File No. 33-62809 CIK #896986
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 21
(Exact Name of Trust)
VAN KAMPEN FUNDS INC.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
VAN KAMPEN FUNDS INC. CHAPMAN AND CUTLER
Attention: A. Thomas Smith III, General Counsel Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective on
April 24, 2000 pursuant to paragraph (b) of Rule 485.
GOLD & INCOME TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 21
- --------------------------------------------------------------------------------
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two. Please retain both parts of this Prospectus for future reference.
- --------------------------------------------------------------------------------
THE TRUST
Gold & Income Trust, Series 1 (the "Trust") is a unit investment trust
which is contained in Van Kampen American Capital Equity Opportunity Trust,
Series 21 (the "Fund"). The Trust offers investors the opportunity to purchase
Units representing proportionate interests in a fixed, diversified portfolio of
common stocks primarily 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, if applicable.
PUBLIC OFFERING PRICE
The Public Offering Price per Unit is equal to the aggregate underlying
value of the Securities plus or minus cash, if any, in the Income and Capital
Accounts, divided by the number of units outstanding, plus the applicable sales
charge. See "Summary of Essential Financial Information" in this Part One.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is April 24, 2000
GOLD & INCOME TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 21
Summary of Essential Financial Information
As of March 2, 2000
Managing Underwriter: International Assets Advisory Corp.
Sponsor: Van Kampen Funds Inc.
Supervisor(1): Van Kampen 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
<TABLE>
<CAPTION>
Gold &
Income
Trust
----------------
General Information
<S> <C>
Number of Units 58,525
Fractional Undivided Interest in Trust per Unit 1/58,525
Public Offering Price:
Aggregate Value of Securities in Portfolio (1) $ 544,184
Aggregate Value of Securities per Unit (including accumulated dividends) $ 9.1100
Sales charge 3.5% (3.627% of Aggregate Value of Securities excluding
principal cash) per Unit (3) $ .3200
Public Offering Price per Unit (2)(3) $ 9.4300
Redemption Price per Unit $ 9.1100
Secondary Market Repurchase Price per Unit $ 9.1100
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ .3200
</TABLE>
Supervisor's Annual Supervisory Fee Maximum of $.007 per Unit
Evaluator's Annual Fee $20 per evaluation
(approximately $5,040 annually)
Evaluations for purpose of sale, purchase or redemption of Units are made as of
4:00 P.M. Eastern time on days of trading on the New York Stock Exchange next
following receipt of an order for a sale or purchase of Units or receipt by The
Bank of New York of Units tendered for redemption.
Date of Deposit....................November 17, 1995
Mandatory Termination Date.........November 1, 2004
Trustee's Annual fee $.008 per Unit
Income Distribution Record Date TENTH day of June and December.
Income Distribution Date TWENTY-FIFTH day of June and December.
Capital Account Record Date TENTH day of December.
Capital Account Distribution Date TWENTY-FIFTH day of December.
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(1) 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.
(2) Equity Securities listed on a national securities exchange are valued at
the closing sale price or if the Equity Securities are not so listed, at
the bid price thereof. Bonds are valued at the bid side evaluation.
(3) Anyone ordering Units will have added to the Public Offering Price a pro
rata share of any cash in the Income and Capital Accounts and accrued
interest, if any.
(4) Effective on each November 22, commencing November 22, 1996, the secondary
sales charge will decrease by .5 of 1% to a minimum sales charge of 3.0%.
See "Public Offering-Offering Price in Part Two."
(5) 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 for distribution in such Account equals
at least $.01 per Unit.
PORTFOLIO
The Gold & Income Trust consists of a portfolio of globally diversified
common stocks primarily 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" in
Part Two.
