File No. 33-64783
CIK #896989
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Van Kampen American Capital Equity
Opportunity Trust, Series 24
B. Name of Depositor: Van Kampen American Capital Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: An indefinite
number of Units of proportionate interest pursuant to Rule 24f-2
under the Investment Company Act of 1940
F. Proposed maximum offering price to the public of the securities
being registered: Indefinite
G. Amount of registration fee: $500 (previously paid)
H. Approximate date of proposed sale to the public:
As Soon As Practicable After the Effective Date of the
Registration Statement
/ X / Check box if it is proposed that this filing will become
effective on January 19, 1996 at 2:00 P.M. pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
Van Kampen American Capital Equity Opportunity Trust
Series 24
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trust
trust's securities and ) Federal Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating
Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) *
underwriter, trustee or any ) Trust Portfolio
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Cover Page
securities ) Trust Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Federal Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
Certified
1(c) to Form S-6) ) Public Accountants
) Statement of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
Preliminary Prospectus Dated January 19, 1996
Subject to Completion
January 19, 1996
Stepstone Growth Equity and Treasury Securities Trust, Series 1
The Trust. Van Kampen American Capital Equity Opportunity Trust, Series 24 is
comprised of one unit investment trust, Stepstone Growth Equity and Treasury
Securities Trust, Series 1 ("Trust"). The Trust offers investors the
opportunity to purchase Units representing proportionate interests in
"zero coupon" U.S. Treasury obligations ("Treasury Obligations")
and shares of Stepstone Growth Equity Fund (the "Fund" or "Fund
Shares"). Collectively, the Treasury Obligations and the Fund Shares are
referred to herein as the "Securities." See "Portfolio." The
Fund is an open-end management investment company, commonly known as a mutual
fund. Unless terminated earlier, the Trust will terminate on May 15, 2008 (the
"Mandatory Termination Date") and any Securities then held will,
within a reasonable time thereafter, be liquidated or distributed by the
Trustee. Any Securities liquidated at termination will be sold at the then
current market value for such Securities; therefore, the amount distributable
in cash to a Unitholder upon termination may be more or less than the amount
such Unitholder paid for his or her Units.
Objectives of the Trust. The objectives of the Trust are to provide the
potential for long-term capital appreciation by investing in shares of
Stepstone Growth Equity Fund and to protect Unitholders' capital by investing
a portion of its portfolio in "zero coupon" U.S. Treasury obligations.
The Treasury Obligations in the Trust evidence the right to receive a fixed
payment at a future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. The guarantee of the U.S. Government
does not apply to the market value of the Treasury Obligations or the Units of
the Trust, whose net asset value will fluctuate and may be worth more or less
than a purchaser's acquisition cost. It is anticipated that upon maturity the
Treasury Obligations will represent an amount per Unit of at least $11.00 per
Unit. The Fund seeks to achieve its long-term capital appreciation objective
by investing primarily in equity securities consisting of common stocks,
warrants to purchase common stock, U.S. dollar denominated equity securities
of foreign issuers, and debt securities and preferred stock convertible into
common stocks. There is, of course, no guarantee that the objectives of the
Trust will be achieved.
Public Offering Price. The Public Offering Price per Unit of the Trust is
equal to the net asset value of the Fund Shares plus the aggregate offering
price of the Treasury Obligations in the initial offering period plus or minus
cash, if any, in the Capital and Income Accounts, divided by the number of
Units outstanding, plus a sales charge equal to 4.7% of the Public Offering
Price which is equivalent to 4.932% of the aggregate value of the Securities.
During the initial offering period, the sales charge is reduced on a graduated
scale for sales involving at least $50,000 or 5,000 Units. If Units were
available for purchase at the opening of business on the Initial Date of
Deposit, the Public Offering Price per Unit would have been $10.06. The
minimum purchase is 200 Units (100 Units for a tax-sheltered retirement plan).
See "Public Offering."
Principal Protection. The Trust has been organized so that purchasers of Units
should receive, at the Mandatory Termination Date of the Trust, an amount per
Unit at least equal to $11.00 (which is equal to the per Unit value upon
maturity of the Treasury Obligations), even if the Trust never paid a dividend
and the value of the Fund Shares were to decrease to zero, which is considered
highly unlikely. This feature of the Trust provides Unitholders who purchase
Units at the price of $11.00 or less per Unit and who hold such Units until
the Mandatory Termination Date with total principal protection, including any
sales charges paid, although they might forego any earnings on the amount
invested. To the extent that Units are purchased at a price less than $11.00
per Unit, this feature may also provide a potential for capital appreciation.
As a result of the volatile nature of the market for "zero coupon"
U.S. Treasury Obligations, Units sold or redeemed prior to maturity will
fluctuate in price, and the underlying Treasury Obligations may be valued at a
price greater or less than their value as of the Initial Date of Deposit.
Unitholders disposing of their Units prior to the maturity of the Trust may
receive more or less than $11.00 per Unit, depending on market conditions on
the date Units are sold or redeemed.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Treasury Obligations deposited in the Trust will mature on May 15, 2008.
The Treasury Obligations have a maturity value greater than the aggregate
Public Offering Price (which includes the sales charge) of the Units of the
Trust on the Initial Date of Deposit; however, the value of the Treasury
Obligations may fluctuate before maturity due to fluctuations in interest
rates. The Fund Shares deposited in the Trust's portfolio have no fixed
maturity date and the value of these underlying Fund Shares will fluctuate
with changes in the values of stocks in general and with changes in the
conditions and performance of the specific securities owned by the Fund. See
"Trust Portfolio."
Additional Deposits. The Sponsor may, from time to time for approximately 12
months following the Initial Date of Deposit, deposit additional Securities in
the Trust as provided under "The Trust."
Dividend and Capital Gains Distributions. Distributions of net income, if any,
other than amortized discount, will be made annually. Distributions of
realized capital gains, if any, received by the Trust, will be made whenever
the Fund makes such a distribution. Income with respect to the amortization of
original issue discount on the Treasury Obligations in the Trust will not be
distributed currently, although Unitholders will be subject to income tax at
ordinary income rates as if a distribution had occurred. Any distribution of
income and/or capital gains will be net of the expenses of the Trust. See
"Federal Taxation." Additionally, upon termination of the Trust, the
Trustee will distribute 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."
Redemption of Units. Unitholders may redeem Units through redemption at prices
based upon the net asset value of the Fund Shares in the Trust plus the
aggregate bid price of the Treasury Obligations, plus or minus a pro rata
share of cash, if any, in the Capital and Income Accounts of the Trust. In
addition, Unitholders tendering at least 200 Units (100 Units if held in a
tax-sheltered retirement account) for redemption may request a distribution in
kind of Fund Shares. The tendering Unitholder will receive his pro rata number
of Fund Shares and may also elect to have his pro rata portion of Treasury
Obligations reinvested into Fund Shares without a sales charge. See
"Rights of Unitholders--Redemption of Units."
Termination. Commencing on the Mandatory Termination Date, Fund Shares will
begin to be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the Fund
Shares. Written notice of any termination of the Trust shall be given by the
Trustee to each Unitholder at his or her address appearing on the registration
books of the Trust maintained by the Trustee. At least 30 days prior to the
Mandatory Termination Date the Trustee will provide written notice thereof to
all Unitholders and will include with such notice a form to enable Unitholders
to elect a distribution of Fund Shares if the Unitholder owns at least 200
Units (100 if held in a tax-sheltered retirement account), rather than to
receive payment in cash for such Unitholder's pro rata share of the amounts
realized upon the disposition by the Trustee of the Fund Shares. Unitholders
eligible for such a distribution may also elect to have their pro rata portion
of the proceeds received upon the maturity of the Treasury Obligations
reinvested without a sales charge into Fund Shares. All Unitholders not
electing such option will receive cash representing their pro rata portion of
the Treasury Obligations. To be effective, the election form and other
documentation required by the Trustee, must be returned to the Trustee at
least five business days prior to the Mandatory Termination Date. Unitholders
not electing a distribution of Fund Shares will receive a cash distribution
from the sale of the remaining Securities within a reasonable time after the
Trust is terminated. See "Trust Administration--Amendment or
Termination."
Risk Factors. An investment in the Trust should be made with an understanding
of the risks associated therewith, including, among other factors, the
possible deterioration of either the Securities which make up the Trust or the
general condition of the stock market, volatile interest rates and economic
recession. The Trust is not actively managed and Securities will not be sold
by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Units of the Trust are not deposits or
obligations of, or guaranteed or endorsed by, any bank and are not federally
insured or otherwise protected by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other agency and involve investment risk,
including the possible loss of principal. See "Risk Factors."
<TABLE>
Summary of Essential Financial Information
As of the Opening of Business on the Initial Date of Deposit: January 19, 1996
Selling Agent: UB Investment Services, Inc.
Sponsor and Managing Underwriter: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of Treasury Obligations Initially Deposited <F1> $ 550,000
Aggregate Number of Shares of Stepstone Growth Equity Fund Initially Deposited 12,597
Number of Units.................................................................. 50,000
Fractional Undivided Interest in the Trust per Unit ............................. 1/50,000
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>................................. $ 479,178
Aggregate Value of Securities per Unit <F1>..................................... $ 9.59
Sales Charge 4.7% (4.932% of the Aggregate Value of Securities per Unit)........ $ .47
Public Offering Price per Unit <F2>............................................. $ 10.06
Redemption Price per Unit........................................................ $ 9.56
Excess of Public Offering Price per Unit over Redemption Price per Unit.......... $ .50
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Evaluation Time..............4:00 P.M. New York time
Mandatory Termination Date...May 15, 2008
Minimum Termination Value....The Trust may be terminated if the net asset value
of the Trust is less than $500,000 unless the net
asset value of the Trust deposits has exceeded
$15,000,000, then the Trust Agreement may be
terminated if the net asset value of the Trust is
less than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Estimated Stepstone Growth Equity Fund Annual
Expenses <F3>..................................$.0336 per Unit
Trustee's Annual Fee............................$.0080 per Unit
Estimated Annual Organizational Expenses <F4>...$.0074 per Unit
Evaluator's Annual Evaluation Fee...............$.0025 per Unit
As soon as practicable after the Fund's
Record Date.....................................annual ex-dividend date
As soon as practicable after the Fund's
Distribution Date...............................annual distribution date
<FN>
<F1>The shares of the Fund are valued at their net asset value. The Treasury
Obligations are valued at their aggregate offering side evaluation. Because
the Fund Shares may from time to time under certain circumstances be sold or
Trust Units may be redeemed, there is no guarantee that the value of each Unit
over the life of the Trust or at the Trust's termination will be equal to the
Aggregate Value of Securities per Unit as stated above. However, due to the
inclusion of the Treasury Obligations in the Trust's portfolio, Unitholders
who hold their Units until maturity will receive at least $11.00 per Unit
(which is the value upon maturity of the Treasury Obligations.)
<F2>On the Initial Date of Deposit there will be no cash in the Income or Capital
Accounts. Anyone ordering Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts.
<F3>Estimated Stepstone Growth Equity Fund Annual Expenses represent the intrinsic
cost to each Unit due to the underlying costs associated with the Fund and are
based upon the net asset value of that number of Fund Shares per Unit
multiplied by the Fund's annual operating expenses less rebated 12b-1 fees.
See "Trust Portfolio--Fund Expenses."
<F4>The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration statement,
the trust indenture and other closing documents, registering Units with the
Securities and Exchange Commission and states, the initial audit of the Trust
portfolio and the initial fees and expenses of the Trustee but not including
the expenses incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses) as is common for mutual
funds. Total organizational expenses will be amortized over a five year
period. See "Trust Operating Expenses" and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts. Estimated Organizational Expenses
have been estimated based on a projected Trust size of $5,000,000. To the
extent the Trust is larger or smaller, the actual organizational expenses paid
by the Trust (and therefore by Unitholders) will vary from the estimated
amount set forth above.
</TABLE>
THE TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 24 is comprised
of one unit investment trust, Stepstone Growth Equity and Treasury Securities
Trust, Series 1. The Trust was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement (the "Trust Agreement"),
among Van Kampen American Capital Distributors, Inc., as Sponsor, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, and The Bank of New York, as Trustee.
The Trust may be an appropriate medium for investors who desire to participate
in a portfolio of mutual fund shares and zero-coupon U.S. Treasury
obligations. Diversification of assets in the Trust will not eliminate the
risk of loss always inherent in the ownership of securities. For a breakdown
of the portfolio see "Trust Portfolio."
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio" herein, including delivery
statements relating to contracts for the purchase of certain such Securities
and an irrevocable letter of credit or cash issued by a financial institution
in the amount required for such purchases. Thereafter, the Trustee, in
exchange for such Securities (and contracts) so deposited, delivered to the
Sponsor documentation evidencing the ownership of that number of Units of the
Trust indicated in "Summary of Essential Financial Information."
Unless otherwise terminated as provided in the Trust Agreement, the Trust will
terminate on the Mandatory Termination Date, and Securities then held will
within a reasonable time thereafter be liquidated or distributed by the
Trustee.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Securities or contracts to purchase securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trust as a result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Securities
into the Trust following the Initial Date of Deposit, provided that such
additional deposits will be in amounts which will maintain the original
proportionate relationship among the number of Fund Shares and the par value
of the Treasury Obligations in the Trust's portfolio. Such deposits of
additional Securities will, therefore, be done in such a manner that the
maturity value of the Treasury Obligations represented by each Unit should
always be an amount at least equal to $11.00. Thus, although additional Units
will be issued, each Unit will continue to represent approximately the same
number of Fund Shares and the same pro rata share of the principal amount of
the Treasury Obligations, and the percentage relationship among each Security
in the Trust will remain the same. On a cost basis to the Trust, the original
percentage relationship on the Initial Date of Deposit was approximately 56%
Treasury Obligations and approximately 44% Fund Shares. Since the prices of
the underlying Treasury Obligations and Fund Shares will fluctuate daily, the
ratio, on a market value basis, will also change daily. The maturity value of
the Treasury Obligations represented by each Unit will not change as a result
of the deposit of additional Securities in the Trust.
Each Unit of the Trust represents an undivided interest in the Trust. To the
extent that any Units are redeemed by the Trustee or additional Units are
issued as a result of additional Securities being deposited by the Sponsor,
the fractional undivided interest in the Trust represented by each unredeemed
Unit will increase or decrease accordingly, although the actual interest in
the Trust represented by such fraction will remain unchanged. Units will
remain outstanding until redeemed upon tender to the Trustee by Unitholders,
which may include the Sponsor, or until the termination of the Trust
Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objectives of the Trust are to provide investors with the potential for
long-term capital appreciation and protect Unitholders' capital. The portfolio
is described under "Trust Portfolio" and "Portfolio" herein.
