File No. 33-65389
CIK #896991
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 2
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 26
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 March 19, 1996 pursuant to Rule 487.
Van Kampen American Capital Equity Opportunity Trust
Series 26
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
March 19, 1996
The Principal Trust
Princor Emerging Growth and Treasury, Series 1
The Trust. Van Kampen American Capital Equity Opportunity Trust, Series 26 is
comprised of one unit investment trust, Princor Emerging Growth and Treasury,
Series 1 (the "Principal Trust" or the "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 Princor Emerging Growth Fund, Inc. (the "
Fund" or "Fund Shares" ). 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 Princor
Emerging Growth Fund and to protect Unitholders' capital by investing a
portion of its portfolio in "zero coupon" U.S. Treasury obligations.
Collectively, the Treasury Obligations and the Fund Shares are referred to
herein as the "Securities." See "Portfolio." 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 of emerging and other
growth-oriented companies. 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 during
the initial offering period includes the net asset value of the Fund Shares,
the aggregate offering price of the Treasury Obligations, a sales charge equal
to 4.9% of the Public Offering Price which is equivalent to 5.152% of the
aggregate value of the Securities, and cash, if any, in the Income and Capital
Accounts held or owned by the Trust. After the initial offering period, the
secondary market Public Offering Price of the Trust will include the net asset
value of the Fund Shares, the aggregate bid price of the Treasury Obligations,
the applicable sales charge as described herein, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. During the initial
offering period, the sales charge is reduced on a graduated scale for sales
involving at least 10,000 Units. If Units were available for purchase at the
close of business on the day prior to the Initial Date of Deposit, the Public
Offering Price per Unit would have been $10.01. 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 termination 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
termination of the Trust 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
Princor Emerging Growth Fund and Treasury 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 at least 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, upon surrender of Units for redemption, to
each Unitholder his pro rata share of the Trust's assets, less expenses, in
the manner set forth under "Rights of Unitholders--Distributions of Income
and Capital."
Secondary Market for Units. After the initial offering period, although not
obligated to do so, the Managing Underwriter intends to maintain a market for
Units of the Trust and offer to repurchase such Units at prices which are
based on the net asset value of the Fund Shares plus the bid side evaluation
of the Treasury Obligations, plus or minus cash, if any, in the Capital and
Income Accounts of the Trust. If a secondary market is maintained during the
initial offering period, the prices at which Units will be repurchased will be
based upon the net asset value of the Fund Shares in the Trust plus the
aggregate offer side evaluation of the Treasury Obligations, plus or minus
cash, if any, in the Capital and Income Accounts of the Trust. If a secondary
market is not maintained, a Unitholder may redeem Units through redemption at
prices based upon the 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. 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 specifying the time or
times at which Unitholders may surrender their certificates for cancellation
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. Unitholders may elect to receive
their pro rata portion of the Fund Shares and to have their pro rata portion
of the proceeds received upon maturity of the Treasury Obligations reinvested
without a sales charge into Fund Shares (an "In Kind Distribution" )
rather than to receive payment in cash for such Unitholder's pro rata share of
such amounts. All Unitholders not electing such option will receive cash
representing their pro rata portion of the Fund Shares and Treasury
Obligations. To be effective, the election form, together with surrendered
certificates, if issued, 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 reinvestment into 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, economic
recession, currency exchange fluctuations, foreign withholding, and
differences between domestic and foreign legal, auditing, brokerage and
economic standards. 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>
PRINCOR EMERGING GROWTH AND TREASURY, SERIES 1
Summary of Essential Financial Information
As of the Close of Business on the Day Prior to the
Initial Date of Deposit: March 18, 1996
Managing Underwriter: Principal Financial Securities, Inc.
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate 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 Princor Emerging Growth Fund Initially Deposited 6,900
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>................................. $ 475,839
Aggregate Value of Securities per Unit.......................................... $ 9.52
Sales Charge 4.9% (5.152% of the Aggregate Value of Securities per Unit)........ $ .49
Public Offering Price per Unit <F2>............................................. $ 10.01
Redemption Price per Unit........................................................ $ 9.49
Secondary Market Repurchase Price per Unit....................................... $ 9.52
Excess of Public Offering Price per Unit over Redemption Price per Unit.......... $ .52
Excess of Initial Repurchase Price per Unit over Redemption Price per Unit....... $ .03
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Evaluation Time..............4:00 P.M. New York time
Mandatory Termination Date...May 15, 2008
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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 $3,000,000.
Estimated Princor Emerging Growth Fund Annual Expenses <F3>...$.05679 per Unit
Trustee's Annual Fee..........................................$.00800 per Unit
Estimated Annual Organizational Expenses <F4>.................$.00709 per Unit
Evaluator's Annual Evaluation Fee.............................Maximum of $.0025 per Unit
As soon as practicable after the
Record Date...................................................Fund's ex-dividend date
As soon as practicable after the
Distribution Date.............................................Fund's distribution date
<FN>
<F1>The Fund Shares 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 Princor Emerging Growth Fund Expenses represent the intrinsic cost
to each Unit due to the underlying costs associated with the Princor Emerging
Growth Fund and are based upon the net asset value of that number of Princor
Emerging Growth 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 "Expenses of the Trust" and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts. Estimated Annual Organizational
Expenses have been estimated based on a projected Trust size of $10,000,000.
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 26 is comprised
of one unit investment trust, Princor Emerging Growth and Treasury, 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 same percentage
relationship among the number of Fund Shares and the par value of Treasury
Obligations that existed immediately prior to any such subsequent deposit.
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 51% Treasury Obligations and approximately 49%
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 to 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: (a) for the portion of the Securities that are Fund
Shares, the Managing Underwriter selected shares of Princor Emerging Growth
Fund, a mutual fund which seeks long-term capital appreciation by investing
primarily in equity securities of emerging and other growth-oriented companies
and which may invest up to 20% of its assets in foreign issuers, and (b) for
the portion of the Securities that are Treasury Obligations, the Managing
Underwriter selected obligations which evidence 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.
Because over the long term equity investments have historically outperformed
other types of investments, an investment in Fund Shares offers the potential
to build wealth and outpace inflation. In particular, stocks of small- and
medium-sized companies may provide even greater growth potential. The Fund's
portfolio will predominantly consist of companies which are experiencing their
optimum growth period. Generally, the Fund's management favors stocks of
companies whose sales records and earnings growth are higher than broad-based
market averages. However, emerging growth stocks may have a higher degree of
risk than stocks of companies that are larger and more developed.
Consequently, the Trust is designed to combine investments in the Princor
Emerging Growth 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 capital. The Managing Underwriter
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 emerging growth stocks while providing the
opportunity for higher growth. The Managing Underwriter 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 and (b) the
assurance that upon termination of the Trust, each Unitholder will receive an
amount equal to the bond's maturity value (approximately $11.00 per Unit).
