File No. 33-62809
CIK #896986
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Van Kampen American Capital Equity
Opportunity Trust, Series 21
B. Name of Depositor: Van Kampen American Capital Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: An indefinite
number of Units of proportionate interest pursuant to Rule 24f-2
under the Investment Company Act of 1940
F. Proposed maximum offering price to the public of the securities
being registered: Indefinite
G. Amount of registration fee: $500 (previously paid)
H. Approximate date of proposed sale to the public:
As Soon As Practicable After the Effective Date of the
Registration Statement
/ X / Check box if it is proposed that this filing will become
effective on November 17, 1995 at 2:00 P.M. pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Van Kampen American Capital Equity Opportunity Trust
Series 21
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trust
trust's securities and ) Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating
Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) *
underwriter, trustee or any ) Trust Portfolio
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's) Cover Page
securities ) Trust Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio)
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates)
58. )
59. Financial statements (Instructions ) Report of Independent
Certified
1(c) to Form S-6) ) Public Accountants
) Statement of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
Preliminary Prospectus Dated November 17, 1995
Subject to Completion
November 17, 1995
Gold & Income Trust, Series 1
The Fund. Van Kampen American Capital Equity Opportunity Trust, Series 21 (the
"Fund") is comprised of one underlying unit investment trust
designated as the Gold & Income Trust, Series 1 (the "Trust"). The
Trust offers investors the opportunity to purchase Units representing
proportionate interests in a fixed, diversified portfolio of common stocks
issued by foreign companies engaged in the exploration for and mining of gold
(certain of which are in American Depositary Receipt form ("ADRs"))
("Equity Securities") and U.S. dollar-denominated high yield, high
risk foreign corporate and sovereign debt obligations ("Bonds")
(collectively, "Securities"). Unless terminated earlier, the Trust
will terminate on November 1, 2004 (the "Mandatory Termination Date")
and any Securities then held will, within a reasonable time thereafter, be
liquidated or distributed by the Trustee. Any Securities liquidated at
termination will be sold at the then current market value for such Securities;
therefore, the amount distributable in cash to a Unitholder upon termination
may be more or less than the amount such Unitholder paid for his Units. Unless
otherwise indicated, all amounts herein are stated in U.S. dollars computed on
the basis of the exchange rate for the related foreign currency on the Initial
Date of Deposit, if applicable.
As of the Initial Date of Deposit approximately 51% of the net assets of the
Trust consist of bonds issued by foreign issuers rated below investment grade
which entail greater risks of untimely interest and principal payments,
default and price volatility than higher rated securities. Such bonds are
commonly referred to as "junk bonds" and should be viewed as
speculative. An investor should carefully consider these risks before
investing. See "Risk Factors" and note (3) in the "Notes to
Portfolio".
Objective of the Trust. The objective of the Trust is to provide an above
average total return through a combination of potential capital appreciation,
dividend income and a high level of interest income by investing in a
portfolio of common stocks issued by foreign companies engaged in the
exploration for and mining of gold (certain of which are ADRs) and U.S.
dollar-denominated high yield, high risk foreign corporate and sovereign debt
obligations. See "Portfolio". There is, of course, no guarantee that
the objective of the Trust will be achieved.
Public Offering Price. The Public Offering Price per Unit of the Trust is
equal to the aggregate underlying value of the Securities in the Trust plus or
minus cash, if any, in the Capital and Income Accounts of the Trust divided by
the number of Units of the Trust outstanding, plus a sales charge equal to
5.5% of the Public Offering Price which is equivalent to 5.820% of the
aggregate value of the Securities in the Trust, plus any accrued interest. The
aggregate underlying value of the Bonds and the Equity Securities is
determined as set forth under "Public Offering--Offering Price". In
the case of Securities denominated in foreign currencies ("Foreign
Denominated Securities"), the Public Offering Price per Unit is based on
the aggregate value of the Securities computed at the Evaluation Time on the
basis of the offering side value of the currency exchange rate for the related
foreign currency expressed in U.S. dollars during the initial offering period
and on the bid side value for secondary market transactions and includes the
commissions and stamp taxes associated with acquiring the Securities during
the initial offering period and the liquidation costs associated with selling
Securities to meet redemptions or upon Trust termination. During the initial
offering period, the sales charge is reduced on a graduated scale for sales
involving at least 10,000 Units. If Units were available for purchase at the
close of business on the day before the Initial Date of Deposit, the Public
Offering Price per Unit would have been that amount set forth under
"Summary of Essential Financial Information". The minimum purchase is 500
Units (100 Units for a tax-sheltered retirement plan). See "Public
Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Additional Deposits. The Sponsor may, from time to time during a period of up
to approximately 12 months after the Initial Date of Deposit, deposit
additional Securities in the Trust, provided it maintains, as nearly as is
practicable, the same percentage relationship among the number of shares of
each Equity Security and the par value of each Bond in the Trust that existed
immediately prior to any such subsequent deposit. See "The Trust".
Distributions. Distributions of income, principal and realized capital gains,
if any, received by the Trust will be paid in cash on the applicable
Distribution Date to Unitholders of record on the applicable Record Date as
set forth in the "Summary of Essential Financial Information". The
initial estimated distribution will be $.36 per Unit and will be made on
June 30, 1996 to Unitholders of record on June 15, 1996. Any
distribution of income, principal and/or capital gains will be net of the
expenses of the Trust. See "Taxation". Additionally, upon surrender of
Units for redemption or termination of the Trust, the Trustee will distribute
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. Although not obligated to do so, International
Assets Advisory Corp. (the "Managing Underwriter") currently intends
to maintain a market for Units of the Trust and offer to repurchase Units at
prices which are based on the aggregate underlying value of Securities in the
Trust (generally determined by the bid prices of the Bonds and the closing
sale prices of the Equity Securities) plus or minus cash, if any, in the
Capital and Income Accounts of the Trust, plus any accrued interest on the
Bonds to the date of settlement. If a secondary market is not maintained, a
Unitholder may redeem Units at prices based upon the aggregate underlying
value of the Securities in the Trust plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust to the date of
settlement. See "Rights of Unitholders--Redemption of Units".
Termination. Commencing on the Mandatory Termination Date, any remaining
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 Securities. Written notice of any termination of the Trust shall be
given by the Trustee to each Unitholder at his address appearing on the
registration books of the Trust maintained by the Trustee. At least 30 days
prior to the Mandatory Termination Date the Trustee will provide written
notice thereof to all Unitholders. Unitholders 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".
Portfolio Supervision. Van Kampen American Capital Investment Advisory Corp.,
the Supervisor for the Trust, has retained Global Assets Advisors, Inc.
("Global Assets Advisors") as the Sub-Supervisor to provide research to the
Supervisor and perform portfolio supervisory services for the Trust. The
Sponsor believes that this arrangement is desirable in the present
circumstances due to the complexity of the foreign securities markets and
Global Assets Advisors' expertise in providing research on individual foreign
securities, emerging markets and the foreign securities markets in general.
The Supervisor will pay Global Assets Advisors the entire supervisory fee for
providing these services. See "Summary of Essential Financial
Information".
Risk Factors. An investment in the Trust should be made with an understanding
of the risks associated with foreign equity securities and high yield, high
risk debt obligations, including the possible deterioration of either the
financial condition of the issuers or the general condition of the securities
markets and currency fluctuations, the lack of adequate financial information
concerning an issuer and exchange control restrictions impacting foreign
issuers. Investors should be aware that the Bonds in the Trust have been rated
below investment grade by the major rating agencies. See "Portfolio"
and "Notes to Portfolio". Bonds with such ratings are commonly
referred to as "junk bonds" and are considered speculative by the
major rating agencies. For certain risk considerations related to the Trust,
see "Risk Factors". Units of the Trust are not deposits or obligations
of, and are not guaranteed or endorsed by, any bank and are not federally
insured or otherwise protected by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other agency and involve investment risk,
including the possible loss of market value or principal.
<TABLE>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
As of the Close of Business on the Day Before the Initial Date of Deposit: November 16, 1995
Managing Underwriter: International Assets Advisory Corp.
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor (1): Van Kampen American Capital Investment Advisory Corp.
Sub-Supervisor (1): Global Assets Advisors, Inc.
Evaluator: Interactive Data Corporation
Trustee: The Bank of New York
<CAPTION>
GENERAL INFORMATION
<S> <C>
Number of Units................................................................. 200,000
Fractional Undivided Interest in the Trust per Unit............................. 1/200,000
Public Offering Price: .........................................................
Aggregate Offering Price of Securities in Portfolio <F2>........................ $ 1,902,479
Aggregate Offering Price of Securities per Unit................................. $ 9.51
Sales Charge 5.5% (5.820% of the Aggregate Value of Securities per Unit) <F3>... $ .55
Public Offering Price per Unit <F3><F4><F5>..................................... $ 10.06
Redemption Price per Unit <F6>.................................................. $ 9.48
Initial Secondary Market Repurchase Price per Unit.............................. $ 9.51
Excess of Public Offering Price per Unit over Redemption Price per Unit......... $ .58
Excess of Initial Repurchase Price per Unit over Redemption Price per Unit...... $ .55
Calculation of Estimated Net Annual Dividends and Interest per Unit <F7>:.......
Estimated Gross Annual Dividends and Interest per Unit.......................... $ .68781
Less: Estimated Annual Expense per Unit......................................... $ .02648
Estimated Net Annual Dividends and Interest per Unit............................ $ .66133
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee <F1>... Maximum of $.007 per Unit
Evaluator's Annual Evaluation Fee.......... $20 per evaluation (approximately $5,040 annually)
First Settlement Date...................... November 22, 1995
Mandatory Termination Date................. November 1, 2004
Minimum Termination Value.................. The Trust may be terminated if the net asset value of the Trust is less than $500,000
unless the net asset value of the Trust's deposits has exceeded $15,000,000, then the
Trust may be terminated if the net asset value of the Trust is less than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee <F8>................ $.008 per Unit
Income Account Record Date............... Fifteenth day of June and December
Income Account Distribution Date......... Last day of June and December
Capital Account Record Date.............. Fifteenth day of December
Capital Account Distribution Date <F9>... Last day of December
Evaluation Time.......................... 4:00 P.M. New York time
<FN>
<F1>Pursuant to a contractual arrangement with the Supervisor, Global Assets
Advisors, Inc. will provide to the Supervisor on an agency basis supervisory
services in return for the entire supervisory fee.
<F2>Each Bond is valued at the offering price and each Equity Security, if listed
on a national securities exchange, is valued at the closing sale price or if
the Equity Security is not so listed, at the closing ask price thereof. The
aggregate value of Foreign Denominated Securities in the Trust represents the
U.S. dollar value based on the offering side value of the currency exchange
rate for the related currency at the Evaluation Time on the date of this
"Summary of Essential Financial Information" and includes the commissions
and stamp taxes associated with acquiring such Foreign Denominated Securities.
<F3>Effective on various dates the sales charge will decrease. See "Public
Offering--Offering Price".
<F4>On the Initial Date of Deposit there will be no cash in the Income or Capital
Accounts. Anyone ordering Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts. The
Public Offering Price per Unit is based on the aggregate value of the Foreign
Denominated Securities computed on the basis of the offering side value of the
currency exchange rate expressed in U.S. dollars and includes the commissions
and stamp taxes associated with acquiring such Foreign Denominated Securities.
<F5>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest on the Bonds from such date to the date of settlement
(normally three business days after order) less distributions from the Income
Account subsequent to the First Settlement Date. For purchases settling on the
First Settlement Date, no accrued interest will be added to the Public
Offering Price.
<F6>The Redemption Price per Unit is based on the aggregate value of the Foreign
Denominated Securities computed at the Evaluation Time on the basis of the bid
side value of the currency exchange rate for the related currency expressed in
U.S. dollars and includes the Trust's estimated costs of liquidating the
Foreign Denominated Securities to meet redemptions (approximately $0.01 per
Unit).
<F7>Estimated annual dividends are based on annualizing the most recently paid
dividends or in the case of certain foreign securities the most recent interim
and final dividends paid.
<F8>In addition, the Trustee will receive additional annual compensation, payable
in monthly installments, of $.055 and $.07 per $1,000 of market value of
Securities traded on the Australian and Canadian stock markets, respectively,
which are held in a sub-custodian account at month end.
<F9>Distributions from the Capital Account will be made monthly on the last day of
the month to Unitholders of record on the fifteenth day of such month if the
amount available for distribution in such Account equals at least $0.10 per
Unit.
</TABLE>
THE TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 21, which is
comprised of one unit investment trust, Gold & Income Trust, Series 1, was
created under the laws of the State of New York pursuant to a Trust Indenture
and Trust Agreement (the "Trust Agreement"), dated the date of this
Prospectus (the "Initial Date of Deposit"), among Van Kampen American
Capital Distributors, Inc., as Sponsor, Van Kampen American Capital Investment
Advisory Corp., as Supervisor, The Bank of New York, as Trustee, and
Interactive Data Corporation as Evaluator.
The Trust offers investors the opportunity to purchase Units representing
proportionate interests in a portfolio of common stocks issued by foreign
companies engaged in the exploration for and mining of gold and U.S.
dollar-denominated high yield, high risk foreign corporate and sovereign debt
obligations.
Unless terminated earlier, the Trust will terminate on the Mandatory
Termination Date set forth under "Summary of Essential Financial
Information" and any Securities then held will, within a reasonable time
thereafter, be liquidated or distributed by the Trustee. Any Securities
liquidated at termination will be sold at the then current market value for
such Securities; therefore, the amount distributable in cash to a Unitholder
upon termination may be more or less than the amount such Unitholder paid for
his Units.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio" herein, including delivery
statements relating to contracts for the purchase of certain such Securities
and an irrevocable letter of credit issued by a financial institution in the
amount required for such purchases. Thereafter, the Trustee, in exchange for
such Securities (and contracts) so deposited, delivered to the Sponsor
documentation evidencing the ownership of that number of Units of the Trust
indicated in "Summary of Essential Financial Information".
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Securities, contracts to purchase securities or irrevocable
letters of credit or cash with instructions to purchase additional Securities
in exchange for the corresponding number of additional Units. As additional
Units are issued by the Trust as a result of the deposit of additional
Securities by the Sponsor, the aggregate value of the securities in the Trust
will be increased and the fractional undivided interest in the Trust
represented by each Unit will be decreased. The Sponsor may continue to make
additional deposits of Securities (or cash or a letter of credit with
instructions to purchase additional Securities) into the Trust for a period of
up to approximately 12 months following the Initial Date of Deposit, provided
that such additional deposits will be in amounts which will maintain as nearly
as is practicable the same percentage relationship among the number of shares
of each Equity Security and par value of each Bond in the Trust that existed
immediately prior to any such subsequent deposit. Thus, although additional
Units may be issued, each Unit will continue to represent approximately the
same number of shares of each Equity Security and par value of each Bond, and
the percentage relationship among each Security in the Trust will remain the
same. The required percentage relationship among the Equity Securities will be
adjusted to reflect the occurrence of a stock dividend, a stock split or a
similar event which affects the capital structure of the issuer of an Equity
Security but which does not affect the Trust's percentage ownership of the
common stock equity of such issuer at the time of such event. The portion of
Securities represented by each Unit will not change as a result of the deposit
of additional Securities in the Trust.
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 or
additional Units are issued as a result of additional Securities being
deposited by the Sponsor, the fractional undivided interest in the Trust
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor or the Managing
Underwriter, or until the termination of the Trust Agreement.
OBJECTIVE AND SECURITIES SELECTION
The objective of the Trust is to provide an above average total return through
a combination of potential capital appreciation, dividend income and a high
level of interest income by investing in a portfolio of common stocks issued
by foreign companies engaged in the exploration for and mining of gold and
U.S. dollar-denominated high yield, high risk foreign corporate and sovereign
debt obligations. There is, of course, no assurance that the Trust (which
includes expenses and sales charges) will achieve its objective.
The Securities selected for deposit in the Trust were chosen by International
Assets Advisory Corporation ("IAAC" or the "Managing
Underwriter"). In selecting the Securities for inclusion in the Trust the
Managing Underwriter considered the following criteria as of the Initial Date
of Deposit: strength within the global marketplace; potential for capital
appreciation; ability to provide a regular stream of income; and maintaining
portfolio diversification. In the Managing Underwriter's opinion, an
investment in the portfolio of Securities will accomplish the Trust's
objectives over the term of the Trust.
Investors should note that the above criteria were applied to the Securities
for inclusion in the Trust as of the Initial Date of Deposit. Subsequent to
the Initial Date of Deposit, the Securities may no longer meet the above
criteria. Should a Security no longer meet the criteria originally established
for inclusion in the Trust, such Security will not as a result thereof be
removed from the Trust portfolio.
Investors will be subject to taxation on the interest and dividend income
received by the Trust and on gains from the sale or liquidation of Securities.
Investors should be aware that there is not any guarantee that the objective
of the Trust will be achieved because it is subject to the continuing ability
of the issuers of Bonds to pay interest and principal when due and the issuers
of Equity Securities to declare and pay dividends, and because the market
value of the Securities can be affected by a variety of factors. Common stocks
may be especially susceptible to general stock market movements and to
volatile increases and decreases of value as market confidence in and
perceptions of the issuers change. Investors should be aware that there can be
no assurance that the value of the underlying Equity Securities will increase
or that the issuers of the Equity Securities will pay dividends on outstanding
common shares. Any distribution of income with respect to the Equity
Securities 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. In addition, a decrease in the value of foreign
currencies relative to the U.S. dollar will adversely affect the value of
certain of the Trust's assets and income and the value of the Units of the
Trust. High yield, high risk, fixed rate debt obligations may entail increased
credit risks and the risk that the value of the Units will decline, and may
decline precipitously, with increases in interest rates. Bonds such as those
included in the Trust are generally subject to greater market fluctuations and
risk of loss of income and principal than are investments in lower-yielding,
higher rated securities. See "Risk Factors".
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,
Securities will not be sold by a Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation. The Trust may
continue to hold Securities even though the evaluation of the attractiveness
of the Securities may have changed and, if the evaluation were performed again
at that time, the Securities would not be selected for the Trust.
TRUST PORTFOLIO
The Trust consists of a portfolio of globally diversified common stocks issued
by foreign companies engaged in the exploration for and mining of gold and
U.S. dollar-denominated high yield, high risk foreign corporate and sovereign
debt obligations. Each of the issuers whose Securities are included in the
portfolio were selected by the Managing Underwriter based upon those factors
referred to under "Objectives and Securities Selection" above.
Because gold and gold stocks are generally influenced by the same market
events, there has historically been a direct correlation in the price of gold
and the equity securities of companies engaged in the exploration for and
mining of gold. For instance, when gold has increased in value so have gold
stocks. Because of this correlation, the Managing Underwriter believes gold
stocks are positioned for growth for the following reasons: as the global
economy expands the demand for gold may increase; gold is a trusted medium of
exchange worldwide; unlike paper currencies, the purchasing power of gold is
typically preserved during times of political upheaval or economic chaos; and
during times of rising inflation, gold may provide a hedge against a decline
in purchasing power. Furthermore, when foreign companies and governments need
to raise capital, they may issue high yield non-investment grade bonds. These
bonds have generally offered higher current yields, or greater potential for
capital appreciation, than higher-grade securities--but with additional risk.
However, to help reduce currency risk, the Trust will invest in U.S.
dollar-denominated bonds, meaning distributions are paid in U.S. dollars.
Overall, the Managing Underwriter believes these bonds, although considered
speculative, provide the opportunity for a regular source of income and for
global diversification. The Trust is also designed to help reduce the effect
of inflation on buying power. Even though inflation is tamer now than the
double-digit figures of a decade ago, the results over time can be
considerable. In addition, there is no guarantee that inflation will not
increase in the future. The Managing Underwriter believes investing for both
growth and income may help keep pace with inflation and protect purchasing
power over time.
The following is a general description of each of the issuers included in the
Trust.
Equity Securities.
Driefontein Consolidated Ltd. Driefontein Consolidated Ltd. (South Africa)
operates gold mining explorations at East Driefontein and West Driefontein in
South Africa's Transvaal Province. The company mines on approximately 8,155
hectares (1 hectare=2.47 acres) in the Oberholzer and Potchefstroom districts.
The company has a market capitalization of over $2 billion, produces
approximately 2mn oz./yr. and has an estimated nominal reserve life of over 21
years.
Euro-Nevada Mining Corporation. Euro-Nevada Mining Corporation (Canada)
acquires, explores and mines natural resource properties for gold. The company
mines gold in Nevada, California, Oregon, Utah, British Columbia and Ontario.
The company has a market capitalization of over $500 million and an estimated
nominal reserve life of over 22 years.
Free State Consolidated Gold Mines, Ltd. Free State Consolidated Gold Mines,
Ltd. (South Africa) produces gold. The company's gold producing properties are
located in the Odendaalsrus, Ventersburg and Welkom districts of Orange Free
State, South Africa. The company has a market capitalization of over $1
billion, produces approximately 3.5mn oz./yr. and has an estimated nominal
reserve life of over 12 years.
Hemlo Gold Mines, Inc. Hemlo Gold Mines, Inc. (Canada) mines gold. The company
owns and operates the Golden Giant Mine near Marathon, Ontario, and owns and
operates 55% of the Sildor Mines in Quebec. The company has a market
capitalization over $500 million and is a low cost miner of gold with an
estimated nominal reserve life of over 12 years production.
Newcrest Mining Ltd. Newcrest Mining Ltd. (Australia) explores for precious
minerals, mainly gold, through six company owned and operated mines in
Australia. The company also has interests in other mining operations
throughout New Zealand, Chile, Indonesia, Vietnam, Canada, Mexico, Bolivia,
Ireland, Scotland, Spain, Greece, Turkey and the United States. The company
has a market capitalization of over $900 million, produces approximately
650,000 oz./yr. and has an estimated nominal reserve life of over 7 years.
Normandy Mining Ltd. Normandy Mining Ltd. (Australia) invests in mining and
oil enterprises in Australia. The investments include Poseidon Ltd., Gold
Mines of Kalgoorlie Ltd. and Command Petroleum Holdings NL. Normandy Capital
Group Ltd., a subsidiary, is a merchant bank to the resources industry,
providing corporate advice, resources project financing, treasury and
investment management. The company has a market capitalization of over $700
million.
Sons of Gwalia, Ltd. Sons of Gwalia, Ltd. (Australia) is a gold mining and
exploration company with operations in Australia. The company produces
tantalite concentrates and participates in the global lithium minerals
industry. Sons of Gwalia also produces and markets talc, tin and kaolin and
develops its Kemerton Silica Sand and Lithium Carbonate projects. The company
primarily operates the Sons of Gwalia and Barnicoat mines. The company has a
market capitalization of over $300 million, produces approximately 100,000
oz./yr. and has an estimated nominal reserve life of over 7 years.
Vaal Reefs Exploration & Mining Company, Ltd. Vaal Reefs Exploration & Mining
Company, Ltd. (South Africa) mines and explores for gold and by-product
uranium oxide throughout Klerksdorp, Transvaal and Vijoenskroon, Orange Free
State, South Africa. The company has a market capitalization of over $1
billion, produces approximately 2.2mn oz./yr. and has an estimated nominal
reserve life of 25 years.
Bonds.
United Mexican States. Mexico is a foreign sovereign government.
Transportacion Maritima Mexicana S.A. de C. V. Transportacion Maritima
Mexicana S.A. de C. V. (TMM) is a full service shipping company involved in
most aspects of maritime dry cargo transport, providing calls to over 150
ports in more than 35 countries. The company's principal office is located in
Mexico City. TMM maintains 25 branch offices and shipping agencies throughout
Mexico, and also operates offices in Japan, Belgium, Germany, the Netherlands
and the United States.
Republic of Argentina. Argentina is a foreign sovereign government.
YPF Sociedad Anonima. YPF Sociedad Anonima (YPF), the largest Argentine
company, is an integrated oil and gas company engaged in the exploration,
development and production of oil and natural gas and in the refining,
marketing, transportation and distribution of oil and a wide range of
petroleum derivatives, petrochemicals and liquid petroleum gas.
Telefonica de Argentina S. A. Telefonica de Argentina S. A. is one of two
licensed suppliers of fixed-link telecommunications services and basic
telephone services in Argentina. The company owns public exchanges, the
network of local telephone lines and the principal domestic long-distance
telephone transmission facilities in the southern region of Argentina, which
includes most of the province of Buenos Aires and more than half of the City
of Buenos Aires.
The Trust consists of (a) the Securities (including contracts for the purchase
thereof) listed under "Portfolio" as may continue to be held from time
to time in the Trust, (b) any additional Securities acquired and held by the
Trust pursuant to the provisions of the Trust Agreement and (c) any cash held
in the related Income and Capital Accounts. Neither the Sponsor nor the
Trustee shall be liable in any way for any failure in any of the Securities.
However, should any contract for the purchase of any of the Securities
initially deposited hereunder fail, the Sponsor will, unless substantially all
of the moneys held in the Trust to cover such purchase are reinvested in
substitute Securities in accordance with the Trust Agreement, refund the cash
and sales charge attributable to such failed contract to all Unitholders on or
before the next scheduled distribution date.
RISK FACTORS
Equity Securities. An investment in Units of the Trust should be made with an
understanding of the risks which an investment in foreign common stocks
entails, including the risk that the financial condition of the issuers of the
Equity Securities or the general condition of the common stock market may
worsen and the value of the Equity Securities and therefore the value of the
Units may decline. Common stocks are especially susceptible to general stock
market movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions are
based on unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or
banking crises. Shareholders of common stocks have rights to receive payments
from the issuers of those common stocks that are generally subordinate to
those of creditors of, or holders of debt obligations or preferred stocks of,
such issuers. Shareholders of common stocks of the type held by the Trust have
a right to receive dividends only when and if, and in the amounts, declared by
each issuer's board of directors and have a right to participate in amounts
available for distribution by such issuer only after all other claims on such
issuer have been paid or provided for. Common stocks do not represent an
obligation of the issuer and, therefore, do not offer any assurance of income
or provide the same degree of protection of capital as do debt securities. The
issuance of additional debt securities or preferred stock will create prior
claims for payment of principal, interest and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends
on its common stock or the rights of holders of common stock with respect to
assets of the issuer upon liquidation or bankruptcy. The value of common
stocks is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Equity Securities in a portfolio
may be expected to fluctuate over the life of 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, have
generally inferior rights to receive payments from the issuer in comparison
with the rights of creditors of, or holders of debt obligations or preferred
stocks issued by, the issuer. Cumulative preferred stock dividends must be
paid before common stock dividends and any cumulative preferred stock dividend
omitted is added to future dividends payable to the holders of cumulative
preferred stock. Preferred stockholders are also generally entitled to rights
on liquidation which are senior to those of common stockholders.
