File No. 33-65389
CIK #896991
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Van Kampen American Capital Equity Opportunity Trust, Series 26
(Exact Name of Trust)
Van Kampen American Capital Distributors, Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
Van Kampen American Capital Distributors, Inc. Chapman and Cutler
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on April 24, 1997 pursuant to paragraph (b) of Rule 485.
PRINCOR EMERGING GROWTH AND TREASURY, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 26
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.Please retain both parts of this Prospectus for future reference.
THE TRUST
Princor Emerging Growth and Treasury, Series 1 (the "Principal Trust"
or the "Trust" ) is a unit investment trust which is contained in Van
Kampen American Capital Equity Opportunity Trust, Series 26. 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.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units during the secondary market will
include the aggregate underlying value of the Securities, an applicable sales
charge, and cash, if any, in the Income and Capital Accounts held or owned by
the Trust. See "Summary of Essential Financial Information" in this
Part One.
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 Dow Jones Industrial Average is the property of Dow Jones & Company,
Inc. Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
The Date of this Prospectus is April 16, 1997
Van Kampen American Capital
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 26
Princor Emerging Growth and Treasury, Series 1
Summary of Essential Financial Information
As of March 5, 1997
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
<TABLE>
<CAPTION>
Princor
Emerging
Growth and
Treasury
---------------
<S> <C>
General Information
Aggregate Maturity Value of Treasury Obligations Initially Deposited................................. $ 550,000
Number of Units...................................................................................... 175,000
Fractional Undivided Interest in Trust per Unit...................................................... 1/175,000
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>..................................................... $ 1,810,457
Aggregate Value Securities per Unit (including accumulated dividends)............................... $ 10.29
Sales charge 4.9% (5.152% of Aggregate Value of Securities excluding principal cash per Unit) <F3>... $ .54
Public Offering Price per Unit <F2><F3>............................................................. $ 10.83
Redemption Price per Unit............................................................................ $ 10.29
Secondary Market Repurchase Price per Unit........................................................... $ 10.29
Excess of Public Offering Price per Unit over Redemption Price per Unit.............................. $ .54
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Evaluator's Annual Fee........................................Maximum of $.0025 per Unit
Evaluations for purpose of sale, purchase or redemption of Units
are made as of 4:00 P.M. Eastern time on days of trading on the
New York Stock Exchange next following receipt of an order for a
sale or purchase of Units or receipt by The Bank of New York of
Units tendered for redemption.
Date of Deposit...............................................March 19, 1996
Mandatory Termination Date....................................May 15, 2008
Estimated Princor Emerging Growth Fund Annual Expenses <F4>...$.057 per Unit
Trustee's Annual Fee..........................................$.008 per Unit
Estimated Annual Organizational Expenses <F5>.................$.007 per Unit
Income Distribution Record Date...............................As soon as practicable after the Fund's annual ex-dividend date.
Income Distribution Date......................................As soon as practicable after the Fund's annual distribution date.
- ----------
<FN>
<F1>The shares of the Fund are valued at their net asset value. The Treasury
Obligations are valued at their aggregate bid side evaluation.
<F2>Anyone ordering Units will have added to the Public Offering Price a pro rata
share of any cash in the Income and Capital Accounts.
<F3>Effective on each March 19, commencing March 19, 1997, the secondary market
sales charge will decrease by .3 of 1% to a minimum sales charge of 1.5%. See
"Public Offering--Offering Price" in Part Two.
<F4>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" in Part
Two.
<F5>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" in Part Two and "Statement of
Condition." Historically, the sponsors of Unit investment trusts have paid
all the costs of establishing such trusts.
