Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
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
Van Kampen American Capital Equity Opportunity Trust, Series 21
(Exact Name of Trust)
Van Kampen American Capital Distributors, Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
Van Kampen American Capital
Distributors, Inc. Chapman and Cutler
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on April 24, 1996 pursuant to paragraph (b) of Rule 485.
April 17, 1996
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 date hereof approximately 52% 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 the notes to the financial statements.
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". 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 the notes to the financil statements. 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>
GOLD & INCOME TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 21
Summary Of Essential Financial Information
As of March 1, 1996
Managing Underwriter: International Assets Advisory Corp.
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor (1): Van Kampen American Capital Investment Advisory Corp.
(An Affiliate of the Sponsor)
Sub-Supervisor (1): Global Assets Advisors, Inc.
Evaluator: Interactive Data Corporation
Trustee: The Bank of New York
<CAPTION>
Gold &
Income
GENERAL INFORMATION Trust
<S> <C>
Number of Units................................................................. 300,000
Fractional Undivided Interest in the Trust per Unit............................. 1/300,000
Public Offering Price:
Aggregate Offering Price of Securities in Portfolio <F2>........................ $ 3,386,102
Aggregate Offering Price of Securities per Unit................................. $ 11.47
Sales Charge 5.5% (5.820% of the Aggregate Value of Securities per Unit) <F3>... $ .65
Public Offering Price per Unit <F3><F4>......................................... $ 12.12
Redemption Price per Unit <F5>.................................................. $ 11.47
Excess of Public Offering Price per Unit over Redemption Price per Unit......... $ .65
Calculation of Estimated Net Annual Dividends and Interest per Unit <F6>:
Estimated Gross Annual Dividends and Interest per Unit.......................... $ .68954
Less: Estimated Annual Expense per Unit......................................... $ .02681
Estimated Net Annual Dividends and Interest per Unit............................ $ .66273
</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 <F7>................ $.008 per Unit
Income Account Record Date............... Tenth day of June and December
Income Account Distribution Date......... Twenty-fifth day of June and December
Capital Account Record Date.............. Tenth day of December
Capital Account Distribution Date <F8>... Twenty-fifth 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 and includes the costs of
acquiring such Foreign Denominated Securities.
<F3>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%.
<F4>Anyone ordering Units will have included in the Public Offering Price a pro
rata share of any cash in the Income and Capital 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 Foreign Denominated Securities.
<F5>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
the U.S. dollars and includes the Trust's estimated costs of liquidating the
Foreign Denominated Securities to meet redemptions (approxiamtely $0.01 per
Unit).
<F6>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.
<F7>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.
<F8>Distributions from the Capital Account will be made monthly on the
twenty-fifth day of the month to Unitholders of record on the tenth day of
such month if the amount available 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 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
Units of the Trust".
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 $3 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. In March 1996,
Battle Mountain Gold and Hemlo Gold agreed to merge, with an offer of 1.48
shares of Battle Mountain Gold per share of Hemlo Gold.
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. In
early 1996, the company acquired a 12.5% interest in Posgold Ltd., and a 14.5%
interest in Normandy Mining Ltd. (see below).
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 $600 million, produces approximately 180,000
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 Financial
Statements" 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, (whether by sale, liquidation, taxable exchange, payment at
maturity, or otherwise) 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, liquidation, taxable 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.
In general, income that is not effectively connected to the conduct of a trade
or business within the United States that is earned by non-U.S. Unitholders
and derived from dividends of foreign corporations will not be subject to U.S.
withholding tax provided that less than 25 percent of the gross income of the
foreign corporation for a three-year period ending with the close of its
taxable year preceding payment was not effectively connected to the conduct of
a trade and business within the United States. In addition, such earnings may
be exempt from U.S. withholding pursuant to a specific treaty between the
United States and a foreign country. Non- U.S. Unitholders should consult
their own tax advisers regarding the imposition of U.S. withholding on
distributions from the Trust.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unitholders. Because under the
grantor trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax purposes
with respect to such taxes. Investors should consult their tax advisers with
respect to foreign withholding taxes and foreign tax credits.
In the opinion of 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 an affiliate of the
Sponsor, will receive an annual supervisory fee, payable in monthly
installments, which is not to exceed the amount set forth under "Summary
of Essential Financial Information" , 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 footnotes in the "
Summary of Essential Financial Information". The Trustee's fees are
payable in monthly installments on or before the twenty-fifth 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
Trust. 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, President's Day, 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 twenty-fifth day of each month to holders of
record on the tenth 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.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the Income Account and, to the extent funds are not sufficient therein, from
the Capital Account 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. 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, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,165,000 (unaudited). (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 date thereof 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, Inc. and the
Unitholders Gold & Income Trust, Series 1:
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Gold & Income Trust,
Series 1 as of December 31, 1995, and the related statements of operations and
changes in net assets for the period from November 17, 1995 (date of deposit)
through December 31, 1995. These statements are the responsibility of the
Trustee and the Sponsor. Our responsibility is to express an opinion on such
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1995 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the statements referred to above present fairly, in all
material respects, the financial position of Gold & Income Trust, Series 1 as
of December 31, 1995, and the results of operations and changes in net assets
for the period from November 17, 1995 (date of deposit) through December 31,
1995, in conformity with generally accepted accounting principles.