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for the Equity Securities may depend on whether dealers will make a market in
the Equity Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity Securities
will be maintained or of the liquidity of the Equity Securities in any markets
made. In addition, the Trust may be restricted under the Investment Company
Act of 1940 from selling Equity Securities to the Sponsor or the Managing
Underwriter. The price at which the Equity Securities may be sold to meet
redemption, and the value of the Trust, will be adversely affected if trading
markets for the Equity Securities are limited or absent.
Unitholders will be unable to dispose of any of the Equity Securities in the
Trust, as such, and will not be able to vote the Equity Securities. As the
holder of the Equity Securities, the Trustee will have the right to vote all
of the voting stocks in the Trust and will vote such stocks in accordance with
the instructions of the Sponsor. In the absence of any such instructions by
the Sponsor, the Trustee will vote such stocks so as to insure that the stocks
are voted as closely as possible in the same manner and the same general
proportion as are shares held by owners other than the Trust.
The Trust includes securities which are issued by companies engaged in the
exploration for and development of gold properties and mining and processing
of gold ore. Mining operations and exploration activities are subject to
extensive federal, state and local laws and regulations governing exploration,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, protection and remediation of the environment, reclamation,
mine safety, toxic substances and other matters. Compliance with such laws and
regulations may increase the costs of planning, designing, drilling,
developing, constructing, operating and closing the mines and other facilities
of certain companies. It is possible that the costs and delays associated with
compliance with such laws and regulations could become such that certain
companies would not proceed with the development or operation of a mine and
could have a significant adverse effect on certain of the issuers of
Securities. Mining and exploration companies must also seek governmental
permits for expansion and advanced exploration activities. Obtaining the
necessary government permits is a complex and time-consuming process involving
numerous federal, state and local agencies. The failure to obtain certain
permits could have a material adverse effect on an issuer's business,
operations and prospects. Furthermore, the laws and regulations of foreign
countries may differ significantly from U.S. laws governing mining operations
in the United States.
In addition, the profitability of precious metals companies is significantly
affected by changes in the market prices of precious metals. Prices of
precious metals can fluctuate widely and are affected by numerous industry
factors, such as demand for precious metals, forward selling by producers,
central bank sales and purchases of gold, and production and cost levels in
major metals-producing regions. Although many companies have hedging programs
in place to reduce the risk associated with precious metals price volatility,
there is no assurance that an issuer's hedging strategies will be successful.
Furthermore, exploration for all minerals, as well as gold and other precious
metals, is highly speculative in nature, involves many risks and frequently is
unsuccessful. There can be no assurance that any company's exploration efforts
will result in the discovery of mineralization or that any mineralization
discovered will result in an increase of any company's reserves. In the event
that new reserves are not developed, an issuer may not be able to sustain its
current level of production which could adversely affect the Securities in the
Trust's portfolio.
Bonds. An investment in Units of the Trust should be made with an
understanding of the risks that an investment in "high yield", high
risk, fixed rate foreign corporate and sovereign debt obligations or "junk
bonds" may entail, including increased credit risks and the risk that the
value of the Units will decline, and may decline precipitously, with increases
in interest rates. In recent years there have been wide fluctuations in
interest rates and thus in the value of fixed-rate debt obligations generally.
Bonds such as those included in the Trust are, under most circumstances,
subject to greater market fluctuations and risk of loss of income and
principal than are investments in lower-yielding, higher rated securities, and
their value may decline precipitously because of increases in interest rates
not only because the increases in rates generally decrease values but also
because increased rates have at times in the past preceded a slowdown in the
economy and a decrease in the value of assets generally that may adversely
affect the credit of issuers of high yield, high risk securities resulting in
a higher incidence of defaults among high yield, high risk securities. A
slowdown in the economy, or a development adversely affecting an issuer's
creditworthiness, may result in the issuer being unable to maintain earnings
or sell assets at the rate and at the prices, respectively, that are required
to produce sufficient cash flow to meet its interest and principal
requirements. For an issuer that has outstanding both senior commercial bank
debt and subordinated high yield, high risk securities, an increase in
interest rates will increase that issuer's interest expense insofar as the
interest rate on the bank debt is fluctuating. However, many leveraged issuers
enter into interest rate protection agreements to fix or cap the interest on a
large portion of their bank debt. This reduces exposure to increasing interest
rates but reduces the benefit to the issuer of declining rates. The Sponsor
cannot predict future economic policies or their consequences or, therefore,
the course or extent of any similar market fluctuations in the future. The
portfolio consists of Bonds that, in many cases, do not have the benefit of
covenants that would prevent the issuer from engaging in capital
restructurings or borrowing transactions in connection with corporate
acquisitions, leveraged buy outs or restructurings that could have the effect
of reducing the ability of the issuer to meet its obligations and might result
in the ratings of the Bonds and the value of the underlying portfolio being
reduced.
The Bonds in the Trust consist of "high yield, high risk" foreign
corporate and sovereign bonds. "High yield" or "junk" bonds,
the generic names for corporate bonds rated below "BBB" by Standard &
Poor's or below "Baa" by Moody's Investor Service, Inc., are
frequently issued by issuers in the growth stage of their development, by
established companies whose operations or industries are depressed or by
highly leveraged companies purchased in leveraged buyout transactions. The
market for high yield bonds is very specialized and investors in it have been
predominantly financial institutions. High yield bonds are generally not
listed on a national securities exchange. Trading of high yield bonds,
therefore, takes place primarily in over-the-counter markets which consist of
groups of dealer firms that are typically major securities firms. Because the
high yield bond market is a dealer market, rather than an auction market, no
single obtainable price for a given bond prevails at any given time. Prices
are determined by negotiation between traders. The existence of a liquid
trading market for the Bonds may depend on whether dealers will make a market
in the Bonds. There can be no assurance that a market will be made for any of
the Bonds, that any market for the Bonds will be maintained or of the
liquidity of the Bonds in any markets made. Not all dealers maintain markets
in all high yield bonds. Therefore, since there are fewer traders in these
bonds than there are in "investment grade" bonds, the bid-offer spread
is usually greater for high yield bonds than it is for investment grade bonds.
The price at which the Securities may be sold to meet redemptions and the
value of the Trust will be adversely affected if trading markets for the Bonds
are limited or absent. If the rate of redemptions is great, the value of the
Trust may decline to a level that requires liquidation.
Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the
issuers of lower-rated securities may not be as strong as that of other
issuers. Moreover, if a Bond is recharacterized as equity by the Internal
Revenue Service for Federal income tax purposes, the issuer's interest
deduction with respect to the Bond will be disallowed and this disallowance
may adversely affect the issuer's credit rating. Because investors generally
perceive that there are greater risks associated with the lower-rated
securities in the Trust, the yields and prices of these securities tend to
fluctuate more than higher-rated securities with changes in the perceived
quality of the credit of their issuers. In addition, the market value of high
yield, high risk, fixed-income securities may fluctuate more than the market
value of higher-rated securities since high yield, high risk, fixed-income
securities tend to reflect short-term credit development to a greater extent
than higher-rated securities. Lower-rated securities generally involve greater
risks of loss of income and principal than higher-rated securities. Issuers of
lower-rated securities may possess less creditworthiness characteristics than
issuers of higher-rated securities and, especially in the case of issuers
whose obligations or credit standing have recently been downgraded, may be
subject to claims by debtholders, owners of property leased to the issuer or
others which, if sustained, would make it more difficult for the issuers to
meet their payment obligations. High yield, high risk bonds are also affected
by variables such as interest rates, inflation rates and real growth in the
economy. Therefore, investors should consider carefully the relative risks
associated with investment in securities which carry lower ratings.
The value of the Units reflects the value of the portfolio securities,
including the value (if any) of securities in default. Should the issuer of
any Bond default in the payment of principal or interest, the Trust may incur
additional expenses seeking payment on the defaulted Bond. Because amounts (if
any) recovered by the Trust in payment under the defaulted Bond may not be
reflected in the value of the Units until actually received by the Trust, and
depending upon when a Unitholder purchases or sells his Units, it is possible
that a Unitholder would bear a portion of the cost of recovery without
receiving any portion of the payment recovered.
High yield, high risk bonds are generally subordinated bonds. The payment of
principal (and premium, if any), interest and sinking fund requirements with
respect to subordinated bonds of an issuer is subordinated in right of payment
to the payment of senior bonds of the issuer. Senior bonds generally include
most, if not all, significant debt of an issuer, whether existing at the time
of issuance of subordinated debt or created thereafter. Upon any distribution
of the assets of an issuer with subordinated bonds upon dissolution, total or
partial liquidation or reorganization of or similar proceeding relating to the
issuer, the holders of senior indebtedness will be entitled to receive payment
in full before holders of subordinated indebtedness will be entitled to
receive any payment. Moreover, generally no payment with respect to
subordinated indebtedness may be made while there exists a default with
respect to any senior indebtedness. Thus, in the event of insolvency, holders
of senior indebtedness of an issuer generally will recover more, ratably, than
holders of subordinated indebtedness of that issuer.
Bonds that are rated lower than "BBB" by Standard & Poor's or
"Baa" by Moody's should be considered speculative as such ratings indicate
a quality of less than investment grade. Investors should carefully review the
objective of the Trust and consider their ability to assume the risks involved
before making an investment in the Trust. See "Notes to Portfolio" for
a description of the ratings on the Bonds.
Certain of the Bonds may be subject to redemption prior to their stated
maturity date pursuant to sinking fund provisions, call provisions or
extraordinary optional or mandatory redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated over a period of time for
retirement of debt. A callable debt obligation is one which is subject to
redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a debt obligation is redeemed, at or before
maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation is
at a premium over par than when it is at a discount from par. The exercise of
redemption or call provisions will (except to the extent the proceeds of the
called Bonds are used to pay for Unit redemptions) result in the distribution
of principal and may result in a reduction in the amount of subsequent
interest distributions. The portfolio contains a listing of the sinking fund
and call provisions, if any, with respect to each of the Bonds. Extraordinary
optional redemptions and mandatory redemptions result from the happening of
certain events. Generally, events that may permit the extraordinary optional
redemption of Bonds or may require the mandatory redemption of Bonds include,
among others: the substantial damage or destruction by fire or other casualty
of the project for which the proceeds of the Bonds were used; an exercise by a
local, state or federal governmental unit of its power of eminent domain to
take all or substantially all of the project for which the proceeds of the
Bonds were used; changes in the economic availability of raw materials,
operating supplies or facilities or technological or other changes which
render the operation of the project for which the proceeds of the Bonds were
used uneconomical; changes in law or an administrative or judicial decree
which renders the performance of the agreement under which the proceeds of the
Bonds were made available to finance the project impossible or which creates
unreasonable burdens or which imposes excessive liabilities, such as taxes,
not imposed on the date the Bonds are issued on the issuer of the Bonds or the
user of the proceeds of the Bonds; an administrative or judicial decree which
requires the cessation of a substantial part of the operations of the project
financed with the proceeds of the Bonds; an overestimate of the costs of the
project to be financed with the proceeds of the Bonds resulting in excess
proceeds of the Bonds which may be applied to redeem Bonds; or an
underestimate of a source of funds securing the Bonds resulting in excess
funds which may be applied to redeem Bonds. The Sponsor is unable to predict
all of the circumstances which may result in such redemption of an issue of
Bonds. See "Portfolio" and footnote (4) in "Notes to Portfolio".
Foreign Issuers. Since the Securities consist of securities of foreign
issuers, an investment in the Trust involves certain investment risks that are
different in some respects from an investment in a trust which invests
entirely in the securities of domestic issuers. These investment risks include
future political or governmental restrictions which might adversely affect the
payment or receipt of payment of interest or dividends on the Securities, the
possibility that the financial condition of the issuers of the Securities may
become impaired or that the general condition of the relevant securities
market may worsen (both of which would contribute directly to a decrease in
the value of the Securities and thus in the value of the Units), the limited
liquidity and relatively small market capitalization of the relevant
securities market, expropriation or confiscatory taxation, economic
uncertainties and foreign currency devaluations and fluctuations. In addition,
for foreign issuers that are not subject to the reporting requirements of the
Securities Exchange Act of 1934, there may be less publicly available
information than is available from a domestic issuer. Also, foreign issuers
are not necessarily subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to domestic issuers. The securities of many foreign issuers are less liquid
and their prices more volatile than securities of comparable domestic issuers.
In addition, fixed brokerage commissions and other transaction costs on
foreign securities exchanges are generally higher than in the United States
and there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the
United States. However, due to the nature of the issuers of the Securities,
the Sponsor believes that adequate information will be available to allow the
Supervisor to provide portfolio surveillance for the Trust.
Equity Securities issued by non-U.S. issuers generally pay dividends in
foreign currencies and are principally traded in foreign currencies.
Therefore, there is a risk that the United States dollar value of these
securities will vary with fluctuations in the U.S. dollar foreign exchange
rates for the various Equity Securities. See "Exchange Rate" below.
Investors should also realize that, although certain Equity Securities are
ADRs and the Bonds in the Trust are U.S. dollar denominated investments, all
foreign issuers which operate internationally are subject to currency risks.
The securities of certain foreign issuers in the Trust are in ADR form. See
"Portfolio". ADRs evidence American Depository Receipts which
represent common stock deposited with a custodian in a depositary. American
Depositary Shares, and receipts therefor (ADRs), are issued by an American
bank or trust company to evidence ownership of underlying securities issued by
a foreign corporation. These instruments may not necessarily be denominated in
the same currency as the securities into which they may be converted. For
purposes of the discussion herein, the term ADR generally includes American
Depositary Shares. ADRs may be sponsored or unsponsored. In an unsponsored
facility, the depositary initiates and arranges the facility at the request of
market makers and acts as agent for the ADR holder, while the company itself
is not involved in the transaction. In a sponsored facility, the issuing
company initiates the facility and agrees to pay certain administrative and
shareholder-related expenses. Sponsored facilities use a single depositary and
entail a contractual relationship between the issuer, the shareholder and the
depositary; unsponsored facilities involve several depositaries with no
contractual relationship to the company. The depositary bank that issues an
ADR generally charges a fee, based on the price of the ADR, upon issuance and
cancellation of the ADR. This fee would be in addition to the brokerage
commissions paid upon the acquisition or surrender of the security. In
addition, the depositary bank incurs expenses in connection with the
conversion of dividends or other cash distributions paid in local currency
into U.S. dollars and such expenses are deducted from the amount of the
dividend or distribution paid to holders, resulting in a lower payout per
underlying shares represented by the ADR than would be the case if the
underlying share were held directly. Certain tax considerations, including tax
rate differentials and withholding requirements, arising from applications of
the tax laws of one nation to nationals of another and from certain practices
in the ADR market may also exist with respect to certain ADRs. In varying
degrees, any or all of these factors may affect the value of the ADR compared
with the value of the underlying shares in the local market. In addition, the
rights of holders of ADRs may be different than those of holders of the
underlying shares, and the market for ADRs may be less liquid than that for
the underlying shares. ADRs are registered securities pursuant to the
Securities Act of 1933 and may be subject to the reporting requirements of the
Securities Exchange Act of 1934.
On the basis of the best information available to the Sponsor at the present
time, none of the Equity Securities are subject to exchange control
restrictions under existing law which would materially interfere with payment
to the Trust of interest or dividends due on, or proceeds from the sale of,
the Securities. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payment to the Trust. In addition, the adoption of exchange control
regulations and other legal restrictions could have an adverse impact on the
marketability of international securities in the Trust and on the ability of
the Trust to satisfy its obligation to redeem Units tendered to the Trustee
for redemption.
Investors should be aware that it may not be possible to buy all Equity
Securities at the same time because of the unavailability of any Equity
Security, and restrictions applicable to the Trust relating to the purchase of
an Equity Security by reason of the federal securities laws or otherwise.
Foreign securities are often not registered under the Securities Act of 1933
and may not be exempt from the registration requirements of such Act. Sales of
non-exempt Securities by the Trust in the United States securities markets are
subject to severe restrictions and may not be practicable. Accordingly, sales
of such securities by the Trust will generally be effected only in foreign
securities markets. Although the Sponsor does not believe that the Trust will
encounter obstacles in disposing of any Securities, if necessary, investors
should realize that the Securities may be traded in foreign countries where
the securities markets are not as developed or efficient and may not be as
liquid as those in the United States. The value of the Securities will be
adversely affected if trading markets for the Securities are limited or
absent. In addition, the Bonds in the Trust may not be listed on a securities
exchange. Whether or not the Bonds are listed, the principal trading market
for the Bonds will generally be in the over-the-counter market. As a result,
the existence of a liquid trading market for the Bonds may depend on whether
dealers will make a market in the Bonds. There can be no assurance that a
market will be made for any of the Bonds, that any market for the Bonds will
be maintained, or of the liquidity of the Bonds in any markets made. The price
at which the Bonds may be sold to meet redemptions and the value of the Trust
will be adversely affected if trading markets for the Bonds are limited or
absent. The Trust may also contain non-exempt Bonds in registered form which
have been purchased on a private placement basis. Sales of these Bonds may not
be practicable outside the United States, but can generally be made to U.S.
institutions in the private placement market which may not be as liquid as the
general U.S. securities market. Since the private placement market is less
liquid, the prices received may be less than would have been received had the
markets been broader.
Non-U.S. issuers of the Bonds included in the Trust will generally not have
submitted to the jurisdiction of U.S. courts for purposes of lawsuits relating
to those Bonds. If the Trust contains Bonds of such an issuer, the Trust as a
holder of those obligations may not be able to assert its rights in U.S.
courts under the documents pursuant to which the Bonds are issued. Even if the
Trust obtains a U.S. Foreign Denominated Securities judgment against a foreign
obligor, there can be no assurance that the judgment will be enforced by a
court in the country in which the foreign obligor is located. In addition, a
judgment for money damages by a court in the United States, if obtained, will
ordinarily be rendered only in U.S. dollars. It is not clear, however,
whether, in granting a judgment, the rate of conversion of the applicable
foreign currency into U.S. dollars, if necessary, would be determined with
reference to the due date or the date the judgement is rendered. Courts in
other countries may have rules that are similar to, or different from, the
rules of the U.S. courts.
Exchange Rate. Certain of the Securities may be principally traded in foreign
currencies and as such involve investment risks that are substantially
different from an investment in a fund which invests in securities that are
principally traded in United States dollars. The United States dollar value of
the portfolio (and hence of the Units) and of the distributions from the
portfolio will vary with fluctuations in the United States dollar foreign
exchange rates for the related foreign currencies. Most foreign currencies
have fluctuated widely in value against the United States dollar for many
reasons, including supply and demand of the respective currency, the rate of
inflation in the respective economies compared to the United States, the
impact of interest rate differentials between different currencies on the
movement of foreign currency rates, the balance of imports and exports of
goods and services, the soundness of the world economy and the strength of the
respective economy as compared to the economies of the United States and other
countries.
The post-World War II international monetary system was, until 1973, dominated
by the Bretton Woods Treaty, which established a system of fixed exchange
rates and the convertibility of the United States dollar into gold through
foreign central banks. Starting in 1971, growing volatility in the foreign
exchange markets caused the United States to abandon gold convertibility and
to effect a small devaluation of the United States dollar. In 1973, the system
of fixed exchange rates between a number of the most important industrial
countries of the world, among them the United States and most western European
countries, was completely abandoned. Subsequently, major industrialized
countries have adopted "floating" exchange rates, under which daily
currency valuations depend on supply and demand in a freely fluctuating
international market. Many smaller or developing countries have continued to
"peg" their currencies to the United States dollar although there has
been some interest in recent years in "pegging" currencies to
"baskets" of other currencies or to a Special Drawing Right administered by
the International Monetary Fund. Currencies are generally traded by leading
international commercial banks and institutional investors (including
corporate treasurers, money managers, pension funds and insurance companies).
From time to time, central banks in a number of countries also are major
buyers and sellers of foreign currencies, mostly for the purpose of preventing
or reducing substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of actual
and proposed government policies on the value of currencies, interest rate
differentials between the currencies and the balance of imports and exports of
goods and services and transfers of income and capital from one country to
another. These economic factors are influenced primarily by a particular
country's monetary and fiscal policies (although the perceived political
situation in a particular country may have an influence as well--particularly
with respect to transfers of capital). Investor psychology may also be an
important determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative strength or
weakness of a particular currency may sometimes exercise considerable
speculative influence on currency exchange rates by purchasing or selling
large amounts of the same currency or currencies. However, over the long term,
the currency of a country with a low rate of inflation and a favorable balance
of trade should increase in value relative to the currency of a country with a
high rate of inflation and deficits in the balance of trade.
The Evaluator will estimate the current exchange rate for the foreign
currencies based on activity in the related currency exchange market. However,
since this market may be volatile and is constantly changing, depending on the
activity at any particular time of the large international commercial banks,
various central banks, large multi-national corporations, speculators and
other buyers and sellers of foreign currencies, and since actual foreign
currency transactions may not be instantly reported, the exchange rates
estimated by the Evaluator may not be indicative of the amount in United
States dollars the Trust would receive had the Trustee sold any particular
currency in the market. The foreign exchange transactions of the Trust will be
concluded by the Trustee with foreign exchange dealers acting as principals on
a spot (i.e., cash) buying basis. Although foreign exchange dealers trade on a
net basis, they do realize a profit based upon the difference between the
price at which they are willing to buy a particular currency (bid price) and
the price at which they are willing to sell the currency (offer price).
For those Equity Securities that are ADRs, currency fluctuations will affect
the U.S. dollar equivalent of the local currency price of the underlying
domestic share and, as a result, are likely to affect the value of the ADRs
and consequently the value of the Equity Securities. The foreign issuers of
securities that are ADRs may pay dividends in foreign currencies which must be
converted into dollars. Most foreign currencies have fluctuated widely in
value against the United States dollar for many reasons, including supply and
demand of the respective currency, the soundness of the world economy and the
strength of the respective economy as compared to the economies of the United
States and other countries. Therefore, for any securities of issuers (whether
or not they are in ADR form) whose earnings are stated in foreign currencies,
or which pay dividends in foreign currencies or which are traded in foreign
currencies, there is a risk that their United States dollar value will vary
with fluctuations in the United States dollar foreign exchange rates for the
relevant currencies.
Compensation For Foreign Withholding Tax. Certain of the Bonds may be subject
to non-U.S. ("foreign") withholding taxes. Certain issuers of Bonds
which are subject to foreign withholding taxes have generally agreed, subject
to certain exceptions, to make additional payments ("Additional
Payments") which together with other payments are intended to compensate
the holder of the Bond for the imposition of certain withholding taxes.
However, both the calculation of the Additional Payment and whether the
Additional Payment compensates the holder of the Bond for any related
penalties, interest or other charges imposed in connection with any applicable
foreign withholding taxes are likely to differ from Bond to Bond. Moreover,
the Additional Payment is itself treated as taxable income to Unitholders for
U.S. income tax purposes. The Additional Payment may not be based upon a
"gross-up" formula which would otherwise compensate an investor for the tax
liability triggered by the receipt of the Additional Payment. For any of these
reasons, an investor may not be adequately compensated for the actual foreign
withholding tax liabilities incurred. If the Trust obtains a certificate from
an issuer evidencing payment of foreign withholding taxes with respect to a
Bond, the Trust will so notify Unitholders. A Unitholder is required to
include in his gross income the entire amount of interest paid on his pro rata
portion of the Bond including the amount of tax withheld therefrom and the
amount of any Additional Payment. However, if the foreign tax withheld
constitutes an income tax for which U.S. foreign tax credits may be taken, the
Unitholder may be able to obtain applicable foreign tax credits (subject to
statutory limitations) or deductions. See "Taxation".
TAXATION
General. The following is a general discussion of certain of the United States
federal income tax consequences of the purchase, ownership and disposition of
the Units. The summary is limited to investors who hold the Units as capital
assets (generally, property held for investment) within the meaning of Section
1221 of the Internal Revenue Code of 1986 (the "Code"). Unitholders
should consult their tax advisers in determining the federal, state, local and
any other tax consequences of the purchase, ownership and disposition of Units
in the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from each Security when such income is considered to be
received by the Trust. Each Unitholder will also be required to include in
taxable income for Federal income tax purposes original issue discount with
respect to his interest in any Bonds held by a Trust at the same time and in
the same manner as though the Unitholder were the direct owner of such
interest.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security, or when the Unitholder redeems or sells his Units. A Unitholder's
tax basis in his Units will equal his tax basis in his pro rata portion of all
of the assets of the Trust. Unitholders must reduce the tax basis of their
Units for their share of accrued interest received, if any, on Bonds delivered
after the date the Unitholders pay for the Units to the extent that such
interest accrued on such Bonds during the period from the Unitholder's
settlement date to the date such Bonds are delivered to the Trust and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing the proceeds of
such sale or redemption with the adjusted basis of the Units. If the Trustee
disposes of Securities (whether by sale, exchange, payment on maturity,
redemption or otherwise), gain or loss is recognized by the Unitholder
(subject to various non-recognition provisions of the Code). The amount of any
such gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with his basis for his fractional
interest in the asset disposed of. In the case of a Unitholder who purchases
his Units, such basis (before the adjustments described below) is determined
by apportioning the tax basis for the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the units.
3. The basis of each Unit and of each Bond which was issued with original
issue discount (or which has market discount) must be increased by the amount
of accrued original issue discount (and market discount, if the Unitholder
elects to include market discount in income as it accrues) and the basis of
each Unit and of each Bond which was purchased by the Trust at a premium must
be reduced by the annual amortization of bond premium which the Unitholder has
properly elected to amortize under Section 171 of the Code. The tax cost
reduction requirements of the Code relating to amortization of bond premium
may, under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to or less than
his original cost. Original issue discount is effectively treated as interest
for Federal income tax purposes and the amount of original issue discount in
this case is generally the difference between the bond's purchase price and
its stated redemption price at maturity. A Unitholder will be required to
include in gross income for each taxable year the sum of his daily portions of
any original issue discount attributable to the Bonds held by the Trust as
such original issue discount accrues for such year even though the income is
not distributed to the Unitholders during such year unless a Bond's original
issue discount is less than a "de minimis" amount as determined under
the Code. To the extent the amount of such discount is less than the
respective "de minimis" amount, such discount shall be treated as
zero. In general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual compounding of
accrued interest. Unitholders should consult their tax advisers regarding the
Federal income tax consequences and accretion of original issue discount.
4. 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 the Equity Securities 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 Equity Securities which exceed such current and accumulated earnings
and profits will first reduce a Unitholder's tax basis in such Equity
Securities, and to the extent that such dividends exceed a Unitholder's tax
basis in such Equity Securities shall generally be treated as capital gain. In
general, any such capital gain will be short-term unless a Unitholder has held
his Units for more than one year.
The Bonds - Premium. If a Unitholder's tax basis of his pro rata portion in
any Bonds held by the Trust exceeds the amount payable by the issuer of the
Bonds with respect to such pro rata interest upon maturity (or, in certain
cases, the call date) of the Bond, such excess would be considered premium
which may be amortized by the Unitholder at the Unitholder's election as
provided in Section 171 of the Code. Unitholders should consult their tax
advisors regarding whether such election should be made and the manner of
amortizing premium.
