File No. 33-58755
CIK #896976
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 14
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.
Attn: Mark J. Kneedy Attn: 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
/ / Check box if it is proposed that this filing will become effective
pursuant to Rule 487.
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
Van Kampen American Capital Equity Opportunity Trust
Series 14
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
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This Prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under
the securities laws of any State.
May 24, 1995
Preliminary Prospectus Dated May 24, 1995
Subject to Completion
Van Kampen American Capital
Van Kampen American Capital Equity Opportunity Trust, Series 14
Govett Smaller Companies Fund and Treasury Trust, Series 1
The Fund. Van Kampen American Capital Equity Opportunity Trust, Series 14 is
comprised of one unit investment trust, Govett Smaller Companies Fund and
Treasury Trust, Series 1 (the "Smaller Companies Fund and Treasury Trust" or
"Trust"). The Smaller Companies Fund and Treasury Trust offers investors the
opportunity to purchase Units representing proportionate interests in "zero
coupon" U.S. Treasury obligations and shares of Govett Smaller Companies Fund
(the "Fund" or "Fund Shares"). The Fund is an open-end management investment
company, commonly known as a mutual fund. Unless terminated earlier, the Trust
will terminate on August 15, 2007 (the "Mandatory Termination Date") and any
securities then held will, within a reasonable time thereafter, be liquidated
or distributed by the Trustee. Any Securities liquidated at termination will
be sold at the then current market value for such Securities; therefore, the
amount distributable in cash to a Unitholder upon termination may be more or
less than the amount such Unitholder paid for his or her Units.
Objectives of the Trust. The objectives of the Smaller Companies Fund and
Treasury Trust are to provide the potential for long-term capital appreciation
by investing in shares of Govett Smaller Companies Fund and to protect
Unitholders' capital by investing a portion of its portfolio in "zero
coupon" U.S. Treasury obligations ("Treasury Obligations"). Collectively, the
Treasury Obligations and the Fund Shares are referred to herein as the
"Securities." See "Portfolio." The Treasury Obligations in the Smaller Companies
Fund and Treasury Trust evidence the right to receive a fixed payment at a
future date from the U.S. Government and are backed by the full faith and
credit of the U.S. Government. The guarantee of the U.S. Government does not
apply to the market value of the Treasury Obligations or the Units of the
Smaller Companies Fund and Treasury Trust, whose net asset value will
fluctuate and may be worth more or less than a purchaser's acquisition cost.
It is anticipated that upon maturity the Treasury Obligations will represent
an amount per Unit of at least $11.00 per Unit. The Fund seeks to achieve its
long-term capital appreciation objective by investing primarily in equity
securities of smaller domestic and foreign companies. There is, of course, no
guarantee that the objectives of the Trust will be achieved.
Public Offering Price. The Public Offering Price per Unit of the Trust is
equal to the net asset value of the Fund Shares plus the aggregate offering
price of the Treasury Obligations in the initial offering period and the net
asset value of the Fund Shares and the aggregate bid price of the Treasury
Obligations in the secondary market plus or minus cash, if any, in the Capital
and Income Accounts, divided by the number of Units outstanding, plus a sales
charge equal to 4.9% of the Public Offering Price which is equivalent to
5.152% of the aggregate value of the Securities. During the offering period,
the sales charge is reduced on a graduated scale for sales involving at least
10,000 Units. If Units were available for purchase at the opening of business
on the Initial Date of Deposit, the Public Offering Price per Unit would have
been $10.00. The minimum purchase is 500 Units (100 Units for a tax-sheltered
retirement plan). See "Public Offering."
Principal Protection. The Smaller Companies Fund and Treasury Trust has been
organized so that purchasers of Units should receive, at the termination of
the Smaller Companies Fund and Treasury Trust, an amount per Unit at least
equal to $11.00 (which is equal to the per Unit value upon maturity of the
Treasury Obligations), even if the Smaller Companies Fund and Treasury Trust
never paid a dividend and the value of the Fund Shares were to decrease to
zero, which the Sponsor considers highly unlikely. This feature of the Smaller
Companies Fund and Treasury Trust provides Unitholders who purchase Units at
the price of $11.00 or less per Unit and who hold such Units until the
termination of the Trust with total principal protection, including any sales
charges paid, although they might forego any earnings on the amount invested.
To the extent that Units are purchased at a price less than $11.00 per Unit,
this feature may also provide a potential for capital appreciation. As a
result of the volatile nature of the market for "zero coupon" U.S. Treasury
Obligations, Units sold or redeemed prior to maturity will fluctuate in price,
and the underlying Treasury Obligations may be valued at a price greater or
less than their value as of the Initial Date of Deposit. Unitholders disposing
of their Units prior to the maturity of the Trust may receive more or less
than $11.00 per Unit, depending on market conditions on the date Units are
sold or redeemed.
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.
The Treasury Obligations deposited in the Smaller Companies Fund and Treasury
Trust will mature on August 15, 2007. The Treasury Obligations have a maturity
value greater than the aggregate Public Offering Price (which includes the
sales charge) of the Units of the Smaller Companies Fund and Treasury Trust on
the Initial Date of Deposit; however, the value of the Treasury Obligations
may fluctuate before maturity due to fluctuations in interest rates. The Fund
Shares deposited in the Trust's portfolio have no fixed maturity date and the
value of these underlying Fund Shares will fluctuate with changes in the
values of stocks in general and with changes in the conditions and performance
of the specific Securities owned by the Fund. See "Trust Portfolio."
Additional Deposits. The Sponsor may, from time to time, deposit additional
Securities in the Trust, provided it maintains the same percentage
relationship of the Treasury Obligations and Fund Shares in the Trust that
existed immediately prior to any such subsequent deposit. See "The Trust."
Dividend and Capital Gains Distributions. Distributions of net income, if any,
other than amortized discount, will be made at least annually. Distributions
of realized capital gains, if any, received by the Trust, will be made
whenever the Fund makes such a distribution. Income with respect to the
amortization of original issue discount on the Treasury Obligations in the
Smaller Companies Fund and Treasury Trust will not be distributed currently,
although Unitholders will be subject to income tax at ordinary income rates as
if a distribution had occurred. Any distribution of income and/or capital
gains will be net of the expenses of the Trust. See "Federal
Taxation." Additionally, upon termination of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unitholder his pro
rata share of the Trust's assets, less expenses, in the manner set forth under
"Rights of Unitholders--Distributions of Income and Capital."
Secondary Market for Units. After the initial offering period, although not
obligated to do so, the Sponsor intends to maintain a market for Units of the
Trust and offer to repurchase such Units at prices which are based on the net
asset value of the Fund Shares plus the bid side evaluation of the Treasury
Obligations, plus or minus cash, if any, in the Capital and Income Accounts of
the Trust. If a secondary market is maintained during the initial offering
period, the prices at which Units will be repurchased will be based upon the
net asset value of the Fund Shares in the Trust plus the aggregate offer side
evaluation of the Treasury Obligations, plus or minus cash, if any, in the
Capital and Income Accounts of the Trust. If a secondary market is not
maintained, a Unitholder may redeem Units through redemption at prices based
upon the net asset value of the Fund Shares in the Trust plus the aggregate
bid price of the Treasury Obligations, plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust. See "Rights of
Unitholders--Redemption of Units."
Termination. Commencing on the Mandatory Termination Date, Fund Shares will
begin to be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the Fund
Shares. Written notice of any termination of the Trust specifying the time or
times at which Unitholders may surrender their certificates for cancellation
shall be given by the Trustee to each Unitholder at his or her address
appearing on the registration books of the Trust maintained by the Trustee. At
least 30 days prior to the Mandatory Termination Date the Trustee will provide
written notice thereof to all Unitholders and will include with such notice a
form to enable Unitholders to elect a distribution of Fund Shares if the
termination value of such Unitholder's Units is at least $500, rather than to
receive payment in cash for such Unitholder's pro rata share of the amounts
realized upon the disposition by the Trustee of the Fund Shares. Unitholders
eligible for such a distribution may also elect to have their pro rata portion
of the proceeds received upon the maturity of the Treasury Obligations
reinvested without a sales charge into Fund Shares. All Unitholders not
electing such option will receive cash representing their pro rata portion of
the Treasury Obligations. To be effective, the election form, together with
surrendered certificates, if issued, and other documentation required by the
Trustee, must be returned to the Trustee at least five business days prior to
the Mandatory Termination Date. Unitholders not electing a distribution of
Fund Shares will receive a cash distribution from the sale of the remaining
Securities within a reasonable time after the Trust is terminated. See "Trust
Administration--Amendment or Termination."
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. See "Rights of Unitholders--Reinvestment Option."
Risk Factors. An investment in the Trust should be made with an understanding
of the risks associated therewith, including, among other factors, the
possible deterioration of either the Securities which make up the Trust or the
general condition of the stock market, volatile interest rates, economic
recession, currency exchange fluctuations, foreign withholding, and
differences between domestic and foreign legal, auditing, brokerage and
economic standards. The Trust is not actively managed and Securities will not
be sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Units of the Trust are not deposits or
obligations of, or 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. See "Risk Factors."
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 14
Summary of Essential Financial Information
As of the Opening of Business on the Initial Date of Deposit: May 24, 1995
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of Treasury Obligations Initially Deposited <F1> ............. $ 2,200,000
Aggregate Number of Shares of Govett Smaller Companies Fund Initially Deposited ....... 39,943
Number of Units........................................................................ 200,000
Fractional Undivided Interest in the Trust per Unit ................................... 1/200,000
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>....................................... $ 1,901,133
Aggregate Value of Securities per Unit................................................ $ 9.51
Sales Charge 4.9% (5.152% of the Aggregate Value of Securities per Unit).............. $ .49
Public Offering Price per Unit <F2>................................................... $ 10.00
Redemption Price per Unit.............................................................. $ 9.48
Secondary Market Repurchase Price per Unit............................................. $ 9.51
Excess of Public Offering Price per Unit over Redemption Price per Unit................ $ .52
Excess of Sponsor's Initial Repurchase Price per Unit over Redemption Price per Unit... $ .03
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Evaluation Time..............4:00 P.M. New York time
Mandatory Termination Date...August 15, 2007
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Estimated Govett Smaller Companies Fund Annual
Expenses <F3>....................................$.0678 per Unit
Trustee's Annual Fee..............................$.0050 per Unit
Annual Organizational Expenses <F4>...............Estimated to be $.0069 per Unit
Record Date.......................................As soon as practicable after the Fund's ex-dividend date
Distribution Date.................................As soon as practicable after the Fund's distribution date
<FN>
<F1>The shares of the Fund are valued at their net asset value. The Treasury
Obligations are valued at their aggregate offering side evaluation. Because
the Fund Shares may from time to time under certain circumstances be sold or
Trust Units may be redeemed, there is no guarantee that the value of each Unit
over the life of the Trust or at the Trust's termination will be equal to the
Aggregate Value of Securities per Unit as stated above. However, due to the
inclusion of the Treasury Obligations in the Trust's portfolio, Unitholders
who hold their Units until maturity will receive at least $11.00 per Unit
(which is the value upon maturity of the Treasury Obligations.)
<F2>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.
<F3>Estimated Govett Smaller Companies Fund Expenses represent the intrinsic cost
to each Unit due to the underlying costs associated with the Govett Smaller
Companies Fund and are based upon the net asset value of that number of Govett
Smaller Companies Fund Shares per Unit multiplied by the Fund's Annual
Operating Expenses less rebated 12b-1 fees. See "Trust Portfolio--Fund
Expenses."
<F4>The Trust (and therefore Unitholders) will bear all or a portion of
its organizational costs (including costs of preparing the registration
statement, the trust indenture and other closing documents, registering Units
with the Securities and Exchange Commission and states, the initial audit of
the Trust portfolio and the initial fees and expenses of the Trustee but not
including the expenses incurred in the preparation and printing of brochures
and other advertising materials and any other selling expenses) as is common
for mutual funds. Total organizational expenses will be amortized over a
five year period. See "Expenses of the Trust" and "Statement of Condition."
Historically, the sponsors of unit investment trusts have paid all the costs
of establishing such trusts.
</TABLE>
THE TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 14 is comprised
of one unit investment trust, Govett Smaller Companies Fund and Treasury
Trust, Series 1. The Trust was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement (the "Trust Agreement"), among Van
Kampen American Capital Distributors, Inc., as Sponsor, American Portfolio
Evaluation Services, a division of Van Kampen American Capital Investment
Advisory Corp., as Evaluator, and The Bank of New York, as Trustee.
The Govett Smaller Companies Fund and Treasury Trust may be an appropriate
medium for investors who desire to participate in a portfolio of mutual fund
shares and zero-coupon U.S. Treasury obligations. Diversification of assets in
the Trust will not eliminate the risk of loss always inherent in the ownership
of securities. For a breakdown of the portfolio see "Trust Portfolio."
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio"herein, including delivery statements
relating to contracts for the purchase of certain such Securities and an
irrevocable letter of credit or cash 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 Govett
Smaller Companies Fund and Treasury Trust indicated in "Summary of Essential
Financial Information."Unless otherwise terminated as provided in the Trust
Agreement, the Trust will terminate on the Mandatory Termination Date, and
Securities then held will within a reasonable time thereafter be liquidated or
distributed by the Trustee.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Securities or contracts to purchase securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trust as a result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Securities
into the Trust following the Initial Date of Deposit, provided that such
additional deposits will be in amounts which will maintain the same percentage
relationship among the Fund Shares and the Treasury Obligations that existed
immediately prior to any such subsequent deposit. Such deposits of additional
Securities will, therefore, be done in such a manner that the maturity value
of the Treasury Obligations represented by each Unit should always be an
amount at least equal to $11.00. Thus, although additional Units will be
issued, each Unit will continue to represent approximately the same number of
Fund Shares and the same pro rata share of the percentage amount of the
Treasury Obligations, and the percentage relationship among each Security in
the Trust will remain the same. On a cost basis to the Smaller Companies Fund
and Treasury Trust, the original percentage relationship on the Initial Date
of Deposit was approximately 50.79% Treasury Obligations and approximately
49.21% Fund Shares. Since the prices of the underlying Treasury Obligations
and Fund Shares will fluctuate daily, the ratio, on a market value basis, will
also change daily. The maturity value of the Treasury Obligations represented
by each Unit will not change as a result of the deposit of additional
Securities in the Trust.