An investor will be subject 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 Fund will make distributions. The Trust, however, has
been organized so that investors would receive, at termination, 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 Managing Underwriter 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 underlying securities in 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 Securities 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 Managing
Underwriter 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 Princor Emerging Growth Fund and (b)
zero-coupon U.S. Treasury Obligations.
Fund Shares. The portfolio of the Trust contains shares of Princor Emerging
Growth Fund, Inc.
Princor Emerging Growth Fund is one of six open end management investment
companies included in the Princor Growth-Oriented Funds which are part of the
Princor family of mutual funds. The objective of the Princor Emerging Growth
Fund is to achieve long-term capital appreciation by investing primarily in
the common stocks and securities (both debt and preferred stock) convertible
into common stocks of emerging and other growth-oriented companies that, in
the judgment of the Fund's Manager, are responsive to changes within the
marketplace and have the fundamental characteristics to support growth.
The Fund is authorized to issue two distinct classes of shares ("Class A
shares" and "Class B shares" ). Each class of shares may be
purchased by investors at a price equal to the net asset value of the Fund per
share plus the respective sales charge. The Trust has purchased Class A shares
for deposit and any reference to Fund Shares in this prospectus shall refer to
Class A shares.
The Fund's investment manager is Princor Management Corporation, an indirectly
wholly-owned subsidiary of Principal Mutual Life Insurance Company. Additional
information about the Fund appears in "Trust Portfolio--Princor Emerging
Growth Fund Summary." This prospectus sets forth concisely 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 Princor Financial Services
Corporation, P.O. Box 10423, Des Moines, Iowa 50306, or by calling
1-800-247-4123. The Fund's Statement of Additional Information, which is
incorporated in its entirety by reference in the Fund's prospectus, contains
more 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 Managing Underwriter, 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." Fund Shares, 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 Fund Shares in accordance with the instructions of the
Sponsor. Actions required to be taken with respect to the Treasury Obligations
will be 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 shares held by owners other
than the Trust and shall take such action with respect to the Treasury
Obligations as it, in its sole discretion, shall deem advisable.
The following section provides a brief description of the Princor Emerging
Growth Fund, specifically its relationship with the Trust. More specific
information regarding Princor Emerging Growth Fund can be obtained from the
prospectus and Statement of Additional Information prepared therefor as
described above. For risk factors related to an investment in Fund Shares, see
"Risk Factors."
Princor Emerging Growth Fund Summary
The tables on the following pages depict the fees and expenses applicable to
the purchase and ownership of shares of the Princor Emerging Growth Fund. The
table immediately below depicts Class A shares of the Fund and is based on
amounts incurred by the Fund during the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Princor Emerging Growth Fund
Class A
Shares
<S> <C>
SHAREHOLDER
TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)1... 4.75%
Redemption Fees.................................................................. None
ANNUAL OPERATING
EXPENSES:
(as a percentage of average net assets)...........................................
Management Fee................................................................... 0.64%
12b-1 Fee2....................................................................... 0.25%
Other Expenses................................................................... 0.58%
Total Fund Operating Expenses.................................................... 1.47%
<FN>
<F1>There is no sales charge payable upon the purchase of the Fund Shares
deposited in the Trust. However, the maximum sales charge on the Units, and
therefore indirectly on the Fund Shares is 4.9% during both the initial
offering period and in the secondary market.
<F2>Effectively, there are no 12b-1 fees on Fund Shares held in the Trust.
However, Unitholders who acquire shares of the Fund at the Trust's termination
will begin to incur 12b-1 fees at such time as shares are acquired.
</TABLE>
Examples:
An investor would pay the following expenses on a $1,000 investment in Fund
Shares assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
Princor Emerging Growth Fund
Class A
Shares
<S> <C>
1 year..... $ 62
3 years.... 92
5 years.... 124
10 years... 215
</TABLE>
An investor would pay the following expenses on the same investment assuming
no redemption:
<TABLE>
<CAPTION>
Princor Emerging Growth Fund
Class A
Shares
<S> <C>
1 year..... $ 62
3 years.... 92
5 years.... 124
10 years... 215
</TABLE>
The purpose of the preceding tables is to help investors in the Fund
understand the various expenses that they will bear either directly or
indirectly. Although Annual Fund Operating Expenses shown in the expense table
above for Class A shares are generally based upon the Fund's actual expenses,
the 12b-1 Plan adopted by the Fund permits the Fund's Underwriter to retain an
annual fee of up to .25% of the Fund's average net assets. A portion of this
fee is considered an asset-based sales charge. Thus, it is theoretically
possible for a long-term shareholder of Class A shares to pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers. While there are effectively no
12b-1 fees on Fund shares held in the Trust, Unitholders who acquire shares of
the Fund at the Trust's termination will begin to incur 12b-1 fees at such
time as shares are acquired.
FINANCIAL HIGHLIGHTS
The following annual financial highlights for the period from the Fund's
inception through October 31, 1995, have been derived from financial
statements which have been audited by the Fund's independent auditors, whose
report thereon has been incorporated by reference into the Fund's prospectus.
The financial highlights should be read in conjunction with the financial
statements, related notes and other financial information for the Fund
appearing in and incorporated by reference into the Fund's prospectus. The
financial statements may be obtained by Fund shareholders, without charge, by
telephoning 1-800-451-5447.
<TABLE>
<CAPTION>
Princor Emerging Growth Fund
Year ended
October 31, Year ended Year ended Year ended Year ended
1995 October 31, 1994 October 31, 1993 October 31, 1992 October 31, 1991
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of
Period.............................. $25.08 $23.56 $19.79 $18.33 $11.35
Income from investment operations:..
Net Investment Income............... .12 -- .06 .14 .17
Net Realized and Unrealized Gain
(Loss) on Investments............... 6.45 1.61 3.82 1.92 7.06
Total from Investment Operations.... 6.57 1.61 3.88 2.06 7.23
Less Distributions:.................
Dividends From Net Investment Income (.06) -- (.11) (.15) (.21)
Distributions From Capital Gains.... (.14) (.09) -- (.45) (.04)
Total Distributions................. (.20) (.09) (.11) (.60) (.25)
Net Asset Value at End of Period.... $31.45 $25.08 23.56 $19.79 $18.33
Total Return (b).................... 26.41% 6.86% 19.66% 11.63% 64.56%
Ratios/Supplemental Data:...........
Net Assets at End of Period (in
thousands).......................... $150,611 $92,965 $48,668 $29,055 $17,174
Ratio of Net Expenses to Average
Net Assets.......................... 1.47% 1.74% 1.66% 1.74% 1.78%
Ratio of Net Investment Income to
Average Net Assets.................. .47% .02% .26% .80% 1.14%
Portfolio Turnover Rate............. 13.5% 8.1% 7.0% 5.8% 8.4%
</TABLE>
<TABLE>
<CAPTION>
Princor Emerging Growth Fund
Year ended
October 31, Year ended Period ended
1990 October 31, 1989 October 31, 1988(a)
<S> <C> <C> <C>
Net Asset Value at Beginning of Period................... $14.10 $12.77 $10.50
Income from investment operations:.......................
