File No. 33-62291 CIK #896981
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 18
(Exact Name of Trust)
VAN KAMPEN FUNDS INC.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
VAN KAMPEN FUNDS INC. CHAPMAN AND CUTLER
Attention: A. Thomas Smith III, General Counsel Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective on
April 26, 1999 pursuant to paragraph (b) of Rule 485.
FINANCIAL INSTITUTIONS TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 18
- --------------------------------------------------------------------------------
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied
by Part Two.
Please retain both parts of this Prospectus for future reference.
- --------------------------------------------------------------------------------
THE TRUST
The Financial Institutions Trust, Series 1 (the "Trust" or "Financial
Institutions Trust") is one unit investment trust in the Van Kampen American
Capital Equity Opportunity Trust, Series 18 (the "Fund"). The Financial
Institutions Trust offers investors the opportunity to purchase Units
representing proportionate interests in a fixed, diversified portfolio of common
stocks primarily issued by financial institutions and banking related service
companies headquartered in the eastern half of the United States. Unless
terminated earlier, the Trust will terminate on October 31, 1999 and any
securities then held will, within a reasonable time thereafter, be liquidated or
distributed by the Trustee. Any Securities liquidated at termination will be
sold at the then current market value for such Securities; therefore, the amount
distributable in cash to a Unitholder upon termination may be more or less than
the amount such Unitholder paid for his Units.
PUBLIC OFFERING PRICE
The secondary market Public Offering Price of the Trust will include
the aggregate underlying value of the Equity Securities, the applicable sales
charge as described herein, and cash, if any, in the Capital and Income Accounts
held or owned by the Trust. See "Public Offering Price" in Part Two and "Summary
of Essential Financial Information" in this Part One.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is April 26, 1999
FINANCIAL INSTITUTIONS TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 18
Summary of Essential Financial Information
As of March 4, 1999
Managing Underwriters & Supervisor: Wheat First Union
Sponsor: Van Kampen Funds Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
Financial
Institutions
Trust
----------------
<S> <C>
General Information
Number of Units 1,364,632
Fractional Undivided Interest in Trust per Unit 1/1,364,632
Public Offering Price:
Aggregate Value of Securities in Portfolio (1) $ 29,556,658
Aggregate Value of Securities per Unit (including accumulated dividends) $ 21.66
Sales charge 3.9% (4.058% of Aggregate Value of Securities excluding principal cash) per Unit $ .87
Public Offering Price per Unit (2)(3) $ 22.53
Redemption Price per Unit $ 21.66
Secondary Market Repurchase Price per Unit $ 21.66
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ .87
Supervisor's Annual Supervisory Fee Maximum of $.0025 per Unit
Evaluator's Annual Fee Maximum of $.0025 per Unit
Evaluations for purpose of sale, purchase or redemption of Units are made
as of 4:00 P.M. Eastern time on days of trading on the New York Stock
Exchange next following receipt of an order for a sale or purchase of
Units or receipt by The Bank of New York of Units tendered for redemption.
Date of Deposit September 19, 1995
Mandatory Termination Date October 31, 1999
Minimum Termination Value The Trust may be terminated if the
net asset value of such Trust is
less than $500,000 unless the
net asset value of such Trust deposits has
exceeded $15,000,000, then the Trust
Agreement may be terminated if the net asset
value of such Trust is less than $3,000,000.
Special Information
Calculation of Estimated Net Annual Dividends per Unit
Estimated Gross Annual Dividends per Unit $ .56254
Less: Estimated Expenses per Unit $ .02235
Estimated Net Annual Dividends per Unit $ .54019
Trustee's Annual fee $.008 per Unit
Estimated Annual Organizational Expenses (4) $ .00862 per Unit
Income Distribution Record Date TENTH day of March, June, September and December.
Income Distribution Date TWENTY-FIFTH day of March, June, September and December.
Capital Account Record Date TENTH day of December.
Capital Account Distribution Date (5) TWENTY-FIFTH day of December.
- --------------------------------------------------------------------------------
(1) Equity Securities listed on a national securities exchange are valued at
the closing sale price or if the Equity Securities are not so listed, at
the bid price thereof.
(2) Anyone ordering Units will have added to the Public Offering Price a pro
rata share of any cash in the Income and Capital Accounts.
(3) Effective on each September 19, commencing September 19, 1996, the
secondary sales charge will decrease by .5 of 1% to a minimum sales charge
of 3.9%. See "Public Offering-Offering Price" in Part Two.
(4) 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 in common for mutual funds. Total organizational expenses will
be amortized over the life of the Trust. See "Trust Operating Expenses" in
Part Two and "Statements of Condition" herein. Historically, the sponsors
of unit investment trusts have paid all the costs of establishing such
trusts.
(5) Distributions from the Capital Account will be made monthly on the
twenty-fifth of the month to Unitholders of record on the tenth day of such
month if the amount available for distribution equals at least $.01 per
Unit.
</TABLE>
<TABLE>
PORTFOLIO
The Financial Institutions Trust consists of 19 Equity Securities primarily
issued by financial institutions and banking related service companies. The
Securities are listed on the NASDAQ National Market System or traded in the
Over-the-Counter market.
<CAPTION>
PER UNIT INFORMATION
1995 (1) 1996 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value per Unit at beginning of period............ $ 9.40 $ 9.94 $ 13.27 $ 20.56
============ ============ ============ ============
Net asset value per Unit at end of period.................. $ 9.94 $ 13.27 $ 20.56 $ 22.40
============ ============ ============ ============
Distributions to Unitholders of investment income including
accumulated dividends paid on Units redeemed
(average Units outstanding for entire period)........... $ 0.06 $ 0.32 $ 0.40 $ 0.53
============ ============ ============ ============
Distributions to Unitholders from Equity Security
redemption proceeds (average Units
outstanding for entire period).......................... $ -- $ -- $ -- $ --
============ ============ ============ ============
Unrealized appreciation (depreciation) of Equity Securities
(per Unit outstanding at end of period)................. $ 0.46 $ 3.22 $ 6.19 $ (1.09)
============ ============ ============ ============
Units outstanding at end of period......................... 2,810,000 2,405,456 1,827,948 1,428,718
- --------------------------------------------------------------------------------
(1) For the period from September 19, 1995 (date of deposit) through December
31, 1995.