Each Unit of the Trust represents an undivided interest in the Trust. To the
extent that any Units are redeemed by the Trustee or additional Units are
issued as a result of additional Securities being deposited by the Sponsor,
the fractional undivided interest in the Trust represented by each unredeemed
Unit will increase or decrease accordingly, although the actual interest in
the Trust represented by such fraction will remain unchanged. Units will
remain outstanding until redeemed upon tender to the Trustee by Unitholders,
which may include the Sponsor, or until the termination of the Trust
Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objectives of the Smaller Companies Fund and Treasury Trust are to protect
Unitholders' capital and provide investors with the potential for long-term
capital appreciation. The portfolio is described under "Trust Portfolio" and
"Portfolio" herein. An investor will be subjected to taxation on the dividend
income received from the Trust and on gains from the sale or liquidation of
Securities (see "Federal Taxation"). Investors should be aware that there is
not any guarantee that the objectives of the Trust will be achieved because
the market value of the Securities can be affected by a variety of factors.
Fund Shares 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 underlying 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 Fund Shares will make distributions. The
Trust, however, has been organized so that investors would receive, at
termination, an amount per Unit at least equal to $11.00 (which is equal to
the per Unit value upon maturity of the Treasury Obligations), even if the
Trust never paid a distribution and the value of the Fund Shares were to
decrease to zero, which the Sponsor considers highly unlikely. Any
distributions of income will generally depend upon the declaration of
dividends by the Fund and the declaration of any dividends depends upon
several factors including the financial condition of the Fund and general
economic conditions.
In seeking this objective, the Sponsor also considered the ability of the
Equity Securities to outpace inflation. While inflation is currently
relatively low, the United States has historically experienced periods of
double-digit inflation. While the prices of equity securities will fluctuate,
over time equity securities have outperformed the rate of inflation, and other
less risky investments, such as government bonds and U.S. Treasury bills.
Since 1926, common stocks have delivered an annual growth rate of 10.19% and
emerging growth stocks have done even better, delivering an annual growth rate
of 12.22%. Historically, the most dynamic phase of growth for most companies
occurs when they are in their emerging growth stage, when they are young and
relatively unknown. Past performance is, however, no guarantee of future
results.
The following chart shows the average annual compounded rate of return of
selected asset classes from 1926 through 1994 compared to the rate of
inflation over the same period. Of course, this chart represents past
performance of these investment categories and there is no guarantee of future
results, either of these categories or of the Trust. The Trust also has sales
charges and expenses which are not reflected in the chart.
<TABLE>
<CAPTION>
<S> <C>
Emerging Growth Stocks 12.22%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Common Stocks (Dow Jones Industrial Average) 10.19%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Long-term U.S. Government bonds 4.81%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
U.S. Treasury bills (short term) 3.69%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Consumer Price Index 3.12%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
0 2 4 6 8 10 12 14%
Source: Ibbotson Associates and Micropal, Inc.
</TABLE>
In selecting Securities for the Smaller Companies Fund and Treasury Trust, the
following factors, among others, were considered: (a) for the portion of the
Securities that are Fund Shares, the Sponsor selected shares of Govett Smaller
Companies Fund, a mutual fund which seeks long-term capital appreciation by
investing primarily in equity securities of smaller companies located
throughout the world, and (b) for the portion of the Securities that are
Treasury Obligations, the evidence of the right to receive a fixed payment at
a future date from the U.S. Government, backed by the full faith and credit of
the U.S. Government.
Investors should be aware that the Trust is not a "managed" fund and as a
result the adverse financial condition of the Fund will not result in its
elimination from the portfolio except under extraordinary circumstances (see
"Trust Administration--Portfolio Administration"). In addition, Securities
will not be sold by the Trust to take advantage of market fluctuations or
changes in anticipated rates of appreciation. Investors should note in
particular that the Securities were selected by the Sponsor as of the date the
Securities were purchased by the Trust. The Trust may continue to purchase or
hold Securities originally selected through this process even though the
evaluation of the attractiveness of the Securities may have changed and, if
the evaluation were performed again at that time, the Securities would not be
selected for the Trust.
TRUST PORTFOLIO
The Smaller Companies Fund and Treasury Trust consists of (a) shares of Govett
Smaller Companies Fund and (b) zero-coupon U.S. Treasury Obligations.
Fund Shares. The portfolio of the Trust contains shares of Govett Smaller
Companies Fund.
Govett Smaller Companies Fund is one of seven portfolios included in The
Govett Funds, Inc. (the "Company"), an open-end management investment company.
Govett Smaller Companies Fund seeks long-term capital appreciation by
investing primarily in equity securities of smaller companies located
throughout the world.
The Fund is authorized to issue three distinct classes of shares ("Class A
shares", "Class B shares" and "Class C shares"). Each class of shares may be
purchased by investors at a price equal to the net asset value of the Fund per
share, plus the respective sales charge. The Trust has purchased Class A
shares for deposit herein and any reference to Fund Shares in this prospectus
shall refer to Class A shares.
The Fund's investment manager is John Govett & Co. Limited ("John Govett" or
the "Manager"), a United Kingdom corporation and an affiliate of Govett &
Company Limited (together with its subsidiaries, the "Govett Group").
Additional information concerning Govett Smaller Companies Fund appears in
"Trust Portfolio--Govett Smaller Companies Fund Summary." This Prospectus sets
forth concisely information about the Fund that a prospective investor should
know before investing. A Fund Prospectus and a Statement of Additional
Information about the Fund have been filed with the Securities and Exchange
Commission (the "Commission") and are available, upon request and without
charge, by writing to Van Kampen American Capital Distributors, Inc. (the
Fund's "Distributor"), 2800 Post Oak Blvd., 44th Floor, Houston, Texas 77056,
or by calling (800) 634-6838. The Fund's Statement of Additional Information,
which is incorporated in its entirety by reference in the Fund's prospectus,
contains more detailed information about the Fund and its management,
including more complete information as to certain risk factors.
Treasury Obligations. The Treasury Obligations deposited in the Smaller
Companies Fund and Treasury Trust consist of U.S. Treasury bonds which have
been stripped of their unmatured interest coupons. The Treasury Obligations
evidence the right to receive a fixed payment at a future date from the U.S.
Government and are backed by the full faith and credit of the U.S. Government.
Treasury Obligations are purchased at a deep discount because the buyer
obtains only the right to a fixed payment at a fixed date in the future and
does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the
Treasury Obligations) is that a fixed yield is earned not only on the original
investment, but also, in effect, on all earnings during the life of the
discount obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such obligations
at a rate as high as the implicit yield on the discount obligation, but at the
same time eliminates the holder's ability to reinvest at higher rates in the
future. For this reason, the Treasury Obligations are subject to substantially
greater price fluctuations during periods of changing interest rates than are
securities of comparable quality which make regular interest payments. The
effect of being able to acquire the Treasury Obligations at a lower price is
to permit more of the Trust's portfolio to be invested in Fund Shares.
General. The Trust consists of the Securities listed under "Portfolio" as may
continue to be held from time to time in the Trust and any additional
Securities acquired and held by the Trust pursuant to the provisions of the
Trust Agreement together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way for any failure
in any of the Securities. However, should any contract for the purchase of any
of the Securities initially deposited hereunder fail, the Sponsor will, unless
substantially all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Securities in accordance with the Trust Agreement,
refund the cash and sales charge attributable to such failed contract to all
Unitholders on the next distribution date.
Because certain of the Fund Shares from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can be
given that the Trust will retain for any length of time its present size and
composition. Although the portfolio is not managed, the Sponsor may instruct
the Trustee to sell Fund Shares under certain limited circumstances. See
"Trust Administration--Portfolio Administration."Fund Shares, however, will
not be sold by the Trust to take advantage of market fluctuations or changes
in anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Fund Shares as such and
will not be able to vote the Fund Shares. As the holder of the Fund Shares,
the Trustee will have the right to vote all of the voting stocks in the Trust
and will vote such stocks in accordance with the instructions of the Sponsor.
Actions required to be taken with respect to the Treasury Obligations will be
in accordance with the instructions of the Sponsor.
The following section provides a brief description of the Govett Smaller
Companies Fund, specifically its relationship with the Trust. More specific
information regarding Govett Smaller Companies Fund can be obtained from the
Prospectus and Statement of Additional Information prepared therefor as
described above.
Govett Smaller Companies Fund Summary
The operating expenses and maximum transaction expenses expected to be
associated with an investment in the Fund are reflected in the following
tables:
<TABLE>
<CAPTION>
Govett Smaller Companies Fund
Class A
Shares
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 1........................................ 4.95%
Sales Charge Imposed on Dividend Reinvestments......................................................................... None
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable)........................................................................................................... None
Redemption Fees........................................................................................................ None
Exchange Fees.......................................................................................................... None
ANNUAL OPERATINGEXPENSES:
(as a percentage of average daily net assets)...........................................................................
Management Fee......................................................................................................... 1.00%
12b-1 Distribution and Service Fees 2.................................................................................. 0.50%
Other Expenses (after reduction of expenses)........................................................................... 0.45%
Total Fund Operating Expenses (after fee waiver and reduction of expenses) 3........................................... 1.95%
The Fund's Manager has agreed to reduce its management fees, and the Fund's
Distributor has agreed to pay certain Fund operating expenses, through at
least December 31, 1995 to the extent necessary to limit total annual Fund
Operating Expenses to the lesser of the percentages listed above under "Total
Fund Operating Expenses,"or the maximum allowed by the most stringent state
expense limitations. Long-term Fund shareholders may pay more than the
economic equivalent of the maximum front-end sales charge otherwise permitted
by the NASD.
<FN>
<F1>There is no sales charge payable upon the purchase of the Fund Shares
deposited in the Trust. However, the maximum sales charge on the Units, and
therefore indirectly on the Fund Shares is 4.9% during both the initial
offering period and in the secondary market.
<F2>Effectively, there are no 12b-1 fees on Fund Shares held in the Trust.
However, Unitholders who acquire shares of the Fund through an In Kind
Distribution upon redemption or at the Trust's termination will begin to incur
12b-1 fees at such time as shares are acquired.
<F3>The percentage in "Other Expenses" for the Class A shares of the Smaller
Companies Fund is based on expenses incurred by the Fund during the fiscal
year ended December 31, 1994 after fee waivers and expense reimbursements by
the Manager and the former distributor to such Fund. Absent such waivers and
reimbursements, "Total Fund Operating Expenses" as a percentage of net assets
for the Class A shares of the Smaller Companies Fund would have been 2.44% for
the fiscal year ended December 31, 1994. See "Summary of Essential
Information" for a description of estimated fees and expenses charged per Unit.
</TABLE>
Examples:
Assuming the current fee waivers and expenses limitations remain in effect, an
investor would pay the following expenses on a $1,000 investment in Fund
Shares assuming (1) 5% annual return 3 and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
Govett Smaller
Companies Fund
Class A
Shares
<S> <C>
1 year..... $ 68
3 years.... 108
5 years.... 150
10 years... 266
</TABLE>
An investor would pay the following expenses on the same investment assuming
no redemption:
<TABLE>
<CAPTION>
Govett Smaller
Companies Fund
Class A
Shares
<S> <C>
1 year..... $ 68
3 years.... 108
5 years.... 150
10 years... 266
</TABLE>
The 5% annual return assumption in this example is required by SEC regulations
applicable to all mutual funds; it does not represent a projection of the
Fund's actual performance. For a detailed discussion of these matters,
investors should refer to the relevant sections of this Prospectus.
The above tables are not intended to reflect precisely the fees and expenses
associated with a particular person's investment in Class A shares of the
Fund. The tables should not be considered a representation of past or future
Fund expenses and actual Fund expenses may be greater or lesser than those
shown in the tables. Rather, the tables have been provided only to assist
investors in understanding the various costs and expenses that a Fund
shareholder will bear, directly or indirectly, in connection with an
investment in the Fund.
FINANCIAL HIGHLIGHTS
The table below provides condensed information concerning income and capital
changes for one Class A share of the Govett Smaller Companies Fund for the
year ended December 31, 1993 and the year ended December 31, 1994. The
information has been audited by the Fund's independent accountants, whose
unqualified report thereon appears in the Annual Report to Shareholders of the
Fund for the fiscal year ended December 31, 1994. The financial statements and
related notes of the Govett Smaller Companies Fund contained in such Annual
Report (and no other portion of such Report) are incorporated by reference
into the Fund's Prospectus.
<TABLE>
<CAPTION>
Govett Smaller Companies Fund
Year ended Year ended
December 31, December 31,
1994 1993 (a)
<S> <C> <C>
Net asset value, beginning of period..................... $15.85 $10.00
Income from investment operations:
Net investment income (loss)............................. (0.10) (0.06)
Net realized and unrealized gain (loss) on investments... 4.47 5.91
Total from investment operations......................... 4.37 5.85
Less distributions to shareholders:
From net investment income............................... -- --
From net realized gains.................................. (1.16) --
Total distributions...................................... (1.16) --
Net asset value, end of period........................... $19.06 $15.85
Total Return *........................................... 28.74% 58.50%
Ratios/Supplemental Data:
Net assets, end of period (000's)........................ $76,873 $39,681
Net expenses to average daily net assets
(Note A)................................................ 1.95% 1.95%
Net investment income (loss) to average
daily net assets........................................ (1.13)% (0.93)%
Portfolio turnover rate.................................. 519% 483%
Note A: John Govett & Co. Limited waived a portion of its management fees and
Govett Financial Services Limited, the Fund's former distributor, reimbursed a
portion of the other operating expenses of the Fund during the periods
indicated. Without the waiver and reimbursement of expenses, the expense
ratios as a percentage of average net assets for the periods indicated would
have been: Expenses 2.40% 2.44%
(a) Commencement of Operations was January 1, 1993.
*Total return calculations exclude front-end sales load.
Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis net
investment income (loss).
</TABLE>
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS OF THE FUND
Govett Smaller Companies Fund is a diversified series of The Govett Funds,
Inc. which seeks long-term capital appreciation by investing primarily in
equity securities of smaller companies located throughout the world.