Net Investment Income.................................... .31 .26 .06
Net Realized and Unrealized Gain (Loss) on Investments... (2.59) 2.02 2.26
Total from Investment Operations......................... (2.28) 2.28 2.32
Less Distributions:......................................
Dividends From Net Investment Income..................... (.37) (.15) (.05)
Distributions From Capital Gains......................... (.10) (.80) --
Total Distributions...................................... (.47) (.95) (.05)
Net Asset Value at End of Period......................... $11.35 $14.10 $12.77
Total Return (b)......................................... (16.80)% 19.65% 19.72%(c)
Ratios/Supplemental Data:................................
Net Assets at End of Period (in thousands)............... $8,959 $8,946 $6,076
Ratio of Net Expenses to Average Net Assets.............. 1.94% 1.79% 1.52%(d)
Ratio of Net Investment Income to Average Net Assets..... 2.43% 2.09% .84%(d)
Portfolio Turnover Rate.................................. 15.8% 13.5% 19.5%(d)
</TABLE>
Notes to financial highlights
(a) Period from December 18, 1987, date shares first offered to public,
through October 31, 1988. Net investment income, aggregating $.04 per share
for the period from the initial purchase of shares on October 30, 1987 through
December 17, 1987, was recognized, none of which was distributed to its sole
stockholder, Principal Mutual Life Insurance Company, during the period.
Additionally, the Fund incurred net realized and unrealized gains on
investments of $.46 per share during this initial interim period. This
represented activities of the fund prior to the initial public offering of
fund shares.
(b) Total Return is calculated without the front-end sales charge.
(c) Total Return amounts have not been annualized.
(d) Computed on an annualized basis.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE FUND
The investment objectives and policies of the Fund are described below. There
can be no assurance that the objectives of the Fund will be realized.
The Princor Emerging Growth Fund is one of six Princor Growth-Oriented Funds,
four of which (including the Fund) seek capital appreciation through
investments in equity securities, one of which seeks a total investment return
including both capital appreciation and income through investments in equity
and debt securities, and one of which seeks growth of capital and growth of
income primarily through investments in common stocks of well capitalized,
established companies.
The Fund may invest in the following securities: common stocks; preferred
stocks and debt securities that are convertible into common stock, that carry
rights or warrants to purchase common stock or that carry rights to
participate in earnings; rights or warrants to subscribe to or purchase any of
the foregoing securities; and sponsored and unsponsored American Depositary
Receipts (ADRs) based on any of the foregoing securities. Unsponsored ADRs are
not created by the issuer of the underlying security, may be subject to fees
imposed by the issuing bank that, in the case of sponsored ADRs, would be paid
by the issuer of a sponsored ADR and may involve additional risks such as
reduced availability of information about the issuer of the underlying
security. The Fund will seek to be fully invested under normal conditions in
equity securities. When in the opinion of the Manager current market or
economic conditions warrant, the Fund may, for temporary defensive purposes,
place all or a portion of its assets in cash (on which the Fund would earn no
income), cash equivalents, bank certificates of deposit, bankers acceptances,
repurchase agreements, commercial paper, commercial paper master notes which
are floating rate debt instruments without a fixed maturity, United States
Government securities, and preferred stocks and debt securities, whether or
not convertible into or carrying rights for common stock. When investing for
temporary defensive purposes the Fund is not investing so as to achieve its
investment objective. The Fund may also maintain reasonable amounts in cash or
short-term debt securities for daily cash management purposes or pending
selection of particular long-term investments.
The objective of Princor Emerging Growth Fund is to achieve long-term capital
appreciation. The strategy of this Fund is to invest primarily in the common
stocks and securities (both debt and preferred stock) convertible into common
stocks of emerging and other growth-oriented companies that, in the judgment
of the Manager, are responsive to changes within the marketplace and have the
fundamental characteristics to support growth. In pursuing its objective of
capital appreciation, the Fund may invest, for any period of time, in any
industry and in any kind of growth-oriented company, whether new and
unseasoned or well known and established. Under normal market conditions, the
Fund will invest at least 65% of its assets in securities of companies having
a total market capitalization of $1 billion or less. The Fund may invest up to
20% of its assets in securities of foreign issuers. For a description of
certain investment risks associated with foreign securities, see "Risk
Factors" below.
There can be, of course, no assurance that the Fund will attain its objective.
Investment in emerging and other growth-oriented companies may involve greater
risk than investment in other companies. The securities of growth-oriented
companies may be subject to more abrupt or erratic market movements, and many
of them may have limited product lines, markets, financial resources or
management. Because of these factors and of the length of time that may be
required for full development of the growth prospects of some of the companies
in which the Fund invests, the Fund believes that its shares are suitable only
for persons who are able to assume the risk of investing in securities of
emerging and growth-oriented companies and prepared to maintain their
investment during periods of adverse market conditions. Investors should not
rely on the Fund for their short-term financial needs. Since the Fund will not
be seeking current income, investors should not view a purchase of Fund shares
as a complete investment program.
CERTAIN INVESTMENT POLICIES AND RESTRICTIONS
Following is a discussion of certain investment practices that the Fund may
use in an effort to achieve its investment objectives.
Repurchase Agreements/Lending Portfolio Securities. The Fund may enter into
repurchase agreements with, and may lend its portfolio securities to,
unaffiliated broker-dealers and other unaffiliated qualified financial
institutions. These transactions must be fully collateralized at all times,
but involve some credit risk to the Fund if the other party should default on
its obligations, and the Fund is delayed or prevented from recovering on the
collateral. See the Statement of Additional Information for further
information regarding the credit risks associated with repurchase agreements
and the standards adopted by the Fund's Board of Directors to deal with those
risks. The Fund does not intend either (i) to enter into repurchase agreements
that mature in more than seven days if any such investment, together with any
other illiquid securities held by the Fund, would amount to more than 15% of
its total assets or (ii) to lend securities in excess of 30% of its total
assets.
Warrants. The Fund may invest in warrants up to 5% of its assets, of which not
more than 2% may be invested in warrants that are not listed on either the New
York or American Stock Exchange.
Borrowing. As a matter of fundamental policy, the Fund may borrow money only
for temporary or emergency purposes. Further, the Fund may borrow only in an
amount not exceeding 5% of its assets.
Options. The Fund may purchase covered spread options, which would give the
Fund the right to sell a security that it owns at a fixed dollar spread or
yield spread in relationship to another security that the Fund does not own,
but which is used as a benchmark. The Fund may also purchase and sell
financial futures contracts, options on financial futures contracts and
options on securities and securities indices, but will not invest more than 5%
of its assets in the purchase of options on securities, securities indices and
financial futures contracts or in initial margin and premiums on financial
futures contracts and options thereon. The Fund may write options on
securities and securities indices to generate additional revenue and for
hedging purposes and may enter into transactions in financial futures
contracts and options on those contracts for hedging purposes.