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of
Financial Institutions Trust, Series 1 (Van Kampen American Capital Equity
Opportunity Trust, Series 18):
We have audited the accompanying statements of condition (including the
analyses of net assets) and the related portfolio of the Financial Institutions
Trust, Series 1 (Van Kampen American Capital Equity Opportunity Trust, Series
18) as of December 31, 1998, and the related statements of operations and
changes in net assets for the three years ended December 31, 1998. These
statements are the responsibility of the Trustee and the Sponsor. Our
responsibility is to express an opinion on such statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1998 by correspondence with the
Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee and the Sponsor, as well as evaluating
the overall financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Financial Institutions
Trust, Series 1 (Van Kampen American Capital Equity Opportunity Trust, Series
18) as of December 31, 1998, and the results of operations and changes in net
assets for the three years ended December 31, 1998, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
March 12, 1999
<TABLE>
FINANCIAL INSTITUTIONS TRUST, SERIES 1
Statements of Condition
December 31, 1998
<CAPTION>
Financial
Institutions
Trust
-----------
<S> <C>
Trust property
Cash ................................................................................................. $ 7,139
Securities at market value, (cost $ 13,250,979) (note 1) ............................................. 32,050,379
Accumulated dividends ................................................................................ 46,034
Organizational Costs ................................................................................. 6,707
-----------
$32,110,259
===========
Liabilities and interest to Unitholders
Interest to Unitholders .............................................................................. $31,997,009
Redemptions payable .................................................................................. 113,250
-----------
$32,110,259
===========
Analyses of Net Assets
Interest of Unitholders (1,428,718 Units of fractional undivided interest outstanding)
Cost to original investors of 3,000,000 Units (note 1) ............................................... $29,785,863
Less initial underwriting commission (note 3) .................................................... 1,461,535
-----------
28,324,328
Less redemption of 1,571,282 Units ............................................................... 23,791,554
-----------
4,532,774
Undistributed net investment income
Net investment income ............................................................................ 2,733,786
Less distributions to Unitholders ................................................................ 2,672,685
-----------
61,101
Realized gain (loss) on Security sale or redemption .................................................. 8,603,734
Unrealized appreciation (depreciation) of Securities (note 2) ........................................ 18,799,400
Distributions to Unitholders of Security sale or redemption proceeds ................................. --
-----------
Net asset value to Unitholders ................................................................ $31,997,009
===========
Net asset value per Unit (1,428,718 Units outstanding) .................................................. $ 22.40
===========
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
FINANCIAL INSTITUTIONS TRUST, SERIES 1
Statements of Operations
Years ended December 31,
<CAPTION>
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Investment income
Dividend income $ 951,680 $ 883,799 $ 807,753
Expenses
Trustee fees and expenses 27,096 21,669 18,297
Evaluator fees 7,608 6,404 5,029
Organizational fees 10,449 11,449 --
Supervisory fees -- 19,759 13,646
------------ ------------- ------------
Total expenses 45,153 59,281 36,972
------------ ------------- ------------
Net investment income 906,527 824,518 770,781
Realized gain (loss) from Securities sale or redemption
Proceeds 4,663,460 9,193,317 8,016,156
Cost 3,789,293 5,643,648 3,848,079
------------ ------------- ------------
Realized gain (loss) 874,167 3,549,669 4,168,077
Net change in unrealized appreciation (depreciation) of Securities 7,745,469 11,318,214 (1,555,737)
------------ ------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 9,526,163 $ 15,692,401 $ 3,383,121
============= ============ =============
Statements of Changes in Net Assets
Years ended December 31,
1996 1997 1998
------------ ------------ -------------
Increase (decrease) in net assets Operations:
Net investment income $ 906,527 $ 824,518 $ 770,781
Realized gain (loss) on Securities sale or redemption 874,167 3,549,669 4,168,077
Net change in unrealized appreciation (depreciation) of Securities 7,745,469 11,318,214 (1,555,737)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations 9,526,163 15,692,401 3,383,121
Distributions to Unitholders from:
Net investment income (845,534) (850,333) (833,045)
Securities sale or redemption proceeds -- -- --
Redemption of Units (4,673,949) (9,196,408) (8,129,497)
------------ ------------- ------------
Total increase (decrease) 4,006,680 5,645,660 (5,579,421)
Net asset value to Unitholders
Beginning of period 27,924,090 31,930,770 37,576,430
------------ ------------- ------------
End of period (including undistributed net investment income of
$149,180, $123,365 and $61,101, respectively) $ 31,930,770 $ 37,576,430 $ 31,997,009
============ ============ =============
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
FINANCIAL INSTITUTIONS TRUST, SERIES 1 PORTFOLIO as of December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Valuation of
Number Market Value Securities
of Shares Name of Issuer Per Share (Note 1)
- --------------- ------------------------------------------------------------------------------------ ---------------
<S> <C> <C> <C>
91,470 Banc One Corporation $ 51.0625 $ 4,670,687
- ----------------------------------------------------------------------------------------------------------------------
33,362 BankAmerica Corporation 60.1250 2,005,890
- ----------------------------------------------------------------------------------------------------------------------
5,679 CCB Financial Corporation 57.0000 323,703
- ----------------------------------------------------------------------------------------------------------------------
4,822 Capital One Financial Corporation 115.0000 554,530
- ----------------------------------------------------------------------------------------------------------------------
13,409 Charter One Financial, Incorporated 27.6875 371,262
- ----------------------------------------------------------------------------------------------------------------------
22,352 Comerica Incorporated 68.1875 1,524,127
- ----------------------------------------------------------------------------------------------------------------------
55,718 Commerce Bancorp, Incorporated 52.5000 2,925,195
- ----------------------------------------------------------------------------------------------------------------------
35,244 Crestar Financial Corporation 72.0000 2,537,568
- ----------------------------------------------------------------------------------------------------------------------
85,518 First Union Corporation 60.8125 5,200,563
- ----------------------------------------------------------------------------------------------------------------------
30,205 Mellon Bank Corporation 68.7500 2,076,594
- ----------------------------------------------------------------------------------------------------------------------
9,968 Mercantile Bankshares Corporation 38.4375 383,145
- ----------------------------------------------------------------------------------------------------------------------
55,387 National City Corporation 72.0000 3,987,864
- ----------------------------------------------------------------------------------------------------------------------
8,317 Northern Trust Corporation 87.2500 725,658
- ----------------------------------------------------------------------------------------------------------------------
8,975 Old Kent Financial Corporation 46.5000 417,337
- ----------------------------------------------------------------------------------------------------------------------
69,076 Summit Bancorporation 43.6875 3,017,758
- ----------------------------------------------------------------------------------------------------------------------
10,598 TCF Financial Corporation 24.1875 256,339
- ----------------------------------------------------------------------------------------------------------------------
10,759 US Bankcorp 35.5000 381,945
- ----------------------------------------------------------------------------------------------------------------------
2,917 Wachovia Corporation 87.4375 255,055
- ----------------------------------------------------------------------------------------------------------------------
10,896 Wells Fargo Company 39.9375 435,159
------------- --------------
564,672 $ 32,050,379
============= ==============
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
FINANCIAL INSTITUTIONS TRUST, SERIES 1
Notes to Financial Statements
December 31, 1996, 1997 and 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the last closing sales price, or if not so listed, on the bid price.
Security Cost - The original cost to the Trust of the Securities was based,
for Securities listed on a national securities exchange, on the closing sales
prices on the exchange or, if not so listed, on the asked prices. The costs were
determined on the date of the various Dates of Deposit.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as described
in Note 1 and (3) accumulated dividends thereon, less accrued expenses of the
Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal Income Taxes.
Distributions to Unitholders of the Trust's taxable income will be taxable as
ordinary or capital gain income to Unitholders.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an identified cost basis.
Organizational Costs - The Trust will bear all or a portion of its
organizational costs, which will be deferred and amortized over the life of the
Trust.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1998 is as follows:
Financial
Institutions
Trust
--------------
Unrealized Appreciation $ 18,799,400
Unrealized Depreciation --
--------------
$ 18,799,400
==============
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Managing
Underwriter intends to maintain a market for Units and to continuously offer to
purchase Units at prices through October 31, 1998, subject to change at any
time, based upon the value of the Securities in the portfolio of the Trust
valued as described in Note 1, plus accumulated dividends to the date of
settlement. If the supply of Units exceeds demand, or for other business
reasons, the Managing Underwriter may discontinue purchases of Units at such
prices. In the event that a market is not maintained for the Units, a Unitholder
desiring to dispose of his Units may be able to do so only by tendering such
Units to the Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the
underlying value of the Securities per Unit on the date of an investor's
purchase, plus a sales charge of 4.9% of the public offering price which is
equivalent to 5.152% of the aggregate underlying value of the Securities. The
secondary market cost to investors is based on the determination of the
underlying value of the Securities per Unit on the date of an investor's
purchase plus a sales charge of 4.9% of the public offering price which is
5.152% of the underlying value of the Securities. Effective on each September
19, commencing September 19, 1996, the secondary sales charge will decrease by
.5 of 1% to a minimum sales charge of 3.9%.
Compensation of Evaluator and Supervisor - The Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.0025 per Unit, not to
exceed the aggregate cost of the Supervisor for providing such services to all
applicable Trusts). The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. Both fees may be adjusted for increases under
the category "All Services Less Rent of Shelter" in the Consumer Price Index.
NOTE 4 - REDEMPTION OF UNITS
During the years ended December 31, 1996, 1997 and 1998, 404,544 Units,
577,508 Units and 399,230 Units, respectively, were presented for redemption.
WHEAT FIRST UNION
FINANCIAL INSTITUTIONS TRUST, SERIES 1
Prospectus Part Two
- --------------------------------------------------------------------------------
The Trust. Financial Institutions Trust, Series 1 (the "Trust") is a unit
investment trust which is contained in Van Kampen American Capital Equity
Opportunity Trust, Series 18. The Trust offers investors the opportunity to
purchase Units representing proportionate interests in a fixed, diversified
portfolio primarily consisting of common stocks issued by financial institutions
and banking related service companies headquartered in the eastern half of the
United States (the "Equity Securities"). Unless terminated earlier, the Trust
will terminate on October 31, 1999 (the "Mandatory Termination Date") and any
Equity Securities then held will, within a reasonable time thereafter, be
liquidated or distributed by the Trustee. Any Equity Securities liquidated at
termination will be sold at the then current market value for such Equity
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 Trust are to provide the
potential for capital appreciation and income by investing in a portfolio
primarily consisting of common stocks issued by financial institutions and
banking related service companies headquartered in the eastern half of the
United States. See "Portfolio" in Part One. Each Unit of the Trust represents an
undivided fractional interest in all the Equity Securities deposited in the
Trust.