While no single Fund is intended to provide a complete or balanced investment
program, the Fund can serve as a component of an investor's overall program to
meet long-term objectives. There can be no assurance that the Fund will
achieve its investment objective. The Fund's net asset value fluctuates based
upon changes in the value of its portfolio securities. The Fund's investment
objective and certain investment limitations (as described in the Fund's
Statement of Additional Information) are fundamental and may not be changed
without shareholder approval. All other investment limitations or policies may
be changed by the Fund's Board of Directors without shareholder approval.
Whenever an investment policy or limitation states a maximum percentage of the
Fund's assets that may be invested in any security or other asset, or sets
forth a policy regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a result of the Fund's
acquisition of such security or other asset. Accordingly, any later increase
or decrease resulting from a change in values, net assets or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment policies and limitations.
Investment Techniques Followed by the Fund. The Fund seeks long-term capital
appreciation by investing primarily in equity securities of those smaller
companies that the Manager believes may be the industry leaders of tomorrow.
The Fund will select its portfolio investments primarily from among U.S. and
foreign companies with individual market capitalizations which would, at the
time of purchase, place them in the same size range as companies included in
the NASDAQ Composite Index, excluding its top 75 companies. Based on this
policy and recent U.S. share prices, the companies in which the Fund invests
typically will have individual market capitalizations of less than $1.0
billion ("smaller companies"). Under normal market conditions, the Fund will
invest at least 65% of its total assets in smaller companies.
Under normal market conditions, it is expected that at least 80% of the Fund's
total assets will be invested in common stocks. The Fund may also invest up to
20% of its total assets in other types of securities with equity
characteristics such as preferred stocks, convertible securities, warrants,
units, and rights. Under normal market conditions, the Fund will not invest
more than 35% of its total assets in the securities of issuers located in any
one country (other than the U.S.). The Fund may invest in both exchange-listed
and over-the-counter ("OTC") securities. Although the Fund may receive current
income from dividends, interest and other sources, income is only an
incidental consideration in the selection of the Fund's investments. Subject
to prevailing market conditions, not more than 5% of the Fund's total assets
will be invested in the securities of any one issuer (excluding the U.S.
government and its agencies), and not more than 25% of the Fund's total assets
will be invested in any one industrial classification.
RISK FACTORS
ADRs and EDRs. The Fund may also invest in both sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs")
and other similar global instruments. The issuance of ADRs is typically
administered by a U.S. bank or trust company, and they evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depositary Receipts, are receipts issued
in Europe, typically through arrangements with foreign banks and trust
companies, that evidence ownership of either foreign or U.S. underlying
securities. Unsponsored ADR and EDR programs are organized independently and
without the cooperation of the issuer of the underlying securities. As a
result, available information concerning the issuer may not be as current as
for sponsored ADRs and EDRs, and the prices of unsponsored ADRs and EDRs may
be more volatile than if they were sponsored by the issuers of the underlying
securities.
Temporary Strategies. Pending investment of proceeds from new sales of Fund
Shares, to meet ordinary daily cash needs, and to retain the flexibility to
respond promptly to changes in market and economic conditions, Govett Asset
Management Company ("Govett Asset Management"or the "Subadvisor"), the Fund's
Subadvisor, may employ a temporary defensive investment strategy for the Fund
if the Subadvisor determines such a strategy to be warranted. It is impossible
to predict when or for how long the Subadvisor may employ such strategies.
Under such a strategy, the Fund may hold cash (U.S. dollars, foreign
currencies or multinational currency units) and/or invest any portion or all
of their respective assets in short-term high quality money market
instruments. For debt obligations other than commercial paper, this includes
securities rated, at the time of purchase, at least AA by Standard & Poor's or
Aa by Moody's, or if unrated, determined to be of comparable quality by the
Subadvisor. For commercial paper, this includes securities rated, at the time
of purchase, at least A-2 by Standard & Poor's or Prime-2 by Moody's, or if
unrated, determined to be a comparable quality by the Subadvisor.
Hedging Strategies. The Fund may use certain hedging strategies to attempt to
reduce the overall level of investment and currency risk normally associated
with the Fund's present and planned investments. There can be no assurance
that such efforts will succeed. It is currently intended that the Fund will
place at risk no more than 5% of its net assets in any one of the following
categories of transactions or securities: forward currency contracts, writing
of covered put and call options, purchase of put and call options on
currencies and equity and debt securities, stock index futures and options
thereon, interest rate futures and options thereon. Participation in the
options or futures markets and in currency exchange transactions involves
investment risks and transactions costs to which the Fund would not be subject
absent the use of these strategies. If the Subadvisor's prediction of
movements in the direction of interest rates, securities prices, or currency
markets are inaccurate, the adverse consequences to the Fund may leave the
Fund in a worse position than if such strategies were not used. Risks inherent
in the use of options, foreign currency and futures contracts and options
thereon include: (1) dependence on the Subadvisor's ability to predict
correctly movements in the direction of interest rates, securities prices and
currency markets; (2) the imperfect correlation between the price of options
and futures contracts and options thereon and movements in the prices of the
securities or currencies being hedged; (3) the fact that the skills needed to
use these strategies are different from those needed to select portfolio
securities; (4) the possible absence of a liquid secondary market for a
particular instrument at any time; and (5) the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences. The Fund's
ability to enter into futures contracts and options thereon is limited by the
requirements of the Internal Revenue Code for qualification as a regulated
investment company. These hedging techniques are described in the Fund's
Statement of Additional Information.
Repurchase Agreements. The Fund may enter into repurchase agreements in which
the Fund acquires a high grade liquid debt security from a U.S. bank,
broker-dealer or other financial institution that simultaneously agrees to
repurchase the security at a specified time and price. Under the 1940 Act,
repurchase agreements are considered to be loans collateralized by the
underlying security and therefore will be collateralized in an amount at least
equal to the current market value of the loaned securities, plus any accrued
interest, by cash, letters of credit, U.S. government securities or other high
grade liquid debt securities the Fund's custodian, or a designated
sub-custodian, segregated from other Fund assets. In segregating such assets,
the Fund's custodian either places them in a segregated account or separately
identifies them and renders them unavailable for investment by the Fund.
Principal Risk Factors. The investment approach required to invest in foreign
markets, particularly emerging markets, is quite specialized. The quality and
quantity of historic economic and securities market data is, in many of those
markets, limited, and many foreign markets are inherently more volatile than
the U.S. securities markets. As a result, the Subadvisor has developed an
investment management process over several decades using in-house and outside
research services. The Subadvisor's in-house analysis includes a three-part
monitoring process including review and analysis of overall market information
(including both political and economic factors); investigation of companies
which are candidates for investment; and use of on-site representatives
providing investment information, where deemed appropriate by the Subadvisor.
The Fund's portfolio is subject to market risk (i.e., the possibility that
stock prices will decline over short, or even extended, periods). Equity and
bond markets outside of the U.S. have, in fact, significantly outperformed
U.S. markets from time to time, and the Subadvisor believes that investments
in securities of companies based outside of the U.S. may provide greater
long-term investment returns than would be available from investing solely in
U.S. securities. It is important, however, to recognize that investments in
securities of foreign issuers involve greater risks than investments in U.S.
companies. There may be less information publicly available about foreign
companies, and less government regulation and supervision of foreign stock
exchanges, securities dealers and listed companies. Foreign companies are not
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S. companies.
Securities of some foreign companies are less liquid, and their prices more
volatile, than securities of comparable U.S. companies. Settlement of
transactions in some foreign markets may be delayed or may be less frequent
than in the U.S., which could affect the liquidity of the Fund's portfolios.
Security trading practices abroad may offer less protection to investors such
as the Fund. Additionally, in some foreign countries, there exists the
possibility of expropriation, nationalization of issuers or confiscatory
taxation, limitations on the removal of securities, property or other assets,
political or social instability, including war or other armed conflict, or
diplomatic developments which could affect U.S. investments in those
countries. The performance of individual foreign economies may also compare
unfavorably to that of the U.S. economy, and the U.S. dollar value of
securities denominated in currencies other than the U.S. dollar may be
affected unfavorably by exchange rate movements. Each of these factors could
adversely affect the value of the Fund's shares, as well as the value of
dividends and interest earned by the Fund and gains which may be realized.
Foreign governments may withhold taxes (typically at a rate between 10% and
35% of the gross amount paid) from dividends or interest paid with respect to
securities held by the Fund, decreasing the net asset value of the Fund. Some
foreign securities are subject to brokerage taxes levied by foreign
governments, increasing the cost of such securities and reducing the realized
gain, or increasing the realized loss, on such securities at the time of sale.
The Fund invests in companies located within emerging or developing countries,
which involves exposure to economic structures that are generally less diverse
and mature, and to political systems which can be expected to have less
stability, than those of more developed countries. Such countries may have
relatively unstable governments, economies based on only a few industries, and
securities markets which trade only a small number of securities. Historical
experience indicates that emerging markets have been more volatile than the
markets of more mature economies; such markets have also from time to time
provided higher rates of return and greater risks to investors. The Subadvisor
believes that these characteristics of emerging markets can be expected to
continue in the future. In addition, throughout the countries commonly
referred to as the Eastern Bloc, the lack of a capital market structure or
market-oriented economy and the possible reversal of recent favorable
economic, political and social events in some of those countries present
greater risks than those associated with more developed, market-oriented
Western European countries and markets.
In addition, investments in securities issued by Mexican companies involve
special considerations and risks not typically associated with investments in
securities of U.S. companies, including the risks associated with high rates
of inflation and interest rates with respect to the Mexican economy, the
limited liquidity and relatively small market capitalization of the Mexican
securities market, relatively higher price volatility, restrictions on foreign
investment, political and social uncertainties, governmental involvement in
the economy and significant foreign currency devaluations and fluctuations.
The special risks of investment in foreign exchange contracts, interest rate
and forward currency futures contracts, options on foreign currencies, and
stock index futures contracts (and options on such futures contracts) are
described in the Statement of Additional Information.
Shares of the Fund are an appropriate investment for prospective investors who
are willing and able to assume the risks associated with the types of
investments made by the Fund. The smaller companies in which the Fund
primarily invests often have rates of sales, earnings, growth and share price
appreciation that exceed those of larger companies. However, such companies
also often have limited product lines, markets or financial resources, and
investors should note that stocks of smaller companies may have limited
marketability and typically experience more market price volatility than
stocks of larger companies, and the Funds' net asset value may reflect this
volatility.
Investment Restrictions. The Fund is a diversified series of The Govett Funds,
Inc. A diversified series of shares of an investment company is required under
the 1940 Act to follow certain guidelines in managing its investments which
may help to reduce risk.
As a non-fundamental policy, the Fund may not invest more than 5% of its net
assets in securities restricted as to resale or in illiquid securities. The
Fund may not invest 25% or more of its total assets in any one industry (other
than U.S. Government and agency obligations). In addition, the Fund may not
borrow money or mortgage or pledge any of its assets (except that the Fund may
borrow from banks, for temporary or emergency purposes, up to 331/3% of its
total assets in connection therewith). Any borrowings that come to exceed the
331/3% limitation will be reduced within three days. The Fund may not purchase
securities when its borrowings exceed 5% of its assets. The Fund may not make
loans if, as a result, more than 331/3% of the Fund's total assets would be
lent to other parties except (i) through the purchase of a portion of an issue
of debt securities in accordance with its investment objectives, policies, and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities. Portfolio securities may be loaned only if continuously
collateralized at least 100% by "marking-to-market" daily.
See the Fund's Statement of Additional Information for the full text of these
restrictions and the Fund's other investment policies. Except for those
investment restrictions designated as fundamental in the Fund's Statement of
Additional Information, the investment policies described in the Fund's
prospectus and in its Statement of Additional Information are not fundamental
policies. The Company's Board of Directors may change a non-fundamental
investment policy without shareholder approval.
MANAGEMENT OF THE FUND
The Company's Board of Directors is responsible for overseeing the conduct of
the Company's business and the activities of the Fund. Pursuant to an
investment management contract, and subject to such policies as the Board of
Directors may establish, John Govett oversees the Fund's operations. For these
investment management and administrative services, the Fund pays fees monthly
to John Govett based upon the average net assets of the Company, as determined
at the close of each business day during the month, at an annual rate of 1%
over the average daily net assets of the Fund. Due to the added complexities
involved in managing international and smaller company investments, the
Manager's fee is higher than that paid by most other investment companies. The
management fees will be reduced, if necessary, to comply with the most
stringent total expense limits prescribed by the states in which the Fund's
shares are offered for sale. The Fund pays all expenses not assumed by John
Govett or other persons, such as the Distributor, as defined below, including
but not limited to the Manager's fees, outside directors' fees; taxes, if any;
auditing, legal, custodial, transfer agent and certain investor servicing and
shareholder reporting expenses; brokerage and commission expenses, if any;
interest charges on any borrowings; costs and expenses of accounting,
bookkeeping and recordkeeping; insurance premiums; trade association dues;
fees and expenses of registering and maintaining registration of their shares
for sale under federal and applicable state securities laws; costs associated
with shareholders' meetings and the preparation and distribution of proxy
materials; printing and mailing prospectuses and statements of additional
information and reports to shareholders; and other expenses relating to the
Fund's operations plus any extraordinary and non-recurring expenses. The
Manager, Distributor, and certain of their respective affiliates have agreed
to share management fees, distribution and service fees, excess Fund expenses,
and sales charges related to the sale of Fund shares.
John Govett has entered into a Subadvisory Agreement with Govett Asset
Management, an affiliate of John Govett, whereby Govett Asset Management
provides day-to-day investment advisory services to the Fund. Under the
subadvisory arrangements, Govett Asset Management furnishes an investment
program and makes investment decisions for the Fund, subject to the
supervision of John Govett and the Board of Directors. For the services
provided under the subadvisory agreements, John Govett pays to Govett Asset
Management, out of the investment advisory fee received by John Govett from
the Company with respect to the Fund, an annual fee, computed daily and paid
monthly, equal to 0.50% of the Fund's average daily net assets. The Fund does
not compensate Govett Asset Management directly for its subadvisory services.
The subadvisory fee payable to Govett Asset Management will be reduced
proportionately if the advisory fee paid to John Govett by the Company with
respect to the Fund is reduced as a result of applicable state expense
limitations or fee waivers.