In selecting Securities for the Trust, the following factors, among others,
were considered by the Selling Agent: (a) for the portion of the Securities
that are Fund Shares, the Selling Agent selected shares of Stepstone Growth
Equity Fund, a mutual fund which seeks long-term capital growth, and (b) for
the portion of the Securities that are Treasury Obligations, the Selling Agent
selected obligations which evidence of the right to receive a fixed payment at
a future date from the U.S. Government, backed by the full faith and credit of
the U.S. Government.
The Trust is designed to combine investments in the Stepstone Growth Equity
Fund with zero-coupon U.S. Treasury obligations, resulting in one investment
that seeks to provide the potential for capital appreciation consistent with
the preservation of invested principal. UB Investment Services, Inc. believes
that the Trust has the potential to achieve this objective because an
investment in a professionally managed diversified mutual fund can help reduce
some of the volatility inherent in common stocks while providing the
opportunity for long-term growth. The Fund seeks to provide long-term capital
appreciation by investing primarily in common stocks with superior earnings
histories and good prospects for future earnings growth. UB Investment
Services, Inc. believes that the U.S. Treasury obligations included in the
Trust will complement the Fund Shares by providing (a) the opportunity to
preserve invested principal if held to maturity and (b) the assurance that
upon termination of the Trust on the Mandatory Termination Date, each
Unitholder will receive an amount equal to the bond's maturity value
(approximately $11.00 per Unit).
UB Investment Services, Inc. believes that an investment in common stocks
(through the Fund Shares) can help offset the effect of inflation and offer
the potential for capital appreciation. Over the period from January 1975,
through December 1994, the average annual return on the stocks comprising the
Standard & Poor's 500 Index was 14.59%, while the average rate of inflation as
measured by the Consumer Price Index during the same period was 5.44%. The
Standard & Poor's 500 Index is an unmanaged statistical composite measuring
the performance of 500 stocks from 83 industrial groups. Investors should note
that the Standard & Poor's 500 Index is made up of different stocks than those
included in the Fund's portfolio and the Trust is not designed to correlate
with this or any other index. Of course, the rates above represent past
performance of these categories and there is no guarantee of future results,
either of these categories or of the Trust. The rates assume all dividends
during a year are reinvested at the end of that year and do not reflect
commissions, custodial or other fees or income taxes. The Trust also includes
a sales charge and expenses which are not reflected in the rates above.
An investor will be subjected to taxation on the dividend income received from
the Trust and on gains from the sale or liquidation of Securities (see "
Federal Taxation"). Investors should be aware that there is not any
guarantee that the objectives of the Trust will be achieved because the market
value of the Securities can be affected by a variety of factors. Fund Shares
may be especially susceptible to general stock market movements and to
volatile increases and decreases of value as market confidence in and
perceptions of the underlying issuers change. Investors should be aware that
there can be no assurance that the value of the underlying Securities will
increase or that the issuers of the Fund Shares will make distributions. The
Trust, however, has been organized so that investors would receive, at
termination on the Mandatory Termination Date, an amount per Unit at least
equal to $11.00 (which is equal to the per Unit value upon maturity of the
Treasury Obligations), even if the Trust never paid a distribution and the
value of the Fund Shares were to decrease to zero, which the Sponsor considers
highly unlikely. Any distributions of income will generally depend upon the
declaration of dividends by the Fund and the declaration of any dividends
depends upon several factors including the financial condition of the Fund and
general economic conditions.
Investors should be aware that the Trust is not a "managed" fund and
as a result the adverse financial condition of the Fund or the Treasury
Obligations will not result in their elimination from the portfolio except
under extraordinary circumstances (see "Trust Administration--Portfolio
Administration"). In addition, Securities will not be sold by the Trust to
take advantage of market fluctuations or changes in anticipated rates of
appreciation. Investors should note in particular that the Securities were
selected by the Selling Agent as of the date the Securities were purchased by
the Trust. The Trust may continue to purchase or hold Securities originally
selected through this process even though the evaluation of the attractiveness
of the Securities may have changed and, if the evaluation were performed again
at that time, the Securities would not be selected for the Trust.
TRUST PORTFOLIO
The Trust consists of (a) shares of the Stepstone Growth Equity Fund and (b)
zero-coupon U.S. Treasury Obligations.
Fund Shares. The portfolio of the Trust contains shares of the Stepstone
Growth Equity Fund.
Stepstone Growth Equity Fund is one of fourteen separate investment funds
included in the Stepstone Funds, a diversified open-end management investment
company. The Stepstone Growth Equity Fund seeks long-term capital growth.
Shareholders may purchase shares in the Fund through two separate classes of
shares (Institutional Class and Investment Class) which provide for variations
in distribution costs, voting rights and dividends. Except for these
differences between Institutional Class and Investment Class shares, each
share represents an equal proportionate interest in the Fund. The Trust has
purchased Investment Class shares for deposit herein and any reference to Fund
Shares in this prospectus shall refer to Investment Class shares.
The Fund's advisor is Union Capital Advisors, a division of Union Bank
("Advisor"). UB Investment Services, Inc. is a wholly-owned subsidiary of
Union Bank. Additional information concerning the Stepstone Growth Equity
Fund appears in "Trust Portfolio--Stepstone Growth Equity Fund
Summary." This prospectus sets forth concise information about the Fund
that a prospective investor should know before investing. A Fund prospectus
and a Statement of Additional Information about the Fund have been filed with
the Securities and Exchange Commission and are available upon request and
without charge by writing to SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658 or by calling (800) 862-6243. The Fund's
Statement of Additional Information, which is incorporated in its entirety by
reference into the Fund's prospectus, contains more detailed information about
the Fund and its management, including more complete information as to certain
risk factors.
Treasury Obligations. The Treasury Obligations deposited in the Trust consist
of U.S. Treasury bonds which have been stripped of their unmatured interest
coupons. The Treasury Obligations evidence the right to receive a fixed
payment at a future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. Treasury Obligations are purchased at
a deep discount because the buyer obtains only the right to a fixed payment at
a fixed date in the future and does not receive any periodic interest
payments. The effect of owning deep discount bonds which do not make current
interest payments (such as the Treasury Obligations) is that a fixed yield is
earned not only on the original investment, but also, in effect, on all
earnings during the life of the discount obligation. This implicit
reinvestment of earnings at the same rate eliminates the risk of being unable
to reinvest the income on such obligations at a rate as high as the implicit
yield on the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason, the
Treasury Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than are securities of comparable
quality which make regular interest payments. The effect of being able to
acquire the Treasury Obligations at a lower price is to permit more of the
Trust's portfolio to be invested in Fund Shares.
General. The Trust consists of the Securities listed under "Portfolio"
as may continue to be held from time to time in the Trust and any additional
Securities acquired and held by the Trust pursuant to the provisions of the
Trust Agreement together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way for any failure
in any of the Securities. However, should any contract for the purchase of any
of the Securities initially deposited hereunder fail, the Sponsor will, unless
substantially all of the moneys held in the Trust to cover such purchase are
reinvested in substitute Securities in accordance with the Trust Agreement,
refund the cash and sales charge attributable to such failed contract to all
Unitholders on the next distribution date.
Because certain of the Fund Shares from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can be
given that the Trust will retain for any length of time its present size and
composition. Although the portfolio is not managed, the Sponsor may instruct
the Trustee to sell Fund Shares under certain limited circumstances. See "
Trust Administration--Portfolio Administration." Securities, however, will
not be sold by the Trust to take advantage of market fluctuations or changes
in anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Fund Shares as such and
will not be able to vote the Fund Shares. As the holder of the Fund Shares,
the Trustee will have the right to vote all of the Fund Shares 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 Fund Shares so as to insure that the Fund Shares are voted as closely as
possible in the same manner and the same general proportion as are Fund Shares
held by owners other than the Trust. Actions required to be taken with respect
to the Treasury Obligations will be in accordance with the instructions of the
Sponsor.
The following section provides a brief description of the Stepstone Growth
Equity Fund, specifically its relationship with the Trust. More specific
information regarding Stepstone Growth Equity Fund can be obtained from the
prospectus and Statement of Additional Information prepared therefor as
described above.
Stepstone Growth Equity Fund Summary
The operating expenses and maximum transaction expenses expected to be
associated with an investment in the Fund are reflected in the following
tables:
<TABLE>
<CAPTION>
Investment
Class
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)1... 4.50%
ANNUAL OPERATING EXPENSES:
(as a percentage of offering price)...............................................
Advisory Fees.................................................................... 0.60%
12b-1 Fees2 (after fee waivers).................................................. 0.25%
Other Expenses................................................................... 0.20%
Total Fund Operating Expenses3................................................... 1.05%
<FN>
<F1>No sales charge is imposed upon the purchase of Fund Shares deposited into the
Trust. However, the maximum sales charge on Units of the Trust is 4.70%.
<F2>Absent fee waivers, 12b-1 Fees would be 0.40%. Effectively, there are no 12b-1
fees on Fund Shares held in the Trust. However, Unitholders who acquire Fund
Shares through an In Kind Distribution upon redemption or at the Trust's
termination will begin to incur 12b-1 fees at such time as shares are acquired.
<F3>"Total Operating Expenses" for the Fund have been restated to reflect
current expenses and the aforementioned fee waivers. Absent fee waivers, "
Total Operating Expenses" would be 1.20% for the Fund.
</TABLE>
Example:
An investor would pay the following expenses on a $1,000 investment in Fund
Shares assuming (1) imposition of the maximum sales charge, (2) 5% return and
(3) redemption at the end of each time period:
<TABLE>
<CAPTION>
Stepstone Growth
Equity Fund
Investment
Class
<S> <C>
1 year..... $ 55
3 years.... 77
5 years.... 100
10 years... 167
</TABLE>
The example is based upon the total operating expenses of the Fund and should
not be considered a representation of past or future expenses. Actual expenses
may be greater or less than those shown. The purpose of this table is to
assist the investor in understanding the various costs and expenses that may
be directly or indirectly borne by investors in the Fund. The information set
forth in the foregoing table and example relates only to Investment Class
shares. The Fund also offers Institutional Class shares which are subject to
the same expenses except there are no sales charges or distribution costs.
Long-term Fund shareholders may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by the Rules of the National
Association of Securities Dealers ("NASD").
FINANCIAL HIGHLIGHTS
The following information has been audited by the Fund's independent
accountants, as indicated in their report dated March 15, 1995 on the Fund's
financial statements as of January 31, 1995 included in the Fund's Statement
of Additional Information under "Financial Information." This table
should be read in conjunction with the Fund's financial statements and notes
thereto. Additional Information is set forth in the 1995 Annual Report to
Shareholders and is available without charge by calling (800) 862-6243.
<TABLE>
For a Share Outstanding Throughout the Year
<CAPTION>
Growth Equity Fund
Investment Class (**)
For the years ended
January 31,:
Net Investment Activities Distributions Net
Asset Net Realized Asset
Value, Net and Unrealized Net Value,
Beginning Investment Gain (Loss) Investment Capital End
of Period Income on Investments Income Gains of Period
<S> <C> <C> <C> <C> <C> <C>
1995 15.19 0.097 (0.884) (0.092) (0.181) 14.13
1994 13.80 0.064 1.392 (0.066) -- 15.19
1993 12.69 0.099 1.103 (0.092) -- 13.80
1992 <F1> 11.76 0.019 0.948 (0.023) (0.014) 12.69
</TABLE>
* Annualized.
** Total return does not reflect the sales charge.
(1) Commenced operations on November 14, 1991
<TABLE>
For a Share Outstanding Throughout the Year (continued)
<CAPTION>
Growth Equity Fund
Investment Class (**)
For the years ended
January 31,:
Ratio of
Net
Ratio of Ratio of Investment
Net Expenses Net Income to
Assets, Ratio of to Average Investment Average
End Expenses Net Assets Income Net Assets Portfolio
Total of Period to Average Excluding to Average Excluding Turnover
Return (000) Net Assets Fee Waivers Net Assets Fee Waivers Rate
<S> <C> <C> <C> <C> <C> <C>
(5.17)% 1.422 0.78% 1.17% 0.69% 0.30% 22%
10.61% 1.243 0.77% 1.18% 0.48% 0.07% 45%
9.56% 43 0.67% 1.17% 0.69% 0.19% 23%
39.11%* 13 0.83%* 0.96%* 0.79%* 0.66%* 26%
</TABLE>
* Annualized.
** Total return does not reflect the sales charge.
(1) Commenced operations on November 14, 1991
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES
The Fund seeks long-term capital growth. At least 65% of the Fund will be
invested in equity securities consisting of common stocks, warrants to
purchase common stock, U.S. dollar denominated equity securities of foreign
issuers, and debt securities and preferred stock convertible into common
stocks.
There is no assurance that the Fund's investment objective will be met.
The Fund may also be invested in covered call options on equity securities and
money market instruments consisting of securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities, receipts including TR's,
TIGR's and CATS, money market funds, repurchase agreements, certificates of
deposit, time deposits, bank master notes and bankers' acceptances issued by
banks having net assets of at least $1 billion as of the end of their most
recent fiscal year, commercial paper rated at least A-1 by Standard & Poor's
or P-1 by Moody's Investors Services, Inc. ("Moody's") and may hold a
portion of its assets in cash for liquidity purposes. All of the common stocks
in which the Fund invests (including foreign securities) are traded on
registered exchanges, on the over-the-counter market or in the form of
American Depositary Receipts traded on registered exchanges of NASDAQ.
GENERAL INVESTMENT POLICIES
For temporary defensive purposes during periods when the Advisor determines
that market conditions warrant, the Fund may invest up to 100% of its assets
in money market instruments consisting of securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities receipts, including
TR's, TIGR's and CATS, money market funds, repurchase agreements, certificates
of deposit, time deposits, bank master notes and bankers' acceptances issued
by banks having net assets of at least $1 billion as of the end of their most
recent fiscal year, commercial paper rated at least A-1 by Standard & Poor's
or P-1 by Moody's, and it also may hold a portion of its assets in cash. The
Fund will not be pursuing its investment objective to the extent that a
substantial portion of its assets are invested in money market securities.