There is, of course, no guarantee that the objectives of the Trust will be
achieved.
Public Offering Price. The secondary market Public Offering Price of the
Trust will include the aggregate underlying value of the Equity Securities, the
applicable sales charge as described herein, and cash, if any, in the Capital
and Income Accounts held or owned by the Trust. The minimum purchase is 150
Units. See "Public Offering."
Dividend and Capital Distributions. Distributions of dividends and capital,
if any, received by the Trust will be paid in cash on the applicable
distribution date to Unitholders of record on the record date as set forth in
the "Summary of Essential Financial Information" in Part One. Any distribution
of income and/or capital will be net of the expenses of the Trust. See "Tax
Status." 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 Managing Underwriter intends to maintain a market for
Units of the Trust and offer to repurchase such Units at prices which are based
on the aggregate underlying value of Equity Securities in the Trust (generally
determined by the closing sale or bid prices of the Equity Securities), plus or
minus a pro rata share of cash, if any, in the Capital and Income Accounts of
the Trust. If a secondary market is not maintained, a Unitholder may redeem
Units through redemption at prices based upon the aggregate underlying value of
the Equity Securities in the Trust (generally determined by the closing sale or
bid prices of the Equity Securities), 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, Equity Securities
will begin to be sold in connection with the termination of the Trust. The
Sponsor will determine the manner, timing and execution of the sale of the
Equity Securities. At least 60 days prior to the Mandatory Termination Date the
Trustee will provide written notice thereof to all Unitholders and will include
with such notice a form to enable Unitholders to elect a distribution of shares
of Equity Securities if such Unitholder owns at least 2,500 Units of the Trust
rather than to receive payment in cash for such Unitholder's pro rata share of
the amounts realized upon the disposition by the Trustee of Equity Securities.
All Unitholders will receive cash in lieu of any fractional shares. To be
effective, the election form, and other documentation required by the Trustee,
must be returned to the Trustee at least five business days prior to the
Mandatory Termination Date. Unitholders not electing a distribution of shares of
Equity Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trust is terminated. See
"Trust Administration--Amendment or Termination."
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
Both parts of this Prospectus should
be retained for future reference. This Prospectus is
dated as of the date of the Prospectus Part I
accompanying this Prospectus Part II.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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 financial condition of the issuers or the general
condition of the stock market, volatile interest rates, economic recession and
potential increased regulation on banks and thrifts. The Trust is not actively
managed and Equity 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."
THE TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 18 is comprised
of one unit investment trust, Union Financial Institutions Trust, Series 1 (the
"Trust"). The Trust was created under the laws of the State of New York pursuant
to a Trust Indenture and Agreement (the "Trust Agreement"), dated the Initial
Date of Deposit, among Van Kampen Funds Inc., as Sponsor, American Portfolio
Evaluation Services, a division of Van Kampen Investment Advisory Corp., as
Evaluator, Wheat First Union, a division of First Union Capital Markets Corp.,
as Supervisor and The Bank of New York, as Trustee, or their predecessors.
The Trust may be an appropriate medium for investors who desire to
participate in a diversified portfolio of equity securities issued by financial
institutions and by issuers which provide banking-related services headquartered
in the eastern half United States. 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
Equity Securities including delivery statements relating to contracts for the
purchase of certain such Equity Securities and an irrevocable letter of credit
issued by a financial institution in the amount required for such purchases.
Thereafter, the Trustee, in exchange for such Equity Securities (and contracts)
so deposited, delivered to the Sponsor documentation evidencing the ownership of
Units of the Trust. Unless otherwise terminated as provided in the Trust
Agreement, the Trust will terminate on the Mandatory Termination Date and Equity
Securities then held will within a reasonable time thereafter be liquidated or
distributed by the Trustee.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in the Trust represented by each unredeemed Unit
will increase 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 Managing
Underwriter, or until the termination of the Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objectives of the Trust are to provide investors with the potential for
capital appreciation and income. The portfolio is described under "Trust
Portfolio" and "Portfolio" in Part One. 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 "Tax Status"). Investors should be aware
that there is not any guarantee that the objectives of the Trust will be
achieved because they are subject to the continuing ability of the respective
Equity Security issuers to continue to declare and pay dividends and because the
market value of the Equity Securities can be affected by a variety of factors.
Common stocks may be especially susceptible to general stock market movements
and to volatile increases and decreases of value as market confidence in and
perceptions of the issuers change. Investors should be aware that there can be
no assurance that the value of the underlying Equity Securities will increase or
that the issuers of the Equity Securities will pay dividends on outstanding
common shares. Any distributions of income will generally depend upon the
declaration of dividends by the issuers of the Equity Securities and the
declaration of any dividends depends upon several factors including the
financial condition of the issuers and general economic conditions.
During recent years, the U.S. banking industry has undergone enormous change,
suffering with recession and asset quality problems raising concern about the
financial health of the industry. However, today the U.S. is generally
considered to have one of the strongest financial systems in the world. Wheat
First Union, the Managing Underwriter, believes that financial institutions will
continue the recent trend in consolidation which will lead to more efficient and
profitable companies and that potential regulatory changes may lead to an
increase in the variety of products offered as well as their mode of
distribution. Furthermore, bank customers are increasingly conducting their
business through teller machines, telephones and personal computers which the
Managing Underwriter believes will make providers of such services and
technologies attractive investments. In selecting the financial institutions for
the Trust portfolio, the Managing Underwriter, considered the following factors,
among others: proven management; unique operating strategies; superior market
share; rapidly growing markets; strong and stable core of deposit funding; low
loan to deposit ratios; high asset liquidity; high reserve levels; low overhead
ratios; leverage ratios which exceed regional minimum requirements; dividend
rates, dividend cover and historic returns on equity; and market capitalization.
Investors should be aware that the Trust is not a "managed" fund and as a
result the adverse financial condition of a company will not result in its
elimination from the portfolio except under extraordinary circumstances (see
"Trust Administration--Portfolio Administration"). In addition, Equity
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 Equity Securities were selected by the Managing
Underwriter prior to the Initial Date of Deposit. The Trust may continue to
purchase or hold Equity Securities originally selected through this process even
though the evaluation of the attractiveness of the Equity Securities may have
changed and, if the evaluation were performed again at that time, the Equity
Securities would not be selected for the Trust.
TRUST PORTFOLIO
The Trust consists of Equity Securities issued by financial institutions and
companies which provide banking-related services all headquartered in the
eastern half of the United States. All of the Equity Securities are listed on a
national securities exchange, the NASDAQ National Market System or traded in the
over-the-counter market. Each of the companies whose Equity Securities are
included in the portfolio were selected based upon those factors referred to
under "Objectives and Securities Selection" above.
General. The Trust consists of such of the Equity Securities listed under
"Portfolio" in Part One as may continue to be held from time to time in the
Trust and any additional Equity 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 Equity Securities.
Because certain of the Equity Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from such
events will be distributed to Unitholders and will not be reinvested, no
assurance can be given that the Trust will retain for any length of time its
present size and composition. Although the portfolio is not managed, the Sponsor
may instruct the Trustee to sell Equity Securities under certain limited
circumstances. Pursuant to the Trust Agreement and with limited exceptions, the
Trustee may sell any securities or other property acquired in exchange for
Equity Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property, the
Trustee shall reject the offer. However, in the event such securities or
property are nonetheless acquired by the Trust, they may be accepted for deposit
in the Trust and either sold by the Trustee or held in the Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Supervisor). See
"Trust Administration--Portfolio Administration." Equity Securities, however,
will not be sold by the Trust to take advantage of market fluctuations or
changes in anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Equity Securities as such
and will not be able to vote the Equity Securities. As the holder of the Equity
Securities, the Trustee will have the right to vote all of the voting stocks in
the Trust and will vote such stocks in accordance with the instructions of the
Sponsor.