During the fiscal year ended December 31, 1994, the total operating expenses
paid by the Class A Shares of the Fund, (including management and
administrative and distribution fees, but after fee reductions and expense
reimbursements) was 1.95% of the Fund's average daily net assets.
John Govett & Co. Limited. John Govett is a United Kingdom-based investment
management company whose investment management activities originated in the
1920s and was incorporated in 1955 to provide a corporate structure for a
management group. Located at 4 Battle Bridge Lane, London SE1 2HR, England,
John Govett is a wholly-owned subsidiary of Govett & Company Limited, a
corporation listed on the London Stock Exchange with a current market
valuation of approximately $440 million. The Govett Group, which manages or
administers investment funds valued at approximately $8.6 billion, maintains
offices in London, Singapore, Jersey (Channel Islands), Sacramento, Raleigh,
and San Francisco. In March 1995 a proposed merger of John Govett & Co. and
Govett Asset Management Co. with Duff & Phelps Corp. was terminated. Govett &
Company Limited currently continues its plans to sell these businesses.
Govett Asset Management Company. Govett Asset Management is a registered
investment adviser whose principal office is located at 650 California Street,
28th Floor, San Francisco, California 94108. Govett Asset Management is an
affiliate of John Govett. Govett Asset Management has been engaged in the
investment management business since 1972, and currently manages approximately
$1.1 billion in assets for both individual and institutional clients. Its
investment management activities include investment in equities (ranging from
small capitalization to large capitalization companies), a full range of fixed
income securities, and asset allocation strategies.
The portfolio manager for the Fund is Garett R. Van Wagoner. Since the Fund's
inception, he has been primarily responsible for the day-to-day management of
the Fund's portfolio and has been a portfolio manager with Govett Asset
Management since 1993. Mr. Van Wagoner graduated from Bucknell University with
a B.S. in Business Administration. He was responsible for income research for
First American Bank, N.A., before joining Flagship National Bank. In 1982, he
joined Bessemer, where he was responsible for the Emerging Growth Stock
Investment Program.
Allocation of Portfolio Transactions. Neither the Manager nor the Subadvisor
has any agreement or commitment to place orders with any particular securities
dealer or dealers with respect to the Fund. In placing orders for the Fund's
portfolio transactions, the Manager and the Subadvisor seek the best net
results, analyzing such factors as price, size of order, difficulty of
execution and the operational capabilities of the firm involved. Prior to
making an investment, the Manager and the Subadvisor perform considerable
research on the specified company and country. In underwritten offerings,
securities are usually purchased at a fixed price which includes an amount of
compensation to the underwriter. On occasion, securities may be purchased
directly from an issuer, in which case there are no commissions or discounts.
Dealers may receive commissions on futures, currency and options transactions.
Commissions on trades made through foreign securities exchanges or
over-the-counter markets typically are fixed and generally are higher than
those made through United States securities exchanges or over-the-counter
markets.
Consistent with their obligations to obtain the best net results, the Manager
and the Subadvisor may consider a securities broker-dealer's sale of Fund
Shares, or research and brokerage services provided by the securities
broker-dealer, as factors in considering through whom portfolio transactions
will be effected. The Fund may pay to those securities broker-dealers who
provide brokerage and research services to the Manager or Subadvisor a higher
commission than that charged by other securities broker-dealers if the Manager
or Subadvisor determines in good faith that the amount of the commission is
reasonable in relation to the value of those services in terms of the overall
responsibility of the Manager or Subadvisor to the Fund and to any other
accounts over which the Manager or Subadvisor exercises investment discretion.
The frequency of portfolio transactions, the Fund's turnover rate, will vary
from year to year depending on market conditions. The portfolio turnover rates
of the Fund for the period from January 1, 1994 through December 31, 1994 was
519%. Because a high annual turnover rate (over 100%) increases transaction
costs and may increase the incidence of federal taxation on the Fund's
capital, the Manager and Subadvisor will carefully weigh the anticipated
benefits of a portfolio transaction against expected transaction costs and tax
consequences. Neither the Manager nor the Subadvisor will engage in short-term
trading other than what is necessary for the prudent management of the Funds'
portfolios.
Distribution Arrangements. Van Kampen American Capital Distributors, Inc. (the
"Distributor") is the distributor, or principal underwriter, of the Fund's
shares and Sponsor of the Trust. The Distributor currently also acts as
principal underwriter for the Van Kampen American Capital Family of Mutual
Funds, which consists of 104 mutual funds with aggregate net assets, on a
proforma basis, of approximately $32.4 billion as of September 30, 1994. The
Distributor's office is located in Houston, Texas. The Distributor is a wholly
owned subsidiary of Van Kampen American Capital, Inc. ("VKAC"), a wholly owned
subsidiary of VKAC Holding, Inc. VKAC Holding, Inc. is controlled, through the
ownership of a substantial majority of its common stock, by The Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("CDLP"), a Connecticut
limited partnership. CDLP is managed by Clayton Dubilier & Rice, Inc., a New
York based private investment firm. The general partner of CDLP is Clayton &
Dubilier Associates IV Limited Partnership ("CD Associates"). The general
partners of CD Associates are Joseph L. Rice, III, B. Charles Ames, Albert
Cribiore, Donald J. Gogel and Hubbard C. Howe, each of whom is a principal of
Clayton, Dubilier & Rice, Inc. In addition, certain officers, directors and
employees of VKAC own, in the aggregate, not more than 8% of the common stock
of VKAC Holding Inc. and have the right to acquire, upon the exercise of
options, approximately an additional 10% of the common stock of VKAC Holding,
Inc. VKAC has been active in the mutual fund business since the 1920s. The
Distributor collects the sales charges imposed on purchases and redemptions of
Fund shares, and reallows a portion (in accordance with the schedule set forth
under "How To Purchase Shares" in the Fund's prospectus and as described below
in "Distribution Plans") of such charges to securities dealers who have sold
such shares.
From time to time, the Distributor may provide promotional and/or cash
incentives, including reallowances of up to the entire sales charge, to
certain securities dealers who have sold or are expected to sell significant
amounts of shares of the Fund. The Distributor may from time to time implement
programs under which a broker, dealer or financial intermediary's sales force
may be eligible to win nominal awards for certain sales efforts or under which
the Distributor will reallow to any broker, dealer or financial intermediary
that sponsor sales contests or recognition programs conforming to criteria
established by the Distributor, or participates in sales programs sponsored by
the Distributor, an amount not exceeding the total applicable sales charges on
sales generated by the broker or dealer during such programs. Also, the
Distributor in its discretion may from time to time, pursuant to objective
criteria established by it, pay fees to, and sponsor business seminars for,
qualifying brokers, dealers or financial intermediaries for certain services
or activities which are primarily intended to result in sales of shares of the
Fund. Such fees paid for such services and activities with respect to the Fund
will not exceed in the aggregate 1.25% of the average total daily net assets
of the Fund on an annual basis. The Distributor may also provide written
information to securities dealers in its selling group which relates to sales
incentive campaigns conducted by such securities dealers for their
representatives, as well as financial assistance in connection with
pre-approved seminars, conferences and advertising. No such programs or
additional compensation will be offered to the extent that they are prohibited
by the laws of any state or any self-regulatory agency with jurisdiction over
the Distributor, such as the National Association of Securities Dealers.
Distribution Plans. Rule 12b-1 adopted by the SEC under the 1940 Act permits
an investment company to directly or indirectly pay expenses associated with
the distribution of its shares ("distribution expenses") in accordance with a
plan adopted by the Company's Board of Directors and approved by its
shareholders. Pursuant to Rule 12b-1, the Company's Board of Directors and the
shareholders of each class of the Fund have adopted three Distribution Plans
hereinafter referred to as the "Class A Plan," the "Class B Plan," and the
"Class C Plan." Each Distribution Plan is in compliance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD
Rules") applicable to mutual fund sales charges. Only the Class A Plan is
applicable to the Trust. The NASD Rules limit the annual distribution charges
that the Fund may impose on a class of shares. The NASD Rules also limit the
aggregate amount which the Fund may pay for such distribution charges. Under
the Class A Plan, the Fund pays an ongoing distribution fee to the Distributor
at an annual rate of 0.50% of the Fund's aggregate average daily net assets
attributable to its Class A shares.
The Class A Plan allows the Fund to compensate the Distributor for services
provided and expenses incurred in the distribution of Class A shares,
including advertising expenses and printing costs (e.g., sales materials used
to offer Class A shares to the public). The Distributor may reallow all or a
portion of the payments received under the Plan to third parties, including
banks.
The Class A Plan provides for quarterly payments by the Fund to the
Distributor at the annual rate of 0.50% of the respective average daily net
assets of the Fund attributable to the Fund's Class A shares. If the Class A
Plan should be terminated as provided therein, the Distributor would not be
compensated for costs incurred but not yet recovered. Payments under the Class
A Plan of the Fund may not be increased to more than 0.50% of the Fund's
average daily net assets attributable to Class A shares without prior approval
of the Class A shareholders.
At present, the Company's Board of Directors has approved payments under the
Class A Plan for the purpose of reimbursing the Distributor for payments of
commissions to the Fund's dealers as well as for certain additional expenses
related to shareholder services and the distribution of Class A shares
(including payments for travel, telephone, and overhead expenses of the
Distributor), subject to the overall percentage limitations described above.
The Rule 12b-1 fees imposed on Fund Shares held in the Trust are rebated to
the Trust and are used to reduce expenses of the Trust resulting in increased
distributions to Unitholders. Unitholders who acquire shares of the Fund
through an In Kind Distribution pursuant to a redemption request or at the
Trust's termination will begin to incur Rule 12b-1 fees at such time as shares
are acquired.
Shareholder Services Agent. Van Kampen American Capital Shareholder Services,
Inc., an affiliate of the Distributor ("ACCESS"or the "Shareholder Services
Agent"), provides the Company and the Fund with certain services, including
the following: (1) preparation and maintenance of accounts and records for the
Fund and performance of certain related functions; and (2) provision of
transfer agency services to the Fund. ACCESS provides such services at cost
plus a profit.
Accounting and Administration Services. Investors Bank & Trust Company
("IBT" or the "Fund Administrator") provides the Company and the Fund with
administration and accounting services.
How the Fund Values Its Shares. The Fund calculates the net asset value per
share of each class by dividing the total value of the assets (the securities
held by the Fund, plus any cash or other assets, including interest and
dividends accrued but not yet received) attributable to the class, less the
total liabilities attributable to the class, by the total number of shares of
the class outstanding. Shares are valued as of the close of trading on the New
York Stock Exchange (usually considered 4:00 p.m. Eastern Time) each day the
Exchange is open. All securities traded on an exchange are valued at the last
sale quotation on the exchange prior to the time of valuation. Portfolio
securities for which market quotations are readily available are stated at
market value. Short-term investments that will mature in 60 days or less are
valued using amortized cost, which the Companys Board of Directors has
determined approximates market value. Amortized cost valuation means that a
debt security with a maturity at purchase of 60 days or less is valued at its
acquisition cost and a debt security originally purchased with a maturity in
excess of 60 days, which currently has a maturity of 60 days or less, is
valued at the market or fair value of the security on the 61st day prior to
maturity (each as adjusted for amortization of premium or discount) rather
than at current market value. All other securities and assets are valued at
their fair value following procedures approved by the Company's Board of
Directors. The Fund's Statement of Additional Information provides a
description of the special valuation procedures for options and futures
contracts.
The Fund's portfolio is expected to include foreign securities listed on
foreign stock exchanges or debt securities of the United States and foreign
governments and corporations. Some of these securities trade on days other
than Business Days, as defined below. Foreign securities quoted in foreign
currencies are translated into United States dollars at the exchange rates at
1:00 pm. Eastern Time or at such other rates as the Manager or Subadvisor may
determine to be appropriate in computing net asset value. As a result,
fluctuations in the value of such currencies in relation to the United States
dollar will affect the net asset value of the Fund's shares even though there
has not been any change in the market values of such securities.
Because of the time zone differences, foreign exchanges and securities markets
will usually be closed prior to the time of the closing of the New York Stock
Exchange and values of foreign options and foreign securities will be
determined as of the earlier closing of such exchanges and securities markets.
However, events affecting the values of such foreign securities may
occasionally occur between the earlier closing of such exchanges and
securities markets and the closing of the New York Stock Exchange which will
not be reflected in the computation of the net asset value of the Fund. If an
event materially affecting the value of such foreign securities occurs during
such period of which the Manager or Subadvisor becomes aware, then such
securities will be valued at fair value as determined in good faith, or in
accordance with procedures adopted, by the Company's Board of Directors.
Shareholder Inquiries. Any questions or communications regarding the Fund
should be directed to: The Govett Funds, Inc. at P.O. Box 419434, Kansas City,
MO 64141. Unitholders may also obtain information regarding the Fund by
calling (800) 421-5666.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION
The Fund will annually distribute substantially all of its net investment
income and net realized capital gains. The annual distribution and/or
dividend, if any, will be declared in November or December of each year.
Distributions from net investment income, if any, are expected to be small.
Distributions from capital gains are made after applying any available loss
carryovers.
The Fund may make additional dividend or capital gain distributions to comply
with certain distribution requirements under the Code.
United States Federal Taxation of the Fund. The Fund intends to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended, for federal income tax purposes and to meet all other
requirements that are necessary for it (but not its shareholders) to be exempt
from federal taxes on income and gains paid to shareholders in the form of
dividends. In order to accomplish this goal, the Fund must, amongst other
things, distribute substantially all of its ordinary income and net capital
gains on a current basis and maintain a portfolio of investments which
satisfies certain diversification criteria.
United States Federal Taxation of Shareholders. For federal income tax
purposes, any income dividends which the shareholder receives from the Fund,
as well as any distributions derived from the excess of net short-term capital
gains over net long-term capital losses, are treated as ordinary income
whether the shareholder has elected to receive them in cash or in additional
shares. Distributions derived from the excess of net long-term capital gains
over net short-term capital losses are treated as long-term capital gains
regardless of the length of time the shareholder has owned the shares of the
Fund and regardless of whether the shareholder receives such distributions in
cash or in additional shares.