The Fund will restrict its investment in illiquid securities to 15% of its net
assets. The Fund may engage in securities lending and will limit such practice
to 331/3% of its assets. The Fund may purchase restricted securities which
have not been registered under the Securities Act of 1933 (Rule 144A
Securities). The Fund may engage in options on stock indices to invest cash on
an interim basis. The aggregate premium paid on all options on stock indices
cannot exceed 20% of the Fund's total assets. In the event that a security
owned by the Fund is downgraded below the stated rating categories, the
Advisor will review and take appropriate action with regard to the security.
For further information about the permitted investments see "Description
of Permitted Investments."
RISK FACTORS
Since the Fund invests in equity securities, the Fund's shares will fluctuate
in value and thus may be more suitable for long-term investors who can bear
the risk of short-term fluctuations.
Securities rated BBB by S&P or Fitch or Baa by Moody's are deemed by these
rating services to have some speculative characteristics, and adverse economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.
In addition, the market value of fixed income securities bears an inverse
relationship to changes in market interest rates which may affect the net
asset value of shares. The longer the remaining maturity of security, the
greater is the effect of interest rate changes on its market value.
Investments in securities of foreign issuers may subject the Fund to different
risks than those attendant to investments in securities of U.S. issuers such
as differences in accounting, auditing and financial reporting standards, the
possibility of expropriation or confiscatory taxation, and political
instability. See "Description of Permitted Investments."
INVESTMENT LIMITATIONS
The Fund may not:
1) Purchase securities of any issuer (except securities issued or guaranteed
by the U.S. government or its agencies or instrumentalities and repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of the Fund would be invested in the securities of such issuer. This
restriction applies to 75% of the Fund's assets.
2) Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in the obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities and
repurchase agreements involving such securities, and provided further, that
utilities as a group will not be considered to be one industry, and
wholly-owned subsidiaries organized to finance the operations of their parent
companies will be considered to be in the same industries as their parent
companies.
3) Make loans, except that the Fund may (a) purchase or hold debt instruments
in accordance with its investment objective and policies; (b) enter into
repurchase agreements; and (c) engage in securities lending as described in
the Fund's prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
The investment objective and investment limitations are fundamental policies
of the Fund. Fundamental policies cannot be changed with respect to the Fund
without the consent of a majority of the Fund's outstanding shares. The term
"majority of the outstanding shares" means the vote of (i) 67% or more
of the Fund's shares present at a meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares, whichever is less.
THE ADVISOR
Stepstone Funds and Union Capital Advisors (the "Advisor"), a division
of Union Bank, have entered into an advisory agreement (the "Advisory
Agreement"). Under the Advisory Agreement, the Advisor makes the
investment decisions for the assets of the Fund and continuously reviews,
supervises and administers the Fund's investment program. The Advisor
discharges its responsibilities subject to the supervision of, and policies
established by, the Trustees of the Stepstone Funds. The Stepstone Funds
shares are not sponsored, endorsed or guaranteed by, and do not constitute
obligations or deposits of, the Advisor or Union Bank and are not guaranteed
by the FDIC or any other governmental agency.
The Advisor is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .60% of the average daily net assets of the Fund. The
Advisor may from time to time waive all or a portions of its fees in order to
limit the operating expenses of the Fund. Any such waiver is voluntary and may
be terminated at any time in the Advisor's sole discretion.
For the fiscal year ended January 31, 1995, the Advisor was paid an advisory
fee of .60% of the average daily net assets of the Fund.
Union Capital Advisors, 445 S. Figueroa Street, Los Angeles, California 90071,
operates as a separate division of Union Bank. In 1988 the former Union Bank
was acquired by California First Bank, and the resulting bank changed its name
to Union Bank. Each of the former banks or its predecessor bank had been in
banking since the early 1900's and each historically has had significant
investment functions within their Trust and Investment Divisions. Union Bank
is a subsidiary of The Bank of Tokyo, Ltd. The Bank of Tokyo, Ltd. directly
owns 72% of the outstanding shares of Union Bank, and directly owns all of the
outstanding shares, except director's qualifying shares, of The Bank of Tokyo
Trust Company ("BOTT") the subadvisor to certain Stepstone mutual
funds and BOT Asset Management (U.K.) Limited ("BOT Asset Management"
), subadvisor to certain Stepstone mutual funds. The Bank of Tokyo, Ltd. and
The Mitsubishi Bank, Limited have announced their intention to merge. The
resulting entity will be named The Bank of Tokyo-Mitsubishi Ltd. The directors
and shareholders of The Bank of Tokyo, Ltd. and The Mitsubishi Bank, Limited
have approved the proposed merger in principle.
The Bank of Tokyo, Ltd. and The Mitsubishi Bank, Limited, announced that they
had reached a basic understanding concerning the merger of their respective
subsidiary banks in California, Union Bank and The Bank of California, N.A.
The merger was approved by the Boards of Directors of Union Bank and The Bank
of California, N.A. and will be finalized after obtaining the required
shareholders' and regulatory approvals. The name of the new combined
California bank will be Union Bank of California.
The target date of both the above-described mergers is April 1, 1996.
One or more of the foregoing transactions may constitute an "
assignment" of the existing investment advisory agreements between the
Fund and Union Bank and the subadvisory agreements between Union Bank and BOTT
and BOT Asset Management under the Investment Company Act of 1940. Under the
Investment Company Act, an "assignment" will result in the automatic
termination of the investment advisory and subadvisory agreements effective at
the time of the transaction(s). Prior to any such transactions, shareholders
of the Fund (including the Trust) will be asked to approve new investment
advisory and subadvisory agreements between the Fund and Union Bank of
California (or an investment advisory affiliate thereof), to take effect at
the time of the transaction(s). A proxy statement describing the terms of the
new agreements will be sent to shareholders prior to their being asked to vote
on the new agreements.
Carl J. Colombo, a Vice President of the Fund's Advisor, has served as the
Fund's co-portfolio manager since May, 1995, and has been with the Advisor and
its predecessor since 1985. Effective July 14, 1995, Mr. Colombo was named as
portfolio manager of the Fund.
At January 31, 1995, Union Capital Advisors managed $4.7 billion in individual
portfolios and collective funds. The Advisor's clients range from pension
funds, national labor union plans and foundations to personal investments and
trust portfolios.
The Glass-Steagall Act restricts the securities activities of banks such as
Union Bank, but federal regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds. Should this position
be challenged successfully in court or reversed by legislation, the Fund may
have to make other investment advisory arrangements.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), a
wholly-owned subsidiary of SEI Corporation ("SEI"), and the Fund are
parties to an administration agreement (the "Administration Agreement"
). Under the terms of the Administration Agreement, the Administrator provides
the Fund with certain management services including all necessary office
space, equipment, personnel, and facilities.
The Administrator is entitled to a fee, calculated daily and paid monthly, at
an annual rate of .15% of Fund assets up to $1 billion, .12% of assets between
$1 billion and $2 billion and .10% of assets over $2 billion. The
Administrator may waive its fee or reimburse various expenses to the extent
necessary to limit the total operating expenses of the Fund's Investment Class
shares. Any such waiver is voluntary and may be terminated at any time in the
Administrator's sole discretion.
THE SHAREHOLDER SERVICING AGENT
SEI Financial Management Corporation serves as the transfer agent, dividend
disbursing agent, and shareholder servicing agent for the Fund. Compensation
for these services is paid under the Administration Agreement.
THE DISTRIBUTOR OF THE FUND
SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation (SEI), and the Fund are parties to a
distribution agreement ("Distribution Agreement"). The Distribution
Agreement is renewable annually and may be terminated by the Distributor, by a
majority vote of the disinterested Trustees or by a majority vote of the
outstanding securities of the Fund upon not more than 60 days written notice
by either party, or upon assignment by the Distributor.
The Investment Class has a distribution plan ("Investment Class Plan").
The Distribution Agreement and the Investment Class Plan adopted by the
Investment Class shareholders provide that the Investment Class shares of the
Fund may bear the following distribution expenses: (1) the cost of
prospectuses, reports to shareholders, sales literature and other materials
for potential investors; (2) advertising; and (3) expenses incurred in
connection with the promotion and sale of the Fund's shares including the
Distributor's expenses for travel, communication, and compensation and
benefits for sales personnel. In addition, the Fund pays the Distributor a fee
of up to .40% of the Fund's Investment Class shares average daily net assets,
of which a maximum of .25% may be used to compensate broker/dealers and
service providers which provide administrative and/or distribution services to
Investment Class shareholders or their customers who beneficially own
Investment Class shares. For the Fund's current year, the Distributor has
agreed to waive any fees payable pursuant to the Plan, and the Distributor
will bear the costs of other distribution-related activities. The Distributor
reserves the right to terminate its waiver at any time at its sole discretion.
PERFORMANCE
From time to time, the Fund may advertise yield and total return. These
figures will be based on historical earnings and are not intended to indicate
future performance. The yield of the Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The
yield is calculated by assuming that the same amount of income is generated by
the investment during that period is generated in each 30-day period over one
year and is shown as a percentage of the investment.
The total return of the Fund refers to the average compounded rate of return
to a hypothetical investment, for designated time periods (including, but not
limited to, the period from which the Fund commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period and assuming the reinvestment of all dividend and capital gain
distributions. The total return of the Fund may also be quoted as a dollar
amount or on an aggregate basis, an actual basis, without inclusion of any
sales charge, or with a reduced sales charge in advertisements distributed to
investors entitled to a reduced sales charge.
The Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual fund rating services (such as Lipper
Analytical), financial and business publications and periodicals; broad groups
of comparable mutual funds; unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or other investment alternatives. The Fund may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance. The fund may quote Ibbotson Associates of Chicago,
Illinois, which provides historical returns of the capital markets in the U.S.
The Fund may use long term performance of these capital markets to demonstrate
general long-term risk versus reward scenarios and cold include the value of a
hypothetical investment in any of the capital markets. The Fund may also quote
financial and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
The Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
The performance of Institutional Class shares will normally be higher than for
Investment Class share because the Institutional Class is generally not
subject to distribution expense generally charged to the Investment Class
shares.
TAXES
The following summary of federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to provide a detailed
explanation of the federal, state, or local income tax treatment of the Fund
or its shareholders (including the Trust). Accordingly, shareholders are urged
to consult their tax advisers regarding specific questions as to federal,
state and local income taxes. Additional information concerning taxes is set
forth in the Statement of Additional Information. For information relating to
the tax treatment of the Trust, see "Federal Taxation."
Tax Status of the Fund: The Fund is treated as a separate entity for federal
income tax purposes and is not combined with the other Stepstone mutual funds.
The Fund intends to qualify for the special tax treatment afforded regulated
investment companies under the Internal Revenue Code of 1986, as amended, so
that it will be relieved of federal income tax on that part of its net
investment income and net capital gain (the excess of net long-term capital
gain over net short-term capital loss) which is distributed to shareholders.
Tax Status of Distributions: The Fund will distribute substantially all of its
net investment income (including net short-term capital gain) and net capital
gain to shareholders. Dividends from the Fund's net investment income will be
taxable to shareholders as ordinary income, (whether received in cash or in
additional shares) to the extent of the Fund's earnings and profits. Dividends
paid by the Fund to corporate shareholders will qualify for the deduction for
dividends received by corporations to the extent derived from dividends
received by the Fund from domestic corporations. However, the full amount of
such dividends may be subject to the alternative minimum tax. Distributions of
net capital gain do not qualify for the dividends-received deduction and are
taxable to shareholders as long-term capital gain, regardless of how long
shareholders have held their shares and regardless of whether the
distributions are received in cash or in additional shares. The Fund will make
annual reports to shareholders of the federal income tax status of all
distributions.
With respect to investments in STRIPS, TR's, TIGR's and CATS, which are sold
at original issue discount and thus do not make periodic cash interest
payments, the Fund will be required to include as part of its current income
the imputed interest on such obligations even though the Fund has not received
any interest payments on such obligations during that period. Because the Fund
distributes all of its net investment income to its shareholders. The Fund may
have to sell fund securities to distribute such imputed income which may occur
at a time when the Advisor would not have chosen to sell such securities and
which may result in a taxable gain or loss.
Dividends declared by the Fund in October, November, or December of any year
and payable to shareholders of record on a date in that month will be deemed
to have been paid by the Fund and received by the shareholders on the last day
of December of that year, if paid by the Fund any time during the following
January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
Income received on direct U.S. obligations is exempt from tax at the state
level when received directly by the Fund and may be exempt, depending on the
state, when received by a shareholder as income dividends from the Fund
provided certain state-specific conditions are satisfied. The Fund will inform
shareholders annually of the percentage of income and distributions derived
from direct U.S. Treasury obligations. Shareholders should consult their tax
advisors to determine whether any portion of the income dividends received
from the Fund is considered tax exempt in their particular state.
A sale, exchange, or redemption of Fund Shares is a taxable transaction to the
shareholders.
GENERAL INFORMATION
The Stepstone Funds. The Stepstone Funds was organized as a Massachusetts
business trust under a Declaration of Trust dated October 16, 1990. The
Declaration of Trust permits the Stepstone Funds to offer separate portfolios
of shares and different classes of each fund. In addition to the Fund, the
Stepstone Funds consists of the following funds: Balanced Fund, Value Momentum
Fund, Emerging Growth Fund, Treasury Money Market Fund, Money Market Fund,
California Tax-Free Money Market Fund, Intermediate-Term Bond Fund, California
Tax Free Bond Fund, Limited Maturity Government Fund, Blue Chip Growth Fund,
Convertible Securities Fund, Government Securities Fund and International
Equity Fund. All consideration received by the Stepstone Funds for shares of
any fund and all assets of such fund belong to that fund and would be subject
to liabilities related thereto. The Stepstone Funds reserves the right to
create and issue shares of additional funds.
The Stepstone Funds pays its expenses, including audit and legal expenses,
expenses of preparing and printing prospectuses, proxy solicitation material
and reports to shareholders, costs of custodial services and registering the
shares under federal and state securities laws, insurance expenses, litigation
and other extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses. Please refer to "Financial Highlights" in this
summary section for more information regarding the Fund's expenses.
Trustees of the Stepstone Funds. The management and affairs of the Stepstone
Funds are supervised by the Trustees under the laws governing business trusts
in the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential
management, administrative and shareholder services to the Stepstone Funds.
Voting Rights. Each share held entitles the shareholder of record to one vote.