The Managing Underwriter acquired the Equity Securities for the Sponsor. The
Managing Underwriter in its general securities business acts as agent or
principal in connection with the purchase and sale of equity securities,
including the Equity Securities in the Trust, and may act as a market maker in
certain of the Equity Securities. The Managing Underwriter may also, from time
to time, issue reports on and make recommendations relating to equity
securities, which may include the Equity Securities. From time to time the
Managing Underwriter may act as investment banker or an employee or affiliate
may be a director of a company whose shares are included among the Equity
Securities; nonpublic information concerning such a company would not be
disclosed to the Managing Underwriter or for the benefit of the Trust under such
circumstances.
RISK FACTORS
An investment in Units of the Trust should be made with an understanding of
the problems and risks inherent in the financial institutions industry in
general. Banks, thrifts and their holding companies are especially subject to
the adverse effects of economic recession, volatile interest rates, portfolio
concentrations in geographic markets and in commercial and residential real
estate loans, and competition from new entrants in their fields of business.
Banks and thrifts are highly dependent on net interest income. Recently, bank
net interest margins have contracted, but volume gains have been strong in both
commercial and consumer products and profits have benefited. There is no
certainty that these conditions will continue. Bank and thrift institutions had
received significant consumer mortgage fee income as a result of activity in the
mortgage and refinance markets. As initial home purchasing and refinancing
activity subsided, this income diminished. Economic conditions in the real
estate markets, which have been weak in the past, can have a substantial effect
upon banks and thrifts because they generally have a portion of their assets
invested in loans secured by real estate. Banks, thrifts and their holding
companies are subject to extensive federal regulation and, when such
institutions are state-chartered, to state regulation as well. Such regulations
impose strict capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their supervisory
and enforcement authority and may substantially restrict the permissible
activities of a particular institution if deemed to pose significant risks to
the soundness of such institution or the safety of the federal deposit insurance
funds. Regulatory actions, such as increases in the minimum capital requirements
applicable to banks and one-time assessments in deposit insurance premiums
required to be paid by companies to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to pay
dividends. Neither federal insurance of deposits nor governmental regulations,
however, ensure the solvency or profitability of banks or their holding
companies or insure against any risk of investment in the securities issued by
such institutions.
The statutory requirements applicable to and regulatory supervision of banks,
thrifts and their holding companies have increased significantly and have
undergone substantial changes in recent years. To a great extent, these changes
are embodied in the Financial Institutions Reform, Recovery and Enforcement Act,
enacted in August 1989, the Federal Deposit Insurance Corporation Improvement
Act of 1991, the Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991 and the regulations promulgated under these laws. Many
of the regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and prospects of
the Equity Securities in the Trust's portfolio cannot be predicted with
certainty. Periodic efforts by recent Administrations to introduce legislation
broadening the ability of banks and thrifts to compete with new products have
not been successful, but if enacted could lead to more failures as a result of
increased competition and added risks. Failure to enact such legislation, on the
other hand, may lead to declining earnings and an inability to compete with
unregulated financial institutions. Efforts to expand the ability of federal
thrifts to branch on an interstate basis have been initially successful through
promulgation of regulations, and legislation to liberalize interstate banking
has recently been signed into law. Under the legislation, banks will be able to
purchase or establish subsidiary banks in any state, one year after the
legislation's enactment. Starting in mid-1997, banks would be allowed to turn
existing banks into branches, though states could pass laws to permit interstate
branch banking before then. Consolidation is likely to continue in both cases.
The Securities and Exchange Commission and the Financial Accounting Standards
Board require the expanded use of market value accounting by banks and have
imposed rules requiring market accounting for investment securities held in
trading accounts or available for sale. Adoption of additional such rules may
result in increased volatility in the reported health of the industry and
mandated regulatory intervention to correct such problems. Additional
legislative and regulatory changes may be forthcoming. For example, the bank
regulatory authorities have proposed substantial changes to the Community
Reinvestment Act and fair lending laws, rules and regulations, and there can be
no certainty as to the effect, if any, that such changes would have on the
Equity Securities in the Trust's portfolio. In addition, from time to time the
deposit insurance system is reviewed by Congress and federal regulators, and
proposed reforms of that system could, among other things, further restrict the
ways in which deposited moneys can be used by banks or reduce the dollar amount
or number of deposits insured for any depositor. Such reforms could reduce
profitability as investment opportunities available to bank institutions become
more limited and as consumers look for savings vehicles other than bank
deposits. Banks and thrifts face significant competition from other financial
institutions such as mutual funds, credit unions, mortgage banking companies and
insurance companies, and increased competition may result from legislative
broadening of regional and national interstate banking powers as has been
recently proposed. Among other benefits, proposed legislation would allow banks
and bank holding companies to acquire across previously prohibited state lines
and to consolidate their various bank subsidiaries into one unit. The Sponsor
makes no prediction as to what, if any, manner of thrift regulatory reform might
ultimately be adopted or what ultimate effect such reform might have on the
Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5% of the
outstanding shares of any class of voting securities of a bank or bank holding
company, (2) acquiring control of a bank or another bank holding company, (3)
acquiring all or substantially all the assets of a bank, or (4) merging or
consolidating with another bank holding company, without first obtaining Federal
Reserve Board ("FRB") approval. In considering an application with respect to
any such transaction, the FRB is required to consider a variety of factors,
including the potential anti-competitive effects of the transaction, the
financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws. In addition, the federal
Change In Bank Control Act and various state laws impose limitations on the
availability of one or more individuals or other entities to acquire control of
banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company experiencing earnings weaknesses should not pay cash
dividends which exceed its net income or which could only be funded in ways that
would weaken its financial health, such as by borrowing. The FRB also may impose
limitations on the payment of dividends as a condition to its approval of
certain applications, including applications for approval of mergers and
acquisitions. The Sponsor makes no prediction as to the effect, if any, such
laws will have on the Equity Securities or whether such approvals, if necessary,
will be obtained.
The principal trading market for certain of the Equity Securities may be in
the over-the-counter market. As a result, the existence of a liquid trading
market for the Equity Securities may depend on whether dealers will make a
market in the Equity Securities. There can be no assurance that a market will be
made for any of the Equity Securities, that any market for the Equity Securities
will be maintained or of the liquidity of the Equity Securities in any markets
made. In addition, the Trust may be restricted under the Investment Company Act
of 1940 from selling Equity Securities to the Managing Underwriter or the
Sponsor. The price at which the Equity Securities may be sold to meet
redemptions, and the value of the Trust, will be adversely affected if trading
markets for the Equity Securities are limited or absent.
In the opinion of the Managing Underwriter, certain of the Equity Securities
included in the Trust which may have the highest potential for capital
appreciation also from time to time may experience limited purchase or sale
availability in the market place. In anticipation of this possibility, the
Managing Underwriter intends to make a market in said Equity Securities to
facilitate the creation of subsequent deposits for this Trust which may have an
impact on the price at which Units are valued during the initial offering
period. In addition, upon termination of the Trust, this potential limited daily
trading volume may result in negative market price consequences for the Trust
stemming from the liquidation of a significant amount of these Equity
Securities. The Sponsor will attempt to mitigate these consequences with a
longer liquidation period (not to exceed 30 days) for these Equity Securities at
the Trust's termination than might be required for the other Equity Securities
included in the Trust. However, these procedures may be insufficient or
unsuccessful in avoiding such negative price consequences.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entail, including the risk that the
financial condition of the issuers of the Equity Securities or the general
condition of the common stock market may worsen and the value of the Equity
Securities and therefore the value of the Units may decline. Common stocks are
especially susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of the
issuers change. The perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Shareholders of common stocks
have rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or preferred stocks of, such issuers. Shareholders of common stocks of the type
held by the Trust have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and have a right to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. Common stocks do not
represent an obligation of the issuer and, therefore, do not offer any assurance
of income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends which could
adversely affect the ability and inclination of the issuer to declare or pay
dividends on its common stock or the rights of holders of common stock with
respect to assets of the issuer upon liquidation or bankruptcy. The value of
common stocks is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Equity Securities may be expected
to fluctuate over the life of the Trust to values higher or lower than those
prevailing on the Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, generally
have inferior rights to receive payments from the issuer in comparison with the
rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Cumulative preferred stock dividends must be paid before
common stock dividends and any cumulative preferred stock dividend omitted is
added to future dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights of liquidation
which are senior to those of common stockholders.