Certain distributions which are declared in October, November, or December but
which, for operational reasons, may not be paid to the shareholder until the
following January, may be treated for federal tax purposes as if received by
the shareholder on December 31 of the calendar year in which the distributions
are declared.
Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a gain or loss. All or a portion of a loss realized
upon a redemption of shares will be disallowed to the extent other shares of a
Fund are purchased (through reinvestment of dividends or otherwise) within 30
days before or after such redemption. If a shareholder receives a long-term
capital gain distribution on shares of the Fund and such shares are held for
less than six months and are sold at a loss, the portion of the loss equal to
the amount of the long-term capital gain distribution will be considered a
long-term capital loss for tax purposes.
All or a portion of the sales charge incurred in purchasing shares of the Fund
will not be included in the federal tax basis of any such shares sold within
90 days or their purchase (for the purpose of determining gain or loss upon
the sale of such shares) if the sales proceeds are reinvested in the Fund and
a sales charge that would otherwise apply to the reinvestment is reduced or
eliminated because the sales proceeds were reinvested in the Fund. The portion
of the sales charge so excluded from the tax basis of the shares sold will
equal the amount by which the sales charge that would otherwise be applicable
upon the reinvestment is reduced. Of course, any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax basis
of the shares acquired in the reinvestment.
The Fund will inform shareholders (which includes the Trust) of the source of
dividends and distributions paid by the Fund at the time they are paid, and
will promptly after the close of each calendar year advise shareholders of the
tax status for federal income tax purposes of such dividends and
distributions. Income received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. If more than 50% of the value of the
Fund's assets at the close of a taxable year consists of securities of foreign
corporations, the Fund may make an election that will permit shareholders to
take a credit (or, if more advantageous, a deduction) for foreign income taxes
paid by the Fund, subject to limitations contained in the Internal Revenue
Code of 1986, as amended. Shareholders would then include in gross income both
dividends paid to them by the Fund and the foreign taxes paid by the Fund on
their foreign investments. The Fund cannot assure shareholders that they will
be eligible for the foreign tax credit. The Fund will advise shareholders
annually of their share of any creditable foreign taxes paid by the Fund.
The Fund will be required to report to the Internal Revenue Service ("IRS")
any taxable dividend or other reportable payment (including share redemption
proceeds). The Fund will also be required to withhold 31% of any such payments
made to individuals and other non-exempt shareholders who have not provided a
correct taxpayer identification number and made certain required
certifications that appear in the account application provided with the Fund's
prospectus. A shareholder may also be subject to backup withholding if the IRS
or a securities dealer notifies the Fund that the taxpayer identification
number furnished by the shareholder is incorrect or that the shareholder is
subject to backup withholding for previous under-reporting of interest or
dividend income.
It is recommended that shareholders consult their own tax advisors with
respect to the foregoing and the applicability of state and local income taxes
to distributions and redemption proceeds received from the Fund. Shareholders
who are not United States persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the
applicability of United States withholding taxes to distributions received by
them from the Fund. More detailed information regarding taxation of
shareholders and taxation of the Fund can be found in the Fund's Statement of
Additional Information.
The foregoing discussion has been prepared by the management of the Company
and does not purport to be a complete description of all tax implications of
an investment in the Fund. Shareholders are advised to consult with their own
tax advisors concerning the application of foreign, federal, state and local
taxes to an investment in the Fund. The foregoing discussion of federal income
taxation relates only to the Fund. For a discussion of tax implications
relating to the Trust see "Federal Taxation."
OTHER INFORMATION
Organization. The Company is a Maryland corporation and is registered with the
SEC as an open-end management investment company. In the future, from time to
time, the Company's Board of Directors may, in its discretion, establish
additional funds and issue shares of additional series of the Company's
shares. Shares of the Fund are entitled to one vote per share (with
proportional voting for fractional shares) and are freely transferable subject
to applicable federal and state securities laws. Shareholders have no
preemptive or conversion rights.
The Fund normally will not hold meetings of shareholders except as required
under the 1940 Act and Maryland law. On any matter submitted to a vote of
shareholders, shares of the Fund will be voted by that Fund's shareholders
individually when the matter affects the specific interest of that Fund only,
such as approval of that Fund's investment management arrangements. The shares
of all the Funds will be voted in the aggregate on other matters, such as the
election of directors and ratification of the Board of Directors' selection of
the Fund's independent accountants. Fund Shares held in the Trust will be
voted by the Trustee. A Director may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of
the Company's outstanding shares may call a meeting of shareholders. The
Company's Bylaws require it to assist shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, the Fund may issue up to
250 million shares. Each share of the Fund represents an interest in that Fund
only, has a par value of one thousandth of one cent per share, represents an
equal proportionate interest in the Fund with other shares of the Fund and is
entitled to such dividends and distributions out of the income earned and
gains realized on the assets belonging to the Fund as may be declared by the
Board of Directors.
Performance Information. The Fund may from time to time include information on
its investment results and/or comparisons of its investment results to various
managed or unmanaged indices or averages or results of other mutual funds or
groups of mutual funds in advertisements, sales literature or reports
furnished to present or prospective shareholders.
In such materials, the Fund may quote its average annual total return
("Standardized Return"). Standardized Return represents the percentage rate
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of a one-year period and at the end of five- and ten-year
periods, reduced by the maximum applicable front-end sales charge imposed on
sales of Fund shares (Class A shares only). Performance information with
respect to a Fund will also reflect that any applicable contingent deferred
sales charge has been paid. If a one-, five- and/or ten-year period has not
yet elapsed, data will be provided as of the end of a shorter period
corresponding to the life of the Fund. The total return computation assumes
the reinvestment of all dividends and capital gain distributions at net asset
value.
Standardized Returns quoted in advertising will reflect all aspects of the
Fund's return, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value per share over the
period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical investment in the Fund over a stated
period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period. For example, a cumulative return of 100%
over ten years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that the Fund's performance
will not be constant over time, but will change from year to year, and that
average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund.
In addition, the Fund may also include in advertisements, sales literature and
shareholder reports other than total return performance data
("Non-Standardized Return"). Non-Standardized Return reflects the percentage
rates of return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); and will assume reinvestment of all dividends
and capital gain distributions. Non-Standardized Return may be quoted for the
same or different periods as those for which Standardized Return is quoted; it
may consist of an aggregate or average annual percentage rate of return,
actual year-by-year rates or any combination thereof. It may or may not take
sales charges into account; a Fund's performance calculated without taking the
effect of sales charges into account will be better than such performance
including the effect of such charges.
The Fund's performance data reflects past performance and is not necessarily
indicative of future results. The Fund's investment results will vary from
time to time depending upon market conditions, the composition of its
portfolio and its operating expenses. These factors and possible differences
in calculation methods should be considered when comparing the Fund's
investment results with those published for other mutual funds, other
investment vehicles and unmanaged indices. The Fund's results also should be
considered relative to the risks associated with its investment objectives and
policies. See "Performance" in the Statement of Additional Information.
The Company's Annual Report for the year ended December 31, 1994 contains
additional performance information on the Fund. This Annual Report is
available from the Sponsor without charge upon request.
FEDERAL TAXATION
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital
assets"(generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986 (the "Code"). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of the assets of the Trust under the Code; and the income of the Trust
will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his pro rata share of income
derived from the Trust asset when such income is received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, redemption, or payment at maturity) or
upon the sale or redemption of Units by such Unitholder. The price a
Unitholder pays for his or her Units, including sales charges, is allocated
among his or her pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the date the Unitholder
purchases his or her Units) in order to determine his or her initial cost for
his or her pro rata portion of each Security held by the Trust. The Treasury
Obligations are treated as stripped bonds and may be treated as bonds issued
at an original issue discount as of the date a Unitholder purchases his or her
Units. Because the Treasury Obligations represent interests in "stripped"U.S.
Treasury bonds, a Unitholder's initial cost for his or her pro rata portion of
each Treasury Obligation held by the Trust shall be treated as its "purchase
price"by the Unitholder. Original issue discount is effectively treated as
interest for federal income tax purposes and the amount of original issue
discount in this case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A Unitholder will be
required to include in gross income for each taxable year the sum of his or
her daily portions of original issue discount attributable to the Treasury
Obligations held by the Trust as such original issue discount accrues and will
in general be subject to federal income tax with respect to the total amount
of such original issue discount that accrues for such year even though the
income is not distributed to the Unitholders during such year to the extent it
is not less than a "de minimis"amount as determined under a Treasury
Regulation issued on December 28, 1992 relating to stripped bonds. To the
extent the amount of such discount is less than the respective "de
minimis"amount, such discount shall be treated as zero. In general, original
issue discount accrues daily under a constant interest rate method which takes
into account the semi- annual compounding of accrued interest. In the case of
the Treasury Obligations, this method will generally result in an increasing
amount of income to the Unitholders each year. Unitholders should consult
their tax advisers regarding the federal income tax consequences and accretion
of original issue discount under the stripped bond rules. For federal income
tax purposes, a Unitholder's pro rata portion of dividends as defined by
Section 316 of the Code paid with respect to a Fund Share held by the Trust
are taxable as ordinary income to the extent of such corporation's current and
accumulated "earnings and profits". A Unitholder's pro rata portion of
dividends paid on such Fund Share which exceed such current and accumulated
earnings and profits will first reduce a Unitholder's tax basis in such Fund
Share, and to the extent that such dividends exceed a Unitholder's tax basis
in such Fund Share shall generally be treated as capital gain. In general, any
such capital gain will be short-term unless a Unitholder has held his or her
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 the Trust will generally be
considered a capital gain except in the case of a dealer or a financial
institution and, in general, will be long-term if the Unitholder has held his
or her Units 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
the Trust will generally be considered a capital loss except in the case of a
dealer or a financial institution and, in general, will be long-term if the
Unitholder has held his or her Units for more than one year. Unitholders
should consult their tax advisers regarding the recognition of such capital
gains and losses for federal income tax purposes.
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 the Trust, including fees of the Trustee, Supervisor and the Evaluator.
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such
Unitholder's pro rata portion of dividends received by the Trust (to the
extent such dividends are taxable as ordinary income, as discussed above) in
the same manner as if such corporation directly owned the Fund Shares paying
such dividends. However, a corporation owning Units should be aware that
Sections 246 and 246A of the Code impose additional limitations on the
eligibility of dividends for the 70% dividends received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days (as determined under Section 246(c) of the
Code). Final regulations have been recently issued which address special rules
that must be considered in determining whether the 46 day holding requirement
is met. Moreover, the allowable percentage of the deduction will be reduced
from 70% if a corporate Unitholder owns certain stock (or Units) the financing
of which is directly attributable to indebtedness incurred by such
corporation. It should be noted that various legislative proposals that would
affect the dividends received deduction have been introduced. Unitholders
should consult with their tax advisers with respect to the limitations on and
possible modifications to the dividends received deductions.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by a Trust
or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by the Trust or if the
Unitholder disposes of a Unit. For taxpayers other than corporations, net
capital 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 "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the potential
effect of this provision on their investment in Units.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of a Trust. As discussed in "Rights of Unitholders--Redemption of
Units", under certain circumstances a Unitholder tendering Units for
redemption may request an In Kind Distribution. A Unitholder may also under
certain circumstances request an In Kind Distribution upon the termination of
the Trust. See "Rights of Unitholders--Redemption of Units." Treasury
Obligations will not be distributed to a Unitholder as part of an In Kind
Distribution. The tax consequences relating to the sale of Treasury
Obligations are discussed above. As previously discussed, prior to the
redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust assets for
federal income tax purposes. The receipt of an In Kind Distribution 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 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
Trust. A "Security" for this purpose is a particular class of stock issued by a
particular corporation (and does not include the Treasury Obligations). 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 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 or her 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 or her tax basis in such Security. Unitholders who request an In Kind
Distribution are advised to consult their tax advisers in this regard.
A Unitholder who requests an In Kind Distribution will have to analyze the tax
consequences with respect to each Security owned by the Trust. The amount of
taxable gain (or loss) recognized upon such exchange will generally equal the
sum of the gain (or loss) recognized under the rules described above by such
Unitholder with respect to each Security owned by the Trust. Unitholders who
request an In Kind Distribution are advised to consult their tax advisers in
this regard.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by
the Trust to such Unitholder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. Distributions by the Trust
will generally be subject to United States income taxation and withholding in
the case of Units held by non-resident alien individuals, foreign corporations
or other non-United States persons (accrual of original issue discount on the
Treasury Obligations may not be subject to taxation or withholding provided
certain requirements are met). Such persons should consult their tax advisers.
Unitholders will be notified annually of the amounts of original issue
discount and income dividends includable in the Unitholder's gross income and
amounts of Trust expenses which may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original issue
discount 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 Trust for New
York tax matters, the Trust is not an association taxable as a corporation and
the income of the Trust will be treated as the income of the Unitholders under
the existing income tax laws of the State and City of New York.
TRUST OPERATING EXPENSES
Compensation of Sponsor and Evaluator. Neither the Sponsor nor the Evaluator
will receive any fees in connection with its activities relating to the Trust.
The Sponsor will receive sales commissions and may realize other profits (or
losses) in connection with the sale of Units and the deposit of the Securities
as described under "Public Offering--Sponsor Compensation".
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial
Information" (which amount is based on the number of Units outstanding on
January 1 of each year for which such compensation relates except during the
initial offering period in which event the calculation is based on the number
of Units outstanding at the end of the month of such calculation). The
Trustee's fees are payable in monthly installments on or before the fifteenth
day of each month from the Income Account to the extent funds are available
and then from the Capital Account. The Trustee benefits to the extent there
are funds for future distributions, payment of expenses and redemptions in the
Capital and Income Accounts since these Accounts are non-interest bearing and
the amounts earned by the Trustee are retained by the Trustee. Part of the
Trustee's compensation for its services to the Trust is expected to result
from the use of these funds. Such fees may be increased without approval of
the Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor or, if such category is no
longer published, in a comparable category. For a discussion of the services
rendered by the Trustee pursuant to its obligations under the Trust Agreement,
see "Rights of Unitholders--Reports Provided" and "Trust Administration."