<TABLE>
<CAPTION>
PER UNIT INFORMATION
1995 (1) 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
Net asset value per Unit at
<S> <C> <C> <C> <C> <C>
beginning of period..................... $ 9.52 $ 10.05 $ 10.83 $ 9.15 $ 9.00
============ ============ ============ ============ ============
Net asset value per Unit at
end of period........................... $ 10.05 $ 10.83 $ 9.15 $ 9.00 $ 9.75
============ ============ ============ ============ ============
Distributions to Unitholders of investment
income including accumulated dividends
paid on Units redeemed (average Units
outstanding for entire period).......... $ -- $ 0.70 $ 0.62 $ 0.49 $ 0.72
============ ============ ============ ============ ============
Distributions to Unitholders from Equity
Security redemption proceeds (average
Units outstanding for entire period).... $ -- $ 0.08 $ -- $ -- $ --
============ ============ ============ ============ ============
Unrealized appreciation (depreciation) of
Equity Securities (per Unit outstanding
at end of period)....................... $ 0.53 $ 0.36 $ (1.64) $ (0.73) $ 1.75
============ ============ ============ ============ ============
Units outstanding at end of period......... 200,000 300,000 292,500 171,800 62,325
</TABLE>
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(1) For the period from November 17, 1995 (date of deposit) through December
31, 1995.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of Gold &
Income Trust, Series 1 (Van Kampen American Capital Equity Opportunity Trust,
Series 21):
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Gold & Income Trust, Series
1 (Van Kampen American Capital Equity Opportunity Trust, Series 21) as of
December 31, 1999 and the related statements of operations and changes in net
assets for the three years ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 by
correspondence with the Trustee. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustee and the Sponsor,
as well as evaluating the overall financial statement presentation. We believe
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gold & Income Trust, Series 1
(Van Kampen American Capital Equity Opportunity Trust, Series 21) as of December
31, 1999, and the related statements of operations and changes in net assets for
the three years ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
GRANT THORNTON LLP
Chicago, Illinois
March 10, 2000
<TABLE>
<CAPTION>
GOLD & INCOME TRUST, SERIES 1
Statements of Condition
December 31, 1999
Gold &
Income
Trust
----------
Trust property
<S> <C>
Securities at market value, (cost $936,405) (note 1) ............................................... $ 653,817
Accumulated dividends............................................................................... --
----------
$ 653,817
==========
Liabilities and interest to Unitholders
Cash overdraft...................................................................................... $ 45,966
Redemptions payable................................................................................. --
Interest to Unitholders............................................................................. 607,851
----------
$ 653,817
==========
Analyses of Net Assets
Interest of Unitholders (62,325 Units of fractional undivided interest outstanding)
Cost to original investors of 300,000 Units (note 1) ............................................... $ 3,220,000
Less initial underwriting commission (note 3) ................................................... 170,037
----------
3,049,963
Less redemption of 237,675 Units................................................................. 2,095,214
----------
954,749
Undistributed net investment income
Net investment income............................................................................ 584,707
Less distributions to Unitholders................................................................ 581,866
----------
2,841
Realized gain (loss) on Security sale or redemption................................................. (44,006)
Unrealized appreciation (depreciation) of Securities (note 2) ...................................... (282,588)
Distributions to Unitholders of Security sale or redemption proceeds................................ (23,145)
----------
Net asset value to Unitholders................................................................ $ 607,851
==========
Net asset value per Unit (62,325 Units outstanding) ................................................... $ 9.75
==========
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
GOLD & INCOME TRUST, SERIES 1
Statements of Operations
Years ended December 31,
1997 1998 1999
------------ ------------ -----------
Investment income
<S> <C> <C> <C>
Interest income.......................................................... $ 156,547 $ 106,025 $ 74,906
Dividend income.......................................................... 36,205 18,875 13,789
------------ ------------ -----------
...................................................................... 192,752 124,900 88,695
Expenses
Trustee fees and expenses............................................. 4,716 5,642 4,346
Evaluator fees........................................................ 5,434 5,456 5,001
Supervisory fees...................................................... 2,202 2,201 1,403
------------ ------------ -----------
Total expenses..................................................... 12,352 13,299 10,750