Year 2000 Readiness Disclosure. These two paragraphs constitute "Year 2000
Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act of 1998. If computer systems used by the Sponsor,
Evaluator, Supervisor, Trustee or other service providers to the Trust do not
properly process date-related information after December 31, 1999, the resulting
difficulties could adversely impact the Trust. This is commonly known as the
"Year 2000 Problem". The Sponsor, Evaluator, Supervisor and Trustee are taking
steps to address this problem and to obtain reasonable assurances that other
service providers to the Trust are taking comparable steps. We cannot guarantee
that these steps will be sufficient to avoid any adverse impact on the Trust.
This problem may impact corporations to varying degrees based on factors such as
industry sector and degree of technological sophistication. We cannot predict
what impact, if any, this problem will have on the issuers of the Securities.
In addition, computer failures throughout the financial services industry
beginning January 1, 2000 could have a detrimental affect on the markets for the
Securities. Improperly functioning trading systems may result in settlement
problems and liquidity issues. Moreover, corporate and governmental data
processing errors may adversely affect issuers and overall economic
uncertainties. Remediation costs will affect the earnings of individual issuers.
These costs could be substantial. Issuers may report these costs inconsistently
in U.S. and foreign financial markets. All of these issues could adversely
affect the Securities and the Trust.
TAX STATUS
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units of the
Trust. The summary is limited to investors who hold the Units as "capital
assets" (generally, property held for investment within the meaning of Section
1221 of the Internal Revenue Code of 1986 (the "Code")). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust. For purposes of the following discussion and opinion, it is assumed
that each Security is equity for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of the
Trust will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his pro rata share of income
derived from the Trust asset when such income is considered to be received by
the Trust.
2. A Unitholder will be considered to have received all of the dividends paid
on his pro rata portion of each Security when such dividends are considered to
be received by the Trust. Unitholders will be taxed in this manner regardless of
whether distributions from the Trust are actually received by the Unitholder or
are automati cally reinvested.
3. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, or otherwise) or
upon the sale or redemption of Units by such Unitholder (except to the extent an
in kind distribution of stock is received by such Unitholder as described
below). The price a Unitholder pays for his Units, generally including sales
charges, is allocated among his pro rata portion of each Security held by the
Trust (in proportion to the fair market values thereof on the valuation date
nearest the date the Unitholder purchase his Units) in order to determine his
initial tax basis for his pro rata portion of each Security held by the Trust.
Unitholders should consult their own tax advisers with regard to calculation of
basis. For federal income tax purposes, a Unitholder's pro rata portion of
dividends as defined by Section 316 of the Code paid by a corporation with
respect to a Security held by the Trust is taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings and profits". A
Unitholder's pro rata portion of dividends paid on such Security which exceeds
such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Security shall generally be treated as
capital gain. In general, the holding period for such capital gain will be
determined by the period of time a Unitholder has held his Units.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain, except in the case of a dealer or a financial
institution. A Unitholder's portion of loss, if any, upon the sale or redemption
of Units or the disposition of Securities held by the Trust will generally be
considered a capital loss (except in the case of a dealer or a financial
institution).
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such Unitholder's
pro rata portion of dividends received by the Trust (to the extent such
dividends are taxable as ordinary income, as discussed above, and are
attributable to domestic corporations) in the same manner as if such corporation
directly owned the Securities paying such dividends (other than corporate
Unitholders, such as "S" corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding corporation
tax). However, a corporation owning Units should be aware that Sections 246 and
246A of the Code impose additional limitations on the eligibility of dividends
for the 70% dividends received deduction. These limitations include a
requirement that stock (and therefore Units) must generally be held at least 46
days (as determined under Section 246(c) of the Code). Final regulations have
been issued which address special rules that must be considered in determining
whether the 46 day holding requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations. Unitholders should
consult with their tax advisers with respect to the limitations on and possible
modifications to the dividends received deduction.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income. Unitholders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by the
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. The Internal Revenue Service Restructing and
Reform Act of 1998 (the "1998 Tax Act") provides that for taxpayers other than
corporations, net capital gain (which is defined as net long-term capital gain
over net short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax rate of
20% (10% in the case of certain taxpayers in the lowest tax bracket). Capital
gain or loss is long-term if the holding period for the asset is more than one
year, and is short-term if the holding period for the asset is one year or less.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposed for determining the holding period of the Unit. Capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
If a Unitholder disposes of a Unit he is deemed thereby to have disposed of
his entire pro rata interest in all assets of the Trust including his pro rata
portion of all Securities represented by a Unit.
The Taxpayer Relief Act of 1997 (the "1997 Act") includes provisions that
treat certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as constructive
sales for purposes of recognition of gain (but not of loss) and for purposes of
determining the holding period. Unitholders should consult their own tax
advisers with regard to any such constructive sales rules.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of the Trust. As discussed in "Rights of Unitholders--Redemption of
Units", under certain circumstances a Unitholder tendering Units for redemption
may request an in kind distribution. A Unitholder may also under certain
circumstances request an in kind distribution upon the termination of the Trust.
See "Rights of Unitholders--Redemption of Units." As previously discussed, prior
to the redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust's assets for
federal income tax purposes. The receipt of an in kind distribution will result
in a Unitholder receiving an undivided interest in whole shares of stock plus,
possibly, cash.
The potential tax consequences that may occur under an in kind distribution
with respect to each Security held by the Trust will depend on whether or not a
Unitholder receives cash in addition to Securities. A "Security" for this
purpose is a particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only receives
Securities in exchange for his or her pro rata portion of the Securities held by
the Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of Security held by the Trust, such Unitholder will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in such fractional share of a
Security held by the Trust.
Because the Trust will own many Securities, a Unitholder who requests an in
kind distribution will have to analyze the tax consequences with respect to each
Security owned by the 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.
Computation of the Unitholder's Tax Basis. Initially, a Unitholder's tax
basis in his Units will generally equal the price paid by such Unitholder of his
Units. The cost of the Units is allocated among the Securities held in the Trust
in accordance with the proportion of the fair market values of such Securities
on the valuation date nearest the date the Units are purchased in order to
determine such Unitholder's tax basis for his pro rata portion of each Security.
A Unitholder's tax basis in his Units and his pro rata portion of a Security
held by the Trust will be reduced to the extent dividends paid with respect to
such Security are received by the Trust which are not taxable as ordinary income
as described above.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the Unitholder
has not been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the Trust (other than those
that are not treated as United States source income, if any) will generally be
subject to United States income taxation and withholding in the case of Units
held by non-resident alien individuals, foreign corporations or other non-United
States persons. Such persons should consult their tax advisers.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unitholders and derived from dividends of foreign corporations will not be
subject to U.S. withholding tax provided that less than 25 percent of the gross
income of the foreign corporations for a three-year period ending with the close
of its taxable year preceding payment was effectively connected to the conduct
of a trade or business within the United States. In addition, such earnings may
be exempt from U.S. withholding pursuant to a specific treaty between the United
States and a foreign country. Non-U.S. Unitholders should consult their own tax
advisers regarding the imposition of U.S. withholding on distributions from the
Trust.
It should be noted that payments to the Trust of dividends on Securities that
are attributable to foreign corporations may be subject to foreign withholding
taxes and Unitholders should consult their tax advisers regarding the potential
tax consequences relating to the payment of any such withholding taxes by the
Trust. Any dividends withheld as a result thereof will nevertheless be treated
as income to the Unitholders. Because, under the grantor trust rules, an
investor is deemed to have paid directly his share of foreign taxes that have
been paid or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States tax purposes with respect to such taxes.
The 1997 Act imposes a required holding period for such credits.
Investors should consult their tax advisers with respect to foreign withholding
taxes and foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security (resulting from redemption or the
sale of any Security), and the fees and expenses paid by the Trust. The Trustee
will also furnish annual information returns to Unitholders and to the Internal
Revenue Service.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal and certain aspects of
New York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers in
this regard. As used herein, the term "U.S. Unitholder" means an owner of a Unit
of the Trust that (a) is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unitholder in paragraph (a) but whose
income from a Unit is effectively connected with such Unitholder's conduct of a
United States trade or business. The term also includes certain former citizens
of the United States whose income and gain on the Units will be taxable.
Unitholders should consult their tax advisers regarding potential foreign, state
or local taxation with respect to the Units.
TRUST OPERATING EXPENSES
Compensation of Sponsor, Evaluator and Managing Underwriter. The Sponsor will
not receive any fees in connection with its activities relating to the Trust.