General. The Statement of Additional Information includes further information
concerning the Fund's investment policies and applicable investment
restrictions. The investment objectives of the Fund are fundamental and
certain investment restrictions designated as such in the prospectus or in the
Statement of Additional Information are fundamental policies that may not be
changed without approval by the holders of the lesser of: (i) 67% of the
Fund's shares present or represented at a shareholders' meeting at which the
holders of more than 50% of such shares are present or represented by proxy;
or (ii) more than 50% of the outstanding shares of the Fund. All other
investment policies described in the prospectus and the Statement of
Additional Information are not fundamental and may be changed by the Board of
Directors of the Fund without shareholder approval.
HOW THE FUND IS MANAGED
Under Maryland law, the business and affairs of the Fund are managed under the
direction of its Board of Directors. Investment services and certain other
services are furnished to the Fund under the terms of a Management Agreement
between the Fund and the Manager. The Manager for the Fund is Princor
Management Corporation (the "Manager" ), an indirectly wholly-owned
subsidiary of Principal Mutual Life Insurance Company, a mutual life insurance
company organized in 1879 under the laws of the State of Iowa. The address of
the Manager is The Principal Financial Group, Des Moines, Iowa 50392. The
Manager was organized on January 10, 1969, and since that time has managed
various mutual funds sponsored by Principal Mutual Life Insurance Company. As
of January 31, 1996, the Manager served as investment advisor for 26 such
funds with assets totaling approximately $3 billion.
The Manager has executed an agreement with Invista Capital Management, Inc.
("Invista" ) under which Invista has agreed to assume the obligations
of the Manager to provide investment advisory services for the Fund. The
Manager will reimburse Invista for the cost of providing these services.
Invista, an indirectly wholly-owned subsidiary of Principal Mutual Life
Insurance Company and an affiliate of the Manager, was founded in 1985 and
manages investments for institutional investors, including Principal Mutual
Life. Assets under management at October 31, 1995 were approximately $15.6
billion. Invista's address is 1500 Hub Tower, 699 Walnut, Des Moines, Iowa
50309.
The Manager or Invista advises the Fund on investment policies and on the
composition of the Fund's portfolio. In this connection, the Manager or
Invista furnishes to the Board of Directors of the Fund a recommended
investment program consistent with the Fund's investment objective and
policies. The Manager or Invista is authorized, within the scope of the
approved investment program, to determine which securities are to be bought or
sold, and in what amounts.
The Manager or Invista has assigned certain individuals the primary
responsibility for the day-to-day management of the Fund's portfolio. Michael
R. Hamilton (MBA degree, Bellarmine College) has been primarily responsible
for the day-to-day management of the Fund since the Fund's inception in
December, 1987. Mr. Hamilton has been a Vice President with Invista since 1987.
For a description of the investment and other services provided by the
Manager, see "Cost of Manager's Services" in the Fund's Statement of
Additional Information. The management fee and total Class A share expenses
incurred by the Fund for the period ended October 31, 1995 were equal to the
.64% and 1.47% of the Fund's average net assets, respectively.
The Manager and Invista may purchase at their own expense statistical and
other information or services from outside sources, including Principal Mutual
Life Insurance Company. An Investment Service Agreement between the Fund, the
Manager, and Principal Mutual Life Insurance Company provides that Principal
Mutual Life Insurance Company will furnish certain personnel, services and
facilities required by the Manager in connection with its performance of the
Management Agreements, and that the Manager will reimburse Principal Mutual
Life Insurance Company for its costs incurred in this regard.
Among the expenses paid by the Fund are brokerage commissions on portfolio
transactions, the cost of stock issue and transfer and dividend disbursements,
administration of shareholder accounts, custodial fees, expenses of
registering and qualifying shares for sale after the initial registration,
auditing and legal expenses, fees and expenses of unaffiliated directors, the
cost of shareholder meetings and taxes and interest (if any). The Fund may
from time to time execute transactions for portfolio securities with, and pay
related brokerage commissions to, Principal Financial Securities, Inc. ("
PFS" ), a broker-dealer affiliated with Princor and the Manager for the
Fund.
The Manager serves as investment advisor, dividend disbursing agent and,
directly and through an affiliate, as transfer agent for the Fund. The Fund
reimburses the Manager for the costs of providing these services.
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS AND FEES
The Fund has adopted a distribution plan (the "Plan" ) for the Class A
shares. The Fund will make payments from its assets to Princor pursuant to
this Plan after the end of each month at an annual rate not to exceed 0.25% of
the average daily net asset value of the Fund. Princor will retain such
amounts as are appropriate to compensate for actual expenses incurred in
distributing and promoting the sale of the Fund shares but may remit on a
continuous basis up to 0.25% to Registered Representatives and other selected
Dealers (including, for this purpose, certain financial institutions) as a
trail fee in recognition of their services and assistance.
The Rule 12b-1 fees imposed on Fund Shares held in the Trust are rebated to
the Trust and are used to reduce expenses of the Trust. Unitholders who
acquire shares of the Fund at the Trust's termination will begin to incur Rule
12b-1 fees at such time as shares are acquired.
General. The purpose of the Plan is to permit the Fund to compensate Princor
for expenses incurred by it in promoting and distributing Fund shares and
providing services to Fund shareholders. If the aggregate payments received by
Princor under the Plan in any fiscal year exceed the expenditures made by
Princor in that year pursuant to the Plan, Princor will promptly reimburse the
Fund for the amount of the excess. If expenses under a Plan exceed the amount
for which Princor may be compensated in any one fiscal year, the Fund will not
carry over such expenses to the next fiscal year. The Fund has no legal
obligation to pay any amount pursuant to the Plan that exceeds the
compensation limit. The Fund will not pay, directly or indirectly, interest,
carrying charges, or other financing costs in connection with the Plan. The
Plan is further described in the Statement of Additional Information.
DETERMINATION OF NET ASSET VALUE OF FUND SHARES
The Fund calculates net asset value of a share by dividing the total value of
the assets less all liabilities by the number of shares outstanding. Shares
are valued as of the close of regular trading on the New York Stock Exchange
each day the Exchange is open.
Securities for which market quotations are readily available are valued using
those quotations. Securities with remaining maturities of 60 days or less are
valued at amortized cost when it is determined by the Board of Directors that
amortized cost reflects fair value. Other assets are valued at fair value as
determined in good faith through procedures established by the Board.
As previously described, the Fund may purchase foreign securities, whose
trading is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing net asset value per share are usually determined as of such times.