------------ ------------ -----------
Net investment income.................................................... 180,400 111,601 77,945
Realized gain (loss) from Securities sale or redemption
Proceeds................................................................. 58,322 1,053,314 934,769
Cost..................................................................... 79,800 973,616 1,035,161
------------ ------------ -----------
Realized gain (loss) ................................................. (21,478) 79,698 (100,392)
Net change in unrealized appreciation (depreciation) of Securities.......... (480,530) (124,971) 109,278
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......... $ (321,608) $ 66,328 $ 86,831
============ ============ ===========
Statements of Changes in Net Assets
Years ended December 31,
1997 1998 1999
------------ ------------ -----------
Increase (decrease) in net assets Operations:
Net investment income................................................. $ 180,400 $ 111,601 $ 77,945
Realized gain (loss) on Securities sale or redemption................. (21,478) 79,698 (100,392)
Net change in unrealized appreciation (depreciation) of Securities.... (480,530) (124,971) 109,278
------------ ------------ -----------
Net increase (decrease) in net assets resulting from operations.... (321,608) 66,328 86,831
Distributions to Unitholders from:
Net investment income................................................. (186,830) (111,854) (79,953)
Securities sale or redemption proceeds................................ -- -- --
Redemption of Units......................................................... (66,075) (1,083,466) (945,673)
------------ ------------ -----------
Total increase (decrease) ......................................... (574,513) (1,128,992) (938,795)
Net asset value to Unitholders
Beginning of period................................................... 3,250,151 2,675,638 1,546,646
Additional Securities purchased from proceeds of Unit Sales........... -- -- --
------------ ------------ -----------
End of period (including undistributed net investment income of $5,102,
$4,849 and $ 2,841, respectively) ................................. $ 2,675,638 $ 1,546,646 $ 607,851
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
GOLD & INCOME TRUST
EQUITY SECURITIES PORTFOLIO as of December 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
Valuation of
Number Market Value Securities
of Shares Name of Issuer Per Share (Note 1)
- --------------- ------------------------------------------------------------------------------------ --------------
<S> <C> <C> <C>
1,935 AngloGold LTD $ 25.6875 $ 49,705
- --------------------------------------------------------------------------------------------------------------------------
12,373 Battle Mountain Canada 2.1515 26,621
- --------------------------------------------------------------------------------------------------------------------------
3,690 Franco-Nevada Mining Corporation 15.3234 56,543
- --------------------------------------------------------------------------------------------------------------------------
5,471 Gold Fields Limited 4.5313 24,791
- --------------------------------------------------------------------------------------------------------------------------
18,359 Newcrest Mining Limited 3.4190 62,769
- --------------------------------------------------------------------------------------------------------------------------
77,396 Normandy Mining Limited 0.7101 54,959
- --------------------------------------------------------------------------------------------------------------------------
20,359 Sons of Gwalia, Limited 3.3533 68,269
------------- --------------
139,583 $ 343,657
============= ==============
</TABLE>
<TABLE>
<CAPTION>
Bonds December 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
Aggregate Name of Issuer, Title, Interest Rate and S&P Moody Redemption Market
Principal Maturity Date Rating Rating Feature Value
- --------------- ------------------------------------------------------ ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 90,000 United Mexican States
8.50% Due 9/15/2002 BB Ba1 $ 91,575
- --------------------------------------------------------------------------------------------------------------------------
182,000 Transportacion Maritima Mexicana S.A. de C.V.
9.25% Due 5/15/2003 BB- Ba3 2000 @ 101.54 151,060
- --------------------------------------------------------------------------------------------------------------------------
73,000 Republic of Argentina
8.375% Due 12/20/2003 BB- B1 67,525
- --------------------------------------------------------------------------------------------------------------------------
- 0 - YPF Socieded Anonima
8.00% Due 2/15/2004 - 0 -
- --------------------------------------------------------------------------------------------------------------------------
- 0 - Telefonica de Argentina S.A.
11.875 Due 11/04/07 - 0 -
- --------------------------------------------------------------------------------------------------------------------------
$ 345,000 $ 310,160
=============== ==============
$ 653,817
==============
</TABLE>
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The accompanying notes are an integral part of these statements.
GOLD & INCOME TRUST, SERIES 1
Notes to Financial Statements
December 31, 1997, 1998 and 1999
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the last closing sales price or, if not so listed, at the bid price.