Chicago, Illinois
March 15, 1996 GRANT THORNTON LLP
<TABLE>
GOLD & INCOME TRUST, SERIES 1
Statement of Condition
As of December 31, 1995
<CAPTION>
Gold 1
<S> <C>
Trust property
Securities at market value, (cost $1,902,479) (note 1)................................ $ 2,008,600
Accumulated Dividends................................................................. 1,033
Accrued Interest...................................................................... 9,647
$ 2,019,280
Liabilities and interest to Unitholders
Cash overdraft........................................................................ $ 9,020
Interest to Unitholders............................................................... 2,010,260
$ 2,019,280
Analysis of Net Assets
Interest of Unitholders (200,000 Units of fractional undivided interest outstanding)
Cost to original investors of 200,000 Units (note 1).................................. $ 2,012,000
Less initial underwriting commission (note 3)......................................... 109,521
1,902,479
Less redemption of 0 Units............................................................ --
1,902,479
Undistributed net investment income
Net investment income................................................................. 1,660
Less distributions to Unitholders..................................................... --
1,660
Realized gain (loss) on security sale or redemption................................... --
Unrealized appreciation (depreciation) of securities (note 2)......................... 106,121
Distributions to Unitholders of security sale or redemption proceeds.................. --
Net asset value to Unitholders........................................................ $ 2,010,260
Net asset value per Unit (200,000 Units outstanding)................................... $ 10.05
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
GOLD & INCOME TRUST, SERIES 1
Statements of Operations
Period from November 17, 1995 (date of deposit) through December 31, 1995
<CAPTION>
1995
<S> <C>
Investment income
Interest income..................................................... $ 1,030
Dividend income..................................................... 1,033
Expenses
Trustee fees and expenses........................................... 154
Evaluator fees...................................................... 195
Supervisory fees.................................................... 54
Total expenses...................................................... 403
Net investment income............................................... 1,660
Realized gain (loss) from Security sale or redemption................
Proceeds............................................................ --
Cost --
Realized gain (loss)................................................ --
Net change in unrealized appreciation (depreciation) of Securities... 106,121
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $ 107,781
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Period from November 17, 1995 (date of deposit) through December 31, 1995
<CAPTION>
1995
<S> <C>
Increase (decrease) in net assets
Operations:
Net investment income..................................................... $ 1,660
Realized gain (loss) on Security sale or redemption....................... --
Net change in unrealized appreciation (depreciation) of Securities........ 106,121
Net increase (decrease) in net assets resulting from operations........... 107,781
Distributions to Unitholders from:
Net investment income..................................................... --
Security sale or redemption proceeds...................................... --
Redemption of Units........................................................ --
Total increase (decrease)................................................. 107,781
Net asset value to Unitholders
Beginning of period....................................................... 1,902,479
End of period (including undistributed net investment income of $1,660)... $ 2,010,260
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
GOLD & INCOME TRUST, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 21)
as of December 31, 1995
Equity Securities
<CAPTION>
Estimated Valuation of
Annual Securities at
Number Market Value Dividends December 31,
of Shares Name of Issuer per Share per Share 1995 (Note 1)
<S> <C> <C> <C> <C>
8,264 Driefontein Consolidated Ltd.................... $ 12.625 $ 0.71 $ 104,333
3,548 Euro-Nevada Mining Corp......................... 35.4709 0.08 129,399
10,592 Free State Consolidates Gold Mines, Ltd......... 7.500 0.79 79,440
14,828 Hemlo Gold Mines, Inc........................... 9.5301 0.17 141,312
30,756 Newcrest Mining Ltd............................. 4.2026 0.19 129,254
92,267 Normandy Mining Ltd............................. 1.4479 0.08 133,591
26,479 Sons of Gwalia, Ltd............................. 5.4945 0.25 145,489
14,745 Vaal Reefs Exploration & Mining Company, Ltd.... 6.500 0.22 95,842
201,479 $ 958,660
</TABLE>
<TABLE>
Bonds
<CAPTION>
Valuation of
Securities at
December 31,
1995 (Note 1)
<S> <C> <C> <C> <C> <C>
Rating
Aggregate Name of Issuer, Title, Interest Rate Standard Redemption
Principal and Maturity Date & Poor's Moody's Feature
242,000 United Mexican States
$ 8.50% Due 9/15/2002............................. BB Ba2 $ 208,725
228,000 Transportacion Maritima Mexicana S.A. de C.V.
9.25% Due 5/15/2003............................. BB- Ba2 1998 @ 104.625 201,780
262,000 Republic of Argentina
8.375 Due 12/20/2003............................ BB- B1 222,700
218,000 YPF Sociedad Anonima
8.00% Due 2/15/2004............................. BB- B1 208,735
200,000 Telefonica de Argentina S.A.
