derived by it
(see 6(i) above) as a resident of the US for the purposes of the
Treaty; and
9.2 the UK branch and the UK-resident subsidiary of the
Trustee will neither have any involvement with establishing or
managing the Fund or its assets, nor will they derive income or
gains from the Fund or its assets.
10. Where the Trustee makes gains on the disposal of shares in the
UK companies in which the Trust invests, a Unitholder will not be liable
to UK capital gains taxation on those gains.
11. UK stamp duty or stamp duty reserve tax will generally be
payable at the rate of 50p per 100 of the consideration (or any part) in
respect of a transfer of the shares in UK incorporated companies or in
respect of transfers to be effected on a UK share register. The
tax will generally be paid by a purchaser. No UK stamp duty or stamp
duty reserve tax should be payable on an agreement to transfer nor a
transfer of Units, provided that such transfer is neither executed in nor
brought into the UK.
12. In our opinion the taxation paragraphs contained on pages 33
and 34 of the Prospectus under the heading "United Kingdom Taxation", as
amended by ourselves, which are to be contained in the Prospectus to be
issued for the Fund, represent a fair summary of material UK taxation
consequences for a US-resident Unitholder.
13. This opinion is addressed to you on the understanding that you
(and only you) may rely upon it in connection with the issue and sale of
the Units (and for no other purpose). This opinion may not be quoted or
referred to in any public document or filed with any governmental agency
or other person without our written consent. We consent however to the
reference which is to be made in the prospectus to be issued for the Fund
to our opinion as to the UK tax consequences to US persons holding Units
in the Trust.
Yours faithfully
Linklaters & Paines
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
February 8, 1995
Van Kampen Merritt, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Strategic Ten Trust:
United States Portfolio, Series 3
United Kingdom Portfolio, Series 3
Hong Kong Portfolio, Series 3
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 33-57451
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Services, Inc.,
as the Evaluator, and to the use of the Obligations prepared by us which
are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Independent Certified Public Accountants' Consent
We have issued our report dated February 8, 1995 on the statements
of condition and related securities portfolios of Van Kampen American
Capital Equity Opportunity Trust, Series 10 as of February 8, 1995
contained in the Registration Statement on Form S-6 and Prospectus. We
consent to the use of our report in the Registration Statement and
Prospectus and to the use of our name as it appears under the caption
"Other Matters-Independent Certified Public Accountants.'"
Grant Thornton LLP
Chicago, Illinois
February 8, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on February 8, 1995 it is
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</LEGEND>
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<NUMBER> 3
<NAME> U.S. Portfolio
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-08-1995
<PERIOD-END> FEB-08-1995
<INVESTMENTS-AT-COST> 1930106
<INVESTMENTS-AT-VALUE> 1930106
<RECEIVABLES> 0
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<TOTAL-ASSETS> 1930106
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<NET-INVESTMENT-INCOME> 0
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<DISTRIBUTIONS-OF-INCOME> 0
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<RETURNS-OF-CAPITAL> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on February 8, 1995 it is
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</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> Hong Kong Portfolio
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-08-1995
<PERIOD-END> FEB-08-1995
<INVESTMENTS-AT-COST> 984290
<INVESTMENTS-AT-VALUE> 984290
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 984290
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 10
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<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on February 8, 1995 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> United Kingdom Portfolio
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-08-1995
<PERIOD-END> FEB-08-1995
<INVESTMENTS-AT-COST> 966014
<INVESTMENTS-AT-VALUE> 966014
<RECEIVABLES> 0
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 966014
<SHARES-COMMON-STOCK> 100000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 10
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<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
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<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