The Evaluator may determine the value of the Bonds (1) on the basis of current
bid prices of the Bonds (1) on the basis of current bid prices of the Bonds
obtained from dealers or brokers who customarily deal in Securities comparable
to those held by the Trust, (2) on the basis of bid prices for comparable
securities, (3) by determining the value of the securities by appraisal or (4)
by any combination of the above.
Security Cost - The original cost to the Trust of the Securities was based,
for Securities listed on a national securities exchange, on the closing sale
prices on the exchange. The cost was determined on the date of the various Dates
of Deposit. The original cost of the Bonds to the Trust was based on the
determination by Interactive Data Corporation of the offering prices of the
Securities on the date of deposit (November 17, 1995). Since the valuation is
based upon the bid prices the Trust recognized an upward adjustment of $619 on
the date of deposit resulting from the difference between the bid and offering
prices. This upward adjustment was included in the aggregate amount of
unrealized appreciation reported in the financial statements for the period
ended December 31, 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) accrued interest and accumulated dividends thereon, less
accrued expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal Income Taxes.
Distributions to Unitholders of the Trust's taxable income will be taxable as
ordinary or capital gain income to Unitholders.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an average cost basis.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1999 is as follows:
Unrealized Appreciation $ 17,110
Unrealized Depreciation (299,698)
--------------
$ (282,588)
==============
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Sponsor 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 valued as described in Note 1, plus accumulated
dividends to the date of settlement. If the supply of Units exceeds demand, or
for other business reasons, the 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
underlying value of the Securities 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 underlying value of the Securities. The
secondary market cost to investors is based on the determination of the
underlying value of the Securities per Unit on the date of an investor's
purchase plus a sales charge of 5.5% of the public offering price which is
5.820% of the underlying value of the Securities. Effective on each November 22,
commencing November 22, 1996, the secondary sales charge will decrease by .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 three years ended December 31, 1997, 1998 and 1999, 7,500 Units,
120,700 Units and 109,475 Units, respectively, were presented for redemption.
GOLD & INCOME TRUST, SERIES 1
Prospectus Part Two
- --------------------------------------------------------------------------------
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.
The Trust contains 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 in Part One.
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" in Part One. 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 the applicable sales charge
described herein, 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 bid side value of the currency exchange rate
for the related foreign currency expressed in U.S. dollars. 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 date of the "Summary of Essential Financial
Information," 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".
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
Both parts of this Prospectus should be retained for future reference. This
Prospectus is dated as of the date of the Prospectus Part I accompanying this
Prospectus Part II.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Distributions. Distributions of income and principal, 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 and principal 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 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
financial 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.
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 Initial Date of Deposit,
among Van Kampen Funds Inc., as Sponsor, Van Kampen Investment Advisory Corp.,
as Supervisor, The Bank of New York, as Trustee, and Interactive Data
Corporation, as Evaluator, or their predecessors.
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.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in the Trust represented by each unredeemed Unit
will increase, although the actual interest in the Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the 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 invests 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 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" in Part One 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 the notes to the financial statements in Part One.
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" in Part One. 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.
Foreign Currencies. The Trust may involve the risk that fluctuations in
exchange rates between the U.S. dollar and foreign currencies may negatively
affect the value of the stocks. For example, if a foreign stock rose 10% in
price but the U.S. dollar gained 5% against the related foreign currency, a U.S.
investor's return would be reduced to about 5%. This is because the foreign
currency would "buy" fewer dollars or, conversely, a dollar would buy more of
the foreign currency. Many foreign currencies have fluctuated widely against the
U.S. dollar for a variety of reasons such as supply and demand of the currency,
investor perceptions of world or country economies, political instability,
currency speculation by institutional investors, changes in government policies,
buying and selling of currencies by central banks of countries, trade balances
and changes in interest rates. A Trust's foreign currency transactions will be
conducted with foreign exchange dealers acting as principals on a spot (i.e.,
cash) buying basis. These dealers realize a profit based on the difference
between the price at which they buy the currency (bid price) and the price at
which they sell the currency (offer price). The Evaluator will estimate the
currency exchange rates based on current activity in the related currency
exchange markets, however, due to the volatility of the markets and other
factors, the estimated rates may not be indicative of the rate a Trust might
obtain had the Trustee sold the currency in the market at that time.