</TABLE>
PORTFOLIO
The Trust consists of shares of Princor Emerging Growth Fund and zero-coupon
U.S. Treasury Obligations.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1996<F1>
-----------
<S> <C>
Net asset value per Unit at beginning of period........................................................................ $ 9.52
===========
Net asset value per Unit at end of period.............................................................................. $ 10.25
===========
Distributions to Unitholders of investment income including accumulated dividends paid on Units redeemed (average
Units outstanding for entire period)................................................................................... $ --
===========
Distributions to Unitholders from Security redemption proceeds (average Units outstanding for entire period)........... $ --
===========
Unrealized appreciation (depreciation) of Securities (per Unit outstanding at end of period)........................... $ 0.35
===========
Units outstanding at end of period..................................................................................... 175,000
</TABLE>
- ----------
For the period from March 19, 1996 (date of deposit) through December 31, 1996.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Princor Emerging Growth and Treasury, Series 1 (Van
Kampen American Capital Equity Opportunity Trust, Series 26):
We have audited the accompanying statements of condition (including the
analyses of net assets) and the related portfolio of Princor Emerging Growth
and Treasury, Series 1 (Van Kampen American Capital Equity Opportunity Trust,
Series 26) as of December 31, 1996 and the related statements of operations
and changes in net assets for the period from March 19, 1996 (date of deposit)
through December 31, 1996. These statements are the responsibility of the
Trustee and the Sponsor. Our responsibility is to express an opinion on such
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1996 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Princor Emerging Growth and
Treasury, Series 1 (Van Kampen American Capital Equity Opportunity Trust,
Series 26) as of December 31, 1996, and the related statements of operations
and changes in net assets for the period from March 19, 1996 (date of deposit)
through December 31, 1996, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Chicago, Illinois
March 14, 1997
<TABLE>
PRINCOR EMERGING GROWTH AND TREASURY, SERIES 1
Statements of Condition
December 31, 1996
<CAPTION>
Princor
Emerging
Growth and
Treasury
<S> <C>
Trust property
Cash.................................................................................. $ --
Securities at market value, (cost $1,740,966) (note 1)................................ 1,802,985
Accumulated dividends................................................................. --
Organizational costs.................................................................. 30,856
$ 1,833,841
===============
Liabilities and interest to Unitholders
Cash overdraft........................................................................ $ 34,330
Redemptions payable................................................................... 6,377
Interest to Unitholders............................................................... 1,793,134
$ 1,833,841
===============
Analyses of Net Assets
Interest of Unitholders (175,000 Units of fractional undivided interest outstanding)
Cost to original investors of 175,000 Units (note 1).................................. $ 1,784,798
Less initial underwriting commission (note 3)......................................... 87,938
---------------
1,696,860
Less redemption of 0 Units............................................................ --
---------------
1,696,860
Undistributed net investment income
Net investment income................................................................. 34,255
Less distributions to Unitholders..................................................... --
---------------
34,255
Realized gain (loss) on Security sale or redemption................................... --
Unrealized appreciation (depreciation) of Securities (note 2)......................... 62,019
Distributions to Unitholders of Security sale or redemption proceeds.................. --
Net asset value to Unitholders........................................................ $ 1,793,134
===============
Net asset value per Unit (175,000 Units outstanding)................................... $ 10.25
===============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
PRINCOR EMERGING GROWTH AND INCOME, SERIES 1
Statements of Operations
Period from March 19, 1996 (date of deposit) through
December 31, 1996
<CAPTION>
1996
----------
<S> <C>
Investment income
Dividend income..................................................... $ 39,959
Expenses
Trustee fees and expenses........................................... 909
Evaluator fees...................................................... 190
Organizational fees................................................. 4,605
----------
Total expenses...................................................... 5,704
----------
Net investment income............................................... 34,255
Realized gain (loss) from Securities sale or redemption
Proceeds............................................................ --
Cost................................................................ --
----------
Realized gain (loss)................................................ --
Net change in unrealized appreciation (depreciation) of Securities... 62,019
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......$ 96,274
==========
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Period from March 19, 1996 (date of deposit) through
December 31, 1996
<CAPTION>
1996
-------------
<S> <C>
Increase (decrease) in net assets
Operations:
Net investment income...................................................... $ 34,255
Realized gain (loss) on Securities sale or redemption...................... --
Net change in unrealized appreciation (depreciation) of Securities......... 62,019
-------------
Net increase (decrease) in net assets resulting from operations............ 96,274
Distributions to Unitholders from:
Net investment income...................................................... --
Securities sale or redemption proceeds..................................... --
Redemption of Units --
-------------
Total increase (decrease).................................................. 96,274
Net asset value to Unitholders
Beginning of period........................................................ 1,696,860
Additional Securities purchased from proceeds of Unit Sales................ --
-------------
End of period (including undistributed net investment income of $34,255)... $ 1,793,134
=============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
PRINCOR EMERGING GROWTH & TREASURY, SERIES 1
PORTFOLIO as of
December 31, 1996
<CAPTION>
Valuation of Securities
at
Number December 31,
of Market Value Per 1996
Shares Name of Issuer Share (Note 1)
- ---------- ------------------------------- --------------------- ----------------------------
<S> <C> <C> <C>
24,150 Princor Emerging Growth Fund $ 36.640 $ 884,856
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Maturity
Value Name of Issuer and Title of Security
- ------------- ---------------------------------------------------------- -------------
<S> <C> <C>
1,925,000 "Zero coupon" U.S. Treasury bonds maturing May 15, 2008.... 918,129
============= -------------
...........................................................$1,802,985
=============
</TABLE>
The accompanying notes are an integral part of these statements.