Miscellaneous Expenses. Expenses incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over the first five years of
the Trust. The following additional charges are or may be incurred by the
Trust: (a) normal expenses (including the cost of mailing reports to
Unitholders) incurred in connection with the operation of the Trust, (b) fees
of the Trustee for extraordinary services, (c) expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (d) various governmental charges, (e) expenses and costs of any
action taken by the Trustee to protect the Trust and the rights and interests
of Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of the Trust without negligence, bad
faith or wilful misconduct on its part and (g) expenditures incurred in
contacting Unitholders upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When such
fees and expenses are paid by or owing to the Trustee, they are secured by a
lien on the Trust's portfolio. Since the Fund Shares consist primarily of
common stock and the income stream produced by dividend payments is
unpredictable, the Sponsor cannot provide any assurance that Fund
distributions will be sufficient to meet any or all expenses of the Trust.
Rule 12b-1 fees imposed on Fund Shares held in the Trust are rebated to the
Trust, deposited in the Income Account and are used to pay expenses of the
Trust. If the balances in the Income and Capital Accounts are insufficient to
provide for amounts payable by the Trust, the Trustee has the power to sell
Fund Shares (but not Treasury Obligations) to pay such amounts. These sales
may result in capital gains or losses to Unitholders. See "Federal Taxation."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price (which is based on the
net asset value of the Fund Shares and the aggregate offering side evaluation
of the Treasury Obligations during the initial offering period and in the
secondary market on the net asset value of the Fund shares and aggregate bid
side evaluation of the Treasury Obligations and in each case includes a sales
charge of 4.9% of the Public Offering Price--which charge is equivalent to
5.152% 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. 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 Dollar Amount of Sales
of Units Purchased Charge Reduction Per Unit
<S> <C>
10,000-24,999 $.05
25,000-49,999 $.10
50,000-99,999 $.15
100,000 or more $.20
</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 Distributors, Inc.-sponsored unit investment trusts which are
being offered in the initial offering period (a) on any one day (the "Initial
Purchase Date") or (b) on any day subsequent to the Initial Purchase Date if
(1) the units purchased are of a unit investment trust purchased on the
Initial Purchase Date, and (2) the person purchasing the units purchased a
sufficient amount of units on the Initial Purchase Date to qualify for a
reduced sales charge on such date. To determine the applicable sales charge
for units purchased in accordance with (b) above, 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 on 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 Trust 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 Trust 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 Trust 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 Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
equal to 5.152% of such value and dividing the sum so obtained by the number
of Units outstanding. Such underlying value shall include the proportionate
share of any cash held in the Capital Account. This computation produced a
gross underwriting profit equal to 4.9% of the Public Offering Price. The
Evaluator will appraise or cause to be appraised daily the value of the
underlying Securities as of the Evaluation Time on days the New York Stock
Exchange is open and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be effective
for all orders received prior to the Evaluation Time on each such day. Orders
received by the Trustee or the Sponsor for purchases, sales or redemptions
after that time, or on a day when the New York Stock Exchange is closed, will
be held until the next determination of price. Effective on each June 1
commencing June 1, 1996, such sales charge will be reduced by .3 of 1% to a
minimum sales charge of 1.5%.
The value of the Fund Shares is determined on each business day based on the
last available net asset value calculation on or immediately prior to the
Evaluation Time on the day the valuation is made. During the initial offering
period, the Treasury Obligations will be valued at their net offering prices.
If offering prices are not available for the Treasury Obligations, then such
evaluations will be based on (1) offering prices for comparable securities,
(2) by determining the value of the Treasury Obligations on the offer side of
the market by appraisal or (3) by any combination of the above. After the
completion of the initial offering period, the Treasury Obligations will be
valued on the bid prices thereof. The offering price of the Treasury
Obligations may be expected to be greater than the bid price of the Treasury
Obligations by less than 2%.
In offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities in the Trust
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Sponsor, broker-dealers and others at the
Public Offering Price. Upon the completion of the initial offering period,
Units repurchased in the secondary market, if any, may be offered by this
Prospectus at the secondary market Public Offering Price in the manner
described above.
The Sponsor has qualified the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of 3.70% per Unit. 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 70% of the sales charge applicable to the transaction.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 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.
Broker-Dealers of the 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 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 charge on the
sales generated by such persons at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time pursuant
to objective criteria established by the Sponsor pay fees to qualifying
brokers, dealers, banks and/or others for certain services or activities which
are primarily intended to result in sales of Units of the Trust. Such payments
are made by the Sponsor out of its own assets, and not out of the assets of
the Trust. These programs will not change the price Unitholders pay for their
Units or the amount that the Trust will receive from the Units sold.
Approximately every eighteen months the Sponsor holds a business seminar which
is open to brokers and dealers that sell units of trusts it sponsors. The
Sponsor pays substantially all costs associated with the seminar, excluding
travel costs. Each broker and dealer is invited to send a certain number of
representatives based on the gross number of units such firm sells during a
designated time period.
Sponsor Compensation. The Sponsor will receive a gross sales commission equal
to 4.9% of the Public Offering Price of the Units (equivalent to 5.152% of the
net amount invested), less any reduced sales charge for quantity purchases (as
described under "General"above). Any quantity discount provided to investors
will be borne by the selling broker, dealer or agent as indicated under
"General" above.
In addition, the Sponsor will realize a profit or will sustain a loss, as the
case may be, as a result of the difference between the price paid for the
Treasury Obligations by the Sponsor and the cost of such Treasury Obligations
to the Trust on the Initial Date of Deposit as well as on subsequent deposits.
See "Portfolio."The Sponsor has participated as distributor of Govett Smaller
Companies Fund. The Sponsor may further realize additional profit or loss
during the initial offering period as a result of the possible fluctuations in
the market value of the Securities in the Trust after a date of deposit, since
all proceeds received from purchasers of Units (excluding dealer concessions
and agency commissions allowed, if any) will be retained by the Sponsor.
Broker-dealers or others (each "a distributor") who distribute 1,000,000 or
more Units 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 it distributes; or each distributor who distributes
2,000,000 or more Units will receive additional compensation of $0.01 for each
Unit it distributes; or each distributor who distributes 3,000,000 or more
Units will receive additional compensation of $0.015 for each Unit it
distributes; or each distributor of 4,000,000 or more Units will receive
additional compensation of $0.02 for each Unit it distributes. However, if the
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 will receive
additional compensation from the Sponsor of $0.025 for each Unit it
distributes; or each distributor who distributes 5,000,000 or more Units will
receive additional compensation of $0.035 for each Unit it distributes.
A person will become owner of the Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor prior
to the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor, subject
to the limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor intends to maintain a
secondary market for Units of the Trust. In so maintaining a market, the
Sponsor will also realize profits or sustain losses in the amount of any
difference between the price at which Units are purchased and the price at
which Units are resold (which price includes the applicable sales charge). In
addition, the Sponsor will also realize profits or sustain losses resulting
from a redemption of such repurchased Units at a price above or below the
purchase price for such Units, respectively.
Public Market. Although not obligated to do so, the Sponsor intends to
maintain a market for the Units offered hereby and offer continuously to
purchase Units at prices, subject to change at any time, based upon the net
asset value of the Fund Shares in the Trust plus the aggregate bid price
(offer price during the initial offering period) of the Treasury Obligations.
If the supply of Units exceeds demand or if some other business reason
warrants it, the Sponsor may either discontinue all purchases of Units or
discontinue purchases of Units at such prices. In the event that a market is
not maintained for the Units and the Unitholder cannot find another purchaser,
a Unitholder desiring to dispose of his or her Units may be able to dispose of
such Units only by tendering them to the Trustee for redemption at the
Redemption Price. See "Rights of Unitholders--Redemption of Units." A
Unitholder who wishes to dispose of his or her Units should inquire of his or
her broker as to current market prices in order to determine whether there is
in existence any price in excess of the Redemption Price and, if so, the
amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for 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 Trust may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-sheltered retirement plan is 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 Trust will be evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee that ownership be in book entry. 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 or her name appears on the
face of the certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other signature
guarantee program in addition to, or in substitution for, STAMP, as may be
accepted by the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Certificates will be issued in
denominations of one Unit or any 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 distributions received by the Trust
with respect to the Fund Shares therein are credited by the Trustee to the
Income Account. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, return of principal, etc.) are credited to the Capital Account of
the Trust.
The Trustee will distribute any net income other than accreted interest
received with respect to any of the Securities in the Trust on or about the
Distribution Dates to Unitholders of record on the preceding Record Dates. See
"Summary of Essential Financial Information." Proceeds received on the sale of
any Securities in the Trust, to the extent not used to meet redemptions of
Units or pay expenses, will be distributed annually on the Distribution Date
to Unitholders of record on the preceding Record Date. Income with respect to
the original issue discount on the Treasury Obligations will not be
distributed currently, although Unitholders in the Trust will be subject to
federal income tax as if a distribution had occurred. See "Federal
Taxation." Proceeds received from the disposition of any of the Securities
after a record date and prior to the following distribution date will be held
in the Capital Account and not distributed until the next distribution date
applicable to such Capital Account. The Trustee is not required to pay
interest on funds held in the Capital or Income Accounts (but may itself earn
interest thereon and therefore benefits from the use of such funds).
The distribution to 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 distributions are not received by the Trust at a
constant rate throughout the year, such distributions to Unitholders, if any,
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.
On a quarterly basis, the Trustee will deduct from the Income Account and, to
the extent funds are not sufficient therein, from the Capital Account amounts
necessary to pay the daily accrued expenses of the Trust (as determined on the
basis set forth under "Trust Operating Expenses"). The Trustee also may
withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of the Trust.
Amounts so withdrawn shall not be considered a part of the Trust's assets
until such time as the Trustee shall return all or any part of such amounts to
the appropriate accounts. In addition, the Trustee may withdraw from the
Income and Capital Accounts such amounts as may be necessary to cover
redemptions of Units.
Reinvestment Option. Unitholders of the Trust may elect to have each
distribution of income, capital gains and/or capital on their Units
automatically reinvested in shares of any of the mutual funds listed under
"Trust Administration--Sponsor" which are registered in the Unitholder's state
of residence (other than B shares). Such mutual funds are hereinafter
collectively referred to as the "Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trust. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. Texas residents who desire to reinvest may request that a broker-dealer
registered in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
income, capital gains and/or capital on the participant's Units will, on the
applicable distribution date, automatically be applied, as directed by such
person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange (which is
currently 4:00 P.M. New York time) 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.
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.
Each Reinvestment Fund, its sponsor and its investment adviser shall have the
right to terminate at any time the reinvestment plan relating to such fund.
Reports Provided. The Trustee shall furnish Unitholders in connection with
each distribution a statement of the amount of income and the amount of other
receipts (received since the preceding distribution), if any, being
distributed, expressed in each case as a dollar amount representing the pro
rata share of each Unit outstanding. For as long as the Sponsor deems it to be
in the best interest of the Unitholders, the accounts of the Trust shall be
audited, not less frequently than annually, by independent certified public
accountants, and the report of such accountants shall be furnished by the
Trustee to Unitholders upon request. Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a registered Unitholder a statement (i)
as to the Income Account: income received (including amortization of original
issue discount with respect to the Treasury Obligations), deductions for
applicable taxes and for fees and expenses of the Trust, for redemptions of
Units, if any, and the balance remaining after such distributions and
deductions, expressed in each case both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (I) as to the Capital Account: the
dates of disposition of any Securities (other than pursuant to In Kind
Distributions) and the net proceeds received therefrom, deductions for payment
of applicable taxes, fees and expenses of the Trust held for distribution to
Unitholders of record as of a date prior to the determination and the balance
remaining after such distributions and deductions expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each
Unit outstanding on the last business day of such calendar year; (iii) a list
of the Securities held and the number of Units outstanding on the last
business day of such calendar year; (iv) the Redemption Price per Unit based
upon the last computation thereof made during such calendar year; and (v)
amounts actually distributed during such calendar year from the Income and
Capital Accounts, separately stated, expressed as total dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his or her
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 (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 elects an
In Kind Distribution as indicated below) an amount for each Unit equal to the
Redemption Price per Unit next computed after receipt by the Trustee of such
tender of Units. The "date of tender"is deemed to be the date on which Units
are received by the Trustee, except that as regards Units received after the
Evaluation Time the date of tender is the next day on which such Exchange is
open for trading and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the redemption price computed on that
day.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions. The Securities to be sold will be selected by
the Trustee from those designated on a current list provided by the Supervisor
for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering Units with a redemption value at least equal to $500 for
redemption may request from the Trustee in lieu of a cash redemption a
distribution in kind ("In Kind Distributions") 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
the Fund Shares 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 Fund Shares comprising the portfolio.
Unitholders may also elect to have the pro rata portion of the Treasury
Obligations to which such tendering Unitholder is entitled reinvested without
a sales charge into Fund Shares. Unitholders not electing to have their pro
rata portion of the Treasury Obligations reinvested into Fund Shares will
receive cash from the Capital Account equal to the pro rata portion of the
Treasury Obligations to which the tendering Unitholder is entitled. In
implementing these redemption procedures, the Trustee shall make any
adjustments necessary to reflect differences between the Redemption Price of
the Securities distributed in kind as of the date of tender. If funds in the
Capital Account are insufficient to cover the required cash distribution to
the tendering Unitholder, the Trustee may sell Securities according to the
criteria discussed above.
To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be, and the diversity of the Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result
in lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the portfolio at the time of
redemption. Special federal income tax consequences will result if a
Unitholder requests an In Kind Distribution. See "Federal Taxation."
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the net asset value of the Fund
Shares in the Trust plus the aggregate bid price of the Treasury Obligations,
plus or minus cash, if any, in the Income and Capital Accounts (while the
Public Offering Price per Unit during the initial offering period will be
determined on the basis of the aggregate offering price of such Treasury
Obligations and the net asset value of the Fund Shares in the Trust, plus or
minus cash, if any, in the Income and Capital Accounts). On the Initial Date
of Deposit, the Public Offering Price per Unit (which includes the sales
charge) exceeded the values at which Units could have been redeemed by the
amounts shown under "Summary of Essential Financial Information." While the
Trustee has the power to determine the Redemption Price per Unit when Units
are tendered for redemption, such authority has been delegated to the
Evaluator which determines the price per Unit on a daily basis. The Redemption
Price per Unit is the pro rata share of each Unit in the Trust determined on
the basis of (i) the cash on hand in the Trust, (ii) the value of the
Securities in the Trust and (iii) dividends or other distributions receivable
on the Fund Shares trading ex-dividend as of the date of computation, less (a)
amounts representing taxes or other governmental charges payable out of the
Trust and (b) the accrued expenses of the Trust. See "Public
Offering--Offering Price" for a description of the method of evaluating the
Fund Shares and Treasury Obligations.