Each fund or class will vote separately on matters relating solely to such
fund or class. As a Massachusetts business trust, the Stepstone Funds is not
required to hold annual meetings but approval will be sought for certain
changes in the operation of Stepstone Funds and for the election of Trustees
under certain circumstances. In addition, a Trustee may be removed by the
remaining Trustees or by shareholders at a special meeting called upon the
written request of shareholders owning at least 10% of the outstanding shares
of the Stepstone Funds. Shareholders will be provided with shareholder
communication assistance in connection with such matters.
Shareholder Inquiries. Shareholder inquiries should be directed to the
Administrator, SEI Financial Management Corporation, 680 East Swedesford Road,
Wayne PA 19087.
Dividends. Substantially all of the net investment income (exclusive of
capital gains) of the Fund is distributed in the form of monthly dividends to
shareholders, however, the Trust will distribute net investment income
annually. Currently, capital gains of the Fund, if any, will be distributed at
least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined
following the record date, unless the shareholder has elected to take such
payment in cash. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the change.
Dividends and distributions of the Fund are paid on a per-share basis. The
value of each share will be reduced by the amount of the payment. If shares
are purchases shortly before the record date for a dividend or the
distribution of capital gains, a shareholder will pay the full price for the
shares and receive some portion of the price back as a taxable dividend or
distribution.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of the permitted investments for the Fund:
American Depositary Receipts (ADRs) -- The Fund may purchase ADRs. ADRs are
receipts typically issued by a U.S. financial institution that evidence
ownership of underlying securities issued by a foreign issuer.
Banker's Acceptance -- A bill of exchange or time draft drawn on and accepted
by a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
Certificate Of Deposit -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity.
Commercial Paper -- Unsecured short-term promissory notes issued by
corporations and other entities. Maturities on these issues vary from a few
days to nine months. Purchase of such instruments involves a risk of default
by the issuer.
Convertible Bonds -- The Fund may purchase Convertible Bonds which are
convertible into a set number of shares of another form of security (usually
common stock) at a prestated price. Convertible bonds have characteristics
similar to both fixed income and equity securities. Because of the conversion
feature, the market value of convertible bonds tends to move together with the
market value of the underlying stock. As a result, the Fund's selection of
convertible bonds is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
bonds is also affected by prevailing interest rates, the credit quality of the
issuer and any call provisions.
Convertible Preferred Stock -- The Fund may invest in Convertible Preferred
Stock, a class of capital stock that pays dividends at a specified rate and
has preference over common stock in the payment of dividends and the
liquidation of assets. Convertible preferred stock is preferred stock
exchangeable for a given number of common stock shares and has characteristics
similar to both fixed-income and equity securities. Because of the conversion
feature, the market value of convertible preferred stock tends to move
together with the market value of the underlying common stock. As a result,
the Fund's selection of convertible preferred stock is based, to a great
extent, on the potential for capital appreciation that may exist in the
underlying common stock. The value of convertible preferred stock is also
affected by prevailing interest rates, the credit quality of the issuer and
any call provisions.
Derivatives -- Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, options (e.g., puts and calls), options on futures, swap
agreements, and some mortgage-backed securities (CMOs, REMICs, IOs and POs).
Investment Grade Bonds -- Interest-bearing or discounted government or
corporate securities that obligate the issuer to pay the bondholder a
specified sum of money, usually at specific intervals, and to repay the
principal amount of the loan at maturity. Investment grade bonds are those
rated BBB or better by Standard & Poor's or Baa or better by Moody's Investors
Service, Inc.
Options -- The Fund may write covered call options. Under a call option, the
purchaser of the option has the right to purchase, and the writer (the Fund)
the obligation to sell, the underlying security at the exercise price during
the option period. A put option gives the purchaser the right to sell, and the
writer the obligation to purchase, the underlying security at the exercise
price during the option period.
In addition, the Fund may buy options on stock indices to invest cash on an
interim basis. Such options will be listed on a national securities exchange.
In order to close out an option position, the Fund may enter into a "
closing purchase transaction" --the purchase of an option on the same
security with the same exercise price and expiration date as the option
contract previously written on any particular security. When the security is
sold, the Fund effects a closing purchase transaction so as to close out any
existing option on that security.
There are risks associated with such investments including the following: (1)
the success of a hedging strategy may depend on the ability of the Advisor to
predict movements in the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be an imperfect
correlation between the movement in prices of securities held by the Fund and
the price of options; (3) there may not be a liquid secondary market for
options; and (4) while the Fund will receive a premium when its writes covered
call options, it may not participate fully in a rise in the market value of
the underlying security.
Repurchase Agreements -- Agreements by which a person obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price (including principal and interest) on an agreed upon date within a
number of days from the date of purchase. The Custodian or its agent will hold
the security as collateral for the repurchase agreement. Collateral must be
maintained at a value at least equal to 102% of the repurchase price. The Fund
bears a risk of loss in the event the other party defaults on its obligations
and the Fund is delayed or prevented from its rights to dispose of the
collateral securities or if the Fund realizes a loss in the sale of the
collateral securities. Repurchase agreements are considered loans under the
Investment Company Act of 1940, as amended.
Rule 144A Securities -- The Fund may purchase Rule 144A Securities. Rule 144A
Securities are restricted securities that have not been registered under the
Securities Act of 1933 but which may be traded between certain qualified
institutional investors, including investment companies. The absence of a
secondary market may affect the value of Rule 144A Securities. The Board of
Trustees of the Stepstone Funds has established guidelines and procedures to
be utilized to determine the liquidity of such securities.
Securities Lending -- In order to generate additional income, the Fund may
lend the securities in which it is invested, pursuant to agreements requiring
that the loan be continuously secured by cash, securities of the U.S.
Government or its agencies or any combination of cash and such securities as
collateral equal to 100% of the market value at all times of the securities
lent. The Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of cash collateral in U.S.
Government securities. Collateral is marked to market daily to provide a level
of collateral at least equal to the value of the securities lent. There may be
risks of delay in receiving additional collateral or risks of delay in
recovery of the securities or even loss of rights in the collateral should the
borrower of the securities fail financially.
Securities Of Foreign Issuers -- The Fund may purchase U.S. dollar denominated
securities of foreign issuers. There may be certain risks connected with
investing in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, including less uniformity in accounting and
reporting requirements, the possibility that there will be less information on
such securities and their issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation of
capital invested abroad, and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities may be subject to
foreign taxes, which reduce yield, and may be less marketable than comparable
U.S. securities. The Fund may be affected favorably or unfavorably by changes
in the exchange rates or exchange control regulations between foreign
currencies and the U.S. dollar. Changes in foreign currency exchange rates may
also affect the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income and gains, if
any, to distributed to shareholders by the Fund.
Time Deposit -- A non-negotiable receipt issued by a U.S. or foreign bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.
U.S. Government Agency Securities -- Certain Federal agencies have been
established as instrumentalities of the U.S. Government to supervise and
finance certain types of activities. Issues of these agencies, while not
direct obligations of the U.S. Government, are either backed by the full faith
and credit of the United States (e.g., GNMA) or supported by the issuing
agencies' right to borrow from the Treasury. The issues of other agencies are
supported only by the credit of the instrumentality (e.g., FNMA).
U.S. Treasury Obligations -- Bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known
as Separately Traded Registered Interest and Principal Securities ("
STRIPS")
Receipts -- Interests in separately traded interest and principal component
parts of U.S. Treasury obligations that are issued by banks and brokerage
firms and are created by depositing Treasury notes and Treasury bonds into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the
certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include "Treasury Receipts" ("TR's"), "Treasury
Investment Growth Receipts" ("TIGR's") and "Certificates of
Accrual on Treasury Securities" ("CATS").
STRIPS, TR'S, TIGR'S and CATS are sold as zero coupon securities which means
that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal.
This discount is accreted over the life of the security, and such accretion
will constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
interest rate volatility than interest paying securities.
Warrants -- The Fund may purchase warrants which are securities that entitle
the holder to buy a proportionate amount of common stock at a specified price
for a limited or unlimited period of time. Warrants are commonly freely
transferable and are traded on the major stock exchanges.
FEDERAL TAXATION
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986 (the "Code"). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from the Trust asset when such income is considered to be
received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, payment at
maturity or otherwise) or upon the sale or redemption of Units by such
Unitholder. The price a Unitholder pays for his or her Units is allocated
among his or her pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the date the Unitholder
purchases his or her Units) in order to determine his or her initial tax basis
(before adjustment for accrual of original issue discount) for his or her pro
rata portion of each Security held by the Trust. The Treasury Obligations are
treated as stripped bonds and are treated as bonds issued at an original issue
discount as of the date a Unitholder purchases his or her Units. Because the
Treasury Obligations represent interests in "stripped" U.S. Treasury
bonds, a Unitholder's initial cost for his or her pro rata portion of each
Treasury Obligation held by the Trust (determined at the time he acquires his
Units, in the manner described above) shall be treated as its "purchase
price" by the Unitholder. Original issue discount is effectively treated
as interest for federal income tax purposes and the amount of original issue
discount in this case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A Unitholder will be
required to include in gross income for each taxable year the sum of his or
her daily portions of original issue discount attributable to the Treasury
Obligations held by the Trust as such original issue discount accrues and
will, in general, be subject to federal income tax with respect to the total
amount of such original issue discount that accrues for such year even though
the income is not distributed to the Unitholders during such year to the
extent it is not less than a "de minimis" amount as determined under
Treasury Regulations relating to stripped bonds. To the extent the amount of
such discount is less than the respective "de minimis" amount, such
discount shall be treated as zero. In general, original issue discount accrues
daily under a constant interest rate method which takes into account the semi-
annual compounding of accrued interest. In the case of the Treasury
Obligations, this method will generally result in an increasing amount of
income to the Unitholders each year. Unitholders should consult their tax
advisers regarding the federal income tax consequences and accretion of
original issue discount. For federal income tax purposes, a Unitholder's pro
rata portion of dividends as defined by Section 316 of the Code paid with
respect to a Fund Share held by the Trust is taxable as ordinary income to the
extent of such Fund's current and accumulated "earnings and profits" .
A Unitholder's pro rata portion of dividends paid on such Fund Share which
exceed such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Fund Share, and to the extent that such
dividends exceed a Unitholder's tax basis in such Fund Share shall generally
be treated as capital gain. In general, any such capital gain will be
short-term unless a Unitholder has held his or her Units for more than one
year.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain except in the case of a dealer and, in general, will
be long-term if the Unitholder has held his or her Units for more than one
year (the date on which the Units are acquired (i.e., the "trade date"
) is excluded for purposes of determining whether the Units have been held for
more than one year). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss (except in the case of a dealer) and,
in general, will be long-term if the Unitholder has held his or her Units for
more than one year. Unitholders should consult their tax advisers regarding
the recognition of such capital gains and losses for federal income tax
purposes.
Dividends Received Deduction. Distributions on the Fund Shares which are
taxable as ordinary income to the Unitholders will constitute dividends for
federal income tax purposes. To the extent dividends received by the Fund are
attributable to foreign corporations, a corporation that owns Units will not
be entitled to the dividends received deduction with respect to the pro rata
portion of such dividends, since the dividends received deduction is generally
available only with respect to dividends paid by domestic corporations.
However, to the extent dividends received by the Fund are from United States
corporations (other than real estate investment trusts) and are designated by
the Fund as being eligible for the dividends received deduction, distributions
received by corporate Unitholders with respect to Fund Shares attributable to
such dividends may qualify for the 70% dividends received deduction, subject
to limitations otherwise applicable to the availability of the deduction.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by a Trust
or Disposition of Units. Because Unitholders are deemed to directly own a pro
rata portion of the Fund Shares as discussed above, Unitholders are advised to
read the discussion of tax consequences for the Fund set forth under "
Trust Portfolio--Stepstone Growth Equity Fund Summary" above.
Distributions declared by the Fund on Fund Shares in October, November or
December that are held by the Trust and paid during the following January will
be treated as having been received by Unitholders on December 31 in the year
such distributions were declared. Distributions of the Fund's net capital gain
which the Fund properly designates as capital gain dividends will be taxable
to the Unitholders as long-term capital gains regardless of how long a person
has been a Unitholder. If a Unitholder holds his or her Units for six months
or less or if the Trust holds shares of the Fund for six months or less, any
loss incurred by a Unitholder related to the disposition of the Fund Shares
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributions received (or deemed to have been received) with
respect to such shares. For taxpayers other than corporations, net capital
gains are subject to a maximum marginal stated tax rate of 28%. However, it
should be noted that legislative proposals are introduced from time to time
that affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units. If the
Unitholder disposes of a Unit, he is deemed thereby to have disposed of his
entire pro rata interest in all assets of the Trust involved including his pro
rata portion of all the Securities represented by that Unit.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him, subject to the following limitation. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of the Trust. As discussed in "Rights of
Unitholders--Redemption of Units" , under certain circumstances a
Unitholder tendering Units for redemption may request an In Kind Distribution.
A Unitholder may also under certain circumstances request an In Kind
Distribution upon the termination of the Trust. See "Rights of
Unitholders--Redemption of Units." Treasury Obligations will not be
distributed to a Unitholder as part of an In Kind Distribution. The tax
consequences relating to the sale of Treasury Obligations are discussed above.
As previously discussed, prior to the redemption of Units or the termination
of the Trust, a Unitholder is considered as owning a pro rata portion of each
of the Trust assets for federal income tax purposes. The receipt of an In Kind
Distribution will result in a Unitholder receiving an undivided interest in
whole shares of the Fund plus, possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
with respect to each Fund Share will depend on whether or not a Unitholder
receives cash in addition to Fund Shares. A Unitholder will not recognize gain
or loss with respect to Fund Shares if a Unitholder only receives shares of
the Fund in exchange for his or her pro rata portion in each share of the Fund
held by the Trust. However, if a Unitholder also receives cash in exchange for
a fractional share of the Fund, such Unitholder will generally recognize gain
or loss based upon the difference between the amount of cash received by the
Unitholder and his tax basis in such fractional share of the Fund. Because a
Unitholder will receive cash in exchange for his or her pro rata portion in
each Treasury Obligation held by the Trust, such Unitholder will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in such Treasury Obligation,
regardless of whether the Unitholder reinvests the cash relating to the
Treasury Obligations into additional Fund Shares.