Occasionally, events which affect the values of such securities and foreign
currency exchange rates may occur between the times at which they are
generally determined and the close of the New York Stock Exchange and would
therefore not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by the Manager under procedures established and regularly
reviewed by the Board of Directors. To the extent the Fund invests in foreign
securities listed on foreign exchanges which trade on days on which the Fund
does not determine its net asset value, for example Saturdays and other
customary national U.S. holidays, the Fund's net asset value could be
significantly affected on days when shareholders have no access to the Fund.
DISTRIBUTION OF INCOME AND REALIZED CAPITAL GAINS
Any dividends from the net income of the Fund normally will be distributed to
shareholders semiannually. Distributions from the Fund will normally be
declared payable on the last business day in June and the next to last
business day in December to shareholders of record at the close of business on
the date prior to distribution. Net realized capital gains for the Fund, if
any, will be distributed annually, generally the first business day of
December. Any dividends or distributions paid shortly after a purchase of
shares by an investor will have the effect of reducing the per share net asset
value by the amount of the dividends or distributions. These dividends or
distributions are subject to taxation like other dividends and distributions,
even though they are in effect a return of capital.
TAX-TREATMENT OF FUND, DIVIDENDS AND DISTRIBUTIONS
It is the policy of the Fund to distribute substantially all net investment
income and net realized gains. Through such distributions, and by satisfying
certain other requirements, the Fund intends to qualify for the tax treatment
applicable to regulated investment companies under the provisions of the
Internal Revenue Code. This means that in each year in which the Fund so
qualifies, it will be exempt from federal income tax upon the amounts so
distributed to investors. The Tax Reform Act of 1986 imposed an excise tax on
mutual funds which fail to distribute net investment income and capital gains
by the end of the calendar year in accordance with the provisions of the Act.
The Fund intends to comply with the Act's requirements and to avoid this
excise tax. The Fund records dividend income on the ex-dividend date, except
dividend income from foreign securities where the ex-dividend date may have
passed, in which case such dividends are recorded as soon as the Fund is
informed of the ex-dividend date. The Fund is required by law to withhold 31%
of dividends paid to investors who do not furnish the Fund their correct
taxpayer identification number, which in the case of most individuals is their
social security number.
Under the federal income tax law, dividends paid from investment income and
from realized short-term capital gains, if any, are generally taxable at
ordinary income rates whether received in cash or additional shares. Although
all net income for book purposes will be distributed to shareholders, such
distributions are taxable to shareholders of the Fund as ordinary income only
to the extent that they do not exceed the shareholder's ratable share of the
Fund's investment income and any short-term capital gain as determined for tax
purposes. The balance, if any, will be applied against and will reduce the
shareholder's cost or other tax basis for the shares.
Dividends from net investment income of the Fund will be eligible for a 70%
dividends received deduction generally available to corporations to the extent
of the amount of qualifying dividends received by the Fund from domestic
corporations for the taxable year. Dividends and capital gains are taxable in
the year in which distributed, whether received in cash or reinvested in
additional shares. Dividends declared with a record date in December and paid
in January will be deemed to have been distributed to shareholders in
December. The Fund will inform shareholders of the amount and nature of their
income dividends and capital gains distributions. Dividends from net income
and distributions or capital gains may also be subject to state and local
taxation.
Additional information regarding taxation is included in the Statement of
Additional Information. Shareholders should consult their own tax advisors as
to the federal, state and local tax consequences of ownership of shares of the
Fund in their particular circumstances. The preceding information relates only
to tax treatment of the Fund. For information relating to the tax treatment of
the Princor Emerging Growth and Treasury Trust, see "Federal Taxation"
below.
PERFORMANCE CALCULATION
From time to time, the Fund may publish advertisements containing information
(including graphs, charts, tables and examples) about its performance. The
Fund's yield and total return figures described below will vary depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses. These factors and possible differences in the methods used in
calculating yield and total return should be considered when comparing the
Fund's performance figures to performance figures published for other
investment vehicles. Any performance data quoted for the Fund represents only
historical performance and is not intended to indicate future performance of
the Fund. For further information on how the Fund calculates yield and total
return figures, see the Statement of Additional Information.
The Fund may advertise its respective average annual total returns. Yield is
determined by annualizing the Fund's net investment income per share for a
specific, historical 30-day period and dividing the result by the ending
maximum public offering price for Class A shares of the Fund for the same
period. Average annual total return for the Fund is computed by calculating
the average annual compounded rate of return over the stated period that would
equate an initial $1,000 investment to the ending redeemable value assuming
the reinvestment of all dividends and capital gains distributions at net asset
value. The same assumptions are made when computing cumulative total return by
dividing the ending redeemable value by the initial investment. These
calculations assume the payment of the maximum front-end load in the case of
Class A shares. The Fund may also calculate total return figures for a
specified period that reflect reduced sales charges available to certain
classes of investors and figures that do not take into account the maximum
applicable sales charge to illustrate changes in the Fund's net asset value
over time. The Fund may also quote rankings, yields or returns as published by
independent statistical services or publishers, and information regarding the
performance of certain market indices.
SHAREHOLDER RIGHTS
The Fund's shares are currently divided into two classes. Each Fund share is
entitled to one vote with fractional shares voting proportionately. The Trust
holds only Class A shares of the Fund. Fund Shares held in the Trust will be
voted by the Trustee in accordance with 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. Both classes of shares for the Fund will
vote together as a single class except where required by law or as determined
by the Fund's Board of Directors. Shares are freely transferable, are entitled
to dividends as declared by the Fund's Board of Directors and, if the Fund
were liquidated, would receive the net assets of the Fund. Shareholders of the
Fund (including the Trust) may remove any director of the Fund with or without
cause by the vote of a majority of the votes entitled to be cast at a meeting
of shareholders. Shareholders will be assisted with shareholder communication
in connection with such matter.
The Board of Directors may increase or decrease the aggregate number of shares
which the Fund has authority to issue and may issue two or more classes of
shares having such preferences and special or relative rights and privileges
as the Directors may determine, without shareholder approval.
The Fund is not required to hold an annual meeting of shareholders in any year
unless required to do so under the Investment Company Act of 1940. The Fund
intends to hold shareholder meetings only when required by law and at such
other times as may be deemed appropriate by its Board of Directors. However,
the Fund will hold a meeting of shareholders when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Fund.
Shareholder inquiries should be directed to the Fund at The Principal
Financial Group, Des Moines, Iowa 50392.
ADDITIONAL INFORMATION
Organization. The Fund was incorporated in the state of Maryland on February
20, 1987.
Custodian. The Bank of New York, 48 Wall Street, New York, New York 10286. The
custodian performs no managerial or policymaking functions for the Fund.
Capitalization. The authorized capital stock of the Fund consists of
100,000,000 shares of common stock, $.01 par value.
Financial Statements. Copies of the financial statements of the Fund will be
mailed to each shareholder semiannually. At the close of each fiscal year, the
Fund's financial statements will be audited by a firm of independent auditors.