The Evaluator shall receive that evaluation fee, payable in any month incurred,
set forth under "Summary of Essential Financial Information" in Part One (which
is based on the number of Units outstanding on January 1 of each year for which
such compensation relates) for regularly evaluating the Trust portfolio. Such
fee may exceed the actual cost of providing such evaluation services for this
Trust, but at no time will the total amount paid to the Evaluator for providing
evaluation services to unit investment trusts of which Van Kampen Funds Inc.
acts as Sponsor in any calendar year exceed the aggregate cost to the Evaluator
of supplying such services in such year. The Managing Underwriter will receive
an annual supervisory fee, payable in monthly installments, which is not to
exceed the amount set forth under "Summary of Essential Financial Information"
in Part One (which is based on the number of Units outstanding on January 1 of
each year for which such compensation relates) for providing portfolio
supervisory services for the Trust. Such fee may exceed the actual cost of
providing such supervision services for this Trust, but at no time will the
total amount paid to the Managing Underwriter for providing portfolio
supervision services to unit investment trusts for which Wheat First Union is
the principal underwriter in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. Both of the foregoing fees
may be increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index published by the United States Department of Labor
or, if such category is no longer published, in a comparable category. The
Sponsor and the Managing Underwriter will receive sales commissions and may
realize other profits (or losses) in connection with the sale of Units and the
deposit of the Equity Securities as described under "Public Offering--Sponsor
and Managing Underwriter Compensation."
Trustee's Fee. For its services the Trustee will receive an annual fee from
the Trust as set forth under "Summary of Essential Financial Information" in
Part One (which amount is based on the number of Units outstanding on January 1
of each year for which such compensation relates). The Trustee's fees are
payable in monthly installments on or before the twenty-fifth day of each month
from the Income Account to the extent funds are available and then from the
Capital Account. The Trustee benefits to the extent there are funds for future
distributions, payment of expenses and redemptions in the Capital and Income
Accounts since these accounts are non-interest bearing and the amounts earned by
the Trustee are retained by the Trustee. Part of the Trustee's compensation for
its services to the Trust is expected to result from the use of these funds.
Such fees may be increased without approval of the Unitholders by amounts not
exceeding proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States Department
of Labor or, if such category is no longer published, in a comparable category.
For a discussion of the services rendered by the Trustee pursuant to its
obligations under the Trust Agreement, see "Rights of Unitholders--Reports
Provided" and "Trust Administration."
Miscellaneous Expenses. Expenses incurred in establishing the Trust,
including the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and state
registration fees, the initial fees and expenses of the Trustee, legal and
accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over the life of the Trust.
The following additional charges are or may be incurred by the Trust: (a) normal
expenses (including the cost of mailing reports to Unitholders) incurred in
connection with the operation of the Trust, (b) fees of the Trustee for
extraordinary services, (c) expenses of the Trustee (including legal and
auditing expenses) and of counsel designated by the Sponsor, (d) various
governmental charges, (e) expenses and costs of any action taken by the Trustee
to protect the Trust and the rights and interests of Unitholders, (f)
indemnification of the Trustee for any loss, liability or expenses incurred in
the administration of the Trust without gross negligence, bad faith or wilful
misconduct on its part and (g) expenditures incurred in contacting Unitholders
upon termination of the Trust. The Trust may pay the cost of updating its
registration statement each year. Unit investment trust sponsors have
historically paid these costs.
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 Equity Securities are all common
stocks, and the income stream produced by dividend payments is unpredictable,
the Sponsor cannot provide any assurance that dividends will be sufficient to
meet any or all expenses of 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 Equity Securities to pay such amounts. These sales
may result in capital gains or losses to Unitholders. See "Tax Status."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. The secondary market
Public Offering Price is based on the aggregate underlying value of the
Securities in the Trust, an applicable sales charge (which will be reduced
annually by .5 of 1% to a minimum sales charge of 3.9%), and cash, if any, in
the Income and Capital Accounts held or owned by the Trust.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Part One in
accordance with fluctuations in the prices of the underlying Equity 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 Equity Securities an
amount initially equal to 5.152% of such value and dividing the sum so obtained
by the number of Units in the Trust outstanding. The Public Offering Price shall
include the proportionate share of any cash held in the Income and Capital
Accounts. This computation produced a gross underwriting profit initially equal
to 4.9% of the Public Offering Price. Such price determination as of the close
of business on the day before the Initial Date of Deposit was made on the basis
of an evaluation of the Equity Securities in the Trust prepared by Interactive
Data Corporation, a firm regularly engaged in the business of evaluating,
quoting or appraising comparable securities. Thereafter, the Evaluator on each
business day will appraise or cause to be appraised the value of the underlying
Equity 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 Managing Underwriter 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 September 19, commencing
September 19, 1996 such sales charge will be reduced by .5 of 1% to a minimum
sales charge of 3.9%.
The value of the Equity Securities during the secondary market is determined
on each business day by the Evaluator as described under "Rights of
Unitholder--Redemption of Units."
In offering the Units to the public, neither the Sponsor, the Managing
Underwriter nor any broker-dealers are recommending any of the individual Equity
Securities in the Trust but rather the entire pool of Equity Securities, taken
as a whole, which are represented by the Units.
Unit Distribution. Units will be distributed to the public by the Managing
Underwriter at the Public Offering Price. Units repurchased in the secondary
market, if any, may be offered by this Prospectus at the secondary market Public
Offering Price in the manner described above.
The Sponsor intends to qualify the Units for sale in a number of states.
Registered representatives of the Managing Underwriter, for secondary market
transactions, will receive a concession amounting to 70% of the applicable sales
charge.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 150 Units. The Managing
Underwriter 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 to registered
representatives from time to time.
Sponsor and Managing Underwriter Compensation. The Managing Underwriter will
receive a gross sales commission initially equal to 4.9% of the Public Offering
Price of the Units (reduced by .5 of 1% annually to a minimum of 3.9%).
In addition, the Managing Underwriter realized a profit or sustained a loss,
as the case may be, as a result of the difference between the price paid for the
Equity Securities by the Managing Underwriter and the cost of such Equity
Securities to the Trust on the Initial Date of Deposit as well as on subsequent
deposits. The Sponsor has not participated as sole underwriter or as manager or
as a member of the underwriting syndicates or as an agent in a private placement
for any of the Equity Securities in the Trust portfolio. The Managing
Underwriter may have further realized additional profit or loss as a result of
the possible fluctuations in the market value of the Equity Securities in the
Trust after a date of deposit, since all proceeds received from the sale of
Units (excluding dealer concessions and agency commissions allowed, if any) will
be retained by the Managing Underwriter.
A person will become the owner of the Units on the date of settlement
provided payment has been received. Cash, if any, made available to the Sponsor
or Managing Underwriter prior to the date of settlement for the purchase of
Units may be used in the Sponsor's or Managing Underwriter's business and may be
deemed to be a benefit to the Sponsor or Managing Underwriter, subject to the
limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Managing Underwriter intends to
maintain a secondary market for Units of the Trust for the period indicated. In
so maintaining a market, the Managing Underwriter or 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 Managing
Underwriter or the Sponsor will also realize profits or sustain losses resulting
from a redemption of such repurchased Units at a price above or below the
purchase price for such Units, respectively.
Public Market. Although it is not obligated to do so, the Managing
Underwriter intends to maintain a secondary market for the Units offered hereby
and offer continuously to purchase Units at prices subject to change at any
time, based upon the aggregate underlying value of the Equity Securities in the
Trust (computed as indicated under "Offering Price" above and "Rights of
Unitholders--Redemption of Units"). If the supply of Units exceeds demand or if
some other business reason warrants it, the Managing Underwriter may either
discontinue all purchases of Units or discontinue purchases of Units at such
prices. In the event that a market is not maintained for the Units and the
Unitholder cannot find another purchaser, a Unitholder desiring to dispose of
his Units will be able to dispose of such Units by tendering them to the Trustee
for redemption at the Redemption Price. It is the current intention of the
Managing Underwriter not to maintain a secondary market after October 31, 1998.
A Unitholder who wishes to dispose of his Units should inquire of his broker as
to current market prices in order to determine whether there is in existence any
price in excess of the Redemption Price and, if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for 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.