11.875% Due 11/1/2004........................... BB- B1 208,000
$ 1,150,000 $ 1,049,940
Total Securities $ 2,008,600
</TABLE>
GOLD & INCOME TRUST, SERIES 1
Notes to Financial Statements
December 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - 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).
Security Cost - The original cost to the Trust was based on the determination
by Interactive Data Corporation of each equity security listed on a national
securities exchange is valued at the closing sale price, or if the Equity
Security is not so listed, at the ask price on the date of deposit (November
17, 1995).
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal income taxes.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an identified cost basis.
NOTE 2 - PORTFOLIO
Ratings - 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".
Maturity - There is shown under this heading the year in which each issue of
Securities matures. Each Security is currently callable at par. 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 received on such redemption.
The Estimated Current Return and Estimated Long-Term Return in this event may
be affected by such redemptions. For the Federal tax effect on Unitholders of
such redemptions and resultant distributions, see the description under "
Tax Status".
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized Appreciation $106,121
Unrealized Depreciation --
$106,121
</TABLE>
Redemption - 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".
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Managing
Underwriter intends to maintain a market for Units and to continuously offer
to purchase Units at prices, subject to change at any time, based upon the
value of the Securities in the portfolio of the Trust, as described in Note 1
plus accumulated dividends and interest accrued to the date of settlement. If
the supply of Units exceeds demand, or for other business reasons, the Sponsor
may discontinue purchases of Units at such prices. In the event that a market
is not maintained for the Units, a Unitholder desiring to dispose of his Units
may be able to do so only by tendering such Units to the Trustee for
redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the
Evaluator's determination of the aggregate offering price of the Bonds per
Unit on the date of an investor's purchase, plus a sales charge of 5.5% of the
public offering price which is equivalent to 5.820% of the aggregate offering
price of the Bonds. The secondary market cost to investors is based on the
Evaluator's determination of the aggregate bid price of the Bonds per Unit on
the date of an investor's purchase plus a sales charge of 5.5 % of the public
offering pirce which is equivalent to 5.820% of the aggregate offering price
of the Bonds. Effective on each November 22, commencing November 22, 1996, the
sales charge decrease .5 of 1% to a minimum sales charge of 3.0%.
Compensation of Evaluator and Supervisor - The Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.007 per Unit, not to
exceed the aggregate cost of the Supervisor for providing such services to all
applicable Trusts). The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. Both fees may be adjusted for increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index.
NOTE 4 - REDEMPTION OF UNITS
During the period ended December 31, 1995, 0 Units were presented for
redemption.
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 OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 3
The Trust 5
Objective and Securities Selection 6
Trust Portfolio 7
Risk Factors 9
Taxation 17
Trust Operating Expenses 21
Public Offering 22
Rights of Unitholders 26
Trust Administration 29
Other Matters 33
Report of Independent Certified Public
Accountants 33
Statement of Condition 34
Portfolio 36
Notes to Portfolio 37
</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
April 17, 1996
GOLD & INCOME TRUST, SERIES 1
Van Kampen American Capital
Equity Opportunity Trust,
Series 21
International AssetsAdvisory Corp.
250 Park Avenue South
Suite 200
Winter Park, Florida 32789
Please retain this Prospectus for future reference.
Contents of Post-Effective Amendment
to Registration Statement
This Post-Effective Amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
21, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Chicago and State of Illinois on the 24th
day of April, 1996.
Van Kampen American Capital Equity Opportunity
Trust, Series 21
(Registrant)
By Van Kampen American Capital Distributors,
Inc.
(Depositor)
By: Sandra A. Waterworth
Vice President
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this
Post Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities on April 24, 1996:
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
)
William R. Molinari President and Chief )
Operating Officer )
)
Ronald A. Nyberg Executive Vice President )
and General Counsel )
)
William R. Rybak Executive Vice President and )
Chief Financial Officer ) 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.
Consent of Independent Certified Public Accountants
We have issued our report dated March 17, 1996 accompanying the
financial statements of Van Kampen American Capital Equity Opportunity
Trust, Series 21 as of December 31, 1995, and for the period then ended,
contained in this Post-Effective Amendment No. 1 to Form S-6.
We consent to the use of the aforementioned report in the Post-
Effective Amendment and to the use of our name as it appears under the
caption "Auditors".
Grant Thornton LLP
Chicago, Illinois
April 24, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GOLD & INCOME
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> NOV-17-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1902479
<INVESTMENTS-AT-VALUE> 2008600
<RECEIVABLES> 0
<ASSETS-OTHER> 10680
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2019280
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9020
<TOTAL-LIABILITIES> 9020
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2010260
<SHARES-COMMON-STOCK> 200000
<SHARES-COMMON-PRIOR> 200000
<ACCUMULATED-NII-CURRENT> 1660
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 106121
<NET-ASSETS> 2010260
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2063
<OTHER-INCOME> 0
<EXPENSES-NET> 403
<NET-INVESTMENT-INCOME> 1660
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 106121
<NET-CHANGE-FROM-OPS> 107781
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 107781
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 403
<AVERAGE-NET-ASSETS> 1956370
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0.008
<PER-SHARE-GAIN-APPREC> 0.531
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.051
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