Registration Statement. This Prospectus omits some information contained in
the Statement of Additional Information (also known as Part B of the
Registration Statement) and Part C of the Registration Statements which the
Fund has filed with the Securities and Exchange Commission. The Fund's
Statement of Additional Information is hereby incorporated by reference into
the Prospectus. A copy of this Statement of Additional Information can be
obtained upon request, free of charge, by writing or telephoning Princor
Financial Services Corporation. You may obtain a copy of Part C of the
Registration Statements filed with the Securities and Exchange Commission,
Washington, D.C. from the Commission upon payment of the prescribed fees.
Principal Underwriter. Princor Financial Services Corporation, P.O. Box 10423,
Des Moines, Iowa 50306, is the principal underwriter for each of the Princor
Funds.
Transfer Agent and Dividend Disbursing Agent. Princor Management Corporation,
The Principal Financial Group, Des Moines, Iowa, 50392, is the transfer agent
and dividend disbursing agent for each of the Princor Funds.
RISK FACTORS
The Fund. An investment in the Fund involves the financial and market risks
that are inherent in any investment in equity securities. These risks include
changes in the financial condition of issuers, in economic conditions
generally and in the conditions in securities markets. They also include the
extent to which the prices of securities will react to those changes.
The Fund may invest in foreign securities up to 20% of its assets. Investment
in foreign securities presents certain risks which may affect the Fund's net
asset value. These risks include, but are not limited to, those resulting from
fluctuations in currency exchange rates, revaluation of currencies, the
imposition of foreign taxes, the withholding of taxes on dividends at the
source, political and economic developments including war, expropriations,
nationalization, the possible imposition of currency exchange controls and
other foreign governmental laws or restrictions, reduced availability of
public information concerning issuers, and the fact that foreign issuers are
not generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those applicable to domestic issuers. Moreover, securities of many foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers. In addition, transactions in foreign securities
may be subject to higher costs, and the time for settlement of transactions in
foreign securities may be longer than the settlement period for domestic
issuers. The Fund's investment in foreign securities may also result in higher
custodial costs and the costs associated with currency conversions.
Treasury Obligations. An investment in Units of the Trust should be made with
an understanding of the risks which an investment in zero coupon U.S. Treasury
obligations may entail. Zero coupon bonds are purchased at a deep discount
because the buyer receives only the right to receive a final payment at the
maturity of the bond and does not receive any periodic interest payments. The
effect of owning deep discount bonds which do not make current interest
payments is that a fixed yield is earned not only on the original investment
but also, in effect, on all discount earned during the life of such income on
such obligation 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, zero coupon bonds are subject
to substantially greater price fluctuations during periods of changing market
interest rates than are securities of comparable quality which pay interest.
Investors should also note that 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.
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 or she
acquires his or her Unit, 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 (other than capital gain dividends as discussed
below) 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. It
should be noted that various legislative proposals that would affect the
dividends received deduction have been introduced. Unitholders should consult
with their tax advisers with respect to the limitations on and possible
modifications to the dividends received deductions.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by the
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--Princor Emerging Growth Fund Summary" .
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 or she is deemed thereby to have disposed of
his or her entire pro rata interest in all assets of the Trust involved,
including his or her pro rata portion of all the Securities represented by the
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.
Tax Consequences Upon Termination of the Trust. A Unitholder will receive cash
upon termination of the Trust unless an In Kind Distribution is requested. See
"Trust Administration--Amendment or Termination." A Unitholder that
requests an In Kind Distribution will receive Fund Shares for his or her pro
rata portion of each Trust asset. 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 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 Fund Shares. The In Kind Distribution will relate to
both the pro rata portion of the Fund Shares held by the Unitholder and his or
her the pro rata portion of the Treasury Obligations held by the Trust. A
Unitholder will not recognize gain or loss on the portion of the In Kind
Distribution which is an exchange for his or her pro rata portion in each Fund
Share held by the Trust. On the portion of the In Kind Distribution which is
an exchange for the Unitholders' pro rata portion in each Treasury Obligation
held by the Trust, the Unitholder will generally recognize gain or loss based
on the difference between the fair market value and his or her tax basis in
the Treasury Obligation.
A Unitholder who receives only cash in exchange for his or her pro rata
portion in each Fund Share held by the Trust and in each Treasury Obligation
held by the Trust will generally recognize gain or loss based upon the
difference between the amount of cash received by the Unitholder and his tax
basis in each such Fund Share and in each such Treasury Obligation held by the
Trust.
Because the Trust will own many Securities, a Unitholder who requests an In
Kind Distribution will have to analyze the tax consequences with respect to
each Security owned by the Trust. The amount of taxable gain (or loss)
recognized upon such exchange will generally equal the sum of the gain (or
loss) recognized under the rules described above by such Unitholder with
respect to each Security owned by the Trust. Unitholders who request an In
Kind Distribution are advised to consult their tax advisers in this regard.
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 gain 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 of 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 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 Managing Underwriter. The Sponsor will
not receive any fees in connection with its activities relating to the Trust.
The Evaluator shall receive that evaluation fee, payable in any month
incurred, set forth under "Summary of Essential Financial Information"
(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. Such fee 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. Such fee will be paid as described under
"General" below. The Sponsor and the Managing Underwriter will receive
sales commissions and may realize other profits (or losses) in connection with
the sale of Units and the deposit of the Securities as described under "
Public Offering--Sponsor and Managing Underwriter 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 or before the
twenty-fifth day of each month as described under "General" below. The
Trustee benefits to the extent there are funds for future distributions,
payment of expenses and redemptions in the Capital and Income Accounts since
these Accounts are non-interest bearing and the amounts earned by the Trustee
are retained by the Trustee. Part of the Trustee's compensation for its
services to the Trust is expected to result from the use of these funds. Such
fees may be increased without approval of the Unitholders by amounts not
exceeding proportionate increases under the category "All Services Less
Rent of Shelter" in the Consumer Price Index published by the United
States Department of Labor or, if such category is no longer published, in a
comparable category. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration."
Miscellaneous Expenses. Expenses incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over the first five years of
the Trust. 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
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.
General. 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. During the initial
offering period the Public Offering Price is based on the net asset value of
the Fund Shares, the aggregate offering side evaluation of the Treasury
Obligations, a sales charge of 4.9% of the Public Offering Price which is
equivalent to 5.152% of the aggregate underlying value of the Securities, and
cash, if any, in the Income and Capital Accounts held or owned by the Trust.
After the initial public offering period, the secondary market public offering
price is based on the net asset value of the Fund Shares, the aggregate bid
side evaluation of the Treasury Obligations, an applicable sales charge (which
will be reduced by .3 of 1% on each March 19 commencing March 19, 1997, to a
minimum sales charge of 1.5%), and cash, if any, in the Income and Capital
Accounts held or owned by the Trust. The sales charge applicable to quantity
purchases is, during the initial offering period, reduced on a graduated basis
to any person acquiring 10,000 or more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number Dollar Amount of Sales
of Units Purchased Charge Reduction Per Unit
<S> <C>
10,000-24,999 $.05
25,000-49,999 $.10
50,000-99,999 $.15
100,000 or more $.20
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
Managing Underwriter, 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 account.