The Bonds - Original Issue Discount. Certain of the Bonds in the Trust may
have been acquired with "original issue discount." In the case of any
Bonds in the Trust acquired with "original issue discount" that
exceeds a "de minimis" amount as specified in the Code, such discount
is includable in taxable income of the Unitholders on an accrual basis
computed daily, without regard to when payments of interest on such Bonds are
received. The Code provides a complex set of rules regarding the accrual of
original issue discount. These rules provide that original issue discount
generally accrues on the basis of a constant compound interest rate over the
term of the Bonds. Unitholders should consult their tax advisers as to the
amount of original issue discount which would have previously accrued based
upon its issue price (its "adjusted issue price"). Similarly, these
special rules would apply to a Unitholder if the tax basis of his pro rata
portion of a Bond issued with original issue discount exceeds his pro rata
portion of its adjusted issue price. Unitholders should also consult their tax
advisers regarding these special rules.
The Bonds - Market Discount. If a Unitholder's tax basis in his pro rata
portion of Bonds is less than the allocable portion of such Bond's stated
redemption price at maturity (or, if issued with original issue discount, the
allocable portion of its "revised issue price"), such difference will
constitute market discount unless the amount of market discount is "de
minimis" as specified in the Code. Market discount accrues daily computed
on a straight line basis, unless the Unitholder elects to calculate accrued
market discount under a constant yield method. Unitholders should consult
their tax advisers regarding whether such election should be made and as to
the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Bonds, on the sale, maturity or disposition
of such Bonds by the Trust, and on the sale by a Unitholder of Units, unless a
Unitholder elects to include the accrued market discount in taxable income as
such discount accrues. If a Unitholder does not elect to annually include
accrued market discount in taxable income as it accrues, deductions for any
interest expense incurred by the Unitholder which is incurred to purchase or
carry his Units will be reduced by such accrued market discount. In general,
the portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in
income. Unitholders should consult their tax advisers regarding whether an
election should be made to include market discount in income as it accrues and
as to the amount of interest expense which may not be currently deductible.
The Bonds - Basis. The tax basis of a Unitholder with respect to his interest
in a Bond is increased by the amount of original issue discount (and market
discount, if the Unitholder elects to include market discount in income as it
accrues) thereon properly included in the Unitholder's gross income as
determined for Federal income tax purposes and reduced by the amount of any
amortized acquisition premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. A Unitholder's tax basis in his Units
will equal his tax basis in his pro rata portion of all of the assets of the
Trust.
Dividends Received Deduction. To the extent dividends received by the Trust
are attributable to foreign corporations, a corporation that owns Units will
not be entitled to the dividends received deduction with respect to its pro
rata portion of such dividends, since the dividends received deduction is
generally available only with respect to dividends paid by domestic
corporations.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by such Unitholder. 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 paid by 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. For taxpayers other than corporations, net
capital gains are subject to a maximum marginal stated tax rate of 28%.
However, it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act")
raised tax rates on ordinary income while capital gains remain subject to a
28% maximum stated rate for taxpayers other than corporations. Because some or
all capital gains are taxed at a comparatively lower rate under the Tax Act,
the Tax Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
Other Matters. Each Unitholder (other than certain foreign investors) 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.
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.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unitholders. Because under the
grantor trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax purposes
with respect to such taxes. Investors should consult their tax advisers with
respect to foreign withholding taxes and foreign tax credits.
In the opinion of Tanner Propp & Farber, special counsel to the Fund 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 (including a foreign investor's country of
residence) 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 advisors regarding potential
state, local or foreign taxation with respect to the Units and foreign
investors should consult their tax advisers with respect to United States tax
consequences of ownership of Units.
TRUST OPERATING EXPENSES
Initial Costs. All costs and expenses incurred in creating and establishing
the Trust, including the cost of the initial preparation, printing and
execution of the Trust Agreement and the certificates, legal and accounting
expenses, advertising and selling expenses, expenses of the Trustee, initial
fees of an evaluator and other out-of-pocket expenses have been borne by the
Sponsor at no cost to the Fund.
Compensation of Sponsor and Supervisor. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, Van Kampen
American Capital Investment Advisory Corp., which is a wholly owned subsidiary
of the Sponsor, will receive an annual supervisory fee, payable in monthly
installments, which is not to exceed the amount set forth under "Summary
of Essential Financial Information", for providing portfolio supervisory
services for the Trust. Such fee (which is based on the number of Units
outstanding on January 1 of each year for which such compensation relates
except during the initial offering period in which case the calculation is
based on the number of Units outstanding at the end of the month of such
calculation) may exceed the actual costs of providing such supervisory
services for this Trust, but at no time will the total amount received for
portfolio supervisory services rendered to series of Van Kampen American
Capital Equity Opportunity Trust and to any other unit investment trusts
sponsored by the Sponsor for which the Supervisor provides portfolio
supervisory services in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. Pursuant to a contract
with the Supervisor, Global Assets Advisors, Inc., a non-affiliated firm
regularly engaged in the business of evaluating, quoting or appraising
comparable securities, provides, for both the initial offering period and
secondary market transactions, portfolio supervisory services for the Trust
and receives for such services the entire supervisory fee paid to the
Supervisor. 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 the Managing Underwriter may
realize other profits (or losses) in connection with the sale of Units and the
deposit of the Securities as described under "Public Offering--Sponsor and
Managing Underwriter Compensation".
Compensation of Evaluator. The Evaluator shall receive the evaluation fee set
forth under "Summary of Essential Financial Information" for regularly
evaluating the Trust's portfolio. 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.
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial
Information" (which is based on the number of Units of the Trust
outstanding on January 1 of each year for which such compensation relates
except during the initial offering period in which case the calculation is
based on the number of Units outstanding at the end of the month of such
calculation) and the additional amounts set forth in footnote (8) in the
"Summary of Essential Financial Information". The Trustee's fees are
payable in monthly installments on or before the fifteenth day of each month
from the Income Account of the Trust to the extent funds are available and
then from the Capital Account of the Trust. The Trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions
in the Capital and Income Accounts since these Accounts are non-interest
bearing and the amounts earned by the Trustee are retained by the Trustee.
Part of the Trustee's compensation for its services to the Trust is expected
to result from the use of these funds. Such fees may be increased without
approval of the Unitholders by amounts not exceeding proportionate increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index published by the United States Department of Labor or, if such
category is no longer published, in a comparable category. For a discussion of
the services rendered by the Trustee pursuant to its obligations under the
Trust Agreement, see "Rights of Unitholders--Reports Provided" and
"Trust Administration".
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trust: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of such
Trust, (b) fees of the Trustee for extraordinary services, (c) expenses of the
Trustee (including legal and auditing expenses) and of counsel designated by
the Sponsor, (d) various governmental charges, (e) expenses and costs of any
action taken by the Trustee to protect the Trust and the rights and interests
of Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of the Trust without negligence, bad
faith or wilful misconduct on its part, (g) foreign custodial and transaction
fees and (h) expenditures incurred in contacting Unitholders upon termination
of the Trust. The fees and expenses set forth herein are payable out of the
Trust. When such fees and expenses are paid by or owing to the Trustee, they
are secured by a lien on the Trust's portfolio. If the balances in the Income
and Capital Accounts are insufficient to provide for amounts payable by the
Trust, the Trustee has the power to sell Securities to pay such amounts. These
sales may result in capital gains or losses to Unitholders. See
"Taxation".
PUBLIC OFFERING
General. Units are offered at the Public Offering Price (which is based on the
aggregate underlying value of the Securities and includes a sales charge of
5.5% of the Public Offering Price which charge is equivalent to 5.820% of the
aggregate underlying value of the Securities, plus any accrued interest on the
Bonds). Such underlying value shall include the proportionate share of any
undistributed cash held in the Capital and Income Accounts of the Trust. Such
underlying value is based on the aggregate value of the Foreign Denominated
Securities computed as of the Evaluation Time on the basis of the offering
side value of the currency exchange rate for the related currency expressed in
U.S. dollars during the initial offering period and on the bid side value for
secondary market transactions and in each case includes the estimated costs of
acquiring or liquidating the Foreign Denominated Securities, as the case may
be. The sales charge applicable to quantity purchases is, during the initial
offering period, reduced on a graduated basis to any person acquiring 10,000
or more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number of Units
Purchased Sales Charge Reduction Per Unit
<S> <C>
10,000-24,999 0.60%
25,000-49,999 0.90
50,000-99,999 1.30
100,000 or more 2.10
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
Managing Underwriter, broker, dealer or agent. Registered representatives of
the Managing Underwriter may purchase Units of the Trust at the current Public
Offering Price less the underwriting commission or less the dealer's
concession in the absence of an underwriting commission. Registered
representatives of selling brokers, dealers, or agents may purchase Units of
the Trust at the current Public Offering Price less the dealer's concession
during the initial offering period and for secondary market transactions.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in the
Trusts. The Public Offering Price per Unit is based on the aggregate value of
the Foreign Denominated Securities computed at the Evaluation Time (set forth
under "Summary of Essential Information") on the basis of the offering
side or bid side value of the currency exchange rate for the related currency
expressed in U.S. dollars during the initial offering period or secondary
market, respectively, and includes the estimated costs of acquiring or
liquidating the Foreign Denominated Securities.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities in the Trust
an amount equal to 5.820% of such value, plus any accrued interest on the
Bonds and dividing the sum so obtained by the number of Units in the Trust
outstanding. Such underlying value shall include the proportionate share of
any cash held in the Income and Capital Accounts in the Trust. This
computation produced a gross underwriting profit equal to 5.5% 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 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 Securities in
the Trust as of the Evaluation Time and will adjust the Public Offering Price
of the Units commensurate with such valuation. Such Public Offering Price will
be effective for all orders received prior to the Evaluation Time on each such
day. Orders received by the Trustee or Managing Underwriter for purchases,
sales or redemptions after that time, or on a day which is not a business day
for the Trust, will be held until the next determination of price. The term
"business day", as used herein and under "Rights of
Unitholders--Redemption of Units", shall exclude Saturdays, Sundays and
the following holidays as observed by the New York Stock Exchange, Inc.: New
Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day. Effective on each November 22,
commencing November 22, 1996, the sales charge will be reduced by .5 of 1% to
a minimum sales charge of 3.0%.
The value of the Equity Securities during the initial offering period is
determined on each business day by the Evaluator in the following manner: if
the Equity Securities are listed on a national securities exchange, 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 ask prices. If the Equity Securities are not so listed or, if so
listed and the principal market therefore is other than on the exchange, the
evaluation shall generally be based on the current ask price on the
over-the-counter market (unless it is determined that these prices are
inappropriate as a basis for evaluation). If current ask prices are
unavailable, the evaluation is generally determined (a) on the basis of
current ask prices for comparable securities, (b) by appraising the value of
the Equity Securities on the ask side of the market or (c) by any combination
of the above. The value of the Equity Securities during the initial offering
period is based on the aggregate value of the Foreign Denominated Securities
computed on the basis of the offering side value of the currency exchange rate
expressed in U.S. dollars as of the Evaluation Time and includes the costs of
acquiring the Securities.
The value of the Bonds is based on the offering price during the initial
offering period and on the bid price for secondary market transactions. The
value of the Bonds in the Trust has been and will be determined on the basis
of bid prices or offering prices, as appropriate, (a) on the basis of current
market prices for the Bonds obtained from dealers or brokers who customarily
deal in bonds comparable to those held by the Trust; (b) if such prices are
not available for any particular Bonds, on the basis of current market prices
for comparable bonds; (c) by causing the value of the Bonds to be determined
by others engaged in the practice of evaluation, quoting or appraising
comparable bonds; or (d) by any combination of the above.
In offering the Units to the public, neither the Sponsor, the Managing
Underwriter nor any broker-dealers are recommending any of the individual
Securities in the Trust but rather the entire pool of Securities, taken as a
whole, which are represented by the Units.
Accrued Interest. Accrued interest is an accumulation of unpaid interest on
bonds which generally is paid semi-annually, although the Trust accrues such
interest daily. Because of this, the Trust always has an amount of interest
earned but not yet collected by the Trustee with respect to the Bonds. For
this reason, with respect to sales settling subsequent to the First Settlement
Date, the Public Offering Price of Units will have added to it the
proportionate share of accrued interest on the Bonds to the date of
settlement. Unitholders will receive on the next distribution date of the
Trust the amount, if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid by Unitholders, the Trustee will advance the amount of accrued
interest to the Sponsor as the Unitholder of record as of the First
Settlement. Consequently, the amount of accrued interest to be added to the
Public Offering Price of Units will include only accrued interest from the
First Settlement Date to the date of settlement, less any distributions from
the Interest Account subsequent to the First Settlement Date. See "Rights
of Unitholders--Distributions of Income and Capital".
Because of the varying interest payment dates of the Bonds, accrued interest
at any point in time will be greater than the amount of interest actually
received by the Trust and distributed to Unitholders. If a Unitholder sells or
redeems all of a portion of his Units, he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his Units.
Since the Trustee has the use of the funds held in the Income Account for
distributions to Unitholders and since such Account is non-interest-bearing to
Unitholders, the Trustee benefits thereby.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Managing Underwriter, broker-dealers and
others at the Public Offering Price. Upon the completion of the initial
offering period, Units repurchased in the secondary market, if any, may be
offered by this Prospectus at the Public Offering Price in the manner
described above.
It is the intention of the Sponsor to qualify Units of the Trust for sale in a
number of states. Sales initially will be made to any broker, dealer or bank
at prices which represent a concession or agency commission in connection with
the distribution of Units during the initial offering period of 3.6% of the
Public Offering Price. Volume concessions or agency commissions of an
additional 0.40% of the Public Offering Price will be given to any broker,
dealer or bank who purchases from the Managing Underwriter at least $100,000
on the Initial Date of Deposit. For secondary market transactions, such
concession or agency commission will amount to 3.6% of the Public Offering
Price (or 65% of the then current maximum sales charge after November 17,
1996). However, resale of Units of the Trust by such Managing Underwriter,
dealers and others to the public will be made at the Public Offering Price
described in the prospectus.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 500 Units (100 Units for a
tax-sheltered retirement plan). The 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 or agency commission to dealers and others from
time to time.
Sponsor and Managing Underwriter Compensation. The Managing Underwriter will
receive the gross sales commission equal to 5.5% of the Public Offering Price
of the Units, less any reduced sales charge for quantity purchases as
described under "General" above. Any such quantity discount provided
to investors will be borne by the selling dealer or agent. The Sponsor will
receive from the Managing Underwriter the excess of such gross sales
commission over the Managing Underwriter's discount. The Managing Underwriter
will be allowed a discount in connection with the distribution of Units of (a)
4.3% per Unit for sales up to $10,000,000 and (b) 4.5% per Unit for sales in
excess of $10,000,000.
In addition, the Managing Underwriter will realize a profit or will sustain a
loss, as the case may be, as a result of the difference between the price paid
for the Securities by the Managing Underwriter and the cost of such Securities
to the Trust on the Initial Date of Deposit as well as on subsequent deposits.
See "Portfolio". The Sponsor has not participated as sole underwriter
or as manager or as a member of the underwriting syndicates or as an agent in
a private placement for any of the Securities in the Trust portfolio. The
Managing Underwriter may further realize additional profit or loss during the
initial offering period as a result of the possible fluctuations in the market
value of the Securities in the Trust after a date of deposit, since all
proceeds received from purchasers of Units (excluding dealer concessions and
agency commissions allowed, if any) will be retained by the Managing
Underwriter.
A person will become the owner of 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 the 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
currently intends to maintain a secondary market for Units of the Trust. In so
maintaining a market, the Managing Underwriter 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 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
currently intends to maintain a market for the Units offered hereby and offer
continuously to purchase Units at prices, subject to change at any time, based
upon the aggregate underlying value of the Securities in the Trust (computed
as indicated under "Offering Price" above and "Rights of
Unitholders--Redemption of Units"). The aggregate underlying value of the
Foreign Denominated Securities is computed at the Evaluation Time on the basis
of the bid side value of the currency exchange rate for the related currency
(offer side during the initial offering period) expressed in U.S. dollars. If
the supply of Units exceeds demand or if some other business reason warrants
it, the 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.
See "Rights of Unitholders--Redemption of Units". A Unitholder who
wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in existence any price in
excess of the Redemption Price and, if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for the individuals, Simplified Employee
Pension Plans for employees, qualified plans for self-employed individuals,
and qualified corporate pension and profit sharing plans for employees. The
purchase of Units of the Trust may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-sheltered retirement plan is 100 Units.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust will be evidenced by book entry unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee 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 or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Income and Capital. Any interest (including that part of the
proceeds of any disposition of Bonds which represents accrued interest) or
dividends received by the Trust with respect to the Securities therein are
credited by the Trustee to the Income Account of the Trust. Other receipts
(e.g., principal, capital gains, proceeds from the sale of Securities, etc.)
are credited to the Capital Account of the Trust. Any amounts to be credited
to such accounts with respect to Foreign Denominated Securities are first
converted into U.S. dollars at the applicable exchange rate.
The Trustee will distribute any net income received with respect to any of the
Securities in the Trust on or about the Income Distribution Dates to
Unitholders of record on the preceding Income Record Dates (after first
deducting amounts sufficient to reimburse the Trustee, without interest, for
any amounts advanced and paid to the Sponsor as the Unitholder of record as of
the First Settlement Date). See "Summary of Essential Financial
Information". Principal received with respect to the Bonds and proceeds
received on the sale of any Securities in the Trust, to the extent not used to
meet redemptions of Units or pay expenses, will be distributed annually on the
Capital Account Distribution Date to Unitholders of record on the preceding
Capital Account Record Date. Proceeds received from the disposition of any of
the Securities after a record date and prior to the following distribution
date will be held in the Capital Account of the Trust and not distributed
until the next distribution date applicable to the Capital Account. The
Trustee is not required to pay interest on funds held in the Capital or Income
Accounts (but may itself earn interest thereon and therefore benefits from the
use of such funds) nor to make a distribution from the Capital Account unless
the amount available for distribution in such Account shall equal at least
$0.10 per Unit. Should the amount available for distribution in the Capital
Account equal or exceed $0.10 per Unit, to the extent permissible under the
Investment Company Act of 1940, the Trustee will make a special distribution
from the Capital Account on the last day of each month to holders of record on
the fifteenth day of such month.
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 on the Equity Securities 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.
As of the fifteenth day of each month, the Trustee will deduct from the Income
Account and, to the extent funds are not sufficient therein, from the Capital
Account of the Trust 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 appropriate accounts. In addition, the Trustee may
withdraw from the Income and Capital Accounts of the Trust such amounts as may
be necessary to cover redemptions of Units.
Reports Provided. The Trustee shall furnish Unitholders of the Trust in
connection with each distribution a statement of the amount of income and the
amount of other receipts (received since the preceding distribution), if any,
being distributed, expressed in each case as a dollar amount representing the
pro rata share of each Unit of the Trust outstanding. Within a reasonable
period of time after the end of each calendar year, the Trustee shall furnish
to each person who at any time during the calendar year was a registered
Unitholder of the Trust a statement (i) as to the Income Account: income
received (including amounts representing interest received upon any
disposition of Bonds), deductions for applicable taxes and for fees and
expenses of the Trust, for redemptions of Units, if any, and the balance
remaining after such distributions and deductions, expressed in each case both
as a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar year;
(ii) as to the Capital Account: the dates of disposition of any Securities and
the net proceeds received therefrom (excluding any portion representing
accrued interest), deductions for payment of applicable taxes, fees and
expenses of the Trust held for distribution to Unitholders of record as of a
date prior to the determination and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
by such Trust and the number of Units of the Trust outstanding on the last
business day of such calendar year; (iv) the Redemption Price per Unit of the
Trust based upon the last computation thereof made during such calendar year;
and (v) amounts actually distributed during such calendar year from the Income
and Capital Accounts of the Trust, separately stated, expressed as total
dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its corporate trust office at 101 Barclay Street,
20th Floor, New York, New York 10286 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, duly endorsed or
accompanied by proper instruments of transfer with signature guaranteed as
described above (or by providing satisfactory indemnity, as in connection with
lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. No redemption fee will be charged. On the third
business day following such tender, the Unitholder will be entitled to receive
in cash an amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units and converted
into U.S. dollars, when necessary, as of the Evaluation Time set forth under
"Summary of Essential Financial Information". The "date of
tender" is deemed to be the date on which Units are received by the
Trustee, except that with respect to Units received after the applicable
Evaluation Time the date of tender is the next business day as defined under
"Public Offering--Offering Price" and such Units will be deemed to
have been tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Foreign securities exchanges are open for trading
on certain days which are U.S. holidays on which the Trust will not transact
business. The Foreign Denominated Securities will continue to trade on those
days and thus the value of the Trust may be significantly affected on days
when a Unitholder cannot sell or redeem his Units.
The Trustee is empowered to sell Securities of the Trust in order to make
funds available for redemption if funds are not otherwise available in the
Capital and Income Accounts of the Trust to meet redemptions. The Securities
to be sold will be selected by the Trustee from those designated on a current
list provided by the Supervisor for this purpose. Units so redeemed shall be
cancelled.
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 Securities in the Trust, plus or minus cash, if any, in the Income and
Capital Accounts of the Trust (net of applicable commissions and stamp taxes).
On the Initial Date of Deposit, the Public Offering Price per Unit (which is
based on the offering price of the Bonds and includes the sales charge)
exceeded the values at which Units could have been redeemed (which is based on
the bid prices of the Bonds) 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 in the Trust or monies in the process of being collected, (ii) the
value of the Securities in the Trust (including accrued interest on the Bonds)
and (iii) dividends receivable on the Equity Securities of the Trust 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 will determine the value of the Bonds on
the basis of the bid prices of the Bonds and may determine such value by
employing any of the methods set forth in "Public Offering--Offering
Price". Accrued interest on the Bonds paid on redemption shall be
withdrawn from the Income Account or, if the balance therein is insufficient,
from the Capital Account. 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 are not so listed or, if so listed and the principal market
therefore is other than on the exchange, the evaluation shall generally be
based on the current bid price on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the value of
the Equity Securities on the bid side of the market or (c) by any combination
of the above. The value of the Foreign Denominated Securities in the secondary
market is based on the aggregate value of such Foreign Denominated Securities
computed on the basis of the bid side value of the currency exchange rate for
the related currency expressed in U.S. dollars as of the Evaluation Time.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in 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 a
Security in certain events such as the issuer having defaulted on payment on
any of its outstanding obligations or the price of a Security has declined to
such an extent or other such credit factors exist so that in the opinion of
the Sponsor the retention of such Securities would be detrimental to the
Trust. Pursuant to the Trust Agreement and with limited exceptions, the
Trustee may sell any securities or other properties acquired in exchange for
the Securities such as those acquired in connection with a merger, refinancing
plan or other transaction. If offered such new or exchanged securities or
property, the Trustee shall reject the offer; provided that in the case of a
refunding or refinancing of any Bond, if (1) the issuer is in default with
respect to such Bond or (2) in the opinion of the Sponsor the issuer will
probably default with respect to such Bond in the reasonably foreseeable
future, the Sponsor shall instruct the Trustee to accept or reject such offer
or take any other action with respect thereto as the Sponsor may deem proper.
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). Proceeds from the sale of
Securities (or any securities or other property received by the Trust in
exchange for the Securities) are credited to the Capital Account for
distribution to Unitholders or to meet redemptions. Except as stated under
"Trust Portfolio" for failed securities and as provided in this
section, the acquisition by the Trust of any securities other than the
Securities is prohibited.
As indicated under "Rights of Unitholders--Redemption of Units" above,
the Trustee may also sell Securities designated by the Supervisor, or if no
such designation has been made, in its own discretion, for the purpose of
redeeming Units of the Trust tendered for redemption and the payment of
expenses. If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor within 30 days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails to
instruct the Trustee to sell or hold such Bond within 30 days after
notification by the Trustee to the Sponsor of such default, the Trustee may in
its discretion sell the defaulted Bond and not be liable for any depreciation
or loss thereby incurred.
The Supervisor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent practicable, the
proportionate relationship among the principal amounts of the Bonds and the
market value of individual issues of Equity Securities in the Trust. To the
extent this is not practicable, the composition and diversity of the
Securities in the 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
in which blocks of 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. The Trust will be
liquidated by the Trustee in the event that a sufficient number of Units of
the Trust not yet sold are tendered for redemption by the Managing Underwriter
or the Sponsor so that the net worth of the Trust would be reduced to less
than 40% of the value of the Securities at the time they were deposited in the
Trust. If the Trust is liquidated because of the redemption of unsold Units by
the Sponsor and/or the Managing Underwriter, the Sponsor will refund to
each purchaser of Units the entire sales charge paid by such purchaser. The
Trust Agreement will terminate upon the sale, redemption or other disposition
of the last Security held thereunder, but in no event will it continue beyond
the Mandatory Termination Date stated under "Summary of Essential
Financial Information".
Commencing on the Mandatory Termination Date, Equity Securities (and any
remaining Bonds) then held in the Trust 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 Securities. The Sponsor shall direct
the liquidation of the Securities in such manner as to effectuate orderly
sales and a minimal market impact. In the event the Sponsor does not so
direct, the Securities shall be sold within a reasonable period and in such
manner as the Trustee, in its sole discretion, shall determine. At least 30
days before the Mandatory Termination Date the Trustee will provide written
notice of any termination to all Unitholders of the Trust. Unitholders will
receive a cash distribution from the sale of the remaining Securities within a
reasonable time following the Mandatory Termination Date. The Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances or
indemnities provided by the Trust Agreement, including estimated compensation
of the Trustee, costs of liquidation and any amounts required as a reserve to
provide for payment of any applicable taxes or other governmental charges. Any
sale of Securities in the Trust upon termination may result in a lower amount
than might otherwise be realized if such sale were not required at such time.
For this reason, among others, in connection with any remaining Bonds held in
the Trust the amount realized by a Unitholder upon termination may be less
than the principal amount or par amount of Bonds represented by the Units held
by such Unitholder. The Trustee will then distribute to each Unitholder of the
Trust his pro rata share of the balance of the Income and Capital Accounts of
the Trust.
Within 60 days after the final distribution Unitholders will be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and the
Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and
duties hereunder.