PRINCOR EMERGING GROWTH AND INCOME, SERIES 1
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - The Fund Shares are valued at their net asset value.
Treasury obligations are valued at the closing bid price.
Security Cost - The original cost to the Trust of the Securities was based,
for the Fund Shares, at their net asset value. The original cost of the
Treasury obligations was based on the closing offer price. In each case, the
costs were determined on the day of the various Dates of Deposit.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal Income Taxes.
Distributions to Unitholders of the Trust's taxable income will be taxable as
ordinary or capital gain income to Unitholders.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an average cost basis. Since the date of deposit, undistributed
net investment income includes $44,106 of accreted interest.
Organizational Costs - The Trust will bear all or a portion of its
organizational costs, which will be deferred and amortized over five years.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Princor
Emerging
Growth and
Treasury
---------------
<S> <C>
Unrealized Appreciation $ 62,019
Unrealized Depreciation --
---------------
$ 62,019
===============
</TABLE>
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Sponsor intends to
maintain a market for Units and to continuously offer to purchase Units at
prices, subject to change at any time, based upon the value of the Securities
in the portfolio of the Trust valued as described in Note 1, plus accumulated
dividends to the date of settlement. If the supply of Units exceeds demand, or
for other business reasons, the Sponsor may discontinue purchases of Units at
such prices. In the event that a market is not maintained for the Units, a
Unitholder desiring to dispose of his Units may be able to do so only by
tendering such Units to the Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the underlying
value of the Securities per Unit on the date of an investor's purchase, plus a
sales charge of 4.9% of the public offering price which is equivalent to
5.152% of the aggregate underlying value of the Securities. The secondary
market cost to investors is based on the determination of the underlying value
of the Securities per Unit on the date of an investor's purchase plus a sales
charge of 4.9% of the public offering price which is 5.152% of the underlying
value of the Securities. Effective on each March 19, commencing March 19,
1997, the secondary sales charge will decrease by .3 of 1% to a minimum sales
charge of 1.5%.
Compensation of Evaluator - The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. This fee may be adjusted for increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index.
The Principal Trust
Princor Emerging Growth and Treasury, Series 1
Prospectus Part Two
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" in Prospectus Part
One. 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 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. 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.
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE
Both parts of this Prospectus should be retained for future reference.
This Prospectus is dated as of the date of the Prospectus Part One
accompanying the Prospectus Part Two.
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."
Dividend and Capital Distributions. Distributions of net income, if any, other
than amortized discount, will be made at least annually. Distributions of
capital, 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 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. 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 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."
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
Securities, 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 Units of the Trust. 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.
Each Unit of the Trust represents an undivided interest in the Trust. To the
extent that any Units are redeemed by the Trustee, the fractional undivided
interest in the Trust represented by each unredeemed Unit will increase
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" herein and "
Portfolio" in Prospectus Part One. 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 several 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"
in Prospectus Part One 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, 1996.
<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%
ANNUAL OPERATING
EXPENSES:
(as a percentage of average net assets)...........................................