Because the Trust will own many Securities, a Unitholder who requests an In
Kind Distribution will have to analyze the tax consequences with respect to
each Security owned by the Trust. The amount of taxable gain (or loss)
recognized upon such exchange will generally equal the sum of the gain (or
loss) recognized under the rules described above by such Unitholder with
respect to each Security owned by the Trust. Unitholders who request an In
Kind Distribution are advised to consult their tax advisers in this regard.
General. If more than 50% of the value of the total assets of the Fund consist
of stock or securities in foreign corporations, the Fund may elect to pass
through to its shareholders the foreign income and similar taxes paid by the
Fund in order to enable such shareholders to take a credit (or deduction) for
foreign income taxes paid by the Fund. If such an election is made,
Unitholders of the Trust, because they are deemed to own a pro rata portion of
the Fund Shares held by the Trust, as described above, must include in their
gross income, for Federal income tax purposes, both their portion of dividends
received by the Trust from the Fund, and also their portion of the amount
which the Fund deems to be the Trust's portion of foreign income taxes paid
with respect to, or withheld from, dividends, interest or other income of the
Fund from its foreign investments. Unitholders may then subtract from their
Federal income tax the amount of such taxes withheld, or else treat such
foreign taxes as deductions from gross income; however, as in the case of
investors receiving income directly from foreign sources, the above described
tax credit or deduction is subject to certain limitations. Unitholders should
consult their tax advisers regarding this election and its consequences to
them.
Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the Unitholder has
not been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the Trust will generally
be subject to United States income taxation and withholding in the case of
Units held by non-resident alien individuals, foreign corporations or other
non-United States persons (accrual of original issue discount on the Treasury
Obligations may not be subject to taxation or withholding provided certain
requirements are met). Such persons should consult their tax advisers.
Unitholders will be notified annually of the amounts of original issue
discount, dividend income and long-term capital gains distributions includable
in the Unitholder's gross income and amounts of Trust expenses which may be
claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original issue
discount may also be subject to state and local taxes. Foreign investors may
be subject to different Federal income tax consequences than those described
above. On December 7, 1995, the U.S. Treasury Department released proposed
legislation that, if adopted, could affect the United States federal income
taxation on non-United States Unitholders and the portion of the Trust's
income allocable to non-United States Unitholders. Investors should consult
their tax advisers for specific information on the tax consequences of
particular types of distributions.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of Tanner Propp LLP, special counsel to the Trust for New York
tax matters, the Trust is not an association taxable as a corporation and the
income of the Trust will be treated as the income of the Unitholders under the
existing income tax laws of the State and City of New York.
TRUST OPERATING EXPENSES
Compensation of Sponsor, Evaluator and Selling Agent. Neither the Sponsor nor
the Selling Agent will receive any fees in connection with its activities
relating to the Trust. The Evaluator shall receive that evaluation fee,
payable in any month incurred set forth under "Summary of Essential
Financial Information" (which is based on the number of Units outstanding
on January 1 of each year for which such compensation relates except during
the initial offering period in which event the calculation is based on the
number of Units outstanding at the end of the month of such calculation) for
regularly evaluating the Trust portfolio. Such fee may exceed the actual cost
of providing such evaluation services for this Trust, but at no time will the
total amount paid to the Evaluator for providing evaluation services to unit
investment trusts of which Van Kampen American Capital Distributors, Inc. acts
as Sponsor in any calendar year exceed the aggregate cost to the Evaluator of
supplying such services in such year. This fee may be increased with 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 Selling
Agent will receive sales commissions and may realize other profits (or losses)
in connection with the sale of Units and the deposit of the Securities as
described under "Public Offering--Sponsor and Selling Agent
Compensation" .
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial
Information" (which amount is based on the number of Units outstanding on
January 1 of each year for which such compensation relates except during the
initial offering period in which event the calculation is based on the number
of Units outstanding at the end of the month of such calculation). The
Trustee's fees are payable in monthly installments on the first day of each
month from the Income Account to the extent funds are available and then from
the Capital Account. The Trustee benefits to the extent there are funds for
future distributions, payment of expenses and redemptions in the Capital and
Income Accounts since these Accounts are non-interest bearing and the amounts
earned by the Trustee are retained by the Trustee. Part of the Trustee's
compensation for its services to the Trust is expected to result from the use
of these funds. Such fees may be increased without approval of the Unitholders
by amounts not exceeding proportionate increases under the category "All
Services Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor or, if such category is no longer
published, in a comparable category. For a discussion of the services rendered
by the Trustee pursuant to its obligations under the Trust Agreement, see "
Rights of Unitholders--Reports Provided" and "Trust
Administration."
Miscellaneous Expenses. Costs incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over a five year period.
Such costs will be paid out of Rule 12b-1 fees imposed on Fund Shares which
are rebated to the Trust. To the extent such costs exceed rebated Rule 12b-1
fees, Securities will be sold to pay such costs. The following additional
charges are or may be incurred by the Trust: (a) normal expenses (including
the cost of mailing reports to Unitholders) incurred in connection with the
operation of the Trust, (b) fees of the Trustee for extraordinary services,
(c) expenses of the Trustee (including legal and auditing expenses) and of
counsel designated by the Sponsor, (d) various governmental charges, (e)
expenses and costs of any action taken by the Trustee to protect the Trust and
the rights and interests of Unitholders, (f) indemnification of the Trustee
for any loss, liability or expenses incurred in the administration of the
Trust without negligence, bad faith or wilful misconduct on its part and (g)
expenditures incurred in contacting Unitholders upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When such
fees and expenses are paid by or owing to the Trustee, they are secured by a
lien on the Trust's portfolio. Since the Fund Shares consist primarily of
common stock and the income stream produced by dividend payments is
unpredictable, the Sponsor cannot provide any assurance that Fund
distributions will be sufficient to meet any or all expenses of the Trust.
Rule 12b-1 fees imposed on Fund Shares held in the Trust are rebated to the
Trust, deposited in the Income Account and are used to pay expenses of the
Trust. If the balances in the Income and Capital Accounts are insufficient to
provide for amounts payable by the Trust, the Trustee has the power to sell
Fund Shares (but not Treasury Obligations) to pay such amounts. These sales
may result in capital gains or losses to Unitholders. See "Federal
Taxation."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price (which is based on the
net asset value of the Fund Shares and the aggregate offering side evaluation
of the Treasury Obligations during the initial offering period and includes a
sales charge of 4.7% of the Public Offering Price--which charge is equivalent
to 4.932% of the aggregate underlying value of the Securities). Such
underlying value shall include the proportionate share of any undistributed
cash held in the Capital and Income Accounts. The sales charge applicable to
quantity purchases is, during the initial offering period, reduced on a
graduated basis to any person acquiring Units as set forth below. Reduced
sales charges are applied on either a dollar or Unit basis as described in the
tables below.
<TABLE>
<CAPTION>
Aggregate Dollar Amount Percentage Sales
of Units Purchased Charge Reduction Per Unit
<S> <C>
$50,000-$99,999 0.50%
$100,000-$249,999 1.00%
$250,000-$499,999 2.00%
$500,000 or more 3.00%
</TABLE>
<TABLE>
<CAPTION>
Aggregate Number Percentage Sales
of Units Purchased Charge Reduction Per Unit
<S> <C>
5,000 - 9,999 0.50%
10,000 - 24,999 1.00%
25,000 - 49,999 2.00%
50,000 or more 3.00%
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
Selling Agent, broker, dealer or agent. Subject to availability of Units, this
reduced sales charge structure will apply on all purchases of Units of the
Trust by the same person (a) on any one day (the "Initial Purchase
Date") or (b) on any day subsequent to the Initial Purchase Date, if the
person purchasing the Units purchased a sufficient amount of Units on the
Initial Purchase Date to qualify for a reduced sales charge on such date.
Assuming a purchaser qualifies for a sales charge reduction, to determine the
applicable sales charge reduction it is necessary to accumulate all purchases
made on the Initial Purchase Date and all purchases made in accordance with
(b) above. Units purchased in the name of the spouse of a purchaser or in the
name of a child of such purchaser under 21 years of age will be deemed to be
additional purchases by the purchaser for the purpose of calculating the
applicable sales charge. The reduced sales charge will also be applicable to a
trustee or other fiduciary purchasing securities for one or more trust estate
or fiduciary accounts. Employees and registered representatives of UB
Investment Services, Inc. may purchase Units of the Trust at the current
Public Offering Price less the Selling Agent's discount described in "
Sponsor and Selling Agent Compensation" below.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in the
Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
equal to 4.932% of such value and dividing the sum so obtained by the number
of Units outstanding. Such underlying value shall include the proportionate
share of any cash held in the Capital Account. This computation produced a
gross underwriting profit equal to 4.7% of the Public Offering Price. The
Evaluator will appraise or cause to be appraised daily the value of the
underlying Securities as of the Evaluation Time on days the New York Stock
Exchange is open and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be effective
for all orders received prior to the Evaluation Time on each such day. Orders
received by the Trustee or the Sponsor for purchases, sales or redemptions
after that time, or on a day when the New York Stock Exchange is closed, will
be held until the next determination of price.
The value of the Fund Shares is determined on each business day based on the
last available net asset value calculation on or immediately prior to the
Evaluation Time on the day the valuation is made. During the initial offering
period, the Treasury Obligations will be valued at their net offering prices.
If offering prices are not available for the Treasury Obligations, then such
evaluations will be based on (1) offering prices for comparable securities,
(2) by determining the value of the Treasury Obligations on the offer side of
the market by appraisal or (3) by any combination of the above. The offering
price of the Treasury Obligations may be expected to be greater than the bid
price of the Treasury Obligations by less than 2%.
In offering the Units to the public, neither the Sponsor, Selling Agent nor
any broker-dealers are recommending any of the individual Securities in the
Trust but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Selling Agent, broker-dealers and others at
the Public Offering Price. The Sponsor has qualified the Units for sale in
California only. Any quantity discount provided to investors will be borne by
the selling Selling Agent, dealer or agent as indicated under "General"
above. To facilitate the handling of transactions, sales of Units shall
normally be limited to transactions involving a minimum of 200 Units (100
Units for a tax-sheltered retirement plan). The Selling Agent reserves the
right to reject, in whole or in part, any order for the purchase of Units and
to change the amount of any concession or agency commission to dealers and
others from time to time.
Sponsor and Selling Agent Compensation. The Sponsor will receive a gross sales
commission equal to 4.7% of the Public Offering Price of the Units (equivalent
to 4.932% of the net amount invested), less any reduced sales charge for
quantity purchases (as described under "General" above). Any quantity
discount provided to investors will be borne by the selling Selling Agent,
broker, dealer or agent as indicated under "General" above. The
Sponsor will receive from the Selling Agent the excess of such gross sales
commission over the Selling Agent's discount. The Selling Agent will be
allowed a discount in connection with the distribution of Units of 3.5% of the
Public Offering Price per Unit.
In addition, the Sponsor will realize a profit or will sustain a loss, as the
case may be, as a result of the difference between the price paid for the
Treasury Obligations by the Sponsor and the cost of such Treasury Obligations
to the Trust on the Initial Date of Deposit as well as on subsequent deposits.
See "Portfolio." The Sponsor has 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
Sponsor and Selling Agent may further realize additional profit or loss during
the initial offering period as a result of the possible fluctuations in the
market value of the Securities in the Trust after a date of deposit, since all
proceeds received from purchasers of Units (excluding dealer concessions and
agency commissions allowed, if any) will be retained by the Sponsor or Selling
Agent.
A person will become owner of the Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor prior
to the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor, subject
to the limitations of the Securities Exchange Act of 1934.
Public Market. A secondary market for the Units will not be maintained.
Accordingly, if a Unitholder cannot find another purchaser, a Unitholder
desiring to dispose of his or her Units may be able to dispose of such Units
only by tendering them to the Trustee for redemption at the Redemption Price.
See "Rights of Unitholders--Redemption of Units." Unitholders should
note that the Sponsor or the Trustee may terminate the Trust if the net asset
value of the Trust falls below a certain level. See "Trust
Administration--Amendment or Termination." If redemptions of Units cause
the net asset value of the Trust to fall to such level, the Trust may be
terminated prior to the Mandatory Termination Date stated herein.
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 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
Units. 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 in book entry form only. Units are transferable
by making a written request to the Trustee. A Unitholder must sign such
written request 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.
Distributions of Income and Capital. Any distributions received by the Trust
representing dividends with respect to the Fund Shares are credited by the
Trustee to the Income Account. Other receipts (e.g., capital gains, capital
gains distributions on Fund Shares, proceeds from the sale of Securities,
return of principal, etc.) are credited to the Capital Account of the Trust.
The Trustee will distribute annually any net income other than accreted
interest received with respect to any of the Securities in the Trust on or
about the Distribution Dates to Unitholders of record on the preceding Record
Dates. See "Summary of Essential Financial Information." Proceeds
received on the sale of any Securities in the Trust, to the extent not used to
meet redemptions of Units or pay expenses, will be distributed annually on the
Distribution Date to Unitholders of record on the preceding Record Date.
Income with respect to the original issue discount on the Treasury Obligations
will not be distributed currently, although Unitholders in the Trust will be
subject to federal income tax as if a distribution had occurred. See "
Federal Taxation." Proceeds received from the disposition of any of the
Securities after a record date and prior to the following distribution date
will be held in the Capital Account and not distributed until the next
distribution date applicable to such Capital Account. The Trustee is not
required to pay interest on funds held in the Capital or Income Accounts (but
may itself earn interest thereon and therefore benefits from the use of such
funds).
The distribution to Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income and Capital Accounts
after deducting estimated expenses. Because distributions are not received by
the Trust at a constant rate throughout the year, such distributions to
Unitholders, if any, are expected to fluctuate from distribution to
distribution. Persons who purchase Units will commence receiving distributions
only after such person becomes a record owner. Notification to the Trustee of
the transfer of Units is the responsibility of the purchaser, but in the
normal course of business such notice is provided by the selling broker-dealer.
On a monthly basis, the Trustee will deduct from the Income Account and, to
the extent funds are not sufficient therein, from the Capital Account amounts
necessary to pay the daily accrued expenses of the Trust (as determined on the
basis set forth under "Trust Operating Expenses"). The Trustee also
may withdraw from said accounts such amounts, if any, as it deems necessary to
establish a reserve for any governmental charges payable out of the Trust.
Amounts so withdrawn shall not be considered a part of the Trust's assets
until such time as the Trustee shall return all or any part of such amounts to
the appropriate accounts. In addition, the Trustee may withdraw from the
Income and Capital Accounts such amounts as may be necessary to cover
redemptions of Units.