The Trustee shall not be liable for depreciation or loss incurred by reason of
the sale by the Trustee of any of the Securities. In the event of the failure
of the Sponsor to act under the Trust Agreement, the Trustee may act
thereunder and shall not be liable for any action taken by it in good faith
under the Trust Agreement. The Trustee shall not be liable for any taxes or
other governmental charges imposed upon or in respect of the Securities or
upon the interest thereon or upon it as Trustee under the Trust Agreement or
upon or in respect of 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 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 and Sub-Supervisor. International Assets Advisory
Corporation ("IAAC"), the Managing Underwriter for the Trust, is a
full-service securities brokerage firm specializing in global investing. IAAC
was formed as a Florida corporation in 1981 and registered as a broker/dealer
in 1982. The firm has focused on the sale of global debt and equity securities
to its clients. IAAC has developed an experienced team specializing in the
selection, research, trading, currency exchange and execution of individual
equity and fixed-income products on a global basis. Members of this team are
also affiliated with Global Assets Advisors, Inc. and have many years of
experience in the global marketplace. Global Assets Advisors, Inc., is the
Sub-Supervisor and provides research and portfolio supervisory services for
the Trust pursuant to a contract with the Supervisor. Global Assets Advisors
is a wholly-owned subsidiary of International Assets Holding Corporation and a
related corporation of IAAC. The principal offices of IAAC and Global Assets
Advisors are located at 250 Park Avenue South, Suite 200, Winter Park, Florida
32789. The telephone number is (800) 432-0000.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Effective
December 20, 1994, the parent of Van Kampen Merritt Inc. acquired American
Capital Management & Research, Inc. As a result, Van Kampen Merritt Inc., has
changed its name to Van Kampen American Capital Distributors, Inc. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas, 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
December 31, 1994 the total stockholders' equity of Van Kampen Merritt Inc.
was $117,357,000 (audited). (This paragraph relates only to the Sponsor and
not to the Trust or to the Managing Underwriter. The information is included
herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided").
The Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp & Farber has acted as counsel for the
Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 21 (Gold & Income Trust, Series 1):
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Equity Opportunity Trust, Series 21
(Gold & Income Trust, Series 1) as of November 17, 1995. The statement of
condition and portfolio are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of an irrevocable letter of credit deposited
to purchase securities by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by the Sponsor, as well as evaluating the overall financial statement
presentation.
We believe our audit provides a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 21 (Gold & Income Trust, Series 1) as of
November 17, 1995, in conformity with generally accepted accounting principles.
Chicago, Illinois
November 17, 1995 GRANT THORNTON LLP
<TABLE>
GOLD & INCOME TRUST, SERIES 1
STATEMENT OF CONDITION
As of November 17, 1995
<CAPTION>
INVESTMENT IN SECURITIES
<S> <C>
Contracts to purchase Securities <F1>................ $ 1,902,479
Accrued interest to First Settlement Date <F1><F2>... 19,588
Total................................................ $ 1,922,067
LIABILITY AND INTEREST OF UNITHOLDERS
Liability-- .........................................
Accrued interest payable to Sponsor <F1><F2>......... $ 19,588
Interest of Unitholders-- ...........................
Cost to investors <F3>............................... 2,012,000
Less: Gross underwriting commission <F3>............. 109,521
Net interest to Unitholders <F3>..................... $ 1,902,479
Total................................................ $ 1,922,067
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" herein
and their cost to the Trust are the same. The value of the Securities is
determined by Interactive Data Corporation on the bases set forth under
"Public Offering--Offering Price". The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $1,922,067 which has been
deposited with the Trustee. Of this amount, $1,902,479 relates to the offering
price on the principal amount of Securities to be purchased and $19,588
relates to accrued interest on the Bonds to the expected dates of delivery.
<F2>The Trustee will advance to the Trust the amount of net interest accrued on
the Bonds to November 22, 1995, the First Settlement Date, for distribution to
the Sponsor as the Unitholder of record as of the First Settlement Date.
<F3>The aggregate public offering price and the aggregate sales charge of 5.5% are
computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor and Managing Underwriter Compensation"
and assume all single transactions involve less than 10,000 Units. For single
transactions involving 10,000 or more Units, the sales charge is reduced (see
"Public Offering--General") resulting in an equal reduction in both
the Cost to investors and the Gross underwriting commission while the Net
interest to Unitholders remains unchanged.
</TABLE>
<TABLE>
GOLD & INCOME TRUST, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 21)
as of the Initial Date of Deposit: November 17, 1995
Equity Securities
<CAPTION>
Estimated
Annual
Dividends Cost of
Number Market Value per Share Securities
of Shares Name of Issuer <F1> per Share <F2> <F2> to Trust <F2>
<S> <C> <C> <C> <C> <C>
+ 8,264 Driefontein Consolidated Ltd. $ 11.500 $ 0.71 $ 95,036.00
/ 3,548 Euro-Nevada Mining Corp. 37.090 0.06 ** 131,596.49
+ 10,592 Free State Consolidates Gold Mines, Ltd. 8.875 0.79 94,004.00
/ 14,828 Hemlo Gold Mines, Inc. 8.950 0.13 ** 132,705.51
/ 30,756 Newcrest Mining Ltd. 4.325 0.14 ** 133,222.53
/ 92,267 Normandy Mining Ltd. 1.348 0.04 ** 124,552.58
/ 26,479 Sons of Gwalia, Ltd. 5.110 0.19 ** 135,514.36
+ 14,745 Vaal Reefs Exploration & Mining Company, Ltd. 6.313 0.22 93,077.81
201,479 $ 939,709.28
</TABLE>
<TABLE>
Bonds
<CAPTION>
Name of Issuer, Title, Interest Rate and Rating<F3> Offering
Aggregate Maturity Date of either Bonds Deposited or Standard Redemption Price To
Principal Bonds Contracted for<F1> & Poor's Moody's Feature<F4> Trust<F2>
<S> <C> <C> <C> <C> <C>
$ 242,000 United Mexican States
#8.50% Due 9/15/2002 BB Ba2 $ 194,205.00
228,000 Transportacion Maritima Mexicana S.A. de C. V.
#9.25% Due 5/1/5/2003 BB- Ba2 1998 @ 104.625 192,090.00
262,000 Republic of Argentina
#8.375% Due 12/20/2003 BB- B1 193,225.00
218,000 YPF Sociedad Anonima
#8.00% Due 2/15/2004 BB- B1 190,750.00
200,000 Telefonica de Argentina S.A.
#11.875% Due 11/1/2004 BB- B1 192,500.00
$ 1,150,000 $ 962,770.00
Total Securities $ 1,902,479.28
NOTES TO PORTFOLIO
(1)All of the Securities are represented by "regular way" contracts for
the performance of which an irrevocable letter of credit has been deposited
with the Trustee. At the Initial Date of Deposit, the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire Securities were entered into on November 16, 1995 and are
expected to settle on November 22, and November 23, 1995. (see "The
Trust").
(2)The market value of each of the Equity Securities is based on the closing sale
price of each listed Equity Security on the applicable exchange and the ask
price of each over-the-counter traded Equity Security (in the case of Foreign
Denominated Securities, converted into U.S. dollars at the offer side of the
exchange rate for the related currency at the Evaluation Time and including
the commissions and stamp taxes associated with acquiring the Foreign
Denominated Securities) on the day prior to the Initial Date of Deposit.
Evaluation of the Bonds is made on the basis of current offering prices for
the Bonds. The offering prices are greater than the current bid prices of the
Bonds which is the basis on which Unit value is determined for purposes of
redemption of Units. Estimated annual dividends are based on the most recently
paid dividends taking into consideration foreign withholding tax, if
applicable (in the case of Foreign Denominated Securities, converted into U.S.
dollars at the offer side of the exchange rate for the related currency at the
Evaluation Time). The aggregate value of the Trust, based on the bid side
evaluation of the Bonds and the aggregate underlying value of the Equity
Securities on the Initial Date of Deposit was $1,896,729. Other information
regarding the Securities in the Trust, as of the Initial Date of Deposit (in
the case of Foreign Denominated Securities, converted into U.S. dollars at the
offer side of the exchange rate for the related currency at the Evaluation
Time), is as follows:
</TABLE>
<TABLE>
<CAPTION>
Aggregate
Cost To Profit (Loss) Estimated Annual
Managing To Managing Dividend and
Underwriter Underwriter Interest Income
<S> <C> <C>
$ 1,901,860 $ 619 $ 137,562
</TABLE>
On the Initial Date of Deposit, the offering side evaluation of the Bonds in
the Trust was higher than the bid side evaluation of such Bonds by 0.50% of
the aggregate principal amount of such Bonds. All contracts are expected to be
settled by the First Settlement Date for the purchase of Units.
A Security marked by "+" indicates an American Depositary Receipt.
"**" Indicates that the dividends shown reflect the net amounts after
giving effect to foreign withholding taxes.
A security marked by "/" indicates an equity security listed on a
foreign securities exchange.
"#" indicates that such Bond was issued at an original issue discount.
The tax effect of Bonds issued at an original issue discount is described in
"Taxation".
(3)The ratings represent the latest published ratings by the respective rating
agency or, if not published, represent private letter ratings or those ratings
expected to be published by the respective rating agency. "N/R"
indicates that the applicable rating service did not provide a rating for that
particular Security. Standard & Poor's states that "[b]onds rated BB have
less near-term vulnerability to default than other speculative grade debt.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions that could lead to inadequate capacity to
meet timely interest and principal payments". Moody's states that
"[b]onds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class". Moody's states that "[b]onds which
are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small". As of the
Initial Date of Deposit, all of the Bonds (approximately 51% of the Trust's
total assets) are rated "BB" by Standard & Poor's while 20% and 31% of
the Trust's total assets are bonds rated "Ba" and "B",
respectively, by Moody's. Subsequent to the Initial Date of Deposit, a Bond
may cease to be so rated. If this should occur, the Trust would not be
required to direct the Trustee to dispose of such investment. See "Trust
Administration--Portfolio Administration".
(4)There is shown under this heading the year in which each issue of Bonds is
initially or currently callable and the call price for that year. Each issue
of Bonds continues to be callable at declining prices thereafter (but not
below par value) except for original issue discount bonds which are redeemable
at prices based on the issue price plus the amount of original issue discount
accreted to redemption date plus, if applicable, the amount of which will
decline in subsequent years. "S.F." indicates a sinking fund is
established with respect to an issue of Bonds. Redemption pursuant to call
provisions generally will, and redemption pursuant to sinking fund provisions
may, occur at times when the redeemed bonds have an offering side valuation
which represents a premium over par. Certain Bonds may be subject to
redemption without premium prior to the date shown pursuant to extraordinary
optional or mandatory redemptions if certain events occur. Notwithstanding any
provisions to the contrary, certain bond issuers have in the past and others
may in the future attempt to redeem Bonds prior to their initially scheduled
call dates and at prices which do not include any premiums. To the extent that
the Securities were deposited in a Trust at a price higher than the price at
which they are redeemed, this will represent a loss of capital when compared
with the original Public Offering Price of the Units. Conversely, to the
extent that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared with the
original Public Offering Price of the Units. Distributions will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Securities and there will be distributed to Unitholders
the principal amount and any premium received on such redemption. For the
Federal tax effect on Unitholders of such redemptions and resultant
distributions, see "Taxation".
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or the Managing Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, securities
in any state to any person to whom it is not lawful to make such offer in such
state.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 3
The Trust 5
Objective and Securities Selection 6
Trust Portfolio 6
Risk Factors 8
Taxation 16
Trust Operating Expenses 19
Public Offering 20
Rights of Unitholders 24
Trust Administration 26
Other Matters 30
Report of Independent Certified Public
Accountants 31
Statement of Condition 32
Portfolio 33
Notes to Portfolio 34
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
November 17, 1995
GOLD & INCOME TRUST, SERIES 1
Van Kampen American Capital
Equity Opportunity Trust,Series 21
International Assets
Advisory Corp.
250 Park Avenue South
Suite 200
Winter Park, Florida 32789
Please retain this Prospectus for future reference.
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.1.1Copy of Standard Terms and Conditions of Trust
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion and consent of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion and consent of counsel as to New York tax status of
securities being registered.
4.1 Consent of Interactive Data Corporation
4.2 Consent of Independent Certified Public Acountants.
4.3 Financial Data Schedule.
Signatures
The Registrant, Van Kampen American Capital Equity Opportunity
Trust, Series 21, hereby identifies Van Kampen Merritt Equity Opportunity
Trust, Series 4, Van Kampen American Capital Equity Opportunity Trust,
Series 13 and Van Kampen Merritt Emerging Markets Income Trust, Series 1
for purposes of the representations required by Rule 487 and represents
the following: (1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is being filed
do not differ materially in type or quality from those deposited in such
previous series; (2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide essential
financial information for, the series with respect to the securities of
which this Registration Statement is being filed, this Registration
Statement does not contain disclosures that differ in any material
respect from those contained in the registration statements for such
previous series as to which the effective date was determined by the
Commission or the staff; and (3) that it has complied with Rule 460 under
the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
21 has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 17th day of November,
1995.
Van Kampen American Capital Equity
Opportunity Trust, Series 21
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on November 17, 1995.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
Standard Terms and Conditions of Trust
For
Van Kampen American Capital Distributors, Inc.
Unit Investment Trusts
Containing Equity And Debt Securities
(Including Securities of Foreign Issuers)
Effective: November 17, 1995
Among
Van Kampen American Capital Distributors, Inc.
Depositor
and
The Bank of New York
Trustee
and
Interactive Data Corporation
Evaluator
and
Van Kampen American Capital Investment Advisory Corp.
Supervisory Servicer
Table of Contents
Page
Preambles 3
Certificate of Ownership 4
Form of Assignment 5
Article I Definitions 7
Section 1.01.Definitions 7
Article II Deposit of Securities; Acceptance of Trust; Form
and Issuance of Certificates 10
Section 2.01.Deposit of Securities 10
Section 2.02.Acceptance of Trust 12
Section 2.03.Issuance of Units 12
Section 2.04.Form of Certificates 12
Article III Administration of Fund 13
Section 3.01.Initial Costs 13
Section 3.02.Income Account 13
Section 3.03.Capital Account 14
Section 3.04.Reserve Account 14
Section 3.05.Deductions and Distributions 14
Section 3.06.Distribution Statements 16
Section 3.07.Sale of Securities 18
Section 3.08.Refunding Bonds 19
Section 3.09.Counsel 20
Section 3.10.Notice and Sale by Trustee 20
Section 3.11.Trustee not Required to Amortize 20
Section 3.12.Liability of Depositor 20
Section 3.13.Notice to Depositor 20
Section 3.14.Replacement Securities 21
Section 3.15.Supervisory Servicer 22
Section 3.16.Foreign Exchange Transactions; Reclaiming
Foreign Taxes 23
Section 3.17.Foreign Exchange Transactions; Foreign Currency
Exchange 23
Section 3.18.Deferred Sales Charge 23
Article IV Evaluation of Securities; Evaluator 24
Section 4.01.Evaluation by Evaluator 24
Section 4.02.Information for Unitholders 25
Section 4.03.Compensation of Evaluator 25
Section 4.04.Liability of Evaluator 26
Section 4.05.Resignation and Removal of Evaluator; Successor 26
Section 4.06.Resignation and Removal of Supervisory Servicer;
Successor 27
Article V Evaluation; Redemption; Purchase; Transfer;
Interchange or Replacement of Units 28
Section 5.01.Trust Evaluation 28
Section 5.02.Redemptions by Trustee; Purchases by Depositor 29
Section 5.03.Transfer or Interchange of Units 31
Section 5.04.Certificates Mutilated, Destroyed, Stolen or
Lost 32
Article VI Trustee 33
Section 6.01.General Definition of Trustee's Liabilities,
Rights and Duties 33
Section 6.02.Books, Records and Reports 40
Section 6.03.Indenture and List of Securities on File 40
Section 6.04.Compensation 40
Section 6.05.Removal and Resignation of Trustee; Successor 41
Section 6.06.Qualifications of Trustee 43
Article VII Rights of Unitholders 43
Section 7.01.Beneficiaries of Trust 43
Section 7.02.Rights, Terms and Conditions 43
Article VIII Additional Covenants; Miscellaneous Provisions 44
Section 8.01.Amendments 44
Section 8.02.Termination 44
Section 8.03.Construction 47
Section 8.04.Registration of Units 47
Section 8.05.Written Notice 47
Section 8.06.Severability 47
Section 8.07.Dissolution of Depositor Not to Terminate 48
Standard Terms and Conditions of Trust
for
Van Kampen American Capital Distributors, Inc.
Unit Investment Trusts
Containing Equity And Debt Securities
(Including Securities of Foreign Issuers)
Effective: November 17, 1995
These Standard Terms and Conditions of Trust effective November 17,
1995 are executed by Van Kampen American Capital Distributors, Inc., as
Depositor, The Bank of New York, as Trustee, Interactive Data
Corporation, as Evaluator, and Van Kampen American Capital Investment
Advisory Corp., as Supervisory Servicer.Preambles
Witnesseth that:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, the Trustee, the Evaluator and the Supervisory
Servicer agree as follows:
Introduction
These Standard Terms and Conditions of Trust, effective November 17,
1995, shall be applicable to certain series of unit investment trusts
sponsored by Van Kampen American Capital Distributors, Inc. established
after the date of effectiveness hereof, as provided in this paragraph.
For unit investment trusts established after the date of effectiveness
hereof to which these Standard Terms and Conditions of Trust effective
November 17, 1995 are to be applicable, the Depositor, the Trustee, the
Evaluator and the Supervisory Servicer shall execute a Trust Agreement
incorporating by reference these Standard Terms and Conditions of Trust
effective November 17, 1995 and designating any exclusions from or
additions or exceptions to such incorporation by reference for the
purposes of that unit investment trust series or variation of the terms
hereof for the purposes of that unit investment trust series.
Whereas, the form of the Certificates in the Trust shall be
substantially as follows:
Certificate of Ownership
Evidencing an Undivided
Interest in
This Is to Certify that
is the owner and registered
holder of this Certificate evidencing
the ownership of
of fractional undivided interest in the above-named Trust created
pursuant to the Indenture, a copy of which is available at the office of
the Trustee. This Certificate is issued under and is subject to the
terms, provisions and conditions of the Indenture to which the Holder of
this Certificate by virtue of the acceptance hereof assents and is bound,
a summary of which Indenture is contained in the prospectus related to
the Trust. This Certificate is transferable and interchangeable by the
registered owner in person or by his duly authorized attorney at the
Trustee's office upon surrender of this Certificate properly endorsed or
accompanied by a written instrument of transfer and any other documents
that the Trustee may require for transfer, in form satisfactory to the
Trustee, and payment of the fees and expenses provided in the Indenture.
Witness the facsimile signature of the Depositor and the manual
signature of an authorized signatory of the Trustee.
Dated:
Van Kampen American The Bank of New York
Capital Distributors, Inc.
Depositor
By____________________________ By
Chairman Authorized Signatory
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT -
_____Custodian_____
TEN ENT -as tenants by the entireties (Cust)
(Minor)
JT TEN -as joint tenants with right Under Uniform Gifts to
of survivorship and not Minors Act
as tenants in common
______________________________
State
Additional abbreviations may also be used though not in the above
list.
(Form of Assignment)
For Value Received,
hereby sell, assign and transfer _________ Units represented by this
Certificate unto
Social Security or Other Identifying
Number of Assignee Must Be Provided
and does hereby irrevocably constitute and appoint
, attorney,
to transfer said Units on the books of the Trustee, with full power and
substitution in the premises.
Dated:
Notice: The signature to this assignm
ent must correspond with the name
as written upon the face of the
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Signature(S) Guaranteed By
Firm or Bank
Authorized Signature
Signature guarantee should be made by a
participant in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other signature guaranty program in
addition to, or in substitution for,
STAMP, as may be accepted by the
Trustee.
Now, Therefore, in consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the Evaluator
and the Supervisory Servicer agree as follows:
Article I DefinitionsArticle I
Definitions
Section 1.01. Definitions. Whenever used in this Indenture the
following words and phrases, unless the context clearly indicates
otherwise, shall have the following meanings:
(1) "Depositor" shall mean Van Kampen American Capital
Distributors, Inc. and its successors in interest, or any successor
depositor appointed as hereinafter provided.
(2) "Trustee" shall mean The Bank of New York, or any
successor trustee appointed as hereinafter provided.
(3) "Evaluator" shall mean Interactive Data Corporation and
its successors in interest, or any successor evaluator appointed as
hereinafter provided.
(4) "Supervisory Servicer" shall mean Van Kampen American
Capital Investment Advisory Corp. and its successors in interest, or
any successor portfolio supervisor appointed as hereinafter
provided.
(5) "Bonds" shall mean such of the debt obligations, including
delivery statements relating to "when issued" and/or "regular way"
contracts, if any, for the purchase of certain bonds and cash,
certified or bank check or checks or letter of credit or letters of
credit sufficient in amount or availability required for such
purchase, deposited in irrevocable trust and listed in Schedule A of
the Trust Agreement, and any obligations received in addition to, or
in exchange, substitution or replacement for, such obligations
pursuant to Sections 2.01, 3.08, 3.13 and 3.14 hereof, as may from
time to time continue to be held as a part of the Trust.
(6) "Business Day" shall mean any day on which the New York
Stock Exchange is open.
(7) "Capital Account Distribution Date" shall have the meaning
assigned to it in the Prospectus.
(8) "Capital Account Record Date" shall have the meaning
assigned to it in the Prospectus.
(9) "Certificate" shall mean any one of the certificates
executed by the Trustee and the Depositor evidencing ownership of an
undivided fractional interest in a Trust.
(10) "Contract Securities" shall mean Securities which are to
be acquired by the Fund pursuant to purchase contracts which have
been assigned to the Trustee.
(11) "Equity Securities" shall mean any equity securities of
corporations or other entities (including such securities held in
American Depositary Receipt ("ADR") form) including delivery
statements relating to contracts, if any, for the purchase of
certain securities and cash, certified or bank check or checks or
letter of credit or letters of credit sufficient in amount or
availability required for such purchase, deposited in irrevocable
trust and listed in Schedule A of the Trust Agreement, and any
securities received in addition to, or in exchange, substitution or
replacement for, such securities pursuant to Sections 2.01, 3.13 and
3.14 hereof, as may from time to time continue to be held as a part
of the Trust.
(12) "First Settlement Date" shall have the meaning assigned to
it in the Prospectus.
(13) "In Kind Distribution" shall have the meaning set forth in
Section 5.02 hereof.
(14) "Income Account Distribution Date" shall have the meaning
assigned to it in the Prospectus.
(15) "Income Account Record Date" shall have the meaning
assigned to it in the Prospectus.
(16) "Indenture" shall mean these Standard Terms and Conditions
of Trust as originally executed or, if amended as hereinafter
provided, as so amended, together with the Trust Agreement creating
a particular series of the Fund.
(17) "Initial Date of Deposit" shall have the meaning assigned
to it in the Prospectus.
(18) "Letter of Credit" shall mean the letter of credit or
letters of credit provided to the Trustee by a financial institution
for the purchase of any Contract Securities deposited in the Fund.
(19) "Mandatory Termination Date" shall be the date so
specified in the Prospectus.
(20) "Percentage Ratio" shall mean, for each Trust which will
issue additional Units pursuant to Section 2.03 hereof, the
percentage relationship existing immediately prior to any subsequent
deposit of Securities among (a) the maturity value per Unit of the
Bonds and each Equity Security per Unit as a percent of all shares
of Equity Securities and (b) the sum of the maturity value per Unit
of the Bonds and all Equity Securities attributable to each Unit.
The Percentage Ratio shall be adjusted to the extent necessary, and
may be rounded, to reflect the occurrence of a stock dividend, a
stock split or a similar event which affects the capital structure
of the issuer of an Equity Security.
(21) "Prospectus" shall mean (a) the prospectus relating to the
Trust filed with the Securities and Exchange Commission pursuant to
Rule 497(b) under the Securities Act of 1933, as amended, and dated
the date of the Trust Agreement or (b) if any post effective
amendment to such prospectus shall have been subsequently made
effective under the Securities Act of 1933, as amended, such post
effective amendment thereto.
(22) "Replacement Security" shall have the meaning assigned to
it in Section 3.14 hereof.
(23) "Securities" shall mean (a) Bonds and Equity Securities
deposited in a Trust, which Securities are listed in the Schedule to
the Trust Agreement or are deposited in the Trust pursuant to
Section 2.01(b) hereof, (b) Replacement Securities acquired pursuant
to Section 3.14 hereof, as may from time to time to be construed to
be held as part of the Trust and (c) distributions of the same
securities.
(24) "Supplemental Indenture" shall mean an amendment or
supplement to the Indenture pursuant to Section 2.01(b) for the
purpose of depositing additional Securities in the Trust and issuing
additional Units.
(25) "Trust," "Trust Fund" or "Fund" shall mean any one of the
separate trusts created by the Trust Agreement, which shall consist
of Securities held pursuant and subject to the Indenture, together
with all undistributed income or other amounts received or accrued
thereon, any undistributed cash held in the Income and Capital
Accounts or otherwise realized from the sale, redemption,
liquidation or maturity thereof. Such amounts as may be on deposit
in the Reserve Account as hereinafter established shall be excluded
from the Trust.
(26) "Trust Agreement" shall mean the Trust Agreement for the
particular series of the Fund into which these Standard Terms and
Conditions are incorporated.
(27) "Unit" in respect of any Trust shall mean the fractional
undivided interest in and ownership of the Trust which shall be
initially equal to the fraction specified in the Trust Agreement,
the numerator of which is one and the denominator of which fraction
shall be (1) increased by the number of any additional Units issued
pursuant to Section 2.03 hereof and (2) decreased by the number of
any Units redeemed as provided in Section 5.02 hereof. Whenever
reference is made herein to the "interest" of a Unitholder in the
Trust or in the Income and Capital Accounts, it shall mean such
fractional undivided interest represented by the number of Units
held of record by such Unitholder.
(28) "Unitholder" shall mean the registered holder of any Unit,
whether or not in certificated form, as recorded on the registration
books of the Trustee.
(29) Words importing singular number shall include the plural
number in each case and vice versa, and words importing persons
shall include corporations and associations, as well as natural
persons.
(30) The words "herein," "hereby," "herewith," "hereof,"
"hereinafter," "hereunder," "hereinabove," "hereafter," "heretofore"
and similar words or phrases of reference and association shall
refer to this Indenture in its entirety.
'Article II Deposit of Securities Acceptance of Trust; Form and
Issuance of Certificates; Separate Trusts';Article II
Deposit of Securities; Acceptance of Trust;
Form and Issuance of Certificates
Section 2.01. Deposit of Securities. (a) The Depositor, on the date of
the Trust Agreement, has deposited with the Trustee in trust the
Securities listed in the Schedules to the Trust Agreement in bearer form
or duly endorsed in blank or accompanied by all necessary instruments of
assignment and transfer in proper form or Contract Securities relating to
such Securities to be held, managed and applied by the Trustee as herein
provided. The Depositor shall deliver the Securities listed on said
Schedules which were not actually delivered concurrently with the
execution and delivery of the Trust Agreement and which were represented
by Contract Securities to the Trustee within 10 calendar days after said
execution and delivery (the "Delivery Period"). If a contract to buy
such Securities between the Depositor and seller is terminated by the
seller thereof for any reason beyond the control of the Depositor or if
for any other reason the Securities are not delivered to the Trust by the
end of the Delivery Period, the Trustee shall immediately draw on the
Letter of Credit, if any, in its entirety, apply the moneys in accordance
with Section 2.01(d), and the Depositor shall forthwith take the remedial
action specified in Section 3.14. If the Depositor does not take the
action specified in Section 3.14 within 10 calendar days of the end of
the Delivery Period, the Trustee shall forthwith take the action
specified in Section 3.14.