Management Fee................................................................... 0.62%
12b-1 Fee2....................................................................... 0.21%
Other Expenses................................................................... 0.49%
Total Fund Operating Expenses.................................................... 1.32%
<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..... $ 60
3 years.... 87
5 years.... 116
10 years... 199
</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..... $ 60
3 years.... 87
5 years.... 116
10 years... 199
</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, 1996, 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 Year ended Year ended Year ended Year ended Year ended
October 31, 1996 October 31, 1995 October 31, 1994 October 31, 1993 October 31, 1992 October 31, 1991
---------------- ---------------- ---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value
at Beginning of
Period.......... $ 31.45 $ 25.08 $ 23.56 $ 19.79 $ 18.33 $ 11.35
---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Income from
investment
operations:
Net Investment
Income.......... 14 12 -- .06 .14 .17
Net Realized
and Unrealized
Gain (Loss) on
Investments..... 5.05 6.45 1.61 3.82 1.92 7.06
---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Total from
Investment
Operations...... 5.19 6.57 1.61 3.88 2.06 7.23
---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Less
Distributions:
Dividends From
Net Investment
Income.......... (.14) (.06) -- (.11) (.15) (.21)
Distributions
From Capital
Gains........... (.75) (.14) (.09) -- (.45) (.04)
---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Total
Distributions... (.89) (.20) (.09) (.11) (.60) (.25)
---------------- ---------------- ---------------- ----------------- ---------------- ----------------
Net Asset Value
at End of Period $ 35.75 $ 31.45 $ 25.08 $ 23.56 $ 19.79 $ 18.33
================ ================ ================ ================= ================ ================
Total Return (b) 16.89% 26.41% 6.86% 19.66% 11.63% 64.56%
Net Assets at
End of Period
(in thousands).. $ 229,465 $ 150,611 $ 92,965 $ 48,668 $ 29,055 $ 17,174
Ratio of Net
Expenses to
Average Net
Assets.......... 1.32% 1.47% 1.74% 1.66% 1.74% 1.78%
Ratio of Net
Investment
Income to
Average Net
Assets.......... 46% 47% .02% .26% .80% 1.14%
Portfolio
Turnover Rate... 12.3% .13.5% 8.1% 7.0% 5.8% 8.4%
Average
Commission Rate
Paid............ $ .0391
</TABLE>
<TABLE>
<CAPTION>
Princor Emerging Growth Fund
-------------------------------------------------------
Year ended Year ended Period ended
October 31, 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 November 30, 1996, the Manager served as investment advisor for 26 such
funds with assets totaling approximately $3.9 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, 1996 were equal to the
.62% and 1.32% 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. For purposes of the following discussion and opinions, it is
assumed that the Fund Shares represent shares in an entity treated as a
regulated investment company for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from 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 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 valuation date closest to 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. It should be noted that
certain legislative proposals have been made which could affect the
calculation of basis for Unitholders holding securities that are substantially
identical to the Securities. Unitholders should consult their own tax advisors
with regard to calculation of basis. The Treasury Obligations are treated as
stripped bonds and are treated as bonds issued at an original issue discount
as of the date a Unitholder purchases his or her Units. Because the Treasury
Obligations represent interests in "stripped" U.S. Treasury bonds, a
Unitholder's initial cost for his or her pro rata portion of each Treasury
Obligation held by the Trust (determined at the time he acquires his Units, in
the manner described above) is generally 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 is generally 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 designated 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 (other than corporate Unitholders such as
"S" corporations which are not eligible for the deduction because of
their special characteristics and other than for purposes of special taxes
such as accumulated earnings tax and personal holding corporation tax) 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 advisors 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 a Trust
or Disposition of Units. Because Unitholders are deemed to directly own a pro
rata portion of the Fund Shares as discussed above, Unitholders are advised to
read the discussion of tax consequences for the Fund set forth under "
Trust Portfolio" above. Distributions declared by the Fund on Fund Shares
in October, November or December that are held by the Trust and paid during
the following January will be treated as having been received by Unitholders
on December 31 in the year such distributions were declared. Distributions of
the Fund's net capital gain which the Fund properly designates as capital gain
dividends will be taxable to the Unitholders as long-term capital gains
regardless of how long a person has been a Unitholder. If a Unitholder holds
his or her Units for six months or less or if the Trust holds shares of the
Fund for six months or less, any loss incurred by a Unitholder related to the
disposition of the Fund Shares will be treated as a long-term capital loss to
the extent of any long-term capital gains distributions received (or deemed to
have been received) with respect to such shares. For taxpayers other than
corporations, net capital gains are subject to a maximum marginal stated tax
rate of 28%. However, it should be noted that legislative proposals are
introduced from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Act" ) raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units. If the
Unitholder disposes of a Unit, he is deemed thereby to have disposed of his
entire pro rata interest in all assets of the Trust involved including his pro
rata portion of all the Securities represented by that Unit.
Legislative proposals have been made that would treat certain transactions
designed to reduce or eliminate risk of loss and opportunities for gain as
constructive sales for purposes of recognition of gain (but not loss).
Unitholders should consult their own tax advisors with regard to any such
constructive sales rules.
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. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income. Unitholders may be required to treat some or all of the expenses
of the Trust as miscellaneous itemized deductions subject to this limitation.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of the Trust. As discussed in "Rights of
Unitholders--Redemption of Units" , under certain circumstances a
Unitholder tendering Units for redemption may request an In Kind Distribution.
A Unitholder may also under certain circumstances request an In Kind
Distribution upon the termination of the Trust. See "Rights of
Unitholders--Redemption of Units." Treasury Obligations will not be
distributed to a Unitholder as part of an In Kind Distribution. The tax
consequences relating to the sale of Treasury Obligations are discussed above.