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size of the Trust will be, and the diversity of the
Trust may be, reduced. Such sales may be required at a time when Securities
would not otherwise be sold and might result in lower prices than might
otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the next
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord with
the Public Offering Price described in the then currently effective prospectus
describing such Units. Any profit resulting from the resale of such Units will
belong to the Sponsor which likewise will bear any loss resulting from a lower
offering or redemption price subsequent to its acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. Traditional methods
of investment management for a managed fund (such as the Fund) typically
involve frequent changes in a portfolio of securities on the basis of
economic, financial and market analysis. While the Trust will not be managed,
the Trust Agreement provides that the Sponsor may (but need not) direct the
Trustee to dispose of Fund Shares in the event that the Fund defaults in the
payment of a distribution that has been declared, that any action or
proceeding has been instituted restraining the payment of distributions or
there exists any legal question or impediment affecting such Fund, that the
Fund has breached a covenant which would affect the payments of distributions,
or otherwise impair the sound investment character of the Fund, or that the
price of the Fund Shares have declined to such an extent or other such credit
factors exist so that in the opinion of the Sponsor, the retention of the Fund
Shares would be detrimental to the Trust. Treasury Obligations may be sold by
the Trustee only pursuant to the liquidation of the Trust or to meet
redemption requests. Proceeds from the sale of Securities (or any securities
or other property received by the Trust in exchange for Fund Shares) are
credited to the Capital Account for distribution to Unitholders or to meet
redemptions.
As indicated under "Rights of Unitholders--Redemption of Units" above, the
Trustee may also sell Securities designated by the Supervisor, or if not so
directed, in its own discretion, for the purpose of redeeming Units of the
Trust tendered for redemption and the payment of expenses; provided, however,
that in the case of Securities sold for such purposes, Treasury Obligations
may only be sold if the Smaller Companies Fund and Treasury Trust is assured
of retaining a sufficient principal amount of Treasury Obligations to provide
funds upon maturity of the Trust at least equal to $11.00 per Unit. Treasury
Obligations may not be sold by the Trustee to meet expenses of the Smaller
Companies Fund and Treasury Trust.
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 (other than as provided in the Trust
Agreement). The Trust Agreement may also be amended in any respect by the
Trustee and Sponsor, or any of the provisions thereof may be waived, with the
consent of the holders of 51% of the Units then outstanding, provided that no
such amendment or waiver will reduce the interest in the Trust of any
Unitholder without the consent of such Unitholder or reduce the percentage of
Units required to consent to any such amendment or waiver without the consent
of all Unitholders. The Trustee shall advise the Unitholders of any amendment
promptly after execution thereof.
A Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of the Smaller Companies Fund and Treasury Trust then
outstanding. The Trust will be liquidated by the Trustee in the event that a
sufficient number of Units not yet sold are tendered for redemption by the
Underwriters, including the Sponsor, so that the net worth of the Trust would
be reduced to less than 40% of the value of the Securities at the time they
were deposited in the Trust. If the Trust is liquidated because of the
redemption of unsold Units by the 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, Fund Shares will begin to be
sold in connection with the termination of the Trust. The Sponsor will
determine the manner, timing and execution of the sales of the Fund Shares.
Written notice of any termination specifying the time or times at which
Unitholders may surrender their certificates for cancellation, if any are then
issued and outstanding, shall be given by the Trustee to each Unitholder so
holding a certificate at his or her address appearing on the registration
books of the Trust maintained by the Trustee. At least 30 days before the
Mandatory Termination Date the Trustee will provide written notice thereof to
all Unitholders and will include with such notice a form to enable Unitholders
owning Units with a termination value at least equal to $500 to request an In
Kind Distribution rather than payment in cash upon the termination of the
related Trust. To be effective, this request must be returned to the Trustee
at least five business days prior to the Mandatory Termination Date. On the
Mandatory Termination Date (or on the next business day thereafter if a
holiday) the Trustee will deliver each requesting Unitholder's pro rata number
of Fund Shares to the account of the broker-dealer or bank designated by the
Unitholder at Depository Trust Company. Unitholders may also elect to have the
pro rata portion of the proceeds received upon the maturity of the Treasury
Obligations reinvested without a sales charge into Fund Shares. Unitholders
not electing to reinvest the proceeds received from the Treasury Obligations
will be paid their pro rata portion of the Treasury Obligations in cash.
Unitholders owning Units with a termination value of less than $500 and those
not requesting an In Kind Distribution will receive a cash distribution from
the sale of the remaining Securities within a reasonable time following the
Mandatory Termination Date. Regardless of the distribution involved, the
Trustee will deduct from the funds of the Trust any accrued costs, expenses,
advances or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee, costs of liquidation and any amounts required as
a reserve to provide for payment of any applicable taxes or other governmental
charges. Any sale of Securities in the Trust upon termination may result in a
lower amount than might otherwise be realized if such sale were not required
at such time. The Trustee will then distribute to each Unitholder his pro rata
share of the balance of the Income and Capital Accounts.
Within 60 days of the final distribution Unitholders will be furnished a final
distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and the
Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or negligence (gross negligence in the case of
the Sponsor, Evaluator and Supervisor) in the performance of their duties or
by reason of their reckless disregard of their obligations and duties
hereunder. The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities. In the event of
the failure of the Sponsor to act under the Trust Agreement, the Trustee may
act thereunder and shall not be liable for any action taken by it in good
faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the
Trust which the Trustee may be required to pay under any present or future law
of the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor, Supervisor 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.
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, 1994 the total stockholders' equity of Van Kampen Merritt Inc.
was $117,357,000 (audited). (This paragraph relates only to the Sponsor and
not to the Insured Municipals Income Trust and Investors' Quality Tax-Exempt
Trust or to any 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 March 31, 1995, the Sponsor and its affiliates managed or supervised
approximately $51.7 billion of investment products, of which over $24.7
billion is invested in municipal securities. The Sponsor and its affiliates
managed $38.9 billion of assets, consisting of $20.3 billion for 42 open end
mutual funds, $9.4 billion for 38 closed-end funds and $5.6 billion for 82
institutional accounts. The Sponsor has also deposited approximately $26
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. Some of the mutual funds and
closed-end funds for which Van Kampen American Capital Distributors, Inc. acts
as distributor are also listed below. Only those mutual funds available for
reinvestment under the Reinvestment Option to Unitholders of unit investment
trusts are 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 of the income of the Trust may be subject to the Oklahoma state
Maturity, Georgia, Louisiana, Massachusetts, Massachusetts income tax)
Premium, 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
High level of current income exempt from Federal and
Van Kampen Merritt Pennsylvania Value Municipal Income Trust....... 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 Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided"). The
Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp & Farber has acted as counsel for the
Trustee.
Independent Certified Public Accounts. The statement of condition and the
related securities portfolio at the opening of business on 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 14 (Govett Smaller Companies Fund and Treasury Trust, Series 1):
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Van Kampen American
Capital Equity Opportunity Trust, Series 14 (Govett Smaller Companies Fund and
Treasury Trust, Series 1) as of May 24, 1995. The statement of condition and
portfolio are the responsibility of the Sponsor. Our responsibility is to
express an opinion on such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of an irrevocable
letter of credit deposited to purchase securities by correspondence with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 14 (Govett Smaller Companies Fund and
Treasury Trust, Series 1) as of May 24,1995, in conformity with generally
accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
May 24, 1995
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST
SERIES 14
Statement of Condition
As of May 24, 1995
<CAPTION>
<S> <C>
Investment in Securities:
Contracts to purchase securities <F1>............... $ 1,901,133
Organizational Costs <F2>........................... 69,001
$ 1,970,134
Liabilities and Interest of Unitholders:
Liability--
Accrued Organizational Costs <F2>................... $ 69,001
Interest of Unitholders--
Units of fractional undivided interest outstanding:
Cost to investors <F2> ........................... $ 2,000,000
Less: Gross underwriting commission <F2> ........... 98,867
Net interest to Unitholders <F2>.................. 1,901,133
Total................................................. $ 1,970,134
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" and their cost
to the Trust are the same. The value of the Securities is determined by
Interactive Data Services, Inc. on the bases set forth under "Public
Offering--Offering Price". The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $965,668 which has been
deposited with the Trustee and cash of $935,465.
<F2>The Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over five years. Organizational costs have been
estimated based on a projected trust size of $20,000,000. To the extent the Trust
is larger or smaller, the estimate will vary.
<F3>The aggregate public offering price and the aggregate sales charge of 4.9% are
computed on the bases set forth under "Public Offering--Offering Price" and
"Public Offering--Sponsor and Underwriter Profits" 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>
GOVETT SMALLER COMPANIES FUND AND TREASURY TRUST SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 14)
as of the Initial Date of Deposit: May 24, 1995
<CAPTION>
Market Cost of
Number of Value Securities
Shares Name of Issuer <F1> per Share to Trust <F2>
<S> <C> <C> <C>
39,943 Govett Smaller Companies Fund $23.420 $ 935,465.06
39,943
</TABLE>
<TABLE>
<CAPTION>
Maturity
Value Name of Issuer and Title of Security <F1><F3>
<S> <C> <C>
$ 2,200,000 "Zero coupon" U.S. Treasury bonds maturing August 15, 2007 965,668.00
$ 1,901,133.06
</TABLE>
NOTES TO PORTFOLIO
(1) All Securities are represented by "regular way" contracts for the
performance of which an irrevocable letter of credit has been deposited with
the Trustee. At the Initial Date of Deposit, Securities may have been
delivered to the Sponsor pursuant to certain of these contracts; the Sponsor
has assigned to the Trustee all of its right, title and interest in and to
such Securities. Contracts to acquire Securities were entered into on May 23,
1995 and are expected to settle on May 24, 1995 (see "The Trust").
(2) The market value of each of the Fund Shares is based on the net asset value
as of the Evaluation Time on the day prior to the Initial Date of Deposit. The
cost of the Treasury Obligations represents the offering side evaluation as
determined by Interactive Data Services, Inc. The offering side evaluation of
the Treasury Obligations is greater than the bid side evaluation of the
Treasury Obligations which is the basis on which the Redemption Price per Unit
will be determined. The aggregate value of the Smaller Companies Fund and
Treasury Trust, based on the bid side evaluation of the Treasury Obligations
and the net asset value of the Fund Shares therein as of the Evaluation Time
on the day prior to the Initial Date of Deposit, was $1,895,171. Other
information regarding the Securities in the Trust, as of the Initial Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Profit
(Loss) to
Cost to Sponsor Sponsor
<S> <C>
$ 1,895,171 $ 5,962
</TABLE>
(3) The Treasury Obligations are being purchased at a discount from their par
value because there is no stated interest income thereon (such securities are
often referred to as zero coupon bonds). Over the life of the Treasury
Obligations the value increases, so that upon maturity the holders will
receive 100% of the principal amount thereof.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust or the Sponsor. This Prospectus does not constitute an offer to sell, or
a solicitation of an offer to buy, securities in any state to any person to
whom it is not lawful to make such offer in such state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 3
The Trust 4
Objectives and Securities Selection 4
Trust Portfolio 6
Risk Factors 11
Federal Taxation 20
Trust Operating Expenses 23
Public Offering 24
Rights of Unitholders 27
Trust Administration 30
Other Matters 36
Report of Independent Certified Public
Accountants 37
Statement of Condition 38
Portfolio 39
Notes to Portfolio 40
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust 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
May 24, 1995
Van Kampen American Capital Equity Opportunity Trust, Series 14
Govett Smaller Companies Fund
and Treasury Trust, Series 1
A Wealth of Knowledge A Knowledge of Wealth
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
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.
4.1 Consent of Interactive Data Services, Inc.
4.2 Consent of Independent Certified Public Acountants.
4.3 Financial Data Schedule.
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
14 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 24th day of May, 1995.
Van Kampen American Capital Equity
Opportunity Trust, Series 14
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 May 24, 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 14
Trust Agreement
Dated: May 24, 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
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
3. Section 1.01(1) shall be amended to read as follows:
"(1) "Depositor" shall mean Van Kampen American Capital
Distributors, Inc. and its successors in interest, or any
successor depositor appointed as hereinafter provided."
4. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean American Portfolio
Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp. and its successors in
interest, or any successor evaluator appointed as
hereinafter provided."
5. Section 1.01(4) shall be amended to read as follows:
"(4) "Supervisory Servicer" shall mean Van Kampen
American Capital Investment Advisory Corp. and its
successors in interest, or any successor portfolio
supervisor appointed as hereinafter provided."
6. Section 1.01(19) will be inapplicable for this Trust.
7. The Initial Date of Deposit for the Trust is May 24, 1995.
8. Notwithstanding anything to the contrary appearing in the
Standard Terms and Conditions of Trust, "Van Kampen American Capital
Equity Opportunity Trust" will replace "Select Equity Trust."
9. 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."
10. Section 1.01(10) shall be amended to read as follows:
"(10) "Mutual Fund" shall mean any open-end diversified
management investment company deposited in a Trust as
specified in the Trust Agreement thereof."
11. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the term "Equity Securities" shall be
replaced with "Mutual Fund shares."
12. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the maturity value of the Zero Coupon
Obligations on a per Unit basis shall equal at least $11.00.