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.
For purposes of the following discussion and opinions, it is assumed that
each Equity Security is equity for federal income tax purposes and that each
Bond is debt for federal income tax purposes. In the opinion of Chapman and
Cutler, special counsel for the Sponsor, under existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of the
Trust will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his pro rata share of income
derived from 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. Such basis is determined (before the adjustments
described below) by apportioning the tax basis for the Units among each of the
Trust's assets according to value as of the valuation date nearest the date of
acquisition of the Units. Unitholders should consult their own tax advisors with
regard to the calculation of basis. 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 before the Trust acquired ownership of the
Bonds (and the amount of this reduction may exceed the amount of accrued
interest paid to the sellers) 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.
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 basis
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 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 sums of his daily portions of any original
issue discount attributable to the Bonds held by the Trust as such original
issue discount accrues for each 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 "earning 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 is such Equity
Securities shall generally be treated as capital gain. In general, the holding
period for such capital gain will be determined by the period of time a
Unitholder has held his Units.
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 accrues.
Special original issue discount rules apply if the purchase price of the Bond
by the Trust exceeds its original issue price plus 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 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.
It is possible that a corporate Bond that has been issued at an orginal issue
discount may be characterized as a "high-yield discount obligation" within the
meanings of Section 163(e)(5) of the Code. To the extent that such an obligation
is issued at a yield in excess of six percentage points over the applicable
Federal rate, a portion of the original issue discount on such obligation will
be characterized as a distribution on stock (e.g. dividends) for purposes of the
dividends received deduction which is available to certain corporations with
respect to certain dividends received by such corporation.
The Bonds - Market Discount. If a Unitholder's tax basis in his pro rata
protion 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 consitute
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 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 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. 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 a Trust
or Disposition of Units. As discussed above, a Unitholder may recognize taxable
gain (or loss) when a Security is disposed of by the Trust or if the Unitholder
disposes of a Unit. The Internal Revenue Service Restructuring and Reform Act of
1998 (the "1998 Tax Act") provides that for taxpayers other than corporations,
net capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property (with
certain exclusions) is subject to a maximum marginal stated tax rate of 20% (10%
in the case of certain taxpayers in the lowest tax bracket). Capital gain or
loss is long-term if the holding period for the asset is more than one year, and
is short-term if the holding period for the asset is one year or less. The date
on which a Unit is acquired (i.e., the "trade date") is excluded for purposes
for determining the holding period of the Unit. Capital gains realized from
assets held for one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
If the Unitholder disposes of a Unit, he or she is deemed thereby to have
disposed of his or her entire pro rata interest in all assets of the Trust,
including his or her pro rata portion of all the Securities represented by the
Unit. The Code includes provisions that treat certain transactions designed to
reduce or eliminate risk of loss and opportunities for gain (e.g., short sales,
offsetting notional principal contracts, futures or forward contracts, or
similar transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Unitholders
should consult their own tax advisors with regard to any such constructive sales
rules.
Other Matters. Each Unitholder (other than a foreign investor who has
properly provided the certifications described) 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 interest on debt of foreign corporations or
governments and from dividends of foreign corporations will not be subject to
U.S. withholding tax provided (in the case of dividends) 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 effectively
connected to the conduct of a trade or business within the United States. In
addition, such earnings may be exempt from U.S. withholding pursuant to a
specific treaty between the United States and a foreign country. Non-U.S.
Unitholders should consult their own tax advisers regarding the imposition of
U.S. withholding on distributions from the Trust.