As previously discussed, prior to the redemption of Units or the termination
of the Trust, a Unitholder is considered as owning a pro rata portion of each
of the Trust assets for federal income tax purposes. The receipt of an In Kind
Distribution will result in a Unitholder receiving an undivided interest in
whole shares of the Fund plus, possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
with respect to each Fund Share will depend on whether or not a Unitholder
receives cash in addition to Fund Shares. A Unitholder will not recognize gain
or loss with respect to Fund Shares if a Unitholder only receives shares of
the Fund in exchange for his or her pro rata portion in each share of the Fund
held by the Trust. However, if a Unitholder also receives cash in exchange for
a fractional share of the Fund, such Unitholder will generally recognize gain
or loss based upon the difference between the amount of cash received by the
Unitholder and his tax basis in such fractional share of the Fund. Because a
Unitholder will receive cash in exchange for his or her pro rata portion in
each Treasury Obligation held by the Trust, such Unitholder will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in such Treasury Obligation,
regardless of whether the Unitholder reinvests the cash relating to the
Treasury Obligations into additional Fund Shares.
Because the Trust will own many Securities, a Unitholder who requests an In
Kind Distribution will have to analyze the tax consequences with respect to
each Security owned by the Trust. The amount of taxable gain (or loss)
recognized upon such exchange will generally equal the sum of the gain (or
loss) recognized under the rules described above by such Unitholder with
respect to each Security owned by the Trust. Unitholders who request an In
Kind Distribution are advised to consult their tax advisers in this regard.
General. If more than 50% of the value of the total assets of the Fund consist
of stock or securities in foreign corporations, the Fund may elect to pass
through to its shareholders the foreign income and similar taxes paid by the
Fund in order to enable such shareholders to take a credit (or deduction) for
foreign income taxes paid by the Fund. If such an election is made,
Unitholders of the Trust, because they are deemed to own a pro rata portion of
the Fund Shares held by the Trust, as described above, must include in their
gross income, for Federal income tax purposes, both their portion of dividends
received by the Trust from the Fund, and also their portion of the amount
which the Fund deems to be the Trust's portion of foreign income taxes paid
with respect to, or withheld from, dividends, interest or other income of the
Fund from its foreign investments. Unitholders may then subtract from their
Federal income tax the amount of such taxes withheld, or else treat such
foreign taxes as deductions from gross income; however, as in the case of
investors receiving income directly from foreign sources, the above described
tax credit or deduction is subject to certain limitations. Unitholders should
consult their tax advisers regarding this election and its consequences to
them.
Each Unitholder will be requested to provide the Unitholder's taxpayer
identification number to the Trustee and to certify that the Unitholder has
not been notified that payments to the Unitholder are subject to back-up
withholding. If the proper taxpayer identification number and appropriate
certification are not provided when requested, distributions by the Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the Trust will generally
be subject to United States income taxation and withholding in the case of
Units held by non-resident alien individuals, foreign corporations or other
non-United States persons (accrual of original issue discount on the Treasury
Obligations may not be subject to taxation or withholding provided certain
requirements are met). Such persons should consult their tax advisers.
Unitholders will be notified annually of the amounts of original issue
discount, dividend income and long-term capital gains distributions includable
in the Unitholder's gross income and amounts of Trust expenses which may be
claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original issue
discount may also be subject to state and local taxes. Foreign investors may
be subject to different Federal income tax consequences than those described
above. Investors should consult their tax advisers for specific information
on the tax consequences of particular types of distributions.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of 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
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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"
in Prospectus Part One (which is based on the number of Units outstanding on
January 1 of each year for which such compensation relates) 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" in Prospectus Part One (which amount is based on the number
of Units outstanding on January 1 of each year for which such compensation
relates). 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
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General. Units are offered at the Public Offering Price. 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 (initially 4.9% of the Public Offering Price and 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. Any sales charge reduction will primarily be the
responsibility of the selling Managing Underwriter, broker, dealer or agent.
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
Prospectus Part One 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
initially 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 initially 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. The Treasury Obligations
will be valued at their net bid prices. If bid prices are not available for
the Treasury Obligations, then such evaluations will be based on (1) bid
prices for comparable securities, (2) by determining the value of the Treasury
Obligations on the bid side of the market by appraisal or (3) by any
combination of the above. The offering price of the Treasury Obligations may
be expected to be greater than the bid price of the Treasury Obligations by
less than 2%.