13. Section 3.01 of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"Section 3.01. Expenses Borne by the Trustee. The
following organization and regular and recurring expenses
of a Trust shall be borne by the Trustee: (a) to the
extent not borne by the Depositor, expenses incurred in
establishing a Trust, including the cost of the initial
preparation and typesetting of the registration statement,
prospectuses (including preliminary prospectuses), the
indenture, and other documents relating to a Trust,
Securities and Exchange Commission and state blue sky
registration fees, the costs of the initial valuation of
the portfolio and audit of a Trust, the initial fees and
expenses of the Trustee, and legal and other out-of-pocket
expenses related thereto, but not including the expenses
incurred in the printing of preliminary prospectuses and
prospectuses, expenses incurred in the preparation and
printing of brochures and other advertising materials and
any other selling expenses, (b) the amount specified in
Section 3.05 and Article VIII, (c) to the extent permitted
by Section 6.02, auditing fees and, to the extent not
borne by the Depositor, expenses incurred in connection
with maintaining a Trust's registration statement current
with Federal and State authorities, (d) any Certificates
issued after the Initial Date of Deposit ; and (e)
expenses of any distribution agent. The Trustee shall be
reimbursed for those organizational expenses referred to
in clause (a) as provided in the related Prospectus.
14. Section 3.02 of the Standard Terms and Conditions of Trust
shall be amended by inserting the following immediately after the
parenthetical in the first sentence of the first paragraph of such
Section 3.02:
"and any Rule 12b-1 fees rebated by or on behalf of the
Mutual Fund"
15. Section 3.06(A)(1) of the Standard Terms and Conditions of
Trust is revised by inserting "and the amount of any rebated Rule
12b-1 fees" at the end of such Section.
16. Section 3.11 shall be revised by inserting the following
section at the end of the first paragraph of such Section:
"In the event that the trustee shall have been notified at
any time of any action to be taken or proposed to be taken
by at least a legally required number of holders of the
shares of any Mutual Fund deposited in a Trust, the
Trustee shall take such action or omit from taking any
action, as appropriate, so as to insure that the shares of
such Mutual Fund are voted as closely as possible in the
same manner and the same general proportion, with respect
to all issues, as are the shares of such Mutual Fund held
by owners other than the Trust."
17. Section 4.01(b) shall be revised by replacing (i) through
(iv) in the second sentence of such Section with the following:
"(i) on the basis of current offering prices for the Zero
Coupon Obligations as obtained from investment dealers or
brokers who customarily deal in securities comparable to
those held by the Trust, and, with respect to any Mutual
Fund shares deposited in a Trust, the net asset value of
such shares, (ii) if offering prices are not available for
the Zero Coupon Obligations, on the basis of the offering
price for comparable securities, and, with respect to any
Mutual Fund shares deposited in a Trust, the net asset
value of such shares, (iii) by determining the valuation
of the Zero Coupon Obligations on the offering side of the
market by appraisal, and, with respest to any Mutual Fund
shares deposited in a Trust, the net asset value of such
shares, or"
18. Section 4.01(c) shall be replaced with the following:
"(c) After the initial offering period and both during
and after the initial offering period, for purposes of the
Trust Fund Evaluations required by Section 5.01 in
determining Redemption Value and Unit Value, Evaluation of
the Securities shall be made in the manner described in
Section 4.01(b), on the basis of current bid prices for
the Zero Coupon Obligations and the net asset value of the
Mutual Fund shares."
19. Section 5.01 shall be amended by replacing the text
following (ii) and (iii) in the first sentence of such Section with
the following:
"(ii) the aggregate Evaluation of all Securities
(including Contract Obligations) on deposit in the Trust
as determined by the Evaluator (such Evaluation to be made
on the basis of bid prices (if Zero Coupon Obligations are
sold on such day, then such Evaluation for the Zero Coupon
Obligations shall be at the weighted average of the
execution prices for all Zero Coupon Obligations sold on
such day) for the Zero Coupon Obligations and Net Asset
Value for the Mutual Fund shares for the purpose of
computing redemption value of Units as set forth in
Section 5.02 hereof, plus (iii) all other income from the
Securities (including dividends receivable on Mutual Fund
shares trading ex-dividend as of the date of such
valuation and accrued rebate of Rule 12b-1 fees as
reported to the Trustee upon which notification the
Trustee is authorized conclusively to rely) as of the
close of business on the date of such Evaluation together
with all other assets of the Trust."
20. Notwithstanding anything to the contrary in Section
5.02 of the Standard Terms and Conditions of trust, upon redemption,
Unitholders will be entitled to an "In Kind Distribution" pursuant
to the terms specified in the Prospectus.
21. Section 6.01(i) of the Standard Terms and Conditions of
Trust shall be amended by deleting the first word of such Section
and replacing it with the following:
"Except as provided in Sections 3.01 and 3.05, no"
22. Section 8.02(d)(i)(y) shall be replaced in its entirety
with the following"
"(y) such Unitholder's pro rata share of the remaining
Mutual Funds shares, in kind, to the extent of the
fractional portion of a share allowed to be transferred on
the Transfer Books of the Mutual Fund,"
23. Section 8.02(d)(i) shall be revised by adding the
following sentence at the end of such Section:
"Notwithstanding the foregoing, Unitholders may elect to
invest that portion of the proceeds received upon
termination represented by cash into Mutual Fund shares
without a sales charge to the extent allowed by the Mutual
Fund."
24. Section 8.04 is hereby amended by inserting the following
at the end of such Section:
", except as provided in Sections 3.01 and 3.05"
25. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the requisite number of Units needed
to be tendered to exercise an In Kind Distribution as set forth in
Sections 5.02 and 8.02 shall be that number set forth in the
Prospectus.
26. Section 8.02 is hereby revised to require an affirmative
vote of Unitholders representing 66 2/3% of the then outstanding
Units to terminate the Trust rather than the 51% indicated therein.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., and Van Kampen American Capital Investment Advisory Corp., have
each caused this Trust Indenture and Agreement to be executed by their
respective President or one of their respective Vice Presidents and the
corporate seal of each to be hereto affixed and attested to by the
Secretary, Assistant Secretary or one of their respective Vice Presidents
or Assistant Vice Presidents and The Bank of New York, has caused this
Trust Agreement to be executed by one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by one of its
Assistant Treasurers all as of the day, month and year first above
written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services, 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 14
(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
May 24, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 14
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 14 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated May 24, 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. 33-58755) 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
May 24, 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 14
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 14 (the "Fund"), in connection with the
issuance of Units of fractional undivided interest in the Fund, under a
Trust Agreement dated May 24, 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 one separate unit
investment trust, Govett Smaller Companies Fund and Treasury Trust,
Series 1.
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of the Trust will consist of a portfolio of shares of
Govett Smaller Companies Fund (the "Fund Shares") and zero coupon U.S.
Treasury Obligations (the "Treasury Obligations") (collectively, the Fund
Shares and Treasury Obligations are referred to herein as "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) The 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 Trust in the proportion that the
number of Units held by him bears to the total number of Units
outstanding. Under subpart E, subchapter J of chapter 1 of the
Code, income of the Trust will be treated as income of each
Unitholder in the proportion described, and an item of Trust
income will have the same character in the hands of a
Unitholder as it would have in the hands of the Trustee. Each
Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income
is received by the Trust. A Unitholder's pro rata portion of
distributions of cash or property by a corporation with respect
to an Equity Security ("dividends" as defined by Section 316 of
the Code ) are taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits."
A Unitholder's pro rata portion of dividends which exceed such
current and accumulated earnings and profits will first reduce
the Unitholder's tax basis in such Equity Security, and to the
extent that such dividends exceed a Unitholder's tax basis in
such Equity Security, shall be treated as gain from the sale or
exchange of property.
(iii) The price a Unitholder pays for his Units, including
sales charges, is allocated among his pro rata portion of each
Security held by the 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 the 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
the Trust as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the
adjusted basis of his Units. Before adjustment, such basis
would normally be cost if the Unitholder had acquired his units
by purchase. Such basis will be reduced, but not below zero,
by the Unitholder's pro rata portion of dividends with respect
to each Equity Security which are not taxable as ordinary
income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, 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) With respect to each Unitholder's pro rata portion of
Treasury Obligations held by the Trust: The Treasury
Obligations are treated as bonds that were originally issued at
an original issue discount. Because the Treasury Obligations
represent interest in "stripped" U.S. Treasury bonds, a
Unitholder's initial cost for his pro rata portion of each
Treasury Obligation held by the Trust (determined at the time
he acquires his Units, in the manner described above) shall be
treated as its "purchase price" by the Unitholder. Under the
special rules relating to stripped bonds, original issue
discount is effectively treated as interest for Federal income
tax purposes and the amount of original issue discount in this
case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A
Unitholder will be required to include in gross income for each
taxable year the sum of his daily portions of original issue
discount attributable to the Treasury Obligations held by the
Trust as such original issue discount accrues and will in
generally be subject to Federal income tax with respect to the
total amount of such original issue discount that accrues for
such year even though the income is not distributed to the
Unitholders during such year to the extent it is greater than
or equal to the "de minimis" amount determined under a Treasury
Regulation (the "Regulation") issued on December 28, 1992 as
described below. To the extent the amount of such discount is
less than the respective "de minimis" amount, such discount
shall be treated as zero. In general, original issue discount
accrues daily under a constant interest rate method which takes
into account the semi-annual compounding of accrued interest.
In the case of the Treasury Obligations, this method will
generally result in an increasing amount of income to the
Unitholders each year.
(vii) With respect to a Unitholder's pro rata portion of
Govett Smaller Companies Fund shares held by the Trust:
(a) Each Unitholder will be considered to receive
his pro rata portion of each distribution made by Govett
Smaller Companies Fund on the shares, when such
distribution is received by Trust. A distribution
declared by Govett Smaller Companies Fund in October,
November or December to the Trust and paid during the
following January will be treated as having been received
by Unitholders on December 31 in that year such
distribution was declared. To the extent that any
distribution by Govett Smaller Companies Fund on the
shares constitutes ordinary income, each Unitholder will
be deemed to have received ordinary income when the
distribution is received by the Trust. To the extent any
distribution constitutes a capital gain distribution, each
Unitholder will be deemed to have received a capital gain
when the distribution is received by the Trust. To the
extent that any distribution constitutes a return of
capital, each Unitholder will be deemed to have received a
return of capital when the distribution is received by the
Trust.
(b) To the extent that Govett Smaller Companies Fund
makes a distribution on the shares which constitutes a
return of capital, such distribution should be applied by
a Unitholder to reduce his basis (determined in accordance
with paragraph (v) hereof) in his pro rata portion of
Govett Smaller Companies Fund shares held by the Trust
until the total of all cash reductions reduces such basis
to zero and thereafter should be reported by the
Unitholder as a capital gain.
(c) Govett Smaller Companies Fund may elect to pass
through to its shareholders the foreign income and similar
taxes paid by the Fund in order to enable its shareholders
to take a credit (or deduction) for foreign income taxes
paid by the Fund. If this election is made, Unitholders
of the Trust, because they are deemed to own a pro rata
portion of Govett Smaller Companies Fund's shares, as
described above, must include in their gross income, for
federal income tax purposes, but their portion of
dividends received by the Trust from Govett Smaller
Companies Fund and also their portion of the amount which
Govett Smaller Companies Fund deems to be their portion of
foreign income taxes paid with respect to, or withheld
from, dividends, interest, or other income of the Fund
from its foreign investments. Unitholders may then
subtract from their federal income tax the amount of such
taxes withheld, or else treat such foreign taxes as
deductions from gross income; however, as in the case of
investors receiving income directly from foreign sources,
the above described tax credit or deduction is subject to
certain limitations.
(viii) A Unitholder's portion of gain, if any, upon the sale
or redemption of Units or the disposition of Securities held by
the Trust will generally be considered a capital gain except in
the case of a dealer or a financial institution and will be
generally long-term if the Unitholder has held his Units 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 the Trust will generally be considered a
capital loss except in the case of a dealer or a financial
institution and will be generally long-term if the Unitholder
has held his Units for more than one year.
(ix) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in
kind distribution of Fund Shares upon the redemption of Units
or upon the termination of the Trust. As previously discussed,
prior to the redemption of Units or the termination of the
Trust, a Unitholder is considered as owning a pro rata portion
of each of the 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 the 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 the 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 the 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 the Trust.
Dividends received by the 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 the Trust as miscellaneous itemized deductions subject to
this limitation.
The Code provides a complex set of rules governing the accrual of
original issue discount, including special rules relating to "stripped"
debt instruments such as the Treasury Obligations. These rules provide
that original issue discount generally accrues on the basis of a constant
compound interest rate. Special rules apply if the purchase price of a
Treasury Obligation exceeds its original issue price plus the amount of
original issue discount which would have previously accrued, based upon
its issued price (its "adjusted issue price"). Similarly, these special
rules would apply to a Unitholder if the tax basis of his pro rata
portion of a Treasury Obligation issued with original issue discount
exceeds his pro rata portion of its adjusted issue price. The
application of these rules will also vary depending on the value of the
Treasury Obligations on the date a Unitholder acquires his Units, and the
price a Unitholder pays for his Units. In addition, as discussed above,
the Temporary Regulation provides that the amount of original issue
discount on a stripped bond is considered zero if the actual amount of
original issue discount on such stripped bond as determined under Section
1286 of the Code is less than a "de minimis" amount, which, the
Regulation provides, is the product of (i) 0.25 percent of the stated
redemption price at maturity and (ii) the number of full years from the
date the stripped bond is purchased (determined separately for each new
purchase thereof) to the final maturity date of the bond.
For taxable years beginning after December 31, 1986 and before
January 1, 1996, certain corporations may be subject to the environmental
tax (the "Superfund Tax") imposed by Section 59A of the Code. Income
received from, and gains recognized from the disposition of, a Security
by the Trust will be included in the computation of the Superfund Tax by
such corporations holding Units in the Trust.
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
May 24, 1995
Van Kampen American Capital Equity
Opportunity Trust, Series 14
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 14 (the "Fund") consisting of Govett
Smaller Companies Fund and Treasury Trust, Series 1 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 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 33-58755, the objectives of the
Fund are to provide the potential for long term capital appreciation
through investment in shares of Govett Smaller Companies Fund and to
protect capital by also investing 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 Depositor 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,
Tanner Propp & Farber
MNS:mw
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
May 23, 1995
Van Kampen Merritt, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital
Govett Small Companies and Treasury Trust, Series 1
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 33-58755
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 May 24, 1995 on the statements of
condition and related securities portfolios of Van Kampen American
Capital Equity Opportunity Trust, Series 14 as of May 24, 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
May 24, 1995
<TABLE> <S> <C>
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This report reflects the current period taken from 487 on 05/24/95 it is
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