RIGHTS OF UNITHOLDERS
General. 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 book entry unless a Unitholder makes a
written request to the Managing Underwriter that ownership be evidenced by
certificates. Units are transferable by making a written request to the Trustee
and, in the case of Units evidenced by a certificate, by presentation and
surrender of such certificate to the Trustee properly endorsed or accompanied by
a written instrument or instruments of transfer. A Unitholder must sign such
written request, and such certificate or transfer instrument, exactly as his
name appears on the records of the Trustee and on the face of any certificate
representing the Units to be transferred with the signature guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("STAMP") or
such other signature guarantee program in addition to, or in substitution for,
STAMP as may be accepted by the Trustee. In certain instances the Trustee may
require additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or certificates
of corporate authority. Certificates will be issued in denominations of one Unit
or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require
a Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer of interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
Distributions of Income and Capital. Any dividends received by the Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account. Other receipts (e.g., capital gains, proceeds from the sale of
Equity Securities, etc.) are credited to the Capital Account.
The Trustee will distribute any net income with respect to any of the Equity
Securities in the Trust on or about the Income Distribution Dates to Unitholders
of record on the preceding Income Record Dates. See "Summary of Essential
Financial Information" in Part One. Proceeds received on the sale of any Equity
Securities in the Trust, to the extent not used to meet redemptions of Units or
pay expenses, will (except as hereinafter provided) be distributed annually on
the Capital Account Distribution Date to Unitholders of record on the preceding
Capital Account Record Date. Proceeds received from the disposition of any of
the Equity Securities after a record date and prior to the following
distribution date will be held in the Capital Account of the Trust and not
distributed until the next distribution date applicable to such Capital Account.
Proceeds received on the sale of any Equity Securities in the Trust, to the
extent not used to meet redemptions of Units or pay expenses, will, however, be
distributed on the twenty-fifth day of each month to holders of record on the
tenth day of such month if the amount available for distribution equals at least
$0.01 per Unit. The Trustee is not required to pay interest on funds held in the
Capital or Income Accounts (but may itself earn interest thereon and therefore
benefits from the use of such funds).
The distribution to Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income Account after deducting
estimated expenses. Because dividends are not received by the Trust at a
constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate from distribution to distribution. Persons who purchase
Units will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business such
notice is provided by the selling broker-dealer.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the Income Account and, to the extent funds are not sufficient therein, from the
Capital Account, amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating Expenses"). The Trustee
also may withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of the Trust.
Amounts so withdrawn shall not be considered a part of the Trust's assets until
such time as the Trustee shall return all or any part of such amounts to the
accounts. In addition, the Trustee may withdraw from the Income and Capital
Accounts such amounts as may be necessary to cover redemptions of Units.
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. Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each person who at any time during
the calendar year was a registered Unitholder of the Trust a statement (i) as to
the Income Account: income received, deductions for applicable taxes and for
fees and expenses of the Trust, for redemptions of Units, if any, and the
balance remaining after such distributions and deductions, expressed in each
case both as a total dollar amount and as a dollar amount representing the pro
rata share of each Unit outstanding on the last business day of such calendar
year; (ii) as to the Capital Account: the dates of disposition of any Equity
Securities and the net proceeds received therefrom, deductions for payment of
applicable taxes, fees and expenses of the Trust held for distribution to
Unitholders of record as of a date prior to the determination and the balance
remaining after such distributions and deductions expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each
Unit outstanding on the last business day of such calendar year; (iii) a list of
the Equity Securities held by the Trust 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 Unit Investment Trust Division, 101
Barclay Street, 20th Floor, New York, New York 10286 of a request for redemption
duly endorsed or accompanied by proper instruments of transfer with signature
guaranteed as described above and by payment of applicable governmental charges,
if any. No redemption fee will be charged. On the third business day following
such tender the Unitholder will receive in cash (unless the redeeming Unitholder
elects an "In Kind Distribution" as described below) an amount for each Unit
equal to the Redemption Price per Unit next computed after receipt by the
Trustee of such tender of Units as of the Evaluation Time set forth under
"Summary of Essential Financial Information." The "date of tender" is deemed to
be the date on which Units are received by the Trustee, except that with respect
to Units received after the applicable Evaluation Time the date of tender is the
next day on which the New York Stock Exchange is open for trading and such Units
will be deemed to have been tendered to the Trustee on such day for redemption
at the redemption price computed on that day.
The Trustee is empowered to sell Equity Securities of the Trust in order to
make funds available for redemption if funds are not otherwise available in the
Capital and Income Accounts to meet redemptions. The Equity Securities to be
sold will be selected by the Trustee from those designated on a current list
provided by the Supervisor for this purpose. Units so redeemed shall be
cancelled.
Unitholders in the Trust tendering 2,500 or more Units for redemption may
request from the Trustee in lieu of a cash redemption a distribution in kind
("In Kind Distribution") of an amount and value of Equity Securities per Unit
equal to the Redemption Price per Unit as determined as of the next evaluation
following the tender. An In Kind Distribution on redemption of Units will be
made by the Trustee through the distribution of each of the Equity Securities in
book-entry form to the account of the Unitholder's broker-dealer at Depository
Trust Company. The tendering Unitholder will receive his pro rata number of
whole shares of each of the Equity Securities comprising the Trust portfolio and
cash from the Capital Account equal to the fractional shares to which the
tendering Unitholder is entitled. The Trustee may adjust the number of shares of
any issue of Equity Securities included in a Unitholder's In Kind Distribution
to facilitate the distribution of whole shares, such adjustment to be made on
the basis of the value of the Equity Securities on the date of tender. If funds
in the Capital Account are insufficient to cover the required cash distribution
to the tendering Unitholder, the Trustee may sell Equity Securities according to
the criteria discussed above.
To the extent that Equity 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 the Equity 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 Equity 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 "Tax Status."
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the aggregate underlying
value of the Equity Securities in the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust. On the Initial Date of Deposit, the
Public Offering Price per Unit (which includes the sales charge) exceeded the
values at which Units could have been redeemed by the amounts shown under
"Summary of Essential Financial Information." The Redemption Price per Unit is
the pro rata share of each Unit in the Trust determined on the basis of (i) the
cash on hand, (ii) the value of the Equity Securities and (iii) dividends
receivable on the Equity Securities trading ex-dividend as of the date of
computation, less (a) amounts representing taxes or other governmental charges
payable out of the Trust and (b) the accrued expenses of the Trust. The
Evaluator may determine the value of the Equity Securities in the Trust in the
following manner: if the Equity Securities are listed on a national securities
exchange, this evaluation is generally based on the closing sale prices on that
exchange (unless it is determined that these prices are inappropriate as a basis
for valuation) or, if there is no closing sale price on that exchange, at the
closing bid prices. If the Equity Securities of the Trust are not so listed or,
if so listed and the principal market therefore is other than on the exchange,
the evaluation shall generally be based on the current bid price on the
over-the-counter market (unless these prices are inappropriate as a basis for
evaluation). If current bid prices are unavailable or inappropriate as a basis
for valuation, the evaluations generally determined (a) on the basis of current
bid prices for comparable securities, (b) by appraising the value of the Equity
Securities on the bid side of the market or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Securities
in the Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Managing Underwriter Purchases of Units. The Trustee shall notify the
Managing Underwriter of any Units tendered for redemption. If the Managing
Underwriter'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 Managing
Underwriter may be tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Managing Underwriter 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 Managing Underwriter which likewise will bear
any loss resulting from a lower offering or redemption price subsequent to its
acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. Traditional methods of
investment management for a managed fund typically involve frequent changes in a
portfolio of securities on the basis of economic, financial and market analyses.
While the Trust will not be managed, the Trust Agreement does provide that the
Sponsor may (but need not) direct the Trustee to dispose of an Equity Security
in certain events such as the issuer having defaulted on the payment on any of
its outstanding obligations or the price of an Equity Security has declined to
such an extent or other such credit factors exist so that in the opinion of the
Sponsor the retention of such Equity Securities would be detrimental to the
Trust. Pursuant to the Trust Agreement and with limited exceptions, the Trustee
may sell any securities or other properties acquired in exchange for Equity
Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property, the
Trustee shall reject the offer. However, in the event such securities or
property are nonetheless acquired by the Trust, they may be accepted for deposit
in the Trust and either sold by the Trustee or held in such Trust pursuant to
the direction of the Sponsor (who may rely on the advice of the Supervisor).