Employees and registered representatives of Principal Financial Securities,
Inc. may purchase Units of the Trust at the current Public Offering Price less
the Managing Underwriter's discount described in "Sponsor and Managing
Underwriter 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 5.152% of such value and dividing the sum so obtained by the number
of Units outstanding. The Public Offering Price shall include the
proportionate share of any cash held in the Capital Account. This computation
produced a gross underwriting profit equal to 4.9% 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. Effective on each March 19
commencing March 19, 1997, such sales charge will be reduced by .3 of 1% to a
minimum sales charge of 1.5%.
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. After the
completion of the initial offering period, the Treasury Obligations will be
valued on the bid prices thereof. 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, the Managing
Underwriter nor any broker-dealers are recommending any of the individual
Securities in the Trust but rather the entire pool of Securities, taken as a
whole, which are represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Managing Underwriter at the Public Offering
Price. Upon the completion of the initial offering period, Units repurchased
in the secondary market, if any, may be offered by this Prospectus at the
secondary market Public Offering Price in the manner described above.
The Sponsor has qualified the Units for sale in a number of states. Any
quantity discount provided to investors will be borne by the Managing
Underwriter or others as indicated under "General" above. Brokers,
dealers and others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of 3.60% per Unit. For secondary market transactions, such concession or
agency commission will amount to 70% of the sales charge applicable to the
transaction.
Certain commercial banks may be making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 200 Units (100 Units for a
tax-sheltered retirement plan). The Sponsor and Managing Underwriter reserve
the right to reject, in whole or in part, any order for the purchase of Units
and to change the amount of the concession or agency commission to dealers and
others from time to time.
Sponsor and Managing Underwriter Compensation. The Managing Underwriter will
receive a gross sales commission equal to 4.9% of the Public Offering Price of
the Units (equivalent to 5.152% 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
Managing Underwriter as indicated under "General" above. The Sponsor
will receive from the Managing Underwriter the excess of such gross sales
commission over the Managing Underwriter's discount. The Managing Underwriter
will be allowed a discount in connection with the distribution of Units
underwritten during the initial offering period of (a) 3.7% for up to
$5,000,000 of Units underwritten, (b) 3.9% for $5,000,001 - $10,000,000 of
Units underwritten, and (c) 4.1% for more than $10,000,000 of Units
underwritten.
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, however,
an affiliate of the Managing Underwriter, Princor Financial Services
Corporation, acts as principal underwriter of the Princor Emerging Growth
Fund. The Sponsor and Managing Underwriter may further realize additional
profit or loss during the initial offering period as a result of the possible
fluctuations in the market value of the Securities in the Trust after a date
of deposit, since all proceeds received from purchasers of Units (excluding
dealer concessions and agency commissions allowed, if any) will be retained by
the Sponsor and Managing Underwriter.
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 Managing
Underwriter or the Sponsor prior to the date of settlement for the purchase of
Units may be used in the Managing Underwriter's or Sponsor's business and may
be deemed to be a benefit to the Managing Underwriter or the Sponsor, subject
to the limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Managing Underwriter
intends to maintain a secondary market for Units of the Trust. In so
maintaining a market, the Managing Underwriter will also realize profits or
sustain losses in the amount of any difference between the price at which
Units are purchased and the price at which Units are resold (which price
includes the applicable sales charge). In addition, the Managing Underwriter
or the Sponsor will also realize profits or sustain losses resulting from a
redemption of such repurchased Units at a price above or below the purchase
price for such Units, respectively.
Public Market. Although not obligated to do so, the Managing Underwriter
intends to maintain a market for the Units offered hereby and offer
continuously to purchase Units at prices, subject to change at any time, based
upon the net asset value of the Fund Shares in the Trust plus the aggregate
bid price (offer price during the initial offering period) of the Treasury
Obligations. If the supply of Units exceeds demand or if some other business
reason warrants it, the Managing Underwriter may either discontinue all
purchases of Units or discontinue purchases of Units at such prices. In the
event that a market is not maintained for the Units and the Unitholder cannot
find another purchaser, a Unitholder desiring to dispose of his 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." A Unitholder who wishes to dispose of his or her Units should
inquire of his or her broker as to current market prices in order to determine
whether there is in existence any price in excess of the Redemption Price and,
if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for the individuals, Simplified Employee
Pension Plans for employees, qualified plans for self-employed individuals,
and qualified corporate pension and profit sharing plans for employees. The
purchase of Units of the Trust may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-sheltered retirement plan is 100 Units.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust will be evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Managing Underwriter that ownership be in book entry form.
Units are transferable by making a written request to the Trustee and, in the
case of Units evidenced by a certificate, by presentation and surrender of
such certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign such written
request, and such certificate or transfer instrument, exactly as his or her
name appears on the face of the certificate with the signature guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("
STAMP" ) or such other signature guarantee program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In certain
instances the Trustee may require additional documents such as, but not
limited to, trust instruments, certificates of death, appointments as executor
or administrator or certificates of corporate authority. Certificates will be
issued in denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Income and Capital. Any distributions received by the Trust
representing dividends with respect to the Fund Shares therein 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 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 Account 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 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 unit investment trust division office at
101 Barclay Street, 20th Floor, New York, New York 10286 and, in the case of
Units evidenced by a certificate, by tendering such certificate to the
Trustee, duly endorsed or accompanied by proper instruments of transfer with
signature guaranteed (or by providing satisfactory indemnity, as in connection
with lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. No redemption fee will be charged. On the third
business day following such tender the Unitholder will be entitled to receive
in cash an amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. 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 will receive cash from the Capital Account equal to the pro rata
portion of the Securities to which the tendering Unitholder is entitled. 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 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.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) 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.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Managing Underwriter Purchases of Units. The Trustee shall notify the Managing
Underwriter of any tender of Units for redemption. If the Managing
Underwriter's bid in the secondary market at that time equals or exceeds the
Redemption Price per Unit, it may purchase such Units by notifying the Trustee
before the close of business on the next succeeding business day and by making
payment therefor to the Unitholder not later than the day on which the Units
would otherwise have been redeemed by the Trustee. Units held by the Managing
Underwriter may be tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Managing Underwriter will be
in accord with the Public Offering Price described in the then currently
effective prospectus describing such Units. Any profit resulting from the
resale of such Units will belong to the Managing Underwriter which likewise
will bear any loss resulting from a lower offering or redemption price
subsequent to its acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed"
by the Managing Underwriter, Sponsor 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.