(b) From time to time following the Initial Date of Deposit, the
Depositor is hereby authorized, in its discretion, to assign, convey to
and deposit with the Trustee additional Securities, duly endorsed in
blank or accompanied by all necessary instruments of assignment and
transfer in proper form (or Contract Securities relating to such
Securities), to be held, managed and applied by the Trustee as herein
provided. Such deposit of additional Securities shall be made, in each
case, pursuant to a Supplemental Indenture accompanied by a legal opinion
issued by legal counsel satisfactory to the Depositor.
The Depositor, in each case, shall ensure that each deposit of
additional Securities pursuant to this Section shall be, as nearly as is
practicable, in the identical ratio as the Percentage Ratio for such
Securities for the Trust and the Depositor shall ensure that such
Securities are identical to those deposited on the Initial Date of
Deposit. The Depositor shall deliver the additional Securities which
were not delivered concurrently with the deposit of additional Securities
and which were represented by Contract Securities within 10 calendar days
after such deposit of additional Securities (the "Additional Securities
Delivery Period"). If a contract to buy such Securities between the
Depositor and seller is terminated by the seller thereof for any reason
beyond the control of the Depositor or if for any other reason the
Securities are not delivered to the Trust by the end of the Additional
Securities Delivery Period for such deposit, the Trustee shall
immediately draw on the Letter of Credit, if any, in its entirety, apply
the moneys in accordance with Section 2.01(d), and the Depositor shall
forthwith take the remedial action specified in Section 3.14. If the
Depositor does not take the action specified in Section 3.14 within 10
calendar days of the end of the Additional Securities Delivery Period,
the Trustee shall forthwith take the action specified in Section 3.14.
(c) In connection with the deposits described in Section 2.01 (a)
and (b), the Depositor has, in the case of Section 2.01(a) deposits, and,
prior to the Trustee accepting a Section 2.01(b) deposit, will, deposit
cash and/or Letter(s) of Credit in an amount sufficient to purchase the
Contract Securities relating to Securities which are not actually
delivered to the Trustee at the time of such deposit. The terms of any
Letter of Credit must unconditionally allow the Trustee to draw on the
full amount of the available Letter of Credit. The Trustee may deposit
such cash or cash drawn on the Letter of Credit in a non-interest bearing
account for the Fund. If any Contract Security requires settlement in a
foreign currency, in connection with the deposit of such Contract
Security the Depositor will deposit with the Trustee either an amount of
such currency sufficient to settle the contract or a foreign exchange
contract in such amount which settles concurrently with the settlement of
the Contract Security and cash or a Letter of Credit in U.S. dollars
sufficient to perform such foreign exchange contract.
(d) In the event that the purchase of Contract Securities pursuant
to any contract shall not be consummated in accordance with said contract
or if the Securities represented by Contract Securities are not delivered
to the Fund in accordance with Section 2.01(a) or 2.01(b) and the moneys,
or, if applicable, the moneys drawn on the Letter of Credit, deposited by
the Depositor are not utilized for Section 3.14 purchases of Replacement
Securities, such funds, to the extent of the purchase price of Failed
Contract Securities for which no Replacement Security were acquired
pursuant to Section 3.14, plus all amounts described in the next
succeeding sentence, shall be credited to the Capital Account and
distributed pursuant to Section 3.05 to Unitholders of record as of the
Income Account Record Date next following the failure of consummation of
such purchase. The Depositor shall cause to be refunded to each
Unitholder his pro rata portion of the sales charge levied on the sale of
Units to such Unitholder attributable to such Failed Contract Security.
Any amounts remaining from moneys drawn on the Letter of Credit which are
not used to purchase Replacement Securities or are not used to provide
refunds to Unitholders shall be paid to the Depositor.
(e) The Trustee is hereby irrevocably authorized to effect
registration or transfer of the Securities in fully registered form to
the name of the Trustee or to the name of its nominee or to hold the
Securities in a depository or clearing agency registered with the
Securities and Exchange Commission (which may specifically include an
eligible foreign custodian as that term is used in Section 6.01(e)) or in
a book entry system operated by the Federal Reserve Board.
Section 2.02. Acceptance of Trust. The Trustee hereby accepts the
trusts herein created for the use and benefit of the Unitholders, subject
to the terms and conditions of this Indenture.
Section 2.03. Issuance of Units. (a) The Trustee hereby acknowledges
receipt of the deposit of the Securities listed in the Schedules to the
Trust Agreement and referred to in Section 2.01 hereof and,
simultaneously with the receipt of said deposit, has recorded on its
books the ownership, by the Depositor or such other person or persons as
may be indicated by the Depositor, of the aggregate number of Units
specified in the Trust Agreement and has delivered, or on the order of
the Depositor will deliver, in exchange for such Securities,
documentation evidencing the ownership of the number of Units specified
and, if such Units are represented by a Certificate, such Certificate
substantially in the form above recited, representing the ownership of
those Units. The Trustee hereby agrees that on the date of any
Supplemental Indenture it shall acknowledge that the additional
Securities identified therein have been deposited with it by recording on
its books the ownership, by the Depositor or such other person or persons
as may be indicated by the Depositor, of the aggregate number of Units to
be issued in respect of such additional Securities so deposited, and
shall, if so requested, execute a Certificate or Certificates
substantially in the form above recited representing the ownership of an
aggregate number of those Units. In the event that the Depositor
determines that the actual Percentage Ratio is different from the
original Percentage Ratio established on the Initial Date of Deposit,
additional Securities may be deposited in the Trust only in the original
Percentage Ratio or as nearly as is practicable to the original
Percentage Ratio.
(b) Under the terms and conditions of the Indenture and the Trust
Agreement and at such times as are permitted by the Trustee, Units may
also be held in uncertificated form. Units will be held in
uncertificated form unless a Unitholder requests a Certificate
representing his or her Units. The Trustee shall, at the request of the
holder of any Units held in uncertificated form, issue a new Certificate
to evidence such Units and at such time make an appropriate notation in
the registration books of the Trustee. Certificates, if requested, will
be issued in denominations of one Unit, or any whole multiple thereof,
subject to the Trust Fund's minimum investment requirements. Thereafter,
Units may again be held in uncertificated form by surrendering such
Certificate to the Trustee for cancellation. At such time, an
appropriate notation will be made in the registration book of the Trustee
to indicate that the Units formerly evidenced by such canceled
Certificate are Units held in uncertificated form. The rights set forth
in this Indenture of any holder of Units held in uncertificated form or
of Units represented by a Certificate shall be the same of those of any
other Unitholder.
Section 2.04. Form of Certificates. Each Certificate referred to in
Section 2.03 is, and each Certificate hereafter issued shall be, in
substantially the form hereinabove recited, numbered serially for
identification, in fully registered form, transferable only on the books
of the Trustee as herein provided, executed manually by an authorized
officer of the Trustee and in facsimile by the Chairman, President or one
of the Vice Presidents of the Depositor and dated the date of execution
and delivery by the Trustee.
Article III Administration of FundArticle III
Administration of Fund
Section 3.01. Initial Costs. The cost of the initial preparation,
printing and execution of the Certificates and the Indenture, the initial
fees of the Trustee, the initial fees of an evaluator, and other
reasonable expenses in connection therewith shall be paid by the
Depositor; provided, however, that the liability on the part of the
Depositor for such initial costs, fees and expenses shall not include any
fees, costs or other expenses incurred in connection herewith after the
execution of the Trust Agreement and the deposit referred to in
Section 2.01.
Section 3.02. Income Account. The Trustee shall collect the interest
(including all interest accrued, but not original issue discount, but
unpaid prior to the date of deposit of the Bonds in trust and including
that part of the proceeds of the sale, liquidation, redemption or
maturity of any Bonds or which represents accrued interest thereon),
dividends or other like cash distributions on the Securities in the Trust
as such becomes payable (including all moneys representing penalties for
the failure to make timely payments on the Securities, or as liquidated
damages for default or breach of any condition or term of the Securities
or of the underlying instrument relating to any Securities and other
income attributable to a Failed Contract Security for which no
Replacement Security has been obtained pursuant to Section 3.14 hereof)
and credit such income to a separate account for the Trust to be known as
the "Income Account."
Any distributions received by the Trustee in a form other than cash
(other than a non-taxable distribution of the shares of a distributing
corporation) shall be sold in the manner directed by the Depositor and
the proceeds of sale credited to the Income Account of the Trust. The
Trustee shall not be liable or responsible in any way for depreciation or
loss incurred by reason of any such sale.
If, as the result of the deposit of Securities subsequent to the
Initial Date of Deposit, distributions with respect to any issue of
Securities are received on some, but not all, Securities of such issue,
the Depositor shall pay to the Trustee for distribution to Unitholders
such amount as will equal the difference between the total of the
distribution on such issue received by the Trust and the amount which
would have been received had distributions been received on all
Securities of such issue. The payment of such amount by the Depositor
shall be made on the fifth business day following such supplemental
deposit, and shall be secured by any cash and/or Letter of Credit
deposited pursuant to Section 2.01(c) hereof.
Section 3.03. Capital Account. All moneys received by the Trustee in
respect of the Securities, other than amounts credited to the Income
Account, shall be credited to a separate account to be known as the
"Capital Account" (except for moneys deposited by the Depositor or moneys
pursuant to draws on the Letter of Credit for purchase of Contract
Securities pursuant to Section 2.01, which shall be separately held in
trust by the Trustee for such purpose and shall not be credited to the
Capital Account except as provided in Section 2.01(d)).
Section 3.04. Reserve Account. From time to time, the Trustee shall
withdraw from the cash on deposit in the Income Account or the Capital
Account of the Trust such amounts as it, in its sole discretion, shall
deem requisite to establish a reserve for any applicable taxes or other
governmental charges that may be payable out of the Trust. Such amounts
so withdrawn shall be credited to a separate account for the Trust which
shall be known as the "Reserve Account." The Trustee shall not be
required to distribute to the Unitholders any of the amounts in the
Reserve Account; provided, however, that if it shall, in its sole
discretion, determine that such amounts are no longer necessary for the
payment of any applicable taxes or other governmental charges, then it
shall promptly deposit such amounts in the account from which withdrawn,
or if the Trust shall have terminated or shall be in the process of
termination, the Trustee shall distribute same in accordance with
Section 8.02(d) to each Unitholder such holder's interest in the Reserve
Account.
Section 3.05. Deductions and Distributions. (a) The Trustee, as of the
"First Settlement Date," as defined in the related Prospectus, shall
advance from its own funds and shall pay to the Unitholders of the Trust
then of record the amount of interest accrued on the Bonds deposited in
the Trust. The Trustee shall also advance from its own funds and pay the
appropriate persons the amount, if any, specified in Part II of the Trust
Agreement, which amount represents interest which accrues on any "when
issued" Bonds deposited in the Trust from the date stated in the
preceding sentence to the respective dates of delivery to the Trust of
any of such Bonds. The Trustee shall be entitled to reimbursement for
such advancement from interest received by the Trust before any further
distributions shall be made from the Interest Account to Unitholders of
the Trust. Subsequent distributions shall be made as hereinafter
provided. On or immediately after the fifteenth the day of each month,
the Trustee shall satisfy itself as to the adequacy of the Reserve
Account, making any further credits thereto as may appear appropriate in
accordance with Section 3.04 and shall then with respect to the Trust:
(i) deduct from the Income Account or, to the extent funds are
not available in such Account, from the Capital Account and pay to
itself individually the amounts that it is at the time entitled to
receive pursuant to Section 6.04;
(ii) deduct from the Income Account or, to the extent funds are
not available in such Account, from the Capital Account and pay to,
or reserve for, the Evaluator the amount that it is at the time
entitled to receive pursuant to Section 4.03;
(iii) deduct from the Income Account or, to the extent funds are
not available in such Account, from the Capital Account and pay to
counsel, as hereinafter provided for, an amount equal to unpaid fees
and expenses, if any, of such counsel pursuant to Section 3.09, as
certified to by the Depositor;
(iv) deduct from the Income Account or to the extent funds are
not available in such Account, from the Capital Account and pay to,
or reserve for, the Supervisory Servicer the amount that it is
entitled to receive pursuant to Section 3.15; and
(v) deduct from the Income Account or to the extent funds are
not available in such Account, from the Capital Account and pay to
the Depositor the amount that it is entitled to receive pursuant to
Section 3.18.
(b) (i) On each Income Account Distribution Date, the Trustee shall
distribute an amount per Unit equal to such Unitholder's Income
Distribution (as defined below) computed as of the close of business on
the Income Account Record Date immediately preceding such Income Account
Distribution Date plus, if such Income Account Distribution Date is also
a Capital Account Distribution Date for the distribution of capital, such
Unitholder's pro rata share of the balance of the Capital Account (except
for moneys on deposit therein required to purchase Contract Securities)
to each Unitholder of record at the close of business on the Record Date.
Should the amount available for distribution in the Capital Account equal
or exceed $0.10 per Unit, to the extent permissible under the Investment
Company Act of 1940, the Trustee shall be required to make a special
distribution from the Capital Account on last day of the next succeeding
month to holders of record on the fifteenth day of such month. The Trust
shall provide the following distribution elections: (1) distributions to
be made by mail addressed to the post office address of the Unitholder as
it appears on the registration books of the Trustee or (2) distributions
to be made to the designated agent for any reinvestment program when, as
and if available to the Unitholder through the Depositor. If no election
is offered by the Depositor or if no election is specified by the
Unitholder at the time of purchase of any Unit, distribution of principal
and income and capital gains, if any, shall be distributed as provided in
(1) above. Any election other than a deemed election as described in the
preceding sentence shall be by written notice to, and in form
satisfactory to, the Trustee. Once a distribution election has been
chosen by the Unitholder, such election shall remain in effect until
changed by the Unitholder. Such change of election may be made by
notification thereof to the Trustee at any time in form satisfactory to
the Trustee. A transferee of any Unit may make his distribution election
in the manner as set forth above. The Trustee shall be entitled to
receive in writing a notification from the Unitholder as to his or her
change of address.
(ii) For the purposes of this Section 3.05, the Unitholder's
"Income Distribution" shall be equal to such Unitholder's pro rata
share of the cash balance (other than any amortized discount) in the
Income Account computed as of the close of business on the Income
Account Record Date immediately preceding such Income Distribution
after deduction of (1) the fees and expenses then deductible
pursuant to Section 3.05(a) and (2) the Trustee's estimate of other
expenses properly chargeable to the Income Account pursuant to the
Indenture which have accrued, as of such Income Account Record Date
or are otherwise properly attributable to the period to which such
Income Distribution relates.
(iii) The amount to be so distributed to each Unitholder shall
be that pro rata share of the balance of the Income and Capital
Accounts, computed as set forth herein, as shall be represented by
the Units registered in the name of such Unitholder. In the
computation of each such pro rata share, fractions of less than one
cent shall be omitted. After any such distribution provided for
above, any cash balance remaining in the Income Account or the
Capital Account shall be held in the same manner as other amounts
subsequently deposited in each of such accounts, respectively.
(iv) Principal and other income attributable to Contract
Securities which the Depositor shall have declared by written notice
to the Trustee to be Failed Contract Securities for which
Replacement Securities are not to be substituted pursuant to
Section 3.14 hereof shall be distributed to Unitholders of record as
of the close of business on the Income Account Record Date next
following the failure of consummation of such purchase and shall be
distributed not more than 120 days after the receipt of such notice
by the Trustee or at such earlier time in such manner as the Trustee
in its sole discretion deems to be in the best interest of
Unitholders.
(v) For the purpose of distributions as herein provided, the
Unitholders of record on the registration books of the Trustee at
the close of business on each Income Account Record Date shall be
conclusively entitled to such distribution, and no liability shall
attach to the Trustee by reason of payment to any Unitholder of
record. Nothing herein shall be construed to prevent the payment of
amounts from the Income Account and the Capital Account to
individual Unitholders by means of one check, draft or other
instrument or device provided that the appropriate statement of such
distribution shall be furnished therewith as provided in
Section 3.06 hereof.
Section 3.06. Distribution Statements. With each distribution from the
Income or Capital Accounts of the Trust, the Trustee shall set forth,
either in the instrument by means of which payment of such distribution
is made or in an accompanying statement, the amount being distributed
from each such account and, if from the Income Account, the amount of
accrued interest on the Bonds (uncollected, other than original issue
discount, and not available for distribution) on the record date for such
distribution, expressed as a dollar amount per Unit.
Within a reasonable period of time after the last Business Day of
each calendar year, the Trustee shall furnish to each person who at any
time during such calendar year was a Unitholder of the Trust a statement
setting forth, with respect to such calendar year:
(A) as to the Income Account:
(1) the amount of income received, including accreted
original issue discount on the Bonds (including amounts
received as a portion of the proceeds of any disposition of
Securities);
(2) the amounts paid from the Income Account for
purchases of Securities pursuant to Section 3.14 and for
redemptions pursuant to Section 5.02;
(3) the deductions from the Income Account for payment
into the Reserve Account;
(4) the deductions for applicable taxes and fees and
expenses of the Trustee, the Evaluator, the Supervisory
Servicer, counsel, auditors and any expenses paid by the Trust
pursuant to Section 3.05; and
(5) the amounts reserved for purchases of Contract
Securities or for purchases made pursuant to Section 3.14; and
(6) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last Business Day of
such calendar year;
(B) as to the Capital Account;
(1) the date of principal payments and prepayments due to
sale, maturity, redemption, liquidation or disposition of any
of the Securities and the net proceeds received therefrom,
excluding any portion thereof credited to the Income Account;
(2) the deductions from the Capital Account, if any, for
payment of applicable taxes and fees and expenses of the
Trustee, the Evaluator, the Supervisory Servicer, counsel,
auditors and any expenses paid by the Trust under Section 3.05;
(3) the amount paid for purchases of Securities pursuant
to Section 3.14 and for redemptions pursuant to Section 5.02;
(4) the deductions from the Capital Account for payments
into the Reserve Account;
(5) the amounts reserved for purchases of Contract
Securities or for purchases made pursuant to Section 3.14;
(6) the balance remaining after such distributions and
deductions, expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last Business Day of
such calendar year; and
(C) the following information:
(1) a list of Securities as of the last Business Day of
such calendar year (grouped by coupon and maturity range in the
case of the Bonds) and a list which identifies all Securities
sold or other Securities acquired during such calendar year, if
any;
(2) the number of Units outstanding on the last Business
Day of such calendar year;
(3) the Unit Value as defined in Section 5.01 based on
the last Trust Fund Evaluation pursuant to Section 5.01 made
during such calendar year; and
(4) the amounts actually distributed or which are
otherwise attributable to Unitholders during such calendar year
from the Income and Capital Accounts, separately stated,
expressed as total dollar amounts for such distributions and
the status of such distributions for federal income tax
purposes.
Section 3.07. Sale of Securities. If necessary, in order to maintain
the sound investment character of the Trust, the Depositor may direct the
Trustee to sell or liquidate Securities at such price and time and in
such manner as shall be determined by the Depositor, provided that the
Depositor has determined with the advice of the Supervisory Servicer, if
appropriate, that any one or more of the following conditions exist:
(a) that there has been a default on any of the Securities in
the payment of principal, interest or dividends (after declared),
when due and payable;
(b) that any action or proceeding has been instituted at law
or equity seeking to restrain or enjoin the payment of dividends on
any Equity Securities, or that there exists any legal question or
impediment affecting such Equity Securities or the payment of
dividends from the same;
(c) that any action or proceeding has been instituted in law
or equity seeking to restrain or enjoin the payment of principal or
interest on any Bonds, attacking the constitutionality of any
enabling legislation or alleging and seeking to have judicially
determined the illegality of the issuing body or the constitution of
its governing body or officers, the illegality, irregularity or
omission of any necessary acts or proceedings preliminary to the
issuance of such Bonds, or seeking to restrain or enjoin the
performance by the officers or employees of any such issuing body of
any improper or illegal act in connection with the administration of
funds necessary for debt service on such Bonds or otherwise; or that
there exists any other legal question or impediment affecting such
Bonds or the payment of debt service on the same;
(d) that there has occurred any breach of covenant or warranty
in any document relating to the issuer of the Securities which would
adversely affect either immediately or contingently the payment of
dividends from the Equity Securities or debt service on the Bonds,
or the general credit standing of the issuer or otherwise impair the
sound investment character of such Equity Securities or Bonds;
(e) that there has been a default in the payment of dividends,
principal of or interest, on any other outstanding obligations of
the issuer of such Securities;
(f) that the price of any Securities had declined to such an
extent or other such credit factors exist so that in the opinion of
the Depositor, as evidenced in writing to the Trustee, the retention
of such Securities would be detrimental to the Trust Fund and to the
interest of the Unitholders;
(g) that any Bonds are the subject of an advanced refunding.
For the purposes of this Section 3.07(g), "an advanced refunding"
shall mean when refunding bonds are issued and the proceeds thereof
are deposited in irrevocable trust to retire the Bonds on or before
their redemption date;
(h) that all of the Securities in the Trust Fund will be sold
pursuant to termination of the Trust pursuant to Section 8.02
hereof; and
(i) that such sale is required due to Units tendered for
redemption.
Upon receipt of such direction from the Depositor, upon which the
Trustee shall rely, the Trustee shall proceed to sell or liquidate the
specified Securities in accordance with such direction, and upon the
receipt of the proceeds of any such sale or liquidation, after deducting
therefrom any fees and expenses of the Trustee connected with such sale
or liquidation and any brokerage charges, taxes or other governmental
charges shall deposit such net proceeds in the applicable Capital
Account; provided, however, that the Trustee shall not sell or liquidate
any Bonds upon receipt of a direction from the Depositor that it has
determined that the conditions in subdivision (g) above exist, unless the
Trustee shall receive on account of such sale or liquidation the full
principal amount of such Bonds, plus the premium, if any, and the
interest accrued and to accrue thereon to the date of the redemption of
such Bonds.
The Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any sale made pursuant to any
such direction or by reason of the failure of the Depositor to give any
such direction, and in the absence of such direction the Trustee shall
have no duty to sell or liquidate any Securities under this Section 3.07
except to the extent otherwise required by Section 3.10 of this
Indenture.
Section 3.08. Refunding Bonds. In the event that an offer shall be
made by an obligor of any of the Bonds to issue new obligations in
exchange and substitution for any issue of Bonds pursuant to a plan for
the refunding or refinancing of such Bonds, the Depositor shall instruct
the Trustee in writing to reject such offer and either to hold or sell
such Bonds, except that if (1) the issuer is in default with respect to
such Bonds or (2) in the opinion of the Depositor, given in writing to
the Trustee, the issuer will probably default with respect to such Bonds
in the reasonably foreseeable future, the Depositor shall instruct the
Trustee in writing to accept or reject such offer or take any other
action with respect thereto as the Depositor may deem proper. Any
obligation so received in exchange shall be deposited hereunder and shall
be subject to the terms and conditions of this Indenture to the same
extent as the Bonds originally deposited hereunder. Within five days
after such deposit, notice of such exchange and deposit shall be given by
the Trustee to each Unitholder, including an identification of the Bonds
eliminated and the bonds substituted therefor.
Section 3.09. Counsel. The Depositor may employ from time to time, as
it deems necessary or desirable, a firm of attorneys for any legal
services which may be required in connection with the Securities,
including any legal matters relating to the possible disposition or
acquisition of any Securities pursuant to any provisions hereof or for
any other reasons deemed advisable by the Depositor or the Trustee, in
their discretion. The fees and expenses of such counsel may, at the
discretion of the Depositor, be paid by the Trustee from the Income
Account and Capital Account as provided for in Section 3.05(a)(iii)
hereof.
Section 3.10. Notice and Sale by Trustee. If at any time the principal
of or interest on any of the Bonds shall be in default and not paid or
provision for payment thereof shall not have been duly made within thirty
days, the Trustee shall notify the Depositor thereof. If within thirty
days after such notification the Depositor has not given any instruction
to sell or to hold or has not taken any other action in connection with
such Bonds, the Trustee may in its discretion sell such Bonds forthwith,
and the Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of such sale.
Section 3.11. Trustee not Required to Amortize. Nothing in this
Indenture, or otherwise, shall be construed to require the Trustee to
make any adjustments between the Income and Capital Accounts by reason of
any premium or discount in respect of any of the Securities.
Section 3.12. Liability of Depositor. The Depositor shall be under no
liability to the Unitholders for any action taken or for refraining from
the taking of any action in good faith pursuant to this Indenture or for
errors in judgment, but shall be liable only for its own willful
misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties hereunder. The Depositor may rely in good faith on any paper,
order, notice, list, affidavit, receipt, opinion, endorsement,
assignment, draft or any other document of any kind prima facie properly
executed and submitted to it by the Trustee, bond counsel or any other
persons pursuant to this Indenture and in furtherance of its duties.
Section 3.13. Notice to Depositor. In the event that the Trustee shall
have been notified at any time of any action to be taken or proposed to
be taken with respect to the Securities (including but not limited to the
making of any demand, direction, request, giving of any notice, consent
or waiver or the voting with respect to any amendment or supplement to
any indenture, resolution, agreement or other instrument under or
pursuant to which the Securities have been issued) the Trustee shall
promptly notify the Depositor and shall thereupon take such action or
refrain from taking any action as the Depositor shall in writing direct;
provided, however, that if the Depositor shall not within five Business
Days of the giving of such notice to the Depositor direct the Trustee to
take or refrain from taking any action, the Trustee shall take such
action or refrain from taking any action, (i) so as to insure that the
Equity Securities are voted as closely as possible in the same manner and
the same general proportion, with respect to all issues, as are shares of
such Equity Securities that are held by owners other than the Trust and
(ii) as it, in its sole discretion, shall deem advisable with respect to
the Bonds.
Subject to Section 3.08, in the event that an offer by the issuer of
any of the Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities, the Trustee
shall reject such offer. However, should any issuance, exchange or
substitution be effected notwithstanding such rejection or without an
initial offer, any securities, cash and/or property received shall be
deposited hereunder and shall be promptly sold, if securities or
property, by the Trustee unless the Depositor advises the Trustee to keep
such securities, cash or properties. The cash received in such exchange
and cash proceeds of any such sales shall be distributed to Unitholders
on the next Income Account Distribution Date in the manner set forth in
Section 3.05 regarding distributions from the Capital Account. The
Trustee shall not be liable or responsible in any way for depreciation or
loss incurred by reason of any such sale.