Reports Provided. The Trustee shall furnish Unitholders in connection with
each distribution a statement of the amount of income and the amount of other
receipts (received since the preceding distribution), if any, being
distributed, expressed in each case as a dollar amount representing the pro
rata share of each Unit outstanding. For as long as the Sponsor deems it to be
in the best interest of the Unitholders, the accounts of the Trust shall be
audited, not less frequently than annually, by independent certified public
accountants, and the report of such accountants shall be furnished by the
Trustee to Unitholders upon request. Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a registered Unitholder a statement (i)
as to the Income Account: income received (including amortization of original
issue discount with respect to the Treasury Obligations), deductions for
applicable taxes and for fees and expenses of the Trust, for redemptions of
Units, if any, and the balance remaining after such distributions and
deductions, expressed in each case both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (ii) as to the Capital Account: the
dates of disposition of any Securities (other than pursuant to In Kind
Distributions) and the net proceeds received therefrom, deductions for payment
of applicable taxes, fees and expenses of the Trust held for distribution to
Unitholders of record as of a date prior to the determination and the balance
remaining after such distributions and deductions expressed both as a total
dollar amount and as a dollar amount representing the pro rata share of each
Unit outstanding on the last business day of such calendar year; (iii) a list
of the Securities held and the number of Units outstanding on the last
business day of such calendar year; (iv) the Redemption Price per Unit based
upon the last computation thereof made during such calendar year; and (v)
amounts actually distributed during such calendar year from the Income and
Capital Accounts, separately stated, expressed as total dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his or her
Units by tender to the Trustee at its corporate trust office at 101 Barclay
Street, 20th Floor, New York, New York 10286. No redemption fee will be
charged. On the third business day following such tender the Unitholder will
be entitled to receive in cash (unless the redeeming Unitholder elects an In
Kind Distribution as indicated below) an amount for each Unit equal to the
Redemption Price per Unit next computed after receipt by the Trustee of such
tender of Units. The "date of tender" is deemed to be the date on
which Units are received by the Trustee, except that as regards Units received
after the Evaluation Time the date of tender is the next day on which the New
York Stock Exchange is open for trading and such Units will be deemed to have
been tendered to the Trustee on such day for redemption at the redemption
price computed on that day.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions. The Securities to be sold will be selected by
the Trustee from those designated on a current list provided by the Sponsor
for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering at least 200 Units (100 Units if held in a tax-sheltered
retirement account) for redemption may request from the Trustee in lieu of a
cash redemption a distribution in kind ("In Kind Distributions") of an
amount and value of Securities per Unit equal to the Redemption Price per Unit
as determined as of the evaluation next following the tender. An In Kind
Distribution on redemption of Units will be made by the Trustee through the
distribution of the Fund Shares in book-entry form to the account of the
Unitholder's bank or broker-dealer at Depository Trust Company. The tendering
Unitholder will receive his pro rata number of Fund Shares comprising the
portfolio. Unitholders may also elect to have the pro rata portion of the
Treasury Obligations to which such tendering Unitholder is entitled reinvested
without a sales charge into Fund Shares. Unitholders not electing to have
their pro rata portion of the Treasury Obligations reinvested into Fund Shares
will receive cash from the Capital Account equal to the pro rata portion of
the Treasury Obligations to which the tendering Unitholder is entitled. In
implementing these redemption procedures, the Trustee shall make any
adjustments necessary to reflect differences between the Redemption Price of
the Securities distributed in kind as of the date of tender. If funds in the
Capital Account are insufficient to cover the required cash distribution to
the tendering Unitholder, the Trustee may sell Securities according to the
criteria discussed above.
To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be, and the diversity of the Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result
in lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the portfolio at the time of
redemption. Special federal income tax consequences will result if a
Unitholder requests an In Kind Distribution. See "Federal Taxation."
The Redemption Price per Unit will be determined on the basis of the net asset
value of the Fund Shares in the Trust plus the aggregate bid price of the
Treasury Obligations, plus or minus cash, if any, in the Income and Capital
Accounts (while the Public Offering Price per Unit during the initial offering
period will be determined on the basis of the aggregate offering price of such
Treasury Obligations and the net asset value of the Fund Shares in the Trust,
plus or minus cash, if any, in the Income and Capital Accounts). On the
Initial Date of Deposit, the Public Offering Price per Unit (which includes
the sales charge) exceeded the values at which Units could have been redeemed
by the amounts shown under "Summary of Essential Financial
Information." While the Trustee has the power to determine the Redemption
Price per Unit when Units are tendered for redemption, such authority has been
delegated to the Evaluator which determines the price per Unit on a daily
basis. The Redemption Price per Unit is the pro rata share of each Unit in the
Trust determined on the basis of (i) the cash on hand in the Trust, (ii) the
value of the Securities in the Trust and (iii) dividends or other
distributions receivable on the Fund Shares trading ex-dividend as of the date
of computation, less (a) amounts representing taxes or other governmental
charges payable out of the Trust and (b) the accrued expenses of the Trust.
See "Public Offering--Offering Price" for a description of the method
of evaluating the Fund Shares and Treasury Obligations.
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size of the Trust will be, and the diversity of the
Trust may be, reduced. Such sales may be required at a time when Securities
would not otherwise be sold and might result in lower prices than might
otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Portfolio Administration. The portfolio of the Trust is not "managed"
by the Sponsor, Selling Agent or the Trustee; their activities described
herein are governed solely by the provisions of the Trust Agreement.
Traditional methods of investment management for a managed fund (such as the
Fund) typically involve frequent changes in a portfolio of securities on the
basis of economic, financial and market analysis. While the Trust will not be
managed, the Trust Agreement provides that the Sponsor may (but need not)
direct the Trustee to dispose of Fund Shares in the event that the Fund
defaults in the payment of a distribution that has been declared, that any
action or proceeding has been instituted restraining the payment of
distributions or there exists any legal question or impediment affecting such
Fund, that the Fund has breached a covenant which would affect the payments of
distributions, or otherwise impair the sound investment character of the Fund,
or that the price of the Fund Shares have declined to such an extent or other
such credit factors exist so that in the opinion of the Sponsor, the retention
of the Fund Shares would be detrimental to the Trust. Treasury Obligations may
be sold by the Trustee only pursuant to the liquidation of the Trust or to
meet redemption requests. Proceeds from the sale of Securities (or any
securities or other property received by the Trust in exchange for Fund
Shares) are credited to the Capital Account for distribution to Unitholders or
to meet redemptions.
As indicated under "Rights of Unitholders--Redemption of Units" above,
the Trustee may also sell Securities designated by the Sponsor, or if not so
directed, in its own discretion, for the purpose of redeeming Units of the
Trust tendered for redemption and the payment of expenses; provided, however,
that in the case of Securities sold for such purposes, Treasury Obligations
may only be sold if the Trust is assured of retaining a sufficient principal
amount of Treasury Obligations to provide funds upon maturity of the Trust at
least equal to $11.00 per Unit. Treasury Obligations may not be sold by the
Trustee to meet expenses of the Trust.
Amendment or Termination. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders (1) to cure any
ambiguity or to correct or supplement any provision thereof which may be
defective or inconsistent, or (2) to make such other provisions as shall not
adversely affect the Unitholders (as determined in good faith by the Sponsor
and the Trustee), provided, however, that the Trust Agreement may not be
amended to increase the number of Units (other than as provided in the Trust
Agreement). The Trust Agreement may also be amended in any respect by the
Trustee and Sponsor, or any of the provisions thereof may be waived, with the
consent of the holders of 51% of the Units then outstanding, provided that no
such amendment or waiver will reduce the interest in the Trust of any
Unitholder without the consent of such Unitholder or reduce the percentage of
Units required to consent to any such amendment or waiver without the consent
of all Unitholders. The Trustee shall advise the Unitholders of any amendment
promptly after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of the Trust then outstanding. In addition, the Trust may
be terminated if the net asset value of the Trust is less than $500,000 unless
the net asset value of the Trust deposits has exceeded $15,000,000, then the
Trust Agreement may be terminated if the net asset value of the Trust is less
than $3,000,000. The Trust will be liquidated by the Trustee in the event that
a sufficient number of Units not yet sold are tendered for redemption by the
Selling Agent, so that the net worth of the Trust would be reduced to less
than 40% of the value of the Securities at the time they were deposited in the
Trust. If the Trust is liquidated because of the redemption of unsold Units by
the Selling Agent, the Sponsor will refund to each purchaser of Units the
entire sales charge paid by such purchaser. The Trust Agreement will terminate
upon the sale or other disposition of the last Security held thereunder, but
in no event will it continue beyond the Mandatory Termination Date stated
under "Summary of Essential Financial Information."
Commencing on the Mandatory Termination Date, Fund Shares will begin to be
sold in connection with the termination of the Trust. The Sponsor will
determine the manner, timing and execution of the sales of the Fund Shares.
The Sponsor shall direct the liquidation of the Fund Shares in such manner as
to effectuate orderly sales and a minimal market impact. In the event the
Sponsor does not so direct, the Fund Shares shall be sold within a reasonable
period and in such manner as the Trustee, in its sole discretion, shall
determine. Written notice of any termination specifying the time or times at
which Unitholders may surrender their certificates for cancellation, if any
are then issued and outstanding, shall be given by the Trustee to each
Unitholder so holding a certificate at his or her address appearing on the
registration books of the Trust maintained by the Trustee. At least 30 days
before the Mandatory Termination Date the Trustee will provide written notice
thereof to all Unitholders and will include with such notice a form to enable
Unitholders owning at least 200 Units (100 Units if held in a tax-sheltered
retirement account) to request an In Kind Distribution rather than payment in
cash upon the termination of the related Trust. To be effective, this request
must be returned to the Trustee at least five business days prior to the
Mandatory Termination Date. On the Mandatory Termination Date (or on the next
business day thereafter if a holiday) the Trustee will deliver each requesting
Unitholder's pro rata number of Fund Shares to the account of the
broker-dealer or bank designated by the Unitholder at Depository Trust
Company. Unitholders may also elect to have the pro rata portion of the
proceeds received upon the maturity of the Treasury Obligations reinvested
without a sales charge into Fund Shares. Unitholders not electing to reinvest
the proceeds received from the Treasury Obligations will be paid their pro
rata portion of the Treasury Obligations in cash. Unitholders owning less than
the minimum number of Units required for In Kind Distributions and those not
requesting an In Kind Distribution will receive a cash distribution from the
sale of the remaining Securities within a reasonable time following the
Mandatory Termination Date. Regardless of the distribution involved, the
Trustee will deduct from the funds of the Trust any accrued costs, expenses,
advances or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee, costs of liquidation and any amounts required as
a reserve to provide for payment of any applicable taxes or other governmental
charges. Any sale of Securities in the Trust upon termination may result in a
lower amount than might otherwise be realized if such sale were not required
at such time. The Trustee will then distribute to each Unitholder his pro rata
share of the balance of the Income and Capital Accounts.
Within 60 days of the final distribution Unitholders will be furnished a final
distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator and the Trustee shall
be under no liability to Unitholders for taking any action or for refraining
from taking any action in good faith pursuant to the Trust Agreement, or for
errors in judgment, but shall be liable only for their own willful
misfeasance, bad faith or negligence (gross negligence in the case of the
Sponsor and Evaluator) 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 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.
Selling Agent. UB Investment Services, Inc. is a registered broker-dealer,
member NASD/SIPC, and a wholly owned subsidiary of Union Bank. UB Investment
Services was established in 1983 and is located at 445 South Figueroa Street,
18th floor, Los Angeles, CA 90071. UB Investment Services offers an extensive
range of investment opportunities to Union Bank's retail and commercial
customer base.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Effective
December 20, 1994, the parent of Van Kampen Merritt Inc. acquired American
Capital Management & Research, Inc. As a result, Van Kampen Merritt Inc.
changed its name to Van Kampen American Capital Distributors, Inc. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas, 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
September 30, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,413,000 (unaudited). (This paragraph
relates only to the Sponsor and not to the Trust or to the Selling Agent. The
information is included herein only for the purpose of informing investors as
to the financial responsibility of the Sponsor and its ability to carry out
its contractual obligations. More detailed financial information will be made
available by the Sponsor upon request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided").
The Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp LLP has acted as counsel for the Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the opening of business on the Initial Date of
Deposit included in this Prospectus have been audited by Grant Thornton LLP,
independent certified public accountants, as set forth in their report in this
Prospectus, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 24 (Stepstone Growth Equity and Treasury Securities Trust):
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Van Kampen American
Capital Equity Opportunity Trust, Series 24 (Stepstone Growth Equity and
Treasury Securities Trust) as of January 19, 1996. The statement of condition
and portfolio are the responsibility of the Sponsor. Our responsibility is to
express an opinion on such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of an irrevocable letter of credit deposited
to purchase securities by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 24 (Stepstone Growth Equity and Treasury
Securities Trust) as of January 19, 1996, in conformity with generally
accepted accounting principles.
Chicago, Illinois GRANT THORNTON LLP
January 19, 1996
<TABLE>
STEPSTONE GROWTH EQUITY AND TREASURY SECURITIES TRUST, SERIES 1
Statement of Condition
As of January 19, 1996
<CAPTION>
<S> <C>
Investment in Securities:
Contracts to purchase securities <F1>..... $ 479,178
Organizational costs <F2>................. 18,432
$ 497,610
Liability and Interest of Unitholders:
Liability--
Accrued organizational costs <F2>......... $ 18,432
Interest of Unitholders--
Cost to investors <F3> ................... $ 503,000
Less: Gross underwriting commission <F3> . 23,822
Net interest to Unitholders <F3>.......... 479,178
Total....................................... $ 497,610
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" and
their cost to the Trust are the same. The value of the Securities is
determined by Interactive Data Corporation on the bases set forth under "
Public Offering--Offering Price" . The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $479,178 which has been
deposited with the Trustee.
<F2>The Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over a five year period. Organizational costs have
been estimated based on a projected trust size of $5,000,000. To the extent
the Trust is larger or smaller, the estimate will vary.
<F3>The aggregate public offering price and the aggregate sales charge of 4.7% are
computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor and Selling Agent Compensation" and
assume all single transactions involve less than $50,000 or 5,000 Units. For
single transactions involving $50,000 or more or 5,000 Units or more, the
sales charge is reduced (see "Public Offering--General") resulting in
an equal reduction in both the Cost to investors and the Gross underwriting
commission while the Net interest to Unitholders remains unchanged.