A 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
Managing Underwriter or the Sponsor so that the net worth of the Trust would
be reduced to less than 40% of the value of the Securities at the time they
were deposited in the Trust. If the Trust is liquidated because of the
redemption of unsold Units by the Managing Underwriter, the Sponsor will
refund to each purchaser of Units the entire sales charge paid by such
purchaser. The Trust Agreement will terminate upon the sale 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 to request to receive their pro rata portion of Fund Shares and to
have their pro rata portion of the proceeds received upon maturity of the
Treasury Obligations reinvested without a sales charge into Fund Shares (an
"In Kind Distribution" ) rather than to receive payment in cash upon
the termination of the Trust. Unitholders not electing an In Kind Distribution
will receive cash representing their pro rata portion of the Fund Shares and
Treasury Obligations. 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 to each Unitholder who has requested a
distribution of Fund Shares at termination such 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 not requesting a
distribution of Fund Shares will receive a cash distribution 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 in 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.
Managing Underwriter. Principal Financial Securities, Inc. based in Dallas,
Texas is a member of The Principal Financial Group, a diversified family of
financial services companies. The group's largest member, Principal Mutual
Life Insurance Company, was founded in 1879 and ranks among the 10 largest
U.S. life insurers based on assets. The Principal(R)offers a full range of
financial products and services for business, groups and individuals. Founded
in 1952 as Eppler, Guerin & Turner, Inc., Principal Financial Securities has
grown to be one of the largest regional investment banking and brokerage
firms. Principal Financial Securities is a member of the New York and American
stock exchanges and the National Association of Securities Dealers.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds with roots in money
management dating back to 1926. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has offices at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (708) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of December 31, 1995 the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$123,165,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Trust or to any Series thereof or to the Managing Underwriter. The
information is included herein only for the purpose of informing investors as
to the financial responsibility of the Sponsor and its ability to carry out
its contractual obligations. More detailed financial information will be made
available by the Sponsor upon request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286, (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the 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 close of business on the day prior to 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 26 (Princor Emerging Growth and Treasury, Series 1):
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Equity Opportunity Trust, Series 26
(Princor Emerging Growth and Treasury, Series 1) as of March 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 26 (Princor Emerging Growth and Treasury,
Series 1) as of March 19, 1996, in conformity with generally accepted
accounting principles.
Chicago, Illinois GRANT THORNTON LLP
March 19, 1996
PRINCOR EMERGING GROWTH AND TREASURY, SERIES 1
Statement of Condition
As of March 19, 1996
<TABLE>
<CAPTION>
<S> <C>
Investment in Securities:
Contracts to purchase securities <F1>................. $ 475,839
Organizational costs <F2>............................. 35,461
...................................................... $ 511,300
Liability and Interest of Unitholders:
Liability--...........................................
Accrued organizational costs <F2>..................... $ 35,461
Interest of Unitholders-- ............................
Units of fractional undivided interest outstanding:...
Cost to investors <F3> ............................... $ 500,500
Less: Gross underwriting commission <F3> ............. 24,661
Net interest to Unitholders <F3>...................... 475,839
Total................................................. $ 511,300
<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 $475,839 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 five years. Organizational costs have been
estimated based on a projected trust size of $10,000,000. 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 4.9% are
computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor and Managing Underwriter Compensation"
and assume all single transactions involve less than 10,000 Units. For single
transactions involving 10,000 or more Units, the sales charge is reduced (see
"Public Offering--General" ) resulting in an equal reduction in both
the Cost to investors and the Gross underwriting commission while the Net
interest to Unitholders remains unchanged.
</TABLE>
<TABLE>
PRINCOR EMERGING GROWTH AND TREASURY, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 26)
as of the Initial Date of Deposit: March 19, 1996
<CAPTION>
Market Cost of
Number of Value Securities
Shares Name of Issuer <F1> per Share to Trust <F2>
<S> <C> <C> <C>
6,900 Princor Emerging Growth Fund $33.73 $232,737.00
</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 243,101.65
Total Cost of
Securities
to Trust
475,838.65
</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 March
18, 1996 and are expected to settle on March 21, 1996 and March 22, 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 $474,699. Other information regarding the Securities in the
Trust, as of the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Cost to Sponsor Profit (Loss) to Sponsor
<S> <C>
$ 475,859 $ (20)
</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, the Sponsor or the Managing Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, securities
in any state to any person to whom it is not lawful to make such offer in such
state
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial 3
Information
The Trust 4
Objectives and Securities Selection 4
Trust Portfolio 5
Risk Factors 15
Federal Taxation 16
Trust Operating Expenses 19
Public Offering 20
Rights of Unitholders 22
Trust Administration 25
Other Matters 28
Report of Independent Certified Public 28
Accountants
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
March 19, 1996
The Principal(R) Trust
PRINCOR(R) EMERGING GROWTH AND TREASURY,
SERIES 1
Van Kampen American Capital
Equity Opportunity Trust, Series 26
Principal Financial Securities, Inc.
Fountain Place
1445 Ross Avenue, Suite 2300
Dallas, Texas 75201
Please retain this Prospectus for future reference.
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
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 26, 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
26 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 March, 1996.
Van Kampen American Capital Equity
Opportunity Trust, Series 26
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 March 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 26
Trust Agreement
Dated: March 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. Section 1.01
(4) shall be amended to read as follows:
"(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 March 19,
1996.
8. Notwithstanding anything to the contrary appearing in the
Standard Terms and Conditions of Trust, "Princor Emerging Growth and
Treasury, 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 termination of
the Trust only, 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.
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 26
(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
March 19, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Van Kampen American Capital Equity Opportunity Trust, Series
26
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 26 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated March 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. 33-65389) 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
March 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 26
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 26 (the "Trust"), in connection with the
issuance of Units of fractional undivided interest in the Trust, under a
Trust Agreement dated March 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, Princor Emerging Growth and Treasury, 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
Princor Emerging Growth 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
Princor Emerging Growth Fund Shares held by the Trust:
(a) Each Unitholder will be considered to receive
his pro rata portion of each distribution made by Princor
Emerging Growth 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
March 19, 1996
Van Kampen American Capital Equity
Opportunity Trust, Series 26
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 26 (the "Fund") consisting of The
Principal Trust, Princor Emerging Growth and Treasury, 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 33-65389), 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. The 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
March 15, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 26
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 33-65389
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 March 19, 1996 on the statement of
condition and related securities portfolio of Van Kampen American Capital
Equity Opportunity Trust, Series 26 as of March 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
March 19, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on March 19, 1996 it is
unaudited
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> PEGT
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-19-1996
<PERIOD-END> MAR-19-1996
<INVESTMENTS-AT-COST> 475839
<INVESTMENTS-AT-VALUE> 475839
<RECEIVABLES> 35461
<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 511300
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35461
<TOTAL-LIABILITIES> 35461
<SENIOR-EQUITY> 0
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<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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<AVG-DEBT-PER-SHARE> 0
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