It should be noted that payments to the Trust of dividends or interest 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 or interest 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. A required holding period is imposed
for such credits. 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
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" In Part
One, 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) 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 all 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" in Part One 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"
in Part One (which is based on the number of Units of the Trust outstanding on
January 1 of each year for which such compensation relates) and the additional
amounts set forth in footnotes in the "Summary of Essential Financial
Information" in Part One. 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 (h) expenditures incurred in contacting Unitholders upon termination of the
Trust and (i) accrual of costs associated with liquidating securities. 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". The Trust may pay the cost of
updating its registration statement each year. Unit investment trust sponsors
have historically paid these costs.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price (which is based on
the aggregate underlying value of the Securities and includes the applicable
sales charge which is reduced annually by .5 of 1% to a minimum sales charge of
3.0%, 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 bid side value of the currency exchange rate
for the related currency expressed in U.S. dollars. The sales charge applicable
to quantity purchases is reduced on a graduated basis to any person acquiring
10,000 or more Units as follows:
Aggregate Number of Units Purchased Sales Charge Reduction Per Unit
--------------------------------- -----------------------------
10,000-24,999 0.60%
25,000-49,999 0.90
50,000-99,999 1.30
100,000 or more 2.10
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 dealerconcession.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Part One in
accordance with fluctuations in the prices of the underlying 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" in Part One) on the basis of the bid side
value of the currency exchange rate for the related currency expressed in U.S.
dollars.
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 initially
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 initially equal to 5.5% of the Public Offering Price. 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 is reduced by .5 of 1% to a minimum sales
charge of 3.0%.
For these purposes, the Evaluator may determine the value of the Equity
Securities in the following manner: If the Securities are listed on a national
or foreign securities exchange or the Nasdaq Stock Market, Inc., this evaluation
is generally based on the closing sale prices on that exchange or market (unless
it is determined that these prices are inappropriate as a basis for valuation)
or, if there is no closing sale price on that exchange or market, at the closing
bid prices. If the Securities are not so listed or, if so listed and the
principal market therefor is other than on the exchange or market, the
evaluation may be based on the current bid price on the over-the-counter market.
If current bid prices are unavailable or inappropriate, the evaluation may be
determined (a) on the basis of current bid prices for comparable securities, (b)
by appraising the Securities on the bid side of the market or (c) by any
combination of the above. The value of any foreign securities is based on the
applicable currency exchange rate as of the Evaluation Time.
The value of the Bonds is based 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, (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 advanced 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. Units will be distributed to the public by the Managing
Underwriter, broker-dealers and others at the Public Offering Price. 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 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 of 65% of the then current maximum sales charge. 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 the sales charge on the Units, less
any reduced sales charge for quantity purchases as described under "General"
above. Any such quantity discount provided to investors will be borne by the
selling dealer or agent.
In addition, the Managing Underwriter realized a profit or sustained a loss,
as the case may be, as a result of the difference between the price paid for the
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. 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 as a result of the possible fluctuations in the market
value of the Securities in the Trust, 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 currency exchange rate for the related currency 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. See "Summary of
Essential Financial Information"in Part One. 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 Unit Investment Trust Division, 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" in Part One. 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. 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. For these purposes,
the Evaluator may determine the value of the Equity Securities in the following
manner: If the Securities are listed on a national or foreign securities
exchange or the Nasdaq Stock Market, Inc., this evaluation is generally based on
the closing sale prices on that exchange or market (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if there is no
closing sale price on that exchange or market, at the closing bid prices. If the
Securities are not so listed or, if so listed and the principal market therefor
is other than on the exchange or market, the evaluation may be based on the
current bid price on the over-the-counter market. If current bid prices are
unavailable or inappropriate, the evaluation may be determined (a) on the basis
of current bid prices for comparable securities, (b) by appraising the
Securities on the bid side of the market or (c) by any combination of the above.
The value of any foreign securities is based on the applicable currency exchange
rate as of the Evaluation Time.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 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.
When the Trust sells Securities, 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 or when the
value of the Securities owned by the Trust, as shown by any evaluation, is less
than that amount set forth under Minimum Termination Value in the "Summary of
Essential Financial Information" in Part One. The Trust Agreement will terminate
upon the sale, 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" in Part One.
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 (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder.