Proceeds from the sale of Equity Securities (or any securities or other property
received by the Trust in exchange for Equity Securities) are credited to the
Capital Account for distribution to Unitholders or to meet redemptions. Except
as stated under "Trust Portfolio--General" for failed securities and as provided
in this paragraph, the acquisition by the Trust of any securities other than the
Equity Securities is prohibited.
As indicated under "Rights of Unitholders--Redemption of Units" above, the
Trustee may also sell Equity Securities designated by the Supervisor, or if no
such designation has been made, in its own discretion, for the purpose of
redeeming Units of the Trust tendered for redemption and the payment of
expenses.
When the Trust sells Securities, the composition and diversity of the Equity
Securities in such Trust may be altered. In order to obtain the best price for
the Trust, it may be necessary for the Supervisor to specify minimum amounts
(generally 100 shares) in which blocks of Equity Securities are to be sold.
Amendment or Termination. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders (1) to cure any
ambiguity or to correct or supplement any provision thereof which may be
defective or inconsistent, or (2) to make such other provisions as shall not
adversely affect the Unitholders (as determined in good faith by the Sponsor and
the Trustee), provided, however, that the Trust Agreement may not be amended to
increase the number of Units (except as provided in the Trust Agreement). The
Trust Agreement may also be amended in any respect by the Trustee and Sponsor,
or any of the provisions thereof may be waived, with the consent of the holders
representing 51% of the Units of the Trust then outstanding, provided that no
such amendment or waiver will reduce the interest in the Trust of any Unitholder
without the consent of such Unitholder or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of all
Unitholders. The Trustee shall advise the Unitholders of any amendment promptly
after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders
representing 66 2/3% of the Units of the Trust then outstanding or by the
Trustee when the value of the Equity Securities owned by the Trust, as shown by
any evaluation, is less than that amount set forth under Minimum Termination
Value in the "Summary of Essential Financial Information" in Part One. The Trust
Agreement will terminate upon the sale or other disposition of the last Equity
Security held thereunder, but in no event will it continue beyond the Mandatory
Termination Date stated under "Summary of Essential Financial Information" in
Part One.
Commencing on the Mandatory Termination Date, Equity Securities will begin to
be sold in connection with the termination of the Trust. The Sponsor will
determine the manner, timing and execution of the sales of the Equity
Securities. At least 60 days before the Mandatory Termination Date the Trustee
will provide written notice of any termination to all Unitholders of the Trust
and will include with such notice a form to enable Unitholders owning 2,500 or
more Units to request an In Kind Distribution rather than payment in cash upon
the termination of the Trust. To be effective, this request must be returned to
the Trustee at least ten business days prior to the Mandatory Termination Date.
On the Mandatory Termination Date (or on the next business day thereafter if a
holiday) the Trustee will deliver each requesting Unitholder's pro rata number
of whole shares of each of the Equity Securities in the Trust to the account of
the broker-dealer or bank designated by the Unitholder at Depository Trust
Company. The value of the Unitholder's fractional shares of the Equity
Securities will be paid in cash. Unitholders with less than 2,500 Units and
Unitholders not requesting an In Kind Distribution will receive a cash
distribution from the sale of the remaining Equity Securities within a
reasonable time following the Mandatory Termination Date. Regardless of the
distribution involved, the Trustee will deduct from the funds of the Trust any
accrued costs, expenses, advances or indemnities provided by the Trust
Agreement, including estimated compensation of the Trustee, costs of liquidation
and any amounts required as a reserve to provide for payment of any applicable
taxes or other governmental charges. Any sale of Equity Securities in the Trust
upon termination may result in a lower amount than might otherwise be realized
if such sale were not required at such time. The Trustee will then distribute to
each Unitholder of the Trust his pro rata share of the balance of the Income and
Capital Accounts.
The Sponsor will attempt to sell Securities as quickly as possible commencing
on the Mandatory Termination Date without in the judgment of the Sponsor
materially adversely affecting the market price of the Securities. The Sponsor
does not anticipate that the period will be longer than one month, and it could
be as short as one day, depending on the liquidity of the Securities being sold.
The liquidity of any Security depends on the daily trading volume of the
Security and the amount that the Sponsor has available on any particular day.
It is expected (but not required) that the Sponsor will generally follow the
following guidelines in selling the Securities; for highly liquid Securities,
the Securities will generally be sold on the Mandatory Termination Date; for
less liquid Securities, on each of the first two days subsequent to the
Mandatory Termination Date, the amount of any underlying Securities will
generally be sold at a price no less than 1/2 of one point under the closing
sale price of those Securities on the preceding day. Thereafter, the Sponsor
intends to sell without any price restrictions at least a portion of the
remaining underlying Securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that day)
in the one month period following the Mandatory Termination Date.
Within 60 days of the final distribution Unitholders will be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in the
same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and
the Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder.
The Trustee shall not be liable for depreciation or loss incurred by reason
of the sale by the Trustee of any of the Equity 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 Equity 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.
Managing Underwriter. Wheat First Union is a division of First Union Capital
Markets Corp., a registered broker/dealer, Member New York Stock Exchange and
SIPC, and a separate non-bank affiliate of First Union Corporation. Founded in
1934, Wheat First Union now has over 3,000 associates and operates 128 offices
nationwide. A non-bank affiliate of First Union Corporation, America's
sixth-largest commercial bank holding company, Wheat First Union has more than
$40 billion in client assets--making it one of the leading securities brokerage
and investment banking firms in the United States.
Sponsor. Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the
Trust. The Sponsor is an indirect subsidiary of Van Kampen Investments Inc. Van
Kampen Investments Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; global custody, securities clearance
services and securities lending; and credit card services.
Van Kampen Funds Inc. specializes in the underwriting and distribution of
unit investment trusts and mutual funds with roots in money management dating
back to 1926. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, (630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1998, the total stockholders' equity of Van Kampen
Funds Inc. was $135,236,000 (audited). (This paragraph relates only to the
Sponsor and not to the Trust or to any other Series thereof. The information is
included herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of September 30, 1997, the Sponsor and its Van Kampen affiliates managed
or supervised approximately $65.3 billion of investment products, of which over
$10.85 billion is invested in municipal securities. The Sponsor and its Van
Kampen affiliates managed $54 billion of assets, consisting of $34.3 billion for
55 open-end mutual funds (of which 45 are distributed by Van Kampen Funds Inc.)
$14.2 billion for 37 closed-end funds and $5.5 billion for 106 institutional
accounts. The Sponsor has also deposited approximately $26 billion of unit
investment trusts. All of Van Kampen's open-end funds, closed-ended funds and
unit investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, New York, New York 10286 (800) 221-7668.
The Bank of New York is subject to supervision and examination by the
Superintendent of 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 Equity 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 Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Equity Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio included in 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.
CONTENTS OF POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement comprises the
following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Van Kampen American Capital Equity Opportunity Trust, Series 18, certifies that
it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment to its Registration Statement to be signed
on its behalf by the undersigned thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Chicago and State of Illinois
on the 26th day of April, 1999.
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 18
(Registrant)
By VAN KAMPEN FUNDS INC.
(Depositor)
By: Gina Costello
Assistant Secretary
(SEAL)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on April 26, 1999 by the
following persons who constitute a majority of the Board of Directors of Van
Kampen Funds Inc.:
SIGNATURE TITLE
Richard F. Powers III Chairman and Chief Executive )
Officer )
John H. Zimmerman III President and Chief Operating )
Officer )
William R. Rybak Executive Vice President and )
Chief Financial Officer )
A. Thomas Smith III Executive Vice President, )
General Counsel and Secretary )
Michael H. Santo Executive Vice President )
Gina M. Costello______________
(Attorney in Fact)*
- --------------------
* An executed copy of each of the related powers of attorney is filed herewith
or was filed with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Van Kampen Focus Portfolios, Series 136
(File No. 333-70897) and the same are hereby incorporated herein by this
reference.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 12, 1999 accompanying the financial
statements of Van Kampen American Capital Equity Opportunity Trust, Series 18 as
of December 31, 1998, and for the period then ended, contained in this
Post-Effective Amendment No. 4 to Form S-6.
We consent to the use of the aforementioned report in the Post-Effective
Amendment and to the use of our name as it appears under the caption "Auditors".
GRANT THORNTON LLP
Chicago, Illinois
April 26, 1999