</TABLE>
<TABLE>
STEPSTONE GROWTH EQUITY AND TREASURY SECURITIES TRUST, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 24)
as of the Initial Date of Deposit: January 19, 1996
<CAPTION>
Market Cost of
Number of Value Securities
Shares Name of Issuer <F1> per Share to Trust <F2>
<S> <C> <C> <C>
12,597 Stepstone Growth Equity Fund $16.660 $ 209,866.02
</TABLE>
<TABLE>
<CAPTION>
Cost of
Maturity Securities
Value Name of Issuer and Title of Security<F1><F3> to Trust <F2>
<S> <C> <C>
$ 550,000 "Zero coupon" U.S. Treasury bonds maturing May 15, 2008 269,312.45
Total Cost of
Securities
to Trust
.................................................................. $ 479,178.47
</TABLE>
NOTES TO PORTFOLIO
(1)All Securities are represented by "regular way" contracts for the
performance of which an irrevocable letter of credit has been deposited with
the Trustee. At the Initial Date of Deposit, Securities may have been
delivered to the Sponsor pursuant to certain of these contracts; the Sponsor
has assigned to the Trustee all of its right, title and interest in and to
such Securities. Contracts to acquire Securities were entered into on January
18, 1996 and are expected to settle on January 23, 1996 and January 24, 1996
(see "The Trust").
(2)The market value of each of the Fund Shares is based on the net asset value
as of the Evaluation Time on the day prior to the Initial Date of Deposit. The
cost of the Treasury Obligations represents the offering side evaluation as
determined by Interactive Data Corporation. The offering side evaluation of
the Treasury Obligations is greater than the bid side evaluation of the
Treasury Obligations which is the basis on which the Redemption Price per Unit
will be determined. The aggregate value of the Trust, based on the bid side
evaluation of the Treasury Obligations and the net asset value of the Fund
Shares therein as of the Evaluation Time on the day prior to the Initial Date
of Deposit was $477,892. Other information regarding the Securities in the
Trust, as of the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Profit
(Loss) to
Cost to Sponsor Sponsor
<S> <C>
$ 478,107 $ 1,071
</TABLE>
(3)The Treasury Obligations are being purchased at a discount from their par
value because there is no stated interest income thereon (such securities are
often referred to as zero coupon bonds). Over the life of the Treasury
Obligations the value increases, so that upon maturity the holders will
receive 100% of the principal amount thereof.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust or the Sponsor. This Prospectus does not constitute an offer to sell, or
a solicitation of an offer to buy, securities in any state to any person to
whom it is not lawful to make such offer in such state.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 3
The Trust 4
Objectives and Securities Selection 4
Trust Portfolio 5
Risk Factors 9
Federal Taxation 16
Trust Operating Expenses 19
Public Offering 20
Rights of Unitholders 22
Trust Administration 24
Other Matters 28
Report of Independent Certified Public
Accountants 28
Statement of Condition 29
Portfolio 30
Notes to Portfolio 30
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
January 19, 1996
Stepstone Growth
Equity and Treasury
Securities Trust,
Series 1
Van Kampen American Capital
Equity Opportunity Trust, Series 24
UB Investment Services, Inc.
[LOGO]
Sales Center
1-800-634-1100
84884 (1/96)
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of Counsel as to the Federal Income tax status of securities
being registered.
3.3 Opinion and consent of counsel as to New York tax status of
securites being registered.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Independent Certified Public Acountants.
4.3 Financial Data Schedule.
Signatures
The Registrant, Van Kampen American Capital Equity Opportunity
Trust, Series 24, hereby identifies Van Kampen Merritt Equity Opportunity
Trust, Series 4 and Van Kampen American Capital Equity Opportunity Trust,
Series 14 for purposes of the representations required by Rule 487 and
represents the following: (1) that the portfolio securities deposited in
the series as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from those
deposited in such previous series; (2) that, except to the extent
necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect
to the securities of which this Registration Statement is being filed,
this Registration Statement does not contain disclosures that differ in
any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined by
the Commission or the staff; and (3) that it has complied with Rule 460
under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
24 has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 19th day of January,
1996.
Van Kampen American Capital Equity
Opportunity Trust, Series 24
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on January 19, 1996.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
Exhibit 1.1
Van Kampen American Capital Equity Opportunity Trust
Series 24
Trust Agreement
Dated: January 19, 1996
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of
Van Kampen American Capital Investment Advisory Corp., as Evaluator, Van
Kampen American Capital Investment Advisory Corp., as Supervisory
Servicer, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Van Kampen Merritt Equity Opportunity Trust, Series 1
and Subsequent Series, Standard Terms and Conditions of Trust, Effective
November 21, 1991" (herein called the "Standard Terms and Conditions of
Trust") and such provisions as are set forth in full and such provisions
as are incorporated by reference constitute a single instrument. All
references herein to Articles and Sections are to Articles and Sections
of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee
agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(22), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
3. Section 1.01(1) shall be amended to read as follows:
"(1) "Depositor" shall mean Van Kampen American Capital
Distributors, Inc. and its successors in interest, or any
successor depositor appointed as hereinafter provided."
4. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean American Portfolio
Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp. and its successors in
interest, or any successor evaluator appointed as
hereinafter provided."
5. Notwithstanding anything to the contrary, all references
to a Supervisory Servicer fee shall be inapplicable.
"(4) "Supervisory Servicer" shall mean Van Kampen
American Capital Investment Advisory Corp. and its
successors in interest, or any successor portfolio
supervisor appointed as hereinafter provided."
6. Section 1.01(19) will be inapplicable for this Trust.
7. The Initial Date of Deposit for the Trust is January 19,
1996.
8. Notwithstanding anything to the contrary appearing in the
Standard Terms and Conditions of Trust, "Stepstone Growth Equity and
Treasury Securities Trust, Series 1" will replace "Select Equity and
Treasury Trust."
9. The second sentence in the second paragraph of Section
3.11 shall be revised as follows: "However, should any issuance,
exchange or substitution be effected notwithstanding such rejection
or without an initial offer, any securities, cash and/or property
received shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee unless the Depositor advises
the Trustee to keep such securities, cash or properties."
10. Section 1.01(10) shall be amended to read as follows:
"(10) "Mutual Fund" shall mean any open-end diversified
management investment company deposited in a Trust as
specified in the Trust Agreement thereof."
11. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the term "Equity Securities" shall be
replaced with "Mutual Fund shares."
12. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the maturity value of the Zero Coupon
Obligations on a per Unit basis shall equal at least $11.00.
13. Section 3.01 of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"Section 3.01. Initial Costs. The following
organization and regular and recurring expenses of a Trust
shall be borne by the Trustee: (a) to the extent not
borne by the Depositor, expenses incurred in establishing
a Trust, including the cost of the initial preparation and
typesetting of the registration statement, prospectuses
(including preliminary prospectuses), the indenture, and
other documents relating to a Trust, Securities and
Exchange Commission and state blue sky registration fees,
the costs of the initial valuation of the portfolio and
audit of a Trust, the initial fees and expenses of the
Trustee, and legal and other out-of-pocket expenses
related thereto, but not including the expenses incurred
in the printing of preliminary prospectuses and
prospectuses, expenses incurred in the preparation and
printing of brochures and other advertising materials and
any other selling expenses, (b) the amount specified in
Section 3.05 and Article VIII, (c) to the extent permitted
by Section 6.02, auditing fees and, to the extent not
borne by the Depositor, expenses incurred in connection
with maintaining a Trust's registration statement current
with Federal and State authorities, (d) any Certificates
issued after the Initial Date of Deposit ; and (e)
expenses of any distribution agent. The Trustee shall be
reimbursed for those organizational expenses referred to
in clause (a) as provided in the related Prospectus.
14. Section 3.02 of the Standard Terms and Conditions of Trust
shall be amended by inserting the following immediately after the
parenthetical in the first sentence of the first paragraph of such
Section 3.02:
"and any Rule 12b-1 fees rebated by or on behalf of the
Mutual Fund"
15. Section 3.06(A)(1) of the Standard Terms and Conditions of
Trust is revised by inserting "and the amount of any rebated Rule
12b-1 fees" at the end of such Section.
16. Section 3.11 shall be revised by inserting the following
section at the end of the first paragraph of such Section:
"In the event that the trustee shall have been notified at
any time of any action to be taken or proposed to be taken
by at least a legally required number of holders of the
shares of any Mutual Fund deposited in a Trust, the
Trustee shall take such action or omit from taking any
action, as appropriate, so as to insure that the shares of
such Mutual Fund are voted as closely as possible in the
same manner and the same general proportion, with respect
to all issues, as are the shares of such Mutual Fund held
by owners other than the Trust."
17. Section 4.01(b) shall be revised by replacing (i) through
(iv) in the second sentence of such Section with the following:
"(i) on the basis of current offering prices for the Zero
Coupon Obligations as obtained from investment dealers or
brokers who customarily deal in securities comparable to
those held by the Trust, and, with respect to any Mutual
Fund shares deposited in a Trust, the net asset value of
such shares, (ii) if offering prices are not available for
the Zero Coupon Obligations, on the basis of the offering
price for comparable securities, and, with respect to any
Mutual Fund shares deposited in a Trust, the net asset
value of such shares, (iii) by determining the valuation
of the Zero Coupon Obligations on the offering side of the
market by appraisal, and, with respest to any Mutual Fund
shares deposited in a Trust, the net asset value of such
shares, or"
18. Section 4.01(c) shall be replaced with the following:
"(c) After the initial offering period and both during
and after the initial offering period, for purposes of the
Trust Fund Evaluations required by Section 5.01 in
determining Redemption Value and Unit Value, Evaluation of
the Securities shall be made in the manner described in
Section 4.01(b), on the basis of current bid prices for
the Zero Coupon Obligations and the net asset value of the
Mutual Fund shares."
19. Section 5.01 shall be amended by replacing the text
following (ii) and (iii) in the first sentence of such Section with
the following:
"(ii) the aggregate Evaluation of all Securities
(including Contract Obligations) on deposit in the Trust
as determined by the Evaluator (such Evaluation to be made
on the basis of bid prices (if Zero Coupon Obligations are
sold on such day, then such Evaluation for the Zero Coupon
Obligations shall be at the weighted average of the
execution prices for all Zero Coupon Obligations sold on
such day) for the Zero Coupon Obligations and Net Asset
Value for the Mutual Fund shares for the purpose of
computing redemption value of Units as set forth in
Section 5.02 hereof, plus (iii) all other income from the
Securities (including dividends receivable on Mutual Fund
shares trading ex-dividend as of the date of such
valuation and accrued rebate of Rule 12b-1 fees as
reported to the Trustee upon which notification the
Trustee is authorized conclusively to rely) as of the
close of business on the date of such Evaluation together
with all other assets of the Trust."
20. Notwithstanding anything to the contrary in Section
5.02 of the Standard Terms and Conditions of trust, upon redemption,
Unitholders will be entitled to an "In Kind Distribution" pursuant
to the terms specified in the Prospectus.
21. Section 6.01(i) of the Standard Terms and Conditions of
Trust shall be amended by deleting the first word of such Section
and replacing it with the following:
"Except as provided in Sections 3.01 and 3.05, no"
22. Section 8.02(d)(i)(y) shall be replaced in its entirety
with the following"
"(y) such Unitholder's pro rata share of the remaining
Mutual Funds shares, in kind, to the extent of the
fractional portion of a share allowed to be transferred on
the Transfer Books of the Mutual Fund,"
23. Section 8.02(d)(i) shall be revised by adding the
following sentence at the end of such Section:
"Notwithstanding the foregoing, Unitholders may elect to
invest that portion of the proceeds received upon
termination represented by cash into Mutual Fund shares
without a sales charge to the extent allowed by the Mutual
Fund."
24. Section 8.04 is hereby amended by inserting the following
at the end of such Section:
", except as provided in Sections 3.01 and 3.05"
25. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the requisite number of Units needed
to be tendered to exercise an In Kind Distribution as set forth in
Sections 5.02 and 8.02 shall be that number set forth in the
Prospectus.
26. Section 8.02 is hereby revised to require an affirmative
vote of Unitholders representing 66 2/3% of the then outstanding
Units to terminate the Trust rather than the 51% indicated therein.
27. Notwithstanding anything to the contrary, Units shall be
issued in book entry form as described in the Prospectus and will
not be held in certificated form.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., and Van Kampen American Capital Investment Advisory Corp., have
each caused this Trust Indenture and Agreement to be executed by their
respective President or one of their respective Vice Presidents and the
corporate seal of each to be hereto affixed and attested to by the
Secretary, Assistant Secretary or one of their respective Vice Presidents
or Assistant Vice Presidents and The Bank of New York, has caused this
Trust Agreement to be executed by one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by one of its
Assistant Treasurers all as of the day, month and year first above
written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
Van Kampen American Capital
Investment Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
The Bank of New York
By Jeffrey Bieselin
Vice President
Attest
By Norbert Loney
Assistant Treasurer
Schedule A to Trust Agreement
Securities Initially Deposited
in
Van Kampen American Capital Equity Opportunity Trust, Series 24
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
January 19, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Van Kampen American Capital Equity Opportunity Trust, Series 24
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc. as Sponsor and Depositor of Van Kampen American
Capital Equity Opportunity Trust, Series 24 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated January 19, 1996, among Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., as Evaluator, Van Kampen American Capital Investment Advisory
Corp., as Supervisory Servicer, and The Bank of New York, as Trustee,
pursuant to which the Depositor has delivered to and deposited the
Securities listed in the Schedule to the Trust Agreement with the Trustee
and pursuant to which the Trustee has provided to or on the order of the
Depositor documentation evidencing ownership of Units of fractional
undivided interest in and ownership of the Trust (hereinafter referred to
as the "Units"), created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of documentation evidencing
ownership of the Units in the Trust have been duly authorized;
and
2. The documentation evidencing ownership of the Units
in the Trust, when duly executed and delivered by the Depositor
and the Trustee in accordance with the aforementioned Trust
Agreement, will constitute valid and binding obligations of the
Trust and the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 33-64783) relating to the Units referred
to above and to the use of our name and to the reference to our firm in
said Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/cjw
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
January 19, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re:Van Kampen American Capital Equity Opportunity Trust, Series 24
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 24 (the "Trust"), in connection with the
issuance of Units of fractional undivided interest in the Trust, under a
Trust Agreement dated January 19, 1996 (the "Indenture") among Van Kampen
American Capital Distributors, Inc., as Depositor, Van Kampen American
Capital Investment Advisory Corp., as Evaluator, Van Kampen American
Capital Investment Advisory Corp., as Supervisory Servicer, and The Bank
of New York, as Trustee. The Trust is comprised of one separate unit
investment trust, Stepstone Growth Equity Trust and Treasury Securities
Trust, Series 1.