The Trustee shall not be liable for depreciation or loss incurred by reason
of the sale by the Trustee of any of the 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 Funds Inc., a Delaware corporation, is the Sponsor of the
Trust. The Sponsor is an indirect subsidiary of Van Kampen Investments Inc. Van
Kampen Investments Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; global custody, securities clearance
services and securities lending; and credit card services.
Van Kampen Funds Inc. specializes in the underwriting and distribution of
unit investment trusts and mutual funds with roots in money management dating
back to 1926. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, (630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1999, the total stockholders' equity of Van Kampen
Funds Inc. was $141,554,861 (audited). (This paragraph relates only to the
Sponsor and not to the Trust or to any other Series thereof. The information is
included herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of March 31, 1999, the Sponsor and its Van Kampen affiliates managed or
supervised approximately $75 billion of investment products. The Sponsor and its
Van Kampen affiliates managed $64 billion of assets, consisting of $36.6 billion
for 50 open-end mutual funds, $19.5 billion for 39 closed-end funds and $8.2
billion for 106 institutional accounts. The Sponsor has also deposited more than
3,200 unit trusts amounting to approximately $35.4 billion of assets. All of Van
Kampen's open-end funds, closed-ended funds and unit investment trusts are
professionally distributed by leading financial firms nationwide. Based on
cumulative assets deposited, the Sponsor believes that it is the largest sponsor
of insured municipal unit investment trusts, primarily through the success of
its Insured Municipals Income Trust(R) or the IM-IT(R) trust. The Sponsor also
provides surveillance or evaluation services at cost for approximately $13.4
billion of unit investment trust assets outstanding. Since 1976, the Sponsor has
serviced over two million investor accounts, opened through retail distribution
firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, (800)
221-7668. The Bank of New York is subject to supervision and examination by the
Superintendent of Banks of the State of New York and the Board of Governors of
the Federal Reserve System, and its deposits are insured by the Federal Deposit
Insurance Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of 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.
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.
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 dealers. This Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, securities in any state to any persons to
whom it is not lawful to make such offer in such state.
Table of Contents Page
- ----------------- ----
The Trust 2
Objectives and Securities Selection 2
Trust Portfolio 3
Risk Factors 3
Taxation 6
Trust Operating Expenses 8
Public Offering 9
Rights of Unitholders 11
Trust Administration 12
Other Matters 14
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.
GOLD & INCOME TRUST,
SERIES 1
PROSPECTUS
PART TWO
Van Kampen American Capital
Equity Opportunity Trust,
Series 12
Note: This Prospectus May Be Used Only
When Accompanied by Part One. Both
Parts of this Prospectus should be
retained for future reference.
Dated as of the date
of the Prospectus
Part One accompanying
this prospectus
Part Two.
International Assets
Advisory Corp.
250 Park Avenue South
Suite 200
Winter Park, Florida 32789
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, 2000.
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 21
(Registrant)
By VAN KAMPEN FUNDS INC.
(Depositor)
By: Gina Costello
Assistant Secretary
(SEAL)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below on April 24, 2000 by the
following persons who constitute a majority of the Board of Directors of Van
Kampen Funds Inc.:
SIGNATURE TITLE
Richard F. Powers III Chairman and Chief Executive )
Officer )
John H. Zimmerman III President and Chief Operating )
Officer )
William R. Rybak Executive Vice President and )
Chief Financial Officer )
A. Thomas Smith III Executive Vice President, )
General Counsel and Secretary )
Michael H. Santo Executive Vice President )
Gina M. Costello______________
(Attorney in Fact)*
- --------------------
* An executed copy of each of the related powers of attorney is filed herewith
or was filed with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Van Kampen Focus Portfolios, Series 136
(File No. 333-70897) and the same are hereby incorporated herein by this
reference.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 10, 2000 accompanying the financial
statements of Van Kampen American Capital Equity Opportunity Trust, Series 21 as
of December 31, 1999, and for the period then ended, contained in this
Post-Effective Amendment No. 4 to Form S-6.
We consent to the use of the aforementioned report in the Post-Effective
Amendment and to the use of our name as it appears under the caption "Auditors".
GRANT THORNTON LLP
Chicago, Illinois
April 24, 2000