Neither the Depositor nor the Trustee shall be liable to any person
for any action or failure to take action pursuant to the terms of this
Section 3.13 other than failure to notify the Depositor.
Section 3.14. Replacement Securities. In the event that any contract
to purchase any Contract Security is not consummated in accordance with
its terms (a "Failed Contract Security"), the Depositor may instruct the
Trustee in writing either to effect a buy-in in accordance with the rules
of the market place where the Failed Contract Securities were purchased
or its clearing house or to purchase a replacement security (the
"Replacement Security") which has been selected by the Depositor or if
the Depositor does not provide such an instruction, the Trustee is hereby
directed either to effect a buy-in in accordance with the rules of the
market place where the Failed Contract Securities were purchased or its
clearing house or to purchase a Replacement Security out of funds held by
the Trustee pursuant to Section 3.03. Purchases of Replacement Securities
will be made subject to the conditions set forth below:
(a) The Replacement Securities shall be Bonds or Equity
Securities as originally selected for deposit in the Trust and any
Replacement Securities which are Bonds, (i) shall have as close as
is reasonably practical, the same maturity date as the Failed
Contract Securities, which must be on or prior to the Mandatory
Termination Date, (ii) shall not be when, as and if issued
obligations, and (iii) shall be purchased at a price that results in
a yield to maturity and in a current return, in each case as of the
Initial Date of Deposit, at least equal to that of the Failed
Contract Securities;
(b) The purchase of the Replacement Securities shall not
adversely affect the federal income tax status of the Trust;
(c) The purchase price of the Replacement Securities shall
(exclusive of any accrued interest) not exceed the total amount of
cash deposited, or the amount available under the Letter of Credit
deposited, by the Depositor at the time of the deposit of the Failed
Contract Security;
(d) The written instructions of the Depositor shall (i)
identify the Replacement Securities to be purchased, (ii) state that
the contract to purchase, if any, to be entered into by the Trustee
is satisfactory in form and substance and (iii) state that the
foregoing conditions of clauses (a) through (d) have been satisfied
with respect to the Replacement Securities; and
(e) The Replacement Securities shall be purchased within 30
days after the deposit of the Failed Contract Security.
Upon satisfaction of the foregoing conditions with respect to any
Replacement Securities which shall be certified by the Depositor in the
written instruction to the Trustee identifying the Replacement
Securities, the Trustee shall enter into the contract to purchase such
Replacement Securities and take all steps reasonably necessary to
complete the purchase thereof. Whenever a Replacement Security is
acquired by the Trustee pursuant to the provisions of this Section, the
Trustee will, as agent for the Depositor, not later than five days after
such acquisition, mail to each Unitholder a notice of such acquisition,
including an identification of the Securities eliminated and the
Securities acquired. Amounts in respect of the purchase price thereof on
account of principal shall be paid out of and charged against the cash
deposited, or the amounts available under the Letter of Credit deposited,
by the Depositor at the time of the deposit of the Failed Contract
Security. In the event the Trustee shall not consummate any purchase of
Replacement Securities pursuant to this Section 3.14, funds held for such
purchase shall be distributed in accordance with Section 2.01(d). Any
excess of the purchase price of a Failed Contract Security over the
purchase price of its corresponding Replacement Security shall be
refunded to the Depositor. The Trustee shall not be liable or
responsible in any way for depreciation or loss incurred by reason of any
purchase made pursuant to, or any failure to make any purchase authorized
by, this Section 3.14. The Depositor shall not be liable for any failure
to instruct the Trustee to purchase any Replacement Securities, nor shall
the Trustee or Depositor be liable for errors of judgment in respect to
this Section 3.14; provided, however, that this provision shall not
protect the Depositor or the Trustee against any liability to which it
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder.
Section 3.15. Supervisory Servicer. As compensation for
providing supervisory portfolio services under this Indenture, the
Supervisory Servicer shall receive, in arrears, against a statement or
statements therefor submitted to the Trustee monthly or annually an
aggregate annual fee in that amount specified as compensation for
supervisory services in the Prospectus for the Trust, but in no event
shall such compensation when combined with all compensation received from
other series of the Fund for providing such supervisory services in any
calendar year exceed the aggregate cost to the Supervisory Servicer for
providing such services. Such compensation may, from time to time, be
adjusted provided that the total adjustment upward does not, at the time
of such adjustment, exceed the percentage of the total increase, after
the date hereof, in consumer prices for services as measured by the
United States Department of Labor Consumer Price Index entitled "All
Services Less Rent of Shelter" or similar index, if such index should no
longer be published. The consent or concurrence of any Unitholder
hereunder shall not be required for any such adjustment or increase.
Such compensation shall be paid by the Trustee, upon receipt of invoice
therefor from the Supervisory Servicer, upon which, as to the cost
incurred by the Supervisory Servicer of providing services hereunder the
Trustee may rely, and shall be charged against the Income and/or Capital
Accounts, in accordance with Section 3.05. If the cash balance in the
Income and Capital Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.15, the Trustee shall have the power
to sell (a) Securities from the current list of Securities designated to
be sold pursuant to Section 5.02 hereof, or (b) if no such Securities
have been so designated, such Securities as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any such sale in
payment of the amounts payable pursuant to this Section 3.15.
Any moneys payable to the Supervisory Servicer pursuant to this
Section 3.15 shall be secured by a lien on the Trust prior to the
interest of Unitholders, but no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04 herein.
'Section 3.16. Foreign Exchange Transactions; Reclaiming Foreign Taxes'.
The Trustee shall use reasonable efforts to reclaim or recoup any amounts
of non-U.S. tax paid by the Trust or withheld from income received by the
Trust to which the Trust may be entitled as a refund.
'Section 3.17. Foreign Exchange Transactions; Foreign Currency
Exchange'. Unless the Depositor shall otherwise direct, whenever funds
are received by the Trustee in foreign currency, upon the receipt thereof
or, if such funds are to be received in respect of a sale of Securities,
concurrently with the contract of the sale for the Security (in the
latter case the foreign exchange contract to have a settlement date
coincident with the relevant contract of sale for the Security), the
Depositor shall enter into a foreign exchange contract for the conversion
of such funds to U.S. dollars. The Depositor shall have no liability for
any loss or depreciation resulting from such action taken.
Section 3.18. Deferred Sales Charge. If the Prospectus related to the
Trust specifies a deferred sale charge, the Trustee shall, on the dates
specified in and as permitted by such Prospectus, withdraw from the
Income Account, an amount per Unit specified in such Prospectus and
credit such amount to a special non-Trust account maintained at the
Trustee out of which the deferred sales charge will be distributed to the
Depositor. If the balance in the Income Account is insufficient to make
any such withdrawal, the Trustee shall, as directed by the Depositor,
either advance funds in an amount equal to the proposed withdrawal and be
entitled to reimbursement of such advance upon the deposit of additional
moneys in the Income Account, sell Securities and credit the proceeds
thereof to such special Depositor's account or credit (if permitted by
law) Securities in kind to such special Depositor's Account. If a
Unitholder redeems Units prior to full payment of the deferred sales
charge, the Trustee shall, if so provided in the related Prospectus, on
the Redemption Date, withhold from the Redemption Price payable to such
Unitholder an amount equal to the unpaid portion of the deferred sales
charge and distribute such amount to such special Depositor's Account.
The Depositor may at any time instruct the Trustee in writing to
distribute to the Depositor cash or Securities previously credited to the
special Depositor's Account.
'Article IV Evaluation of Securities Evaluator';Article IV
Evaluation of Securities; Evaluator
Section 4.01. Evaluation by Evaluator. (a) The Evaluator shall
determine separately, and shall promptly furnish to the Trustee and the
Depositor upon request, the value of each issue of Securities (including
Contract Securities) ("Evaluation") as of the time stated in the
Prospectus relating to the Trust (the "Evaluation Time") (i) on each
Business Day during the period which the Units are being offered for sale
to the public and (ii) on any other day on which a Trust Fund Evaluation
is to be made pursuant to Section 5.01 or which is requested by the
Depositor or the Trustee. As part of the Trust Evaluation, the Evaluator
shall determine separately and promptly furnish to the Trustee and the
Depositor upon request the Evaluation of each issue of Securities
initially deposited in the Trust on the Initial Date of Deposit. The
Evaluator's determination of the offering prices of the Securities on the
Initial Date of Deposit shall be included in the Schedules attached to
the Trust Agreement.
(b) During the initial offering period such Evaluation shall be
made in the following manner: if the Securities are listed on a national
securities exchange or foreign securities exchange, such Evaluation shall
generally be based on the last available sale price on or immediately
prior to the Evaluation Time on the exchange which is the principal
market therefor, which shall be deemed to be the New York Stock Exchange
if the Securities are listed thereon (unless the Evaluator deems such
price inappropriate as a basis for evaluation) or, if there is no such
available sale price on such exchange at the last available ask prices of
the Equity Securities. If the Securities are not so listed or, if so
listed, the principal market therefor is other than on such exchange or
there is no such available sale price on such exchange, such Evaluation
shall generally be based on the following methods or any combination
thereof whichever the Evaluator deems appropriate: (i) in the case of
Equity Securities, on the basis of the current ask price on the over-the-
counter market (unless the Evaluator deems such price inappropriate as a
basis for evaluation), (ii) on the basis of current offering prices for
the Bonds as obtained from investment dealers or brokers who customarily
deal in securities comparable to those held by the Fund, (iii) if
offering prices are not available for the Bonds or the Equity Securities,
on the basis of offering or ask prices for comparable securities, (iv) by
determining the valuation of the Bonds or the Equity Securities on the
offering or ask side of the market by appraisal or (v) by any combination
of the above. If the Trust holds Securities denominated in a currency
other than U.S. dollars, the Evaluation of such Security shall be
converted to U.S. dollars based on current offering side exchange rates
(unless the Evaluator deems such prices inappropriate as a basis for
valuation). The Evaluator shall add to the Evaluation of each Security
which is principally traded outside of the United States the amount of
any commissions and relevant taxes associated with the acquisition of the
Security. As used herein, the closing sale price is deemed to mean the
most recent closing sale price on the relevant securities exchange
immediately prior to the Evaluation Time. For each Evaluation, the
Evaluator shall also confirm and furnish to the Trustee and the
Depositor, on the basis of the information furnished to the Evaluator by
the Trustee as to the value of all Trust assets other than Securities,
the calculation of the Trust Fund Evaluation to be computed pursuant to
Section 5.01.
(c) For purposes of the Trust Fund Evaluations required by
Section 5.01 in determining Redemption Value (after the initial offering
period) and Unit Value (both during and after the initial offering
period), Evaluation of the Securities shall be made in the manner
described in 4.01(b), on the basis of current bid prices for the Bonds
and, except in those cases in which the Equity Securities are listed on a
national securities exchange or a foreign securities exchange and the
last available sale prices are utilized, on the basis of the last
available bid prices of the Equity Securities. In addition, the
Evaluator (i) shall not make the addition specified in the fourth
sentence of Section 4.01(b) and (ii) shall reduce the Evaluation of each
Security which is principally traded outside of the United States by the
amount of any liquidation costs and any capital gains or other taxes
which would be incurred by the Trust upon the sale of such Security, such
taxes being computed as if the Security were sold on the date of the
Evaluation.
Section 4.02. Information for Unitholders. For the purpose of
permitting Unitholders to satisfy any reporting requirements of
applicable federal or state tax law, the Evaluator shall make available
to the Trustee and the Trustee shall transmit to any Unitholder upon
request any determinations made by it pursuant to Section 4.01.
Section 4.03. Compensation of Evaluator. As compensation for its
services hereunder, the Evaluator shall receive against a statement or
statements therefor submitted to the Trustee monthly or annually, an
amount equal to the amount specified as compensation for the Evaluator in
the Prospectus. Such compensation may, from time to time, be adjusted
provided that the total adjustment upward does not, at the time of such
adjustment, exceed the percentage of the total increase, after the date
hereof, in consumer prices for services as measured by the United States
Department of Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index shall no longer be published.
The consent or concurrence of any Unitholder hereunder shall not be
required for any such adjustment or increase. Such compensation shall be
charged by the Trustee, upon receipt of invoice therefor from the
Evaluator, against the Income and Capital Accounts. If the cash balance
in the Income and Capital Accounts shall be insufficient to provide for
amounts payable pursuant to this Section 4.03, the Trustee shall have the
power to sell (a) Securities from the current list of Securities
designated to be sold pursuant to Section 5.02 hereof or (b) if no such
Securities have been so designated, such Securities as the Trustee may
see fit to sell in its own discretion, and to apply the proceeds of any
such sale in payment of the amounts payable pursuant to this
Section 4.03.
Section 4.04. Liability of Evaluator. The Trustee, the Depositor and
the Unitholders may rely on any Evaluation furnished by the Evaluator and
shall have no responsibility for the accuracy thereof. The
determinations made by the Evaluator hereunder shall be made in good
faith upon the basis of the best information available to it. The
Evaluator shall be under no liability to the Trustee, the Depositor or
the Unitholders for errors in judgment; provided, however, that this
provision shall not protect the Evaluator against any liability to which
it would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder.
'Section 4.05. Resignation and Removal of Evaluator; Successor'. (a)
The Evaluator may resign and be discharged hereunder, by executing an
instrument in writing resigning as Evaluator and filing the same with the
Depositor and the Trustee, not less than 60 days before the date
specified in such instrument when, subject to Section 4.05(e), such
resignation is to take effect. Upon receiving such notice of
resignation, the Depositor and the Trustee shall use their best efforts
to appoint a successor evaluator having qualifications and at a rate of
compensation satisfactory to the Depositor and the Trustee. Such
appointment shall be made by written instrument executed by the Depositor
and the Trustee, in duplicate, one copy of which shall be delivered to
the resigning Evaluator and one copy to the successor evaluator. The
Depositor or the Trustee may remove the Evaluator at any time, with or
without cause, upon 30 days' written notice and appoint a successor
evaluator having qualifications and at a rate of compensation
satisfactory to the Depositor and the Trustee. Such appointment shall be
made by written instrument executed by the Depositor and the Trustee, in
duplicate, one copy of which shall be delivered to the Evaluator so
removed and one copy to the successor evaluator. Notice of such
resignation or removal and appointment of a successor evaluator shall be
mailed by the Trustee to each Unitholder then of record.
(b) Any successor evaluator appointed hereunder shall execute,
acknowledge and deliver to the Depositor and the Trustee an instrument
accepting such appointment hereunder, and such successor evaluator
without any further act, deed or conveyance shall become vested with all
the rights, powers, duties and obligations of its predecessor hereunder
with like effect as if originally named Evaluator herein and shall be
bound by all the terms and conditions of this Indenture.
(c) In case at any time the Evaluator shall resign and no successor
evaluator shall have been appointed and have accepted appointment within
30 days after notice of resignation has been received by the Depositor
and the Trustee, the Evaluator may forthwith apply to a court of
competent jurisdiction for the appointment of a successor evaluator.
Such court may thereupon after such notice, if any, as it may deem proper
and prescribe, appoint a successor evaluator.
(d) Any corporation into which the Evaluator hereunder may be
merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Evaluator hereunder shall
be a party, shall be the successor evaluator under this Indenture without
the execution or filing of any paper, instrument or further act to be
done on the part of the parties hereto, anything herein, or in any
agreement relating to such merger or consolidation, by which the
Evaluator may seek to retain certain powers, rights and privileges
theretofore obtaining for any period of time following such merger or
consolidation, to the contrary notwithstanding.
(e) Any resignation or removal of the Evaluator and appointment of
a successor evaluator pursuant to this Section shall become effective
upon acceptance of appointment by the successor evaluator as provided in
subsection (b) hereof.
'Section 4.06. Resignation and Removal of Supervisory Servicer;
Successor'. (a) The Supervisory Servicer may resign and be discharged
hereunder, by executing an instrument in writing resigning as Supervisory
Servicer and filing the same with the Depositor (if other than the
Supervisory Servicer) and the Trustee, not less than 60 days before the
date specified in such instrument when, subject to Section 4.06(e), such
resignation is to take effect. Upon receiving such notice of
resignation, the Depositor (if other than the Supervisory Servicer) and
the Trustee shall use their best efforts to appoint a successor
supervisory servicer having qualifications and at a rate of compensation
satisfactory to the Depositor and the Trustee. Such appointment shall be
made by written instrument executed by the Depositor and Trustee, in
duplicate, one copy of which shall be delivered to the resigning
Supervisory Servicer and one copy to the successor supervisory servicer.
The Depositor (if other than the Supervisory Servicer) or the Trustee may
remove the Supervisory Servicer at any time upon 30 days' written notice
and appoint a successor supervisory servicer having qualifications and at
a rate of compensation satisfactory to the Depositor and the Trustee.
Such appointment shall be made by written instrument executed by the
Depositor (if other than the Supervisory Servicer) and the Trustee, in
duplicate, one copy of which shall be delivered to the Supervisory
Servicer so removed and one copy to the successor supervisory servicer.
Notice of such resignation or removal and appointment of a successor
supervisory servicer shall be mailed by the Trustee to each Unitholder
then of record.
(b) Any successor supervisory servicer appointed hereunder shall
execute, acknowledge and deliver to the Depositor and the Trustee an
instrument accepting such appointment hereunder, and such successor
supervisory servicer without any further act, deed or conveyance shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder with like effect as if originally named Supervisory
Servicer herein and shall be bound by all the terms and conditions of
this Indenture.
(c) In case at any time the Supervisory Servicer shall resign and
no successor supervisory servicer shall have been appointed and have
accepted appointment within 30 days after notice of resignation has been
received by the Depositor (if other than the Supervisory Servicer) and
the Trustee, the Supervisory Servicer may forthwith apply to a court of
competent jurisdiction for the appointment of a successor supervisory
servicer. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, appoint a successor supervisory servicer.
(d) Any corporation into which the Supervisory Servicer hereunder
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Supervisory
Servicer hereunder shall be a party, shall be the successor supervisory
servicer under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which the Supervisory Servicer may seek to retain
certain powers, rights and privileges theretofore obtaining for any
period of time following such merger or consolidation, to the contrary
notwithstanding.
(e) Any resignation or removal of the Supervisory Servicer and
appointment of a successor supervisory servicer pursuant to this Section
shall become effective upon acceptance of appointment by the successor
supervisory servicer as provided in subsection (b) hereof.
Article V Evaluation Redemption; Purchase; Transfer; Interchange or
Replacement of Units;Article V
Evaluation; Redemption; Purchase; Transfer; Interchange or Replacement of
Units
Section 5.01. Trust Evaluation. As of the Evaluation Time (a) on the
last Business Day of each year, (b) on the day on which any Unit is
tendered for redemption and (c) on any other day desired by the Trustee
or requested by the Depositor, the Trustee shall: Add (i) all moneys on
deposit in the Trust or moneys in the process of being collected from
matured interest coupons or bonds matured or called for redemption prior
to maturity (excluding (1) cash, cash equivalents or Letters of Credit
deposited pursuant to Section 2.01 hereof for the purchase of Contract
Securities, unless such cash or Letters of Credit have been deposited in
the Income and Capital Accounts because of failure to apply such moneys
to the purchase of Contract Securities pursuant to the provisions of
Sections 2.01, 3.02 and 3.03 hereof and (2) moneys credited to the
Reserve Account pursuant to Section 3.04 hereof), plus (ii) the aggregate
Evaluation of all Securities (including Contract Securities) on deposit
in the Trust as is determined by the Evaluator, plus (iii) all other
income from the Securities (including dividends receivable on the Equity
Securities trading ex-dividend as of the date of such valuation and
including interest accrued on the Bonds not subject to collection and
distribution) as of the Evaluation Time on the date of such Evaluation
together with all other assets of the Trust. For each such Evaluation
there shall be deducted from the sum of the above (i) amounts
representing any applicable taxes or governmental charges payable out of
the Trust and for which no deductions shall have previously been made for
the purpose of addition to the Reserve Account, (ii) amounts representing
estimated accrued expenses of such Trust including but not limited to
unpaid fees and expenses of the Trustee, the Evaluator, the Supervisory
Servicer, the Depositor and counsel, in each case as reported by the
Trustee to the Depositor on or prior to the date of evaluation, (iii) any
moneys identified by the Trustee, as of the date of the Evaluation, as
held for distribution to Unitholders of record as of an Income or Capital
Distribution Record Date or for payment of the Redemption Value of Units
tendered prior to such date and (iv) any reduction to be made pursuant to
the last sentence of Section 4.01(c). The resulting figure is herein
called a "Trust Fund Evaluation." The value of the pro rata share of each
Unit of the respective Trust determined on the basis of any such
evaluation shall be referred to herein as the "Unit Value." Amounts
receivable by the Trust in foreign currency, if any, shall be converted
by the Trustee to U.S. dollars based on current exchange rates, in the
same manner as provided in Section 4.01(b) or 4.01(c), as applicable, for
the conversion of the valuation of foreign Securities, and the Evaluator
shall report such conversion with each Evaluation made pursuant to
Section 4.01.
For each day on which the Trustee shall make a Trust Fund Evaluation
it shall also determine Unit Value for such day. Such Unit Value shall
be determined by dividing said Trust Fund Evaluation by the number of
Units outstanding on such day.
'Section 5.02. Redemptions by Trustee; Purchases by Depositor'. Any
Certificate tendered for redemption by a Unitholder or his duly
authorized attorney to the Trustee at its corporate trust office in the
City of New York, or any Unit in uncertificated form tendered by means of
an appropriate request for redemption in form approved by the Trustee
shall be paid by the Trustee on the third business day following the day
on which tender for redemption is made in proper form (being herein
called the "Settlement Date"). Subject to (a) payment by such Unitholder
of any tax or other governmental charges which may be imposed thereon and
(b) payments in the form of In Kind Distributions (as defined below),
such redemption is to be made by payment of cash equivalent to the Unit
Value determined on the basis of a Trust Fund Evaluation made in
accordance with Section 5.01 determined by the Trustee as of the
Evaluation Time on the Redemption Date, multiplied by the number of Units
tendered for redemption (herein called the "Redemption Value"). Units
received for redemption by the Trustee on any day after the Evaluation
Time will be held by the Trustee until the next day on which the New York
Stock Exchange is open for trading and will be deemed to have been
tendered on such day for redemption at the Redemption Value computed on
that day.
The Trustee may in its discretion, and shall when so directed by the
Depositor in writing, suspend the right of redemption for Units of the
Trust or postpone the date of payment of the Redemption Value for more
than three business days following the day on which tender for redemption
is made (i) for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or during which
trading on the New York Stock Exchange is restricted; (ii) for any period
during which an emergency exists as a result of which disposal by the
Trust of the Securities is not reasonably practicable or it is not
reasonably practicable fairly to determine in accordance herewith the
value of the Securities; or (iii) for such other period as the Securities
and Exchange Commission may by order permit, and shall not be liable to
any person or in any way for any loss or damage which may result from any
such suspension or postponement.
Not later than the close of business on the day of tender of any
Certificate or Unit for redemption by a Unitholder other than the
Depositor, the Trustee shall notify the Depositor of such tender. The
Depositor shall have the right to purchase such Certificate or Unit by
notifying the Trustee of its election to make such purchase as soon as
practicable thereafter but in no event subsequent to the close of
business on the first Business Day after the day on which such
Certificate or Unit was tendered for redemption. Such purchase shall be
made by payment by the Depositor to the Unitholder on the Redemption Date
of an amount not less than the Redemption Value which would otherwise be
payable by the Trustee to such Unitholder. So long as the Depositor
maintains a bid in the secondary market, the Depositor may repurchase the
Units tendered to the Trustee for redemption by the Depositor but shall
be under no obligation to maintain any bids and may, at any time while so
maintaining such bids, cease to do so immediately at any time or from
time to time without notice.
Any Units so purchased by the Depositor may at the option of the
Depositor be tendered to the Trustee for redemption at the corporate
trust office of the Trustee in the manner provided in the first paragraph
of this Section 5.02.
If the Depositor does not elect to purchase any Certificate or Unit
tendered to the Trustee for redemption, or if a Certificate or Unit is
being tendered by the Depositor for redemption, that portion of the
Redemption Price which represents interest shall be withdrawn from the
Income Account to the extent available. The balance paid on any
redemption, including accrued interest on the Bonds, if any, shall be
withdrawn from the Capital Account to the extent that funds are available
for such purpose. If such available balance shall be insufficient, the
Trustee shall sell such of the Securities, currently designated for such
purposes by the Supervisory Servicer, as the Trustee in its sole
discretion shall deem necessary. In the event that funds are withdrawn
from the Capital Account for payment of accrued interest on the Bonds,
the Capital Account shall be reimbursed for such funds so withdrawn when
sufficient funds are next available in the Income Account.
Notwithstanding the foregoing provisions of this Section 5.02, until
the close of business on the second Business Day after the day on which
such Certificate or Unit was tendered for redemption the Trustee is
hereby irrevocably authorized in its discretion, in the event that the
Depositor does not purchase any Units tendered to the Trustee for
redemption, or in the event that a Unit is being tendered by the
Depositor for redemption, in lieu of redeeming Units, to sell Units in
the over-the-counter market through any broker-dealer of its choice for
the account of the tendering Unitholder at prices which will return to
the Unitholder an amount in cash, net after deducting brokerage
commissions, transfer taxes and other charges, equal to or in excess of
the Redemption Value which such Unitholder would otherwise be entitled to
receive on redemption pursuant to this Section 5.02. The Trustee shall
pay to the Unitholder the net proceeds of any such sale on the day on
which such Unitholder would otherwise be entitled to receive payment of
the Redemption Value hereunder.
Notwithstanding anything to the contrary in this Section 5.02, any
Unitholder may, if such Unitholder tenders at least that number of Units
set forth in the Prospectus for redemption, request at the time of tender
to receive from the Trustee in lieu of cash such Unitholder's pro rata
share of each Equity Security then held by the Trust. Such tendering
Unitholder will receive his pro rata number of whole shares of each of
the Equity Securities comprising the portfolio of the Trust and cash from
the Capital Account equal to the value of the fractional shares to which
such tendering Unitholder is entitled and such Unitholder's pro rata
share of the value of the Bonds. Such pro rata share of each Equity
Security and the related cash to which such tendering Unitholder is
entitled is referred to herein as an "In Kind Distribution." An In Kind
Distribution 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 bank or broker-dealer at Depository Trust Company. If funds
in the Capital Account are insufficient to cover the required cash
distribution to the tendering Unitholder, the Trustee may sell Securities
according to the criteria discussed herein.
The Supervisory Servicer shall maintain with the Trustee a current
list of Securities designated to be sold for the purpose of funding the
Capital Account for redemption of Units tendered for redemption and, to
the extent necessary, for payment of expenses under this Indenture. In
connection therewith, the Depositor may specify in the Trust Agreement
the minimum amounts of any Securities to be sold at any one time. If the
Supervisory Servicer shall for any reason fail to maintain such a list,
the Trustee may in its sole discretion designate a current list of
Securities for such purposes. The net proceeds of any sale of Securities
from such list representing income (including accrued interest on the
Bonds) shall be credited to the Income Account and then disbursed
therefrom for payment of expenses and payments to Unitholders required to
be paid under this Indenture. Any balance remaining after such
disbursements shall remain credited to the Capital Account.