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of the Trust will consist of a portfolio of shares of
Stepstone Growth Equity Fund (the "Fund" or "Fund Shares") and zero
coupon U.S. Treasury Obligations (the "Treasury Obligations")
(collectively, the Fund Shares and Treasury Obligations are referred to
herein as "Securities") as set forth in the Prospectus.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) The Trust is not an association taxable as a
corporation for federal income tax purposes.
(ii) A Unitholder will be considered as owning a pro rata
share of each asset of the Trust in the proportion that the
number of Units held by him bears to the total number of Units
outstanding. Under subpart E, subchapter J of chapter 1 of the
Code, income of the Trust will be treated as income of each
Unitholder in the proportion described, and an item of Trust
income will have the same character in the hands of a
Unitholder as it would have in the hands of the Trustee. Each
Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income
is considered to be received by the Trust. A Unitholder's pro
rata portion of distributions of cash or property by the Fund
with respect to Fund Shares ("dividends" as defined by Section
316 of the Code ) are taxable as ordinary income to the extent
of such Fund's current and accumulated "earnings and profits."
A Unitholder's pro rata portion of dividends which exceed such
current and accumulated earnings and profits will first reduce
the Unitholder's tax basis in such Fund Share, and to the
extent that such dividends exceed a Unitholder's tax basis in
such Fund Share, shall be treated as gain from the sale or
exchange of property.
(iii) The price a Unitholder pays for his Units is
allocated among his pro rata portion of each Security held by
the Trust (in the proportion to the fair market values thereof
on the date the Unitholder purchases his Units), in order to
determine his tax basis for his pro rata portion of each
Security held by the Trust.
(iv) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units, except to the extent an in
kind distribution of Fund Shares is received by such Unitholder
from the Trust as discussed below. Such gain or loss is
measured by comparing the proceeds of such redemption or sale
with the adjusted basis of his Units. Before adjustment, such
basis would normally be cost if the Unitholder had acquired his
units by purchase. Such basis will be reduced, but not below
zero, by the Unitholder's pro rata portion of dividends with
respect to Fund Shares which are not taxable as ordinary
income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, redemption, payment on maturity or otherwise)
gain or loss will be recognized to the Unitholder and the
amount thereof will be measured by comparing the Unitholder's
aliquot share of the total proceeds from the transaction with
his basis for his fractional interest in the asset disposed of.
Such basis is ascertained by apportioning the tax basis for his
Units (as of the date on which his Units were acquired) among
each of the Trust assets of such Trust (as of the date on which
his Units were acquired) ratably according to their values as
of the valuation date nearest the date on which he purchased
such Units. A Unitholder's basis in his Units and of his
fractional interest in each Trust asset must be reduced, but
not below zero, by the Unitholder's pro rata portion of
dividends with respect to Fund Shares which are not taxable as
ordinary income.
(vi) With respect to each Unitholder's pro rata portion of
Treasury Obligations held by the Trust: The Treasury
Obligations are treated as bonds that were originally issued at
an original issue discount. Because the Treasury Obligations
represent interests in "stripped" U.S. Treasury bonds, a
Unitholder's initial cost for his pro rata portion of each
Treasury Obligation held by the Trust (determined at the time
he acquires his Units, in the manner described above) shall be
treated as its "purchase price" by the Unitholder. Original
issue discount is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount
in this case is generally the difference between the bond's
purchase price and its stated redemption price at maturity. A
Unitholder will be required to include in gross income for each
taxable year the sum of his daily portions of original issue
discount attributable to the Treasury Obligations held by the
Trust as such original issue discount accrues and will, in
general, be subject to Federal income tax with respect to the
total amount of such original issue discount that accrues for
such year even though the income is not distributed to the
Unitholders during such year to the extent it is not less than
the "de minimis" amount determined under Treasury Regulations
(the "Regulation"). To the extent the amount of such discount
is less than the respective "de minimis" amount, such discount
shall be treated as zero. In general, original issue discount
accrues daily under a constant interest rate method which takes
into account the semi-annual compounding of accrued interest.
In the case of the Treasury Obligations, this method will
generally result in an increasing amount of income to the
Unitholders each year.
(vii) With respect to a Unitholder's pro rata portion of
Stepstone Growth Equity Fund Shares held by the Trust:
(a) Each Unitholder will be considered to receive
his pro rata portion of each distribution made by
Stepstone Growth Equity Fund on the shares, when such
distribution is received by Trust. A distribution
declared by the Fund in October, November or December that
are held by the Trust and paid during the following
January will be treated as having been received by
Unitholders on December 31 in that year such distribution
was declared. To the extent that any distribution by the
Fund on the shares constitutes ordinary income, each
Unitholder will be deemed to have received ordinary income
when the distribution is received by the Trust. To the
extent any distribution constitutes a capital gain
distribution, each Unitholder will be deemed to have
received a capital gain when the distribution is received
by the Trust. To the extent that any distribution
constitutes a return of capital, each Unitholder will be
deemed to have received a return of capital when the
distribution is received by the Trust.
(b) To the extent that the Fund makes a distribution
on the shares which constitutes a return of capital, such
distribution should be applied by a Unitholder to reduce
his basis (determined in accordance with paragraph (v)
hereof) in his pro rata portion of the Fund Shares held by
the Trust until the total of all cash reductions reduces
such basis to zero and thereafter should be reported by
the Unitholder as a capital gain.
(c) If more than 50% of the value of the total
assets of the Fund consist of stock or securities in
foreign corporations, the Fund may elect to pass through
to its shareholders the foreign income and similar taxes
paid by the Fund in order to enable its shareholders to
take a credit (or deduction) for foreign income taxes paid
by the Fund. If this election is made, Unitholders of the
Trust, because they deemed to own a pro rata portion of
the Fund Shares held by the Trust, as described above,
must include in their gross income, for federal income tax
purposes, both their portion of dividends received by the
Trust from the Fund and also their portion of the amount
which the Fund deems to be their portion of foreign income
taxes paid with respect to, or withheld from, dividends,
interest, or other income of the Fund from its foreign
investments. Unitholders may then subtract from their
federal income tax the amount of such taxes withheld, or
else treat such foreign taxes as deductions from gross
income; however, as in the case of investors receiving
income directly from foreign sources, the above described
tax credit or deduction is subject to certain limitations.
(viii) A Unitholder's portion of gain, if any, upon the sale
or redemption of Units or the disposition of Securities held by
the Trust will generally be considered a capital gain except in
the case of a dealer and will be generally long-term if the
Unitholder has held his Units for more than one year. A
Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by
the Trust will generally be considered a capital loss (except
in the case of a dealer) and will be generally long-term if the
Unitholder has held his Units for more than one year.
(ix) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in
kind distribution of Fund Shares upon the redemption of Units
or upon the termination of the Trust. As previously discussed,
prior to the redemption of Units or the termination of the
Trust, a Unitholder is considered as owning a pro rata portion
of each of the particular Trust's assets. The receipt of an in
kind distribution will result in a Unitholder receiving an
undivided interest in whole shares of the Fund plus, possibly,
cash. The potential federal income tax consequences that may
occur under an in kind distribution with respect to each Fund
Share will depend on whether or not a Unitholder receives cash
in addition to Fund Shares (and does not include the Treasury
Obligations). A Unitholder will not recognize gain or loss
with respect to Fund Shares if a Unitholder only receives
shares of the Fund in exchange for his or her pro rata portion
in each share of the Fund held by the Trust. However, if a
Unitholder also receives cash in exchange for a fractional
share of the Fund such Unitholder will generally recognize gain
or loss based upon the difference between the amount of cash
received by the Unitholder and its tax basis in such fractional
share of the Fund. Because a Unitholder will receive cash in
exchange for his or her pro rata portion in each Treasury
Obligation held by the Trust, such Unitholder will generally
recognize gain or loss based upon the difference between the
amount of cash received by the Unitholder and his tax basis in
such Treasury Obligation, regardless of whether the Unitholder
reinvests the cash relating to the Treasury Obligations into
additional Fund shares. Because the Trust will own many
Securities, a Unitholder who requests an in kind distribution
will have to analyze the tax consequences with respect to each
Security owned by such Trust. The total amount of taxable
gains (or losses) recognized upon such exchange will generally
equal the sum of the gain (or loss) recognized under the rules
described above by such Unitholder with respect to each
Security owned by the Trust.
Distributions on the Fund Shares which are taxable as ordinary
income to the Unitholders will constitute dividends for federal income
tax purposes. To the extent dividends received by the Fund are
attributable to foreign corporations, a corporation that owns Units will
not be entitled to the dividends received deduction with respect to the
pro rata portion of such dividends, since the dividends received
deduction is generally available only with respect to dividends paid by
domestic corporations. However, to the extent dividends received by the
Fund are from United States corporations (other than real estate
investment trusts) and are designated by the Fund as being eligible for
the dividends received deduction, distributions received by corporate
Unitholders with respect to Fund Shares attributable to such dividends
may qualify for the 70% dividends received deduction, subject to
limitations otherwise applicable to the availability of the deduction.
Each Unitholder's pro rata share of each expense paid by the Trust
is deductible by the Unitholder to the same extent as though the expense
had been paid directly by him, subject to the following limitation. It
should be noted that as a result of the Tax Reform Act of 1986 certain
miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible
by individuals only to the extent they exceed 2% of such individual's
adjusted gross income. Unitholders may be required to treat certain
expenses of the Trust as miscellaneous itemized deductions subject to
this limitation.
The scope of this opinion is expressly limited to the matters set
forth herein, and, except as expressly set forth above, we express no
opinion with respect to any other taxes, including state or local taxes
or collateral tax consequences with respect to the purchase, ownership
and disposition of Units.
Very truly yours
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Tanner Propp LLP
99 Park Avenue
New York, New York 10016
January 19, 1996
Van Kampen American Capital Equity
Opportunity Trust, Series 24
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 24 (the "Fund") consisting of Stepstone
Growth Equity and Treasury Trust, Series 1 (individually a "Trust") for
the purposes of determining the applicability of certain New York taxes
under the circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the
"Indenture"), dated as of today (the "Date of Deposit") among Van Kampen
American Capital Distributors, Inc. (the "Depositor"), American Portfolio
Evaluation Services, a division of a subsidiary of Depositor, as
Evaluator and The Bank of New York as Trustee (the "Trustee"). As
described in the prospectus relating to the Fund dated today to be filed
as an amendment to a registration statement heretofore filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Prospectus") (File Number 33-64783), the objectives of the
Fund are to provide the potential for long term capital appreciation and
income through investment in shares of a mutual fund and treasury
securities. It is noted that no opinion is expressed herein with regard
to the Federal tax aspects of the securities, units of the Trust (the
"Units"), or any interest, gains or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trust the securities and/or contracts and cash for
the purchase thereof together with an irrevocable letter of credit in the
amount required for the purchase price of the securities comprising the
corpus of the Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities
to be deposited in the Trust, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of the Trust as more fully set forth in
the Prospectus. The Units, which are represented by certificates
("Certificates"), will be offered to the public upon the effectiveness of
the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash
dividends received by the Fund and with the proceeds from the disposition
of securities held in the Fund and the proceeds of the treasury
obligation on maturity and the distribution of such cash dividends and
proceeds to the Unitholders. The Trustee will also maintain records of
the registered holders of Certificates representing an interest in the
Fund and administer the redemption of Units by such Certificateholders
and may perform certain administrative functions with respect to an
automatic investment option.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations..
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(l)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in
which interest or ownership is evidenced by
certificate or other written instrument. includes,
but is not limited to, an association commonly
referred to as a "business trust" or "Massachusetts
trust". In determining whether a trustee or trustees
are conducting a business, the form of the agreement
is of significance but is not controlling. The
actual activities of the trustee or trustees, not
their purposes and powers, will be regarded as
decisive factors in determining whether a trust is
subject to tax under Article 9-A. The mere
investment of funds and the collection of income
therefrom, with incidental replacement of securities
and reinvestment of funds, does not constitute the
conduct of a business in the case of a business
conducted by the trustee or trustees. 20 NYCRR 1-
2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1073, 85 N.Y.S.2d 705 (1949).
An opinion of the Attorney General of the State of New York, 47 N.Y.
Atty. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee
of an unincorporated investment trust was without authority to reinvest
amounts received upon the sales of securities and could dispose of
securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell
obligations contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the issuer of
such equity security is in question or in which cash is needed to pay
redeeming Unit holders or to pay expenses, or where the Fund is
liquidated pursuant to the termination of the Indenture. In substance,
the Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to vary the
investment of any Unit holder in a Trust.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance June 23,
1978.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be
considered as owning a share of each asset of a Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income
of each Unit holder in said proportion pursuant to Subpart E of Part 1,
subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York.
1. Each Trust will not constitute an association taxable as a
corporation under New York law and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax.
2. The income of the Trust will be treated as the income of the
Unit holders under the income tax laws of the State and City of New York,
and
3. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business trade profession or occupation
carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
Tanner Propp LLP
MNS:ac
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
January 19, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 24
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 33-64783
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Services, Inc.,
as the Evaluator, and to the use of the Obligations prepared by us which
are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Independent Certified Public Accountants' Consent
We have issued our report dated January 19, 1996 on the statement of
condition and related securities portfolio of Van Kampen American Capital
Equity Opportunity Trust, Series 24 as of January 19, 1996 contained in
the Registration Statement on Form S-6 and Prospectus. We consent to the
use of our report in the Registration Statement and Prospectus and to the
use of our name as it appears under the caption "Other Matters-
Independent Certified Public Accountants.'"
Grant Thornton LLP
Chicago, Illinois
January 19, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects current period taken from 487 on January 19, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> SGET
<CAPTION>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-19-1996
<PERIOD-END> JAN-19-1996
<INVESTMENTS-AT-COST> 479178
<INVESTMENTS-AT-VALUE> 479178
<RECEIVABLES> 18432
<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 497610
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18432
<TOTAL-LIABILITIES> 18432
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<PAID-IN-CAPITAL-COMMON> 479178
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<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