In offering the Units to the public, neither the Sponsor, 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. Units will be distributed to the public by the Managing
Underwriter at the Public Offering Price. 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. 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 initially 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.
In addition, the Sponsor realized a profit or sustained 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. 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 have further realized 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) are 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 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
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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" in Prospectus Part One.
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, 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" in
Prospectus Part One. 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
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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 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" in Prospectus Part One.
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. The Sponsor is an indirect
subsidiary of VK/AC Holding, Inc. Prior to October 31, 1996, VK/AC Holding,
Inc. was controlled, through the ownership of a substantial majority of its
common stock, by The Clayton & Dubilier Private Equity IV Limited Partnership.
On October 31, 1996, VK/AC Holding, Inc. became a wholly owned indirect
subsidiary of Morgan Stanley Group Inc. pursuant to the closing of an
Agreement and Plan of Merger among Morgan Stanley Group Inc., MSAM Holdings
II, Inc. and MSAM Acquisition Inc., whereby MSAM Acquisition Inc. was merged
with and into VK/AC Holding, Inc. and VK/AC Holding, Inc. was the surviving
corporation (the "Acquisition" ).
As a result of the Acquisition, VK/AC Holding, Inc. became a wholly owned
subsidiary of MSAM Holdings II, Inc. which, in turn, is a wholly owned
subsidiary of Morgan Stanley Group Inc. Morgan Stanley Group Inc. and various
of its directly or indirectly owned subsidiaries, including Morgan Stanley
Asset Management Inc., an investment adviser (MSAM" ), Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and Morgan
Stanley International, are engaged in a wide range of financial services.
Their principal businesses include securities underwriting, distribution and
trading; merger, acquisition, restructuring and other corporate finance
advisory activities; merchant banking; stock brokerage and research services;
asset management; trading of futures, options, foreign exchange commodities
and swaps (involving foreign exchange, commodities, indices and interest
rates); real estate advice, financing and investing; and global custody,
securities clearance services and securities lending. As of September 30,
1996, MSAM, together with its affiliated investment advisory companies, had
approximately $103.5 billion of assets under management and fiduciary advice.
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions
being met, it is currently anticipated that the transaction will close in
mid-1997. Thereafter, Van Kampen American Capital Distributors, Inc. will be
an indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three major
businesses: full service brokerage, credit services and asset management.
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, (630) 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 November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Trust or to any other Series thereof. The information is included
herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
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. Kroll & Tract 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.
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>
The Trust 3
Objectives and Securities Selection 3
Trust Portfolio 4
Risk Factors 14
Federal Taxation 15
Trust Operating Expenses 18
Public Offering 19
Rights of Unitholders 21
Trust Administration 23
Other Matters 27
</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
Part Two
The Principal(R) Trust
PRINCOR(R) EMERGING GROWTH AND TREASURY, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 26
Note: This Prospectus May Be Used Only When Accompanied by Part One. Both
Parts of this Prospectus should be retained for future reference.
Dated as of the date of the Prospectus Part One accompanying this Prospectus
Part Two.
Principal Financial Securities, Inc.
Fountain Place
1445 Ross Avenue, Suite 2300
Dallas, Texas 75201
Please retain this Prospectus for future reference.
Contents of Post-Effective Amendment
to Registration Statement
This Post-Effective Amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
26, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Chicago and State of Illinois on the 24th
day of April, 1997.
Van Kampen American Capital Equity Opportunity
Trust, Series 26
(Registrant)
By Van Kampen American Capital Distributors,
Inc.
(Depositor)
By: Sandra A. Waterworth
Vice President
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on
April 24, 1997 by the following persons who constitute a majority of the
Board of Directors of Van Kampen American Capital Distributors, Inc.:
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
William R. Molinari President and Chief Operating )
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Sandra A. Waterworth ) (Attorney in Fact)*
____________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 203
(File No. 33-65744) and with the Registration Statement on Form S-6
of Insured Municipals Income Trust, 170th Insured Multi-Series (File
No. 33-55891) and the same are hereby incorporated herein by this
reference.
Consent of Independent Certified Public Accountants
We have issued our report dated March 21, 1997 accompanying the
financial statements of Van Kampen American Capital Equity Opportunity
Trust, Series 26 as of December 31, 1996, and for the period then ended,
contained in this Post-Effective Amendment No. 1 to Form S-6.
We consent to the use of the aforementioned report in the Post-
Effective Amendment and to the use of our name as it appears under the
caption "Auditors".
Grant Thornton LLP
Chicago, Illinois
April 24, 1997
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