Neither the Depositor nor the Trustee shall be liable or responsible
in any way for depreciation or loss incurred by reason of any sale of
Securities made pursuant to this Section 5.02.
Certificates evidencing Units redeemed pursuant to this Section 5.02
shall be canceled by the Trustee and the Unit or Units evidenced by such
Certificates shall be terminated by such redemptions. In the event that
a Certificate shall be tendered representing a number of Units greater
than those requested to be redeemed by the Unitholder, the Trustee shall
issue to such Unitholder, unless such Unitholder requests such Units be
uncertificated, upon payment of any tax or charges of the character
referred to in the second paragraph of Section 5.03, a new Certificate
evidencing the Units representing the balance of the Certificate so
tendered and not redeemed.
Section 5.03. Transfer or Interchange of Units. Units will be held in
uncertificated form unless the Unitholder requests in writing to have a
Certificate or Certificates representing such Units be issued. Units may
be transferred by the registered holder thereof by presentation and
surrender of such Units and Certificates, if issued, at the corporate
trust office of the Trustee, properly endorsed or accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Trustee and executed by the Unitholder or his authorized attorney,
whereupon new Units or, if requested, a new registered Certificate or
Certificates for the same number of Units of the Trust executed by the
Trustee and the Depositor will be issued in exchange and substitution
therefor and Units surrendered shall be canceled by the Trustee. The
registered holder of any Unit may transfer such Unit by the presentation
of transfer instructions and Certificates, if issued, to the Trustee at
the corporate trust office of the Trustee accompanied by such documents
as the Trustee deems necessary to evidence the authority of the person
making such transfer and executed by the registered holder or his
authorized attorney, whereupon the Trustee shall make proper notification
of such transfer on the registration books of the Trustee. Unitholders
holding their Units in uncertificated form may at any time request the
Trustee to issue Certificates for such Units and Unitholders holding
Certificates may at any time request that their Units be held in
uncertificated form. The Trustee shall, upon receipt of such request in
form satisfactory to it, accompanied by Certificates, if any, issue such
Certificates, or cancel such Certificate and make such appropriate
notations on its books, as may be requested by such Unitholder; provided
that the Trustee is entitled to specify the minimum denomination of any
Certificate issued. Certificates issued pursuant to this Indenture are
interchangeable for one or more other Certificates in an equal aggregate
number of Units of the Trust and all Certificates issued shall be issued
in denominations of one Unit or any whole multiple thereof as may be
requested by the Unitholder. The Trustee may deem and treat the
registered Unitholder as the owner of the Units whether or not held in
certificated form for all purposes hereunder and in either case the
Trustee shall not be affected by any notice to the contrary, nor be
liable to any person or in any way for so deeming and treating the person
in whose name any Certificate shall be so registered.
A sum sufficient to pay any tax or other governmental charge that
may be imposed in connection with any such transfer or interchange shall
be paid by the Unitholder to the Trustee. The Trustee may require a
Unitholder to pay a reasonable fee for each new Certificate issued on any
such transfer or interchange.
All Certificates canceled pursuant to this Indenture shall be
disposed of by the Trustee without liability on its part.
Section 5.04. Certificates Mutilated, Destroyed, Stolen or Lost. In
case any Certificate shall become mutilated, destroyed, stolen or lost,
the Trustee shall execute and deliver a new Certificate, if requested, in
exchange and substitution therefor upon the Unitholder's furnishing the
Trustee with proper identification and satisfactory indemnity, complying
with such other reasonable regulations and conditions as the Trustee may
prescribe and paying such expenses as the Trustee may incur. Any
mutilated Certificate shall be duly surrendered and canceled before any
new Certificate shall be issued in exchange and substitution therefor.
Upon the issuance of any new Certificate, a sum sufficient to pay any tax
or other governmental charge and the fees and expenses of the Trustee may
be imposed. Any such new Certificate issued pursuant to this
Section shall constitute complete and indefeasible evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
In the event the Trust has terminated or is in the process of
termination, the Trustee may, instead of issuing a new Certificate in
exchange and substitution for any Certificate which shall have become
mutilated or shall have been destroyed, stolen or lost, make the
distributions in respect of such mutilated, destroyed, stolen or lost
Certificate (without surrender thereof except in the case of a mutilated
Certificate) as provided in Section 8.02 hereof if the Trustee is
furnished with such security or indemnity as it may require to save it
harmless, and in the case of destruction, loss or theft of a Certificate,
evidence to the satisfaction of the Trustee of the destruction, loss or
theft of such Certificate and of the ownership thereof.
Article VI TrusteeArticle VI
Trustee
Section 6.01. General Definition of Trustee's Liabilities, Rights and
Duties. The Trustee shall in its discretion undertake such action as it
may deem necessary at any and all times to protect the Trust and the
rights and interests of the Unitholders pursuant to the terms of this
Indenture; provided, however, that the expenses and costs of such
actions, undertakings or proceedings shall be reimbursable to the Trustee
from the Income and Capital Accounts of the Trust, and the payment of
such costs and expenses shall be secured by a lien on the Trust prior to
the interest of Unitholders.
In addition to and notwithstanding the other duties, rights,
privileges and liabilities of the Trustee as otherwise set forth, the
liabilities of the Trustee are further defined as follows:
(a) All moneys deposited with or received by the Trustee
hereunder related to a Trust shall be held by it without interest in
trust within the meaning of the Investment Company Act of 1940, as
part of the Trust or the Reserve Account of the Trust until required
to be disbursed in accordance with the provisions of this Indenture,
and such moneys will be segregated by separate recordation on the
trust ledger of the Trustee so long as such practice preserves a
valid preference under applicable law, or if such preference is not
so preserved the Trustee shall handle such moneys in such other
manner as shall constitute the segregation and holding thereof in
trust within the meaning of the Investment Company Act of 1940.
(b) The Trustee shall be under no liability for any action
taken in good faith on any appraisal, paper, order list, demand,
request, consent, affidavit, notice, opinion, direction, evaluation,
endorsement, assignment, resolution, draft or other document,
whether or not of the same kind, prima facie properly executed, or
for the disposition of moneys, Securities, Units, or Certificates,
pursuant to this Indenture, or in respect of any evaluation which it
is required to make or is required or permitted to have made by
others under this Indenture or otherwise, except by reason of its
own negligence, lack of good faith or willful misconduct, provided
that the Trustee shall not in any event be liable or responsible for
any evaluation made by the Evaluator. The Trustee may construe any
of the provisions of this Indenture, insofar as the same may appear
to be ambiguous or inconsistent with any other provisions hereof,
and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the parties hereto.
(c) The Trustee shall not be responsible for or in respect of
the recitals herein, the validity or sufficiency of this Indenture
or for the due execution hereof by the Depositor, the Supervisory
Servicer, or the Evaluator, or for the form, character, genuineness,
sufficiency, value or validity of any of the Securities (except that
the Trustee shall be responsible for the exercise of due care in
determining the genuineness of Securities delivered to it pursuant
to contracts for the purchase of such Securities) or for or in
respect of the validity or sufficiency of the Units or of the
Certificates (except for the due execution thereof by the Trustee)
or for the due execution thereof by the Depositor, and the Trustee
shall in no event assume or incur any liability, duty or obligation
to any Unitholder or the Depositor other than as expressly provided
for herein. The Trustee shall not be responsible for or in respect
of the validity of any signature by or on behalf of the Depositor,
the Supervisory Servicer or the Evaluator.
(d) The Trustee shall be under no obligation to appear in,
prosecute or defend any action which in its opinion may involve it
in expense or liability, unless as often as required by the Trustee
it shall be furnished with reasonable security and indemnity against
such expense or liability, and any pecuniary cost of the Trustee
from such actions shall be deductible from and a charge against the
Income and Capital Accounts of the Trust. The Trustee shall, in its
discretion, undertake such action as it may deem necessary at any
and all times to protect the Trust and the rights and interests of
the Unitholders pursuant to the terms of this Indenture, provided
however, that the expenses and costs of such actions, undertakings
or proceedings shall be reimbursable to the Trustee from the Income
and Capital Accounts and the payment of such amounts shall be
secured by a prior lien on the Trust.
(e) (I) Subject to the provisions of subparagraphs (II) and
(III) of this paragraph, the Trustee may employ agents, sub-
custodians, attorneys, accountants and auditors and shall not be
answerable for the default or misconduct of any such agents, sub-
custodians, attorneys, accountants or auditors if such agents, sub-
custodians, attorneys, accountants or auditors shall have been
selected with reasonable care. The Trustee shall be fully protected
in respect of any action under this Indenture taken or suffered in
good faith by the Trustee in accordance with the opinion of counsel,
which may be counsel to the Depositor acceptable to the Trustee,
provided, however, that this disclaimer of liability shall not
(i) excuse the Trustee from the responsibilities specified in
subparagraph II below or (ii) limit the obligation of the Trustee to
indemnify the Trust under subparagraph III below. The fees and
expenses charged by such agents, sub-custodians, attorneys,
accountants or auditors shall constitute an expense of the Trust
reimbursable from the Income and Capital Accounts of the Trust as
set forth in section 6.04 hereof.
(II) The Trustee may place and maintain in the care of an
eligible foreign custodian (which is employed by the Trustee as a
sub-custodian as contemplated by subparagraph (I) of this
paragraph (e) and which may be an affiliate or subsidiary of the
Trustee or any other entity in which the Trustee may have an
ownership interest) the Trust's foreign securities, cash and cash
equivalents in amounts reasonably necessary to effect the Trust's
foreign securities transactions, provided that:
(1) The Trustee shall have:
(i) determined that maintaining the Trust's assets
in a particular country or countries is consistent with
the best interests of the Trust and the Unitholders;
(ii) determined that maintaining the Trust's assets
with such eligible foreign custodian is consistent with
the best interests of the Trust and the Unitholders; and
(iii) entered into a written contract which is
consistent with the best interests of the Trust and the
Unitholders and which will govern the manner in which such
eligible foreign custodian will maintain the Trust's
assets and which provides that:
(A) The Trust will be adequately indemnified
and its assets adequately insured in the event of
loss (without regard to the indemnity provided by the
Trustee under Section III hereof);
(B) The Trust's assets will not be subject to
any right, charge, security interest, lien or claim
of any kind in favor of the eligible foreign
custodian or its creditors except a claim for payment
for their safe custody or administration;
(C) Beneficial ownership of the Trust's assets
will be freely transferable without the payment of
money or value other than for safe custody or
administration;
(D) Adequate records will be maintained
identifying the assets as belonging to the Trust;
(E) The Trust's independent public accountants
will be given access to records identifying assets of
the Trust or confirmation of the contents of those
records; and
(F) The Trustee will receive periodic reports
with respect to safekeeping of the Trust's assets,
including, but not necessarily limited to,
notification of any transfer to or from the Trustee's
account.
(2) The Trustee shall establish a system to monitor such
foreign custody arrangements to ensure compliance with the
conditions of this subparagraph.
(3) The Trustee, at least annually, shall review and
approve the continuing maintenance of Trust assets in a
particular country or countries with a particular eligible
foreign custodian or particular eligible foreign custodians as
consistent with the best interests of the Trust and the
Unitholders.
(4) The Trustee shall maintain and keep current written
records regarding the basis for the choice or continued use of
a particular eligible foreign custodian pursuant to this
subparagraph, and such records shall be available for
inspection by Unitholders and the Securities and Exchange
Commission at the Trustee's offices at all reasonable times
during its usual business hours.
(5) Where the Trustee has determined that a foreign
custodian may no longer be considered eligible under this
subparagraph or that, pursuant to clause (3) above, continuance
of the arrangement would not be consistent with the best
interests of the Trust and the Unitholders, the Trust must
withdraw its assets from the care of that custodian as soon as
reasonably practicable, and in any event within 180 days of the
date when the Trustee made the determination.
As used in this subparagraph (II),
(1) "foreign securities" include: securities issued and
sold primarily outside the United States by a foreign
government, a national of any foreign country or a corporation
or other organization incorporated or organized under the laws
of any foreign country and securities issued or guaranteed by
the government of the United States or by any state or any
political subdivision thereof or by any agency thereof or by
any entity organized under the laws of the United States or of
any state thereof which have been issued and sold primarily
outside the United States.
(2) "eligible foreign custodian" means
(a) The following securities depositories and
clearing agencies which operate transnational systems for
the central handling of securities or equivalent book
entries which, by appropriate exemptive order issued by
the Securities and Exchange Commission, have been
qualified as eligible foreign custodians for the Trust but
only for so long as such exemptive order continues in
effect: Morgan Guaranty Trust Company of New York,
Brussels, Belgium, in its capacity as operator of the
Euroclear System ("Euroclear"), and Central de Livraison
de Valeurs Mobilires, S.A. ("CEDEL").
(b) Any other entity that shall have been qualified
as an eligible foreign custodian for the foreign
securities of the Trust by the Securities and Exchange
Commission by exemptive order, rule or other appropriate
action, commencing on such date as it shall have been so
qualified but only for so long as such exemptive order,
rule or other appropriate action continues in effect.
The determinations set forth above to be made by the Trustee
should be made only after consideration of all matters which the
Trustee, in carrying out its fiduciary duties, finds relevant,
including, but not necessarily limited to, consideration of the
following:
1. With respect to the selection of the country where
the Trust's assets will be maintained, the Trustee should
consider:
a. Whether applicable foreign law would restrict
the access afforded the Trust's independent public
accountants to books and records kept by an eligible
foreign custodian located in that country;
b. Whether applicable foreign law would restrict
the Trust's ability to recover its assets in the event of
the bankruptcy of an eligible foreign custodian located in
that country;
c. Whether applicable foreign law would restrict
the Trust's ability to recover assets that are lost while
under the control of an eligible foreign custodian located
in that country;
d. The likelihood of expropriation,
nationalization, freezes, or confiscation of the Trust's
assets; and
e. Whether difficulties in converting the Trust's
cash and cash equivalents to U.S. dollars are reasonably
foreseeable.
2. With respect to the selection of an eligible foreign
custodian, the Trustee should consider:
a. The financial strength of the eligible foreign
custodian, its general reputation and standing in the
country in which it is located, its ability to provide
efficiently the custodial services required and the
relative cost for those services;
b. Whether the eligible foreign custodian would
provide a level of safeguards for maintaining the Trust's
assets not materially different from that provided by the
Trustee in maintaining the Trust's securities in the
United States;
c. Whether the eligible foreign custodian has
branch offices in the United States in order to facilitate
the assertion of jurisdiction over and enforcement of
judgments against such custodian; and
d. In the case of an eligible foreign custodian
that is a foreign securities depository, the number of
participants in, and operating history of, the depository.
3. The Trustee should consider the extent of the Trust's
exposure to loss because of the use of an eligible foreign
custodian. The potential effect of such exposure upon
Unitholders shall be disclosed, if material, by the Depositor
in the Prospectus relating to the Trust.
(III) The Trustee will indemnify and hold the Trust harmless
from and against any loss that shall occur as the result of the
failure of an eligible foreign custodian holding the foreign
securities of the Trust to exercise reasonable care with respect to
the safekeeping of such foreign securities to the same extent that
the Trustee would be required to indemnify and hold the Trust
harmless if the Trustee were holding such foreign securities in the
jurisdiction of the United States whose laws govern the Indenture,
provided, however, that the Trustee will not be liable for loss
except by reason of the gross negligence, bad faith or willful
misconduct of the Trustee or the eligible foreign custodian.
(f) If at any time the Depositor shall fail to undertake or
perform any of the duties which by the terms of this Indenture are
required by it to be undertaken or performed, or such Depositor
shall become incapable of acting or shall be adjudged a bankrupt or
insolvent, or a receiver of such Depositor or of its property shall
be appointed, or any public officer shall take charge or control of
such Depositor or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then in any such case,
the Trustee may: (1) appoint a successor depositor, which may be
the Trustee or an affiliate, who shall act hereunder in all respects
in place of such Depositor, which successor shall be satisfactory to
the Trustee, and which may be compensated at rates deemed by the
Trustee to be reasonable under the circumstances, by deduction
ratably from the Income Account of the Trust or, to the extent funds
are not available in such Account, from the Capital Account of the
Trust, but no such deduction shall be made exceeding such reasonable
amount as the Securities and Exchange Commission may prescribe in
accordance with Section 26(a)(2)(C) of the Investment Company Act of
1940, or (2) terminate this Indenture and the trust created hereby
and liquidate the Trust Fund in the manner provided in Section 8.02.
(g) If by reason of the Depositor's redemption of Units of the
Trust not theretofore sold constituting more than 60% of the number
of Units initially authorized, the net worth of the Trust is reduced
to less than 40% of the aggregate value of Securities deposited in
the Trust at the termination of the initial offering period, the
Trustee may in its discretion, and shall when so directed by the
Depositor, terminate this Indenture and the trust created hereby and
liquidate the Trust, in such manner as the Depositor shall direct.
(h) In no event shall the Trustee be liable for any taxes or
other governmental charges imposed upon or in respect of the
Securities or upon the income or interest thereon or upon it as
Trustee hereunder or upon or in respect of the Trust which it 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
the premises. For all such taxes and charges and for any expenses,
including counsel fees, which the Trustee may sustain or incur with
respect to such taxes or charges, the Trustee shall be reimbursed
and indemnified out of the Income and Capital Accounts of the the
Trust, and the payment of such amounts so paid by the Trustee shall
be secured by a prior lien on the Trust.
(i) No payment to a Depositor or to any principal underwriter
(as defined in the Investment Company Act of 1940) for the Trust or
to any affiliated person (as so defined) or agent of a Depositor or
such underwriter shall be allowed the Trustee as an expense except
for payment of such reasonable amounts as the Securities and
Exchange Commission may prescribe as compensation for performing
bookkeeping and other administrative services of a character
normally performed by the Trustee.
(j) The Trustee, except by reason of its own negligence or
willful misconduct, shall not be liable for any action taken or
suffered to be taken by it in good faith and believed by it to be
authorized or within the discretion, rights or powers conferred upon
it by this Indenture.
(k) The Trustee in its individual or any other capacity may
become an owner or pledgee of, or be an underwriter or dealer in
respect of, obligations issued by the same issuer (or an affiliate
of such issuer) of any Securities at any time held as part of the
Trust and may deal in any manner with the same or with the issuer
(or an affiliate of the issuer) with the rights and powers as if it
were not the Trustee hereunder.
(1) The Trust may include a Letter or Letters of Credit for
the purchase of Contract Securities issued by the Trustee in its
individual capacity for the account of the Depositor and the Trustee
may otherwise deal with the Depositor and the Trust with the same
rights and powers as if it were not the Trustee hereunder.
(m) The Trustee is authorized to appoint as co-trustee of the
Trust a trust company affiliated with the Trustee to perform the
functions of custodian and receiving and paying agent.
Section 6.02. Books, Records and Reports. The Trustee shall keep
proper books of record and account of all the transactions of the Trust
under this Indenture at its corporate trust office, including a record of
the name and address of, and the Units issued by the Trust and held by,
every Unitholder, and such books and records of the Trust shall be open
to inspection by any Unitholder of thr Trust 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 or rule or regulation thereunder.
Unless the Depositor determines that such an audit is not required,
the accounts of the Trust shall be audited not less than annually by
independent public accountants designated from time to time by the
Depositor and reports of such accountants shall be furnished by the
Trustee, upon request, to Unitholders. The Trustee, however, in
connection with any such audits shall not be obligated to use Trust
assets to pay for such audits in excess of the amounts indicated in the
Prospectus relating to the Trust.
To the extent permitted under the Investment Company Act of 1940 as
evidenced by an opinion of independent counsel to the Depositor
satisfactory to the Trustee or "no-action" letters issued by the staff of
the Securities and Exchange Commission, the Trustee shall pay, or
reimburse to the Depositor or others, from the Income or Capital Account
the costs of the preparation of documents and information with respect to
the Trust required by law or regulation in connection with the
maintenance of a secondary market in units of the Trust. Such costs may
include but are not limited to accounting and legal fees, blue sky
registration and filing fees, printing expenses and other reasonable
expenses related to documents required under federal and state securities
laws.
Section 6.03. Indenture and List of Securities on File. The Trustee
shall keep a certified copy or duplicate original of this Indenture on
file at its corporate trust office available for inspection at all
reasonable times during the usual business hours by any Unitholder,
together with a current list of the Securities.
Section 6.04. Compensation. The Trustee shall receive at the times set
forth in Section 3.05, as compensation for performing ordinary normal
recurring services under this Indenture, an amount calculated at the
annual compensation rate stated in the Prospectus. Such annual
compensation shall include a fee to induce the Trustee to advance funds
to meet scheduled distributions with respect to the Bonds. The Trustee
shall charge a pro rated portion of its annual fee at the times specified
in Section 3.05 which portion shall be calculated as described in the
Prospectus. The Trustee may from time to time adjust its compensation as
set forth above, provided that total adjustment upward does not, at the
time of such adjustment, exceed the percentage of the total increase,
after the date hereof, in consumer prices for services as measured by the
United States Department of Labor Consumer Price Index entitled "All
Services Less Rent." The consent or concurrence of any Unitholder
hereunder shall not be required for any such adjustment or increase.
Such compensation shall be charged by the Trustee against the Income and
Capital Accounts of the Trust; provided, however, that such compensation
shall be deemed to provide only for the usual, normal and proper
functions undertaken as Trustee pursuant to this Indenture.
The Trustee shall charge the Income and Capital Accounts for any and
all expenses and disbursements incurred hereunder, including legal and
auditing expenses, and for any extraordinary services performed
hereunder, which extraordinary services shall include but not be limited
to all costs and expenses incurred by the Trustee in making any annual or
other reports or other documents referred to in Sections 6.01 and 6.02;
provided, however, that the amount of any such charge which has not been
finally determined as of any calculation time may be estimated and any
necessary adjustments shall be made. Provided, further, that if the
balances in the Income and Capital Accounts shall be insufficient to
provide for amounts payable pursuant to this Section 6.04, the Trustee
shall have the power to sell Securities in the manner provided in
Section 5.02. The Trustee shall not be liable or responsible in any way
for depreciation or loss incurred by reason of any such sale.
The Trustee shall be indemnified ratably by the Trust and held
harmless against any loss or liability accruing to it without negligence,
bad faith or willful misconduct on its part, arising out of or in
connection with the acceptance or administration of this Fund, including
the costs and expenses (including counsel fees) of defending itself
against any claim of liability in the premises, including any loss,
liability or expense incurred in acting pursuant to written directions to
the Trustee given by the Depositor from time to time in accordance with
the provisions of this Indenture or in undertaking actions from time to
time which the Trustee deems necessary in its discretion to protect the
Fund and the rights and interests of the Unitholders pursuant to the
terms of this Indenture. Any moneys payable to the Trustee under this
Section 6.04 shall be secured by a lien on the Trust prior to the
interest of Unitholders.
'Section 6.05. Removal and Resignation of Trustee; Successor'. The
following provisions shall provide for the removal and resignation of the
Trustee and the appointment of any successor trustee:
(a) The Trustee or any trustee or trustees hereafter appointed
may resign and be discharged of the Trust created by this Indenture,
by executing an instrument in writing resigning as Trustee of the
Trust and filing same with the Depositor and mailing a copy of a
notice of resignation to all Unitholders then of record, not less
than 60 days before the date specified in such instrument when,
subject to Section 6.05(e), such resignation is to take effect.
Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor trustee as hereinafter provided, by
written instrument, in duplicate, one copy of which shall be
delivered to the resigning Trustee and one copy to the successor
trustee. The Depositor may at any time remove the Trustee, with or
without cause, and appoint a successor trustee by written
instrument, in duplicate, one copy of which shall be delivered to
the Trustee so removed and one copy to the successor trustee.
Notice of such resignation or removal of a trustee and appointment
of a successor trustee shall be mailed by the successor trustee,
promptly after its acceptance of such appointment, to each
Unitholder then of record.
(b) Any successor trustee appointed hereunder shall execute,
acknowledge and deliver to the Depositor and to the resigning or
removed Trustee an instrument accepting such appointment hereunder,
and such successor trustee without any further act, deed or
conveyance shall become vested with all the rights, powers and
duties and obligations of its predecessor hereunder with like effect
as if originally named Trustee herein and shall be bound by all the
terms and conditions of this Indenture. Upon the request of such
successor trustee, the Depositor and the resigning or removed
Trustee shall, upon payment of any amounts due the resigning or
removed Trustee, or provision therefor to the satisfaction of such
resigning or removed Trustee, execute and deliver an instrument
acknowledged by it transferring to such successor trustee all the
rights and powers of the resigning or removed Trustee; and the
resigning or removed Trustee shall transfer, deliver and pay over to
the successor trustee all Securities and moneys at the time held by
it hereunder, together with all necessary instruments of transfer
and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof
maintained by the resigning or removed Trustee in the administration
hereof as may be requested by the successor trustee, and shall
thereupon be discharged from all duties and responsibilities under
this Indenture.
(c) In case at any time the Trustee shall resign and no
successor trustee shall have been appointed and have accepted
appointment within 30 days after notice of resignation has been
received by the Depositor, the retiring Trustee may forthwith apply
to a court of competent jurisdiction for the appointment of a
successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, appoint a successor
trustee.
(d) Any corporation into which any trustee hereunder may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which any trustee
hereunder shall be a party, shall be the successor trustee under
this Indenture without the execution or filing of any paper,
instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger
or consolidation, by which any such trustee may seek to retain
certain powers, rights and privileges theretofore obtaining for any
period of time following such merger or consolidation, to the
contrary notwithstanding.
(e) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to this Section shall become
effective upon acceptance of appointment by the successor trustee as
provided in subsection (b) hereof.
Section 6.06. Qualifications of Trustee. The Trustee shall be a
corporation organized and doing business under the laws of the United
States or any state thereof, which is authorized under such laws to
exercise corporate trust powers and having at all times aggregate
capital, surplus and undivided profits of not less than $5,000,000.
Article VII Rights of UnitholdersArticle VII
Rights of Unitholders
Section 7.01. Beneficiaries of Trust. By the purchase and acceptance
or other lawful delivery and acceptance of any Unit, whether certificated
or not, the Unitholder shall be deemed to be a beneficiary of such Trust
created by this Indenture and vested with all right, title and interest
in the Trust to the extent of the Unit or Units set forth and whether
evidenced by such Certificate or held in uncertificated form, subject to
the terms and conditions of this Indenture.
Section 7.02. Rights, Terms and Conditions. In addition to the other
rights and powers set forth in the other provisions and conditions of
this Indenture, the Unitholders shall have the following rights and
powers and shall be subject to the following terms and conditions:
(a) A Unitholder may at any time prior to the Trustee's close
of business as of the date on which the Trust is terminated tender
his Units or his Certificate(s) if held in certificated form
(including any temporary Certificate or other evidence of ownership
of Units of the Trust, issued by the Trustee or the Depositor) to
the Trustee for redemption, subject to and in accordance with
Section 5.02.
(b) The death or incapacity of any Unitholder shall not
operate to terminate this Indenture or the Trust, nor entitle his
legal representatives or heirs to claim an accounting or to take any
action or proceeding in any court of competent jurisdiction for a
partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of
them. Each Unitholder expressly waives any right he may have under
any rule of law, of the provisions of any statute, or otherwise, to
require the Trustee at any time to account, in any manner other than
as expressly provided in this Indenture, in respect of the
Securities or moneys from time to time received, held and applied by
the Trustee hereunder.
(c) No Unitholder shall have any right to vote or in any
manner otherwise control the operation and management of the Trust,
or the obligations and management of the Trust, or the obligations
of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates which may have been
issued, be construed so as to constitute the Unitholders from time
to time as partners or members of an association; nor shall any
Unitholder ever be under any liability to any third persons by
reason of any action taken by the parties to this Indenture, or any
other cause whatsoever.
'Article VIII Additional Covenants Miscellaneous Provisions';Article
VIII
Additional Covenants; Miscellaneous Provisions
Section 8.01. Amendments. (a) This Indenture may be amended from time
to time by the Depositor and Trustee hereto or their respective
successors, without the consent of any of the Unitholders (i) to cure any
ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision contained
herein or (ii) to make such other provision regarding matters or
questions arising hereunder as shall not adversely affect the interests
of the Unitholders; provided, however, that in no event may any amendment
be made which would adversely affect the characterization of the Trust as
a grantor trust for federal income tax purposes. This Indenture may not
be amended, however, without the consent of all Unitholders then
outstanding, so as (1) to permit, except in accordance with the terms and
conditions hereof, the acquisition hereunder of any Securities other than
those specified in the Schedules to the Trust Agreement or (2) to reduce
the aforesaid percentage of Units the holders of which are required to
consent to certain of such amendments. This Indenture may not be amended
so as to reduce the interest in the Trust represented by Units (whether
evidenced by Certificates or held in uncertificated form) without the
consent of all affected Unitholders.
(b) Except for the amendments, changes or modification as provided
in Section 8.01(a) hereof, neither the parties hereto nor their
respective successors shall consent to any other amendment, change or
modification of this Indenture without the giving of notice and the
obtaining of the approval or consent of Unitholders representing at least
51% of the Units then outstanding of the Trust. Nothing contained in
this Section 8.01(b) shall permit, or be construed as permitting, a
reduction of the aggregate percentage of Units the holders of which are
required to consent to any amendment, change or modification of this
Indenture without the consent of the Unitholders of all of the Units then
outstanding of the Trust and in no event may any amendment be made which
would (1) alter the rights to the Unitholders as against each other,
(2) provide the Trustee with the power to engage in business or
investment activities other than as specifically provided in this
Indenture or (3) adversely affect the characterization of the Trust as a
grantor trust for federal income tax purposes.
(c) Promptly after the execution of any such amendment the Trustee
shall furnish written notification to all then outstanding Unitholders of
the substance of such amendment.
Section 8.02. Termination. This Indenture and the Trust created hereby
shall terminate upon the maturity, redemption, sale or other disposition
as the case may be of the last Security held in the Trust hereunder
unless sooner terminated as hereinbefore specified, and may be terminated
at any time by the written consent of Unitholders representing at least
66-2/3% of the Units then outstanding; provided that in no event shall
the Trust continue beyond the Mandatory Termination Date. Upon the date
of termination the registration books of the Trustee shall be closed.
In the event of a termination, the Trustee shall proceed to
liquidate the Securities then held and make the payments and
distributions provided for hereinafter in this Section 8.02 based on such
Unitholder's pro rata interest in the balance of the Capital and Income
Accounts after the deductions herein provided. Written notice shall be
given by the Trustee in connection with any termination to each
Unitholder at his address appearing on the registration books of the
Trustee and in connection with a Mandatory Termination Date such notice
shall be given no later than 30 days before the Mandatory Termination
Date. Included with such notice shall be a form to enable Unitholders
owning that number of Units referred to in the Prospectus to request an
In Kind Distribution rather than payment totally in cash upon
termination. Such request must be returned to the Trustee at least five
Business Days prior to the Mandatory Termination Date. Unitholders who
do not effectively request an In Kind Distribution shall receive their
distribution upon termination in cash.
In connection with any such termination, the Trustee shall segregate
(i) such number of Equity Securities or Bonds as the Trustee,
in its sole discretion, determines shall be necessary to liquidate
to provide for fees and expenses of the Trust and
(ii) such number of the remaining Equity Securities as shall be
necessary to satisfy distributions to Unitholders electing an In
Kind Distribution.
The Trustee will liquidate the Bonds then held, if any, and the
Equity Securities not segregated for In Kind Distributions during such
period and in such daily amounts as the Depositor shall direct. The
Depositor shall direct the liquidation of the Equity Securities in such
manner as to effectuate orderly sales and a minimal market impact. In
the event the Depositor does not so direct, the Securities shall be sold
within a reasonable period and in such manner as the Trustee, in its sole
discretion, shall determine. The Trustee shall not be liable for or
responsible in any way for depreciation or loss incurred by reason of any
sale or sales made in accordance with the Depositor's direction or, in
the absence of such direction, in the exercise of the discretion granted
by this Section 8.02. The Trustee shall deduct from the proceeds of these
sales and pay any tax or governmental charges and any brokerage
commissions in connection with such sales. Amounts received by the
Trustee representing the proceeds from the sales of Securities shall be
credited to the Capital Account.
On the fifth Business Day following receipt of all proceeds of sale
of the Securities, the Trustee shall:
(a) deduct from the Income Account of the Trust or, to the
extent that funds are not available in such Account of the Trust,
from the Capital Account of the Trust, and pay to itself
individually an amount equal to the sum of (i) its accrued
compensation for its ordinary recurring services, (ii) any
compensation due it for its extraordinary services in connection
with the Trust, and (iii) any costs, expenses or indemnities in
connection with the Trust as provided herein;
(b) deduct from the Income Account of the Trust or, to the
extent that funds are not available in such Account, from the
Capital Account of the Trust, and pay accrued and unpaid fees of the
Evaluator, the Supervisory Servicer and counsel in connection with
the Trust, if any;
(c) deduct from the Income Account of the Trust or the Capital
Account of the Trust any amounts which may be required to be
deposited in the Reserve Account to provide for payment of any
applicable taxes or other governmental charges and any other amounts
which may be required to meet expenses incurred under this Indenture
in connection with the Trust;
(d) make final distributions from the Trust, against surrender
for cancellation of all of each Unitholder's Certificate or
Certificates, if issued, as follows:
(i) to each Unitholder requesting an In Kind Distribution
(y) such holder's pro rata portion of each of the Equity
Securities segregated for distribution in kind, in whole
shares, and (z) cash equal to such Unitholder's pro rata
portion of the Income and Capital Accounts as follows: (1) a
pro rata portion of the net proceeds of sale of the Equity
Securities representing any fractional shares included in such
Unitholder's pro rata share of the Equity Securities not
segregated for liquidation to provide for Trust expenses, (2)
cash equal to such Unitholder's pro rata share of the net
proceeds of liquidation of the Bonds, if any, not segregated
for liquidation to provide for Trust expenses and (3) cash
equal to such Unitholder's pro rata share of the sum of the
cash balances of the Income and Capital Accounts as of the
Mandatory Termination Date plus the net proceeds of sale of the
Equity Securities segregated for liquidation to provide for
Trust expenses less deduction of the fees and expenses
specified in this Section 8.02 and less deduction of the
Trustee's cost of registration and delivery of such
Unitholder's Equity Securities;
(ii) to each Unitholder receiving distribution in cash,
such holder's pro rata share of the cash balances of the Income
and Capital Accounts; and
(iii) on the conditions set forth in Section 3.04 hereof,
to all Unitholders, their pro rata share of the balance of the
Reserve Account.
In Kind Distributions of Equity Securities shall 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 bank or broker-
dealer at the Depository Trust Company; and
(e) within 60 days after the distribution to each Unitholder
as provided for in (d), furnish to each such Unitholder a final
distribution statement, setting forth the data and information in
substantially the form and manner provided for in Section 3.06
hereof.
The Trustee shall be under no liability with respect to moneys held
by it in the Income, Reserve and Capital Accounts of the Trust upon
termination except to hold the same in trust within the meaning of the
Investment Company Act of 1940, without interest until disposed of in
accordance with the terms of this Indenture.
Section 8.03. Construction. This Indenture is executed and delivered
in the state of New York, and all laws or rules of construction of such
state shall govern the rights of the parties hereto and the Unitholders
and the interpretation of the provisions hereof.
Section 8.04. Registration of Units. The Depositor agrees and
undertakes on its own part to register the Units with the Securities and
Exchange Commission or other applicable governmental agency, federal or
state, pursuant to applicable federal or state statutes, if such
registration shall be required, and to do all things that may be
necessary or required to comply with this provision during the term of
the Trust Fund created hereunder, and the Trustee shall incur no
liability or be under any obligation or expenses in connection therewith.
Section 8.05. Written Notice. Any notice, demand, direction or
instruction to be given to the Depositor hereunder shall be in writing
and shall be duly given if mailed or delivered to the Depositor, One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, or at such other
address as shall be specified by the Depositor to the other parties
hereto in writing.
Any notice, demand, direction or instruction to be given to the
Trustee shall be in writing and shall be duly given if delivered to the
corporate trust office of the Trustee at 101 Barclay Street, 17th Floor,
New York, New York 10286, Attention: Unit Trust Division, or to such
other address as shall be specified by the Trustee to the other parties
in writing.
Any notice, demand, direction or instruction to be given to the
Evaluator hereunder shall be in writing and shall be duly given if mailed
or delivered to the Evaluator at 14 West Street, New York, New York
10005, or at such other address as shall be specified by the Evaluator to
the other parties hereto in writing.
Any notice, demand, direction or instruction to be given to the
Supervisory Servicer shall be in writing and shall be duly given if
mailed or delivered to the Supervisory Servicer at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 or at such other address as shall be
specified by the Supervisory Servicer to the other parties in writing.
Any notice to be given to the Unitholders shall be duly given if
mailed by first class mail with postage prepaid or delivered to each
Unitholder at the address of such holder appearing on the registration
books of the Trustee.
Section 8.06. Severability. If any one or more of the covenants,
agreements, provisions or terms of this Indenture shall be held contrary
to any express provision of law or contrary to policy of express law,
though not expressly prohibited, or against public policy, or shall for
any reason whatsoever be held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Indenture and shall in
no way affect the validity or enforceability of the other provisions of
this Indenture or of the Certificates or the rights of the holders
thereof.
Section 8.07. Dissolution of Depositor Not to Terminate. The
dissolution of the Depositor for any cause whatsoever shall not operate
to terminate this Indenture or the Trust insofar as the duties and
obligations of the Trustee are concerned.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.,
Interactive Data Corporation, Van Kampen American Capital Investment
Advisory Corp. and The Bank of New York have each caused these Standard
Terms and Conditions of Trust to be executed by authorized officers; all
as of the day, month and year first above written.
Van Kampen American Capital
Distributors, Inc., Depositor
By Sandra A. Waterworth
Vice President
Interactive Data Corporation,
Evaluator
By James Perry
Vice President
Van Kampen American Capital
Investment Advisory Corp.,
Supervisory Servicer
By Dennis J. McDonnell
President
The Bank of New York, Trustee
By Jeffrey Bieselin
Vice President
Exhibit 1.1
--
Van Kampen American Capital Equity Opportunity Trust
Series 21
Trust Agreement
Dated: November 17, 1995
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, Interactive Data Corporation, as Evaluator, Van
Kampen American Capital Investment Advisory Corp., as Supervisory
Servicer, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust for Van Kampen
American Capital Distributors, Inc. Unit Investment Trusts Containing
Equity and Debt Securities (Including Securities of Foreign Issuers),
Effective November 17, 1995" (herein called the "Standard Terms and
Conditions of Trust") and such provisions as are set forth in full and
such provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are to
Articles and Sections of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee
agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(23), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
3. The approximate amounts, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid to
the Depositor pursuant to Section 3.05 shall be the amount per Unit
that the Trustee agreed to reduce its fee or pay Trust expenses set
forth in the footnotes to the "Summary of Essential Financial
Information" in the Prospectus times the number of Units in the
Trust referred to under clause 2 of this Trust Agreement.
4. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, all references to In Kind
Distributions as set forth in Sections 5.02 and 8.02 shall be
inapplicable to the Trust.
5. Any moneys held to purchase "when-issued" bonds will be
held in non-interest bearing accounts.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, Interactive Data Corporation and Van
Kampen American Capital Investment Advisory Corp., have each caused this
Trust Agreement to be executed by their respective President or one of
their respective Vice Presidents and the corporate seal of each to be
hereto affixed and attested to by the Secretary, Assistant Secretary or
one of their respective Vice Presidents or Assistant Vice Presidents and
The Bank of New York, has caused this Trust Agreement to be executed by
one of its Vice Presidents and its corporate seal to be hereto affixed
and attested to by one of its Assistant Treasurers all as of the day,
month and year first above written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
Interactive Data Corporation.
By James Perry
Vice President
Attest
By Wayne Channer
Assistant Secretary
Van Kampen American Capital
Investment Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
The Bank of New York
By Jeffrey Bieselin
Vice President
Attest
By Norbert Loney
Assistant Treasurer
Schedule A to Trust Agreement
Securities Initially Deposited
in
Van Kampen American Capital Equity Opportunity Trust, Series 21
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
November 17, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 21
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc. as Sponsor and Depositor of Van Kampen American
Capital Equity Opportunity Trust, Series 21 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated November 17, 1995, among Van Kampen American
Capital Distributors, Inc., as Depositor, Interactive Data Corporation,
as Evaluator, Van Kampen American Capital Investment Advisory Corp., as
Supervisory Servicer, and The Bank of New York, as Trustee, pursuant to
which the Depositor has delivered to and deposited the Securities listed
in the Schedule to the Trust Agreement with the Trustee and pursuant to
which the Trustee has provided to or on the order of the Depositor
documentation evidencing ownership of Units of fractional undivided
interest in and ownership of the Trust (hereinafter referred to as the
"Units"), created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of documentation evidencing
ownership of the Units in the Trust have been duly authorized;
and
2. The documentation evidencing ownership of the Units
in the Trust, when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust
Agreement, will constitute valid and binding obligations of the
Trust and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-62809) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
said Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/cjw
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
November 17, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
Unit Investment Trust Division
101 Barclay Street
New York, New York 10286
Re: Van Kampen American Capital Equity Opportunity Trust, Series 21,
Gold & Income Trust, Series 1
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 21, Gold & Income Trust, Series 1 (the
"Trust"), in connection with the issuance of Units of fractional
undivided interest in the Trust, under a Trust Agreement dated November
17, 1995 (the "Indenture") among Van Kampen American Capital
Distributors, Inc., as Depositor, Interactive Data Corporation, as
Evaluator, Van Kampen American Capital Investment Advisory Corp., as
supervisory Servicer, and The Bank of New York, as Trustee.
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of the Trust will consist of a portfolio of foreign
equity securities ("Equity Securities") and U.S dollar denominated high
yield, high risk foreign corporate and sovereign debt obligations
("Bonds") (collectively, "Securities").
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
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
Internal Revenue Code of 1986 (the "Code"); and the income of the Trust
will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from each Security when such income is considered to be
received by the Trust. Each Unitholder will also be required to include
in taxable income for Federal income tax purposes original issue discount
with respect to his interest in any Bonds held by the Trust at the same
time and in the same manner as through the Unitholder were the direct
owner of such interest.
2. Each Unitholder will have a taxable event when the Trust
disposes of a Security, or when the Unitholder redeems or sells his
Units. A Unitholder's tax basis in his Units will equal his tax basis in
his pro rata portion of all of the assets of the Trust. Unitholders must
reduce the tax basis of their Units for their share of accrued interest
received, if any, on Bonds delivered after the date the Unitholders pay
for the Units to the extent that such interest accrued on such Bonds
during the period from the Unitholder's settlement date to the date such
Bonds are delivered to the Trust and, consequently, such Unitholders may
have an increase in taxable gain or reduction in capital loss upon the
disposition of such Units. Gain or loss upon the sale or redemption of
Units is measured by comparing the proceeds of such sale or redemption
with the adjusted basis of the Units. If the Trustee disposes of
Securities (whether by sale, exchange, payment on maturity, redemption or
otherwise), gain or loss is recognized by the Unitholder (subject to
various non-recognition provisions of the Code). The amount of any such
gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with his basis for his
fractional interest in the asset disposed of. In the case of a
Unitholder who purchases his Units, such basis (before the adjustments
described below) is determined by apportioning the tax basis for the
Units among each of the Trust assets ratably according to value as of the
valuation date nearest the date of acquisition of the Units.
3. The basis of each Unit and of each Bond which was issued with
original issue discount (or which has market discount) must be increased
by the amount of accrued original issue discount (and market discount, if
the Unitholder elects to include market discount in income as it accrues)
and the basis of each Unit and of each Bond which was purchased by the
Trust at a premium must be reduced by the annual amortization of bond
premium which the Unitholder has properly elected to amortize under
Section 171 of the Code. The tax cost reduction requirements of the Code
relating to amortization of bond premium may, under some circumstances,
result in the Unitholder realizing a taxable gain when his Units are sold
or redeemed for an amount equal to or less than his original cost.
Original issue discount is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount in this
case is generally the difference between the bond's purchase price and
its stated redemption price at maturity. A Unitholder will be required
to include in gross income for each taxable year the sum of his daily
portions of any original issue discount attributable to the Bonds held by
the Trust as such original issue discount accrues for such year even
though the income is not distributed to the Unitholders during such year
unless a Bond's original issue discount is less than a "de minimis"
amount as determined under the Code. To the extent the amount of such
discount is less than the respective "de minimis" amount, such discount
shall be treated as zero. In general, original issue discount accrues
daily under a constant interest rate method which takes into account the
semi-annual compounding of accrued interest.
4. 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 the Equity Securities 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 Equity Securities which exceed such current and
accumulated earnings and profits will first reduce a Unitholder's tax
basis in such Equity Securities, and to the extent that such dividends
exceed a Unitholder's tax basis in such Equity Securities shall generally
be treated as capital gain. In general, any such capital gain will be
short-term unless a Unitholder has held his Units for more than one year.
If a Unitholder's tax basis of his pro rata portion in any Bonds
held by the Trust exceeds the amount payable by the issuer of the Bonds
with respect to such pro rata interest upon maturity (or, in certain
cases, the call date) of the Bond, such excess would be considered
premium which may be amortized by the Unitholder at the Unitholder's
election as provided in Section 171 of the Code.
Certain of the Bonds in the Trust may have been acquired with
"original issue discount." In the case of any Bonds in the Trust
acquired with "original issue discount" that exceeds a "de minimis"
amount as specified in the Code, such discount is includable in taxable
income of the Unitholders on an accrual basis computed daily, without
regard to when payments of interest on such Bonds are received. The Code
provides a complex set of rules regarding the accrual of original issue
discount. These rules provide that original issue discount generally
accrues on the basis of a constant compound interest rate over the term
of the Bonds. Similarly, these special rules would apply to a Unitholder
if the tax basis of his pro rata portion of a Bond issued with original
issue discount exceeds his pro rata portion of its adjusted issue price.
If a Unitholder's tax basis in his pro rata portion of Bonds is less
than the allocable portion of such Bond's stated redemption price at
maturity (or, if issued with original issue discount, the allocable
portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a
straight line basis, unless the Unitholder elects to calculate accrued
market discount under a constant yield method.
Accrued market discount is generally includable in taxable income to
the Unitholders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Bonds, on the sale, maturity
or disposition of such Bonds by the Trust, and on the sale by a
Unitholder of Units, unless a Unitholder elects to include the accrued
market discount in taxable income as such discount accrues. If a
Unitholder does not elect to annually include accrued market discount in
taxable income as it accrues, deductions for any interest expense
incurred by the Unitholder which is incurred to purchase or carry his
Units will be reduced by such accrued market discount. In general, the
portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in
income.
The tax basis of a Unitholder with respect to his interest in a Bond
is increased by the amount of original issue discount (and market
discount, if the Unitholder elects to include market discount in income
as it accrues) thereon properly included in the Unitholder's gross income
as determined for Federal income tax purposes and reduced by the amount
of any amortized acquisition premium which the Unitholder has properly
elected to amortize under Section 171 of the Code. A Unitholder's tax
basis in his Units will equal his tax basis in his pro rata portion of
all of the assets of the Trust.
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.
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 such Unitholder. 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 paid by
the Trust as miscellaneous itemized deductions subject to this
limitation.
As discussed above, a Unitholder may recognize taxable gain (or
loss) when a Security is disposed of by the Trust or if the Unitholder
disposes of a Unit. For taxpayers other than corporations, net capital
gains are subject to a maximum marginal stated tax rate of 28%. However,
it should be noted that legislative proposals are introduced from time to
time that affect tax rates and could affect relative differences at which
ordinary income and capital gains are taxed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax
rates on ordinary income while capital gains remain subject to a 28%
maximum stated rate for taxpayers other than corporations. Because some
or all capital gains are taxed at a comparatively lower rate under the
Tax Act, the Tax Act includes a provision that recharacterizes capital
gains as ordinary income in the case of certain financial transactions
that are "conversion transactions" effective for transactions entered
into after April 30, 1993.
Each Unitholder (other than certain foreign investors) 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.
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.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject
to foreign withholding taxes. 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 foregoing opinion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal income taxes. 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. The scope of
this opinion is expressly limited to the matters set forth herein, and,
except as expressly set forth above, we express no opinion with respect
to any other taxes, including state or local taxes, foreign taxation,
United States tax consequences to non-U.S. Unitholders or collateral tax
consequences with respect to the purchase, ownership and disposition of
Units.
Very truly yours
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Tanner Propp & Farber
99 Park Avenue
New York, New York 10016
November 17, 1995
Van Kampen American Capital Equity
Opportunity Trust, Series 21
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 21 (the "Fund") consisting of Gold &
Income Trust, Series 1 ("Trust") for the purposes of determining the
applicability of certain New York taxes under the circumstances
hereinafter described.
The Fund is created pursuant to a Trust Agreement (the
"Indenture"), dated as of today (the "Date of Deposit") among Van Kampen
American Capital Distributors, Inc. (the "Depositor"), American Portfolio
Evaluation Services, a division of a subsidiary of Depositor, as
Evaluator and Supervisor, and The Bank of New York, as Trustee (the
"Trustee"). As described in the prospectus relating to the Fund dated
today to be filed as an amendment to a registration statement heretofore
filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Prospectus") (File Number 33-62809), the
objectives of the Trust are to provide the potential for above average
total return through a combination of potential capital appreciation,
dividend income and a high yield level of interest income by investing in
common stock issued by foreign companies engaged in the exploration for
and mining of gold and U.S. Dollar denominated, high yield, high risk
foreign corporate and sovereign debt obligations. It is noted that no
opinion is expressed herein with regard to the Federal tax aspects of the
securities, units of the Trust (the "Units"), or any interest, gains or
losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trust the securities and/or contracts and cash for
the purchase thereof together with an irrevocable letter of credit in the
amount required for the purchase price of the securities comprising the
corpus of the Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities
to be deposited in the Trust, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of the Trust as more fully set forth in
the Prospectus. The Units, which are represented by certificates
("Certificates"), will be offered to the public upon the effectiveness of
the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash
dividends received by the Fund and with the proceeds from the disposition
of securities held in the Fund and the proceeds of the treasury
obligation on maturity and the distribution of such cash dividends and
proceeds to the Unitholders. The Trustee will also maintain records of
the registered holders of Certificates representing an interest in the
Fund and administer the redemption of Units by such Certificateholders
and may perform certain administrative functions with respect to an
automatic investment option.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations..
Prior to the termination of the Fund, the Trustee is empowered to
sell equity securities designated by the Supervisor only for the purpose
of redeeming Units tendered to it and of paying expenses for which funds
are not available. The Trustee does not have the power to vary the
investment of any Unit holder in the Fund, and under no circumstances may
the proceeds of sale of any equity securities held by the Fund be used to
purchase new equity securities to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(l)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in
which interest or ownership is evidenced by
certificate or other written instrument. includes,
but is not limited to, an association commonly
referred to as a "business trust" or "Massachusetts
trust". In determining whether a trustee or trustees
are conducting a business, the form of the agreement
is of significance but is not controlling. The
actual activities of the trustee or trustees, not
their purposes and powers, will be regarded as
decisive factors in determining whether a trust is
subject to tax under Article 9-A. The mere
investment of funds and the collection of income
therefrom, with incidental replacement of securities
and reinvestment of funds, does not constitute the
conduct of a business in the case of a business
conducted by the trustee or trustees. 20 NYCRR 1-
2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1073, 85 N.Y.S.2d 705 (1949).
An opinion of the Attorney General of the State of New York, 47 N.Y.
Atty. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee
of an unincorporated investment trust was without authority to reinvest
amounts received upon the sales of securities and could dispose of
securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell
obligations contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the issuer of
such equity security is in question or in which cash is needed to pay
redeeming Unit holders or to pay expenses, or where the Fund is
liquidated pursuant to the termination of the Indenture. In substance,
the Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to vary the
investment of any Unit holder in a Trust.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance June 23,
1978.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be
considered as owning a share of each asset of a Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income
of each Unit holder in said proportion pursuant to Subpart E of Part 1,
subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York.
1. Each Trust will not constitute an association taxable as a
corporation under New York law and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax.
2. The income of the Trust will be treated as the income of the
Unit holders under the income tax laws of the State and City of New York,
and
3. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business trade profession or occupation
carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
Tanner Propp & Farber
MNS:ddj
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
November 15, 1995
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 21
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 33-62809
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation,
as the Evaluator, and to the use of the Obligations prepared by us which
are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Independent Certified Public Accountants' Consent
We have issued our report dated November 17, 1995 on the statement
of condition and related securities portfolio of Van Kampen American
Capital Equity Opportunity Trust, Series 21 as of November 17, 1995
contained in the Registration Statement on Form S-6 and Prospectus. We
consent to the use of our report in the Registration Statement and
Prospectus and to the use of our name as it appears under the caption
"Other Matters-Independent Certified Public Accountants.'"
Grant Thornton LLP
Chicago, Illinois
November 17, 1995
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This report reflects the current period taken from 487 on 11/17/95 it is
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<NAME> Gold and Income Trust
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