File No. 333-00585
CIK #896992
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Van Kampen American Capital Equity
Opportunity Trust, Series 27
B. Name of Depositor: Van Kampen American Capital Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital
Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: An indefinite
number of Units of proportionate interest pursuant to Rule 24f-2
under the Investment Company Act of 1940
F. Proposed maximum offering price to the public of the securities
being registered: Indefinite
G. Amount of registration fee: $500 (previously paid)
H. Approximate date of proposed sale to the public:
As Soon As Practicable After the Effective Date of the
Registration Statement
/ / Check box if it is proposed that this filing will become effective
on pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
Van Kampen American Capital Equity Opportunity Trust
Series 27
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of Fund ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Fund Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Fund Administration
4. Name and address of principal ) Underwriting
underwriter
5. Organization of trust ) The Fund
6. Execution and termination of ) The Fund
Trust Indenture and Agreement ) Fund Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Fund
trust's securities and ) Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Fund Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Fund
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Fund Operating Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) Underwriting
underwriter, trustee or any ) Trust Portfolio
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Fund
underlying securities ) Rights of Unitholders
) Fund Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Fund Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Fund Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Fund Administration
20. Certain miscellaneous provisions ) Fund Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Fund Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Fund Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Fund Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Fund Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Fund Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Fund Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Fund Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Fund Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Fund Operating Expenses
50. Trustee's lien ) Fund Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Cover Page
securities ) Fund Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Fund Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Fund Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
Certified 1(c) to Form S-6) ) Public Accountants
) Statement of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
Preliminary Prospectus Dated February 7, 1996
Subject To Completion
February 22, 1996
First of Michigan Real Estate Income and Growth Trust, Series 1
The Trust. First of Michigan Real Estate Income and Growth Trust, Series 1
(the "Trust" ) is a unit investment trust which is contained in Van
Kampen American Capital Equity Opportunity Trust, Series 27. The Trust offers
investors the opportunity to purchase Units representing proportionate
interests in a fixed, diversified portfolio of common stocks issued by
publicly traded equity real estate investment trusts, known as REITs (the "
Securities" ). Unless terminated earlier, the Trust will terminate on
, 2000 (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 income and capital appreciation by investing in a portfolio of
common stocks issued by publicly traded equity real estate investment trusts.
See "Portfolio." Each Unit of the Trust represents an undivided
fractional interest in all the Securities deposited in the Trust. There is, of
course, no guarantee that the objectives of the Trust will be achieved.
Public Offering Price. The Public Offering Price per Unit of the Trust is
equal to the aggregate underlying value of the Securities plus or minus cash,
if any, in the Capital and Income Accounts, divided by the number of Units
outstanding, plus a sales charge equal to 4.5% of the Public Offering Price
which is equivalent to 4.712% of the aggregate value of the Securities. During
the initial offering period, the sales charge is reduced on a graduated scale
for sales involving at least 10,000 Units. If Units were available for
purchase at the close of business on the day before the Initial Date of
Deposit, the Public Offering Price per Unit would have been $ . The
minimum purchase is 200 Units (100 Units for a tax-sheltered retirement plan).
See "Public Offering."
Additional Deposits. The Sponsor may, from time to time during a period of up
to approximately 6 months after the Initial Date of Deposit, deposit
additional Securities in the Trust, as provided under "The Trust."
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.
Dividend and Capital Distributions. Distributions of dividends and capital, if
any, received by the Trust will be paid in cash on the applicable distribution
date to Unitholders of record on the record date as set forth in the "
Summary of Essential Financial Information." The initial estimated
distribution will be $ per Unit and will be made on 25,
1996 to Unitholders of record on 10, 1996. Any distribution
of income and/or capital will be net of the expenses of the Trust. See "
Tax Status." 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." As of
February 2, 1996, the estimated net annual dividends per Unit of the Trust is
anticipated to be $0.75.
Secondary Market for Units. After the initial offering period, although not
obligated to do so, the Managing Underwriter intends to maintain a market for
Units of the Trust and offer to repurchase such Units at prices which are
based on the aggregate underlying value of Securities in the Trust (generally
determined by the closing sale prices of the listed Securities and the bid
prices of the over-the-counter traded Securities), plus or minus a pro rata
share of cash, if any, in the Capital and Income Accounts of the Trust. If a
secondary market is maintained during the initial offering period, the prices
at which Units will be repurchased will be based upon the aggregate underlying
value of the Securities in the Trust (generally determined by the closing sale
prices of the listed Securities and the ask prices of the over-the-counter
traded Securities), plus or minus a pro rata share of 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 aggregate underlying value of the Securities in the Trust (generally
determined by the closing sale prices of the listed Securities and the bid
prices of the over-the-counter traded Securities), 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, Securities will
begin to be sold in connection with the termination of the Trust. The Sponsor
will determine the manner, timing and execution of the sale of the Securities.
At least 60 days prior to the Mandatory Termination Date the Trustee will
provide written notice thereof to all Unitholders and will include with such
notice a form to enable Unitholders to elect a distribution of shares of
Securities if such Unitholder owns at least 2,500 Units of the Trust rather
than to receive payment in cash for such Unitholder's pro rata share of the
amounts realized upon the disposition by the Trustee of Securities. All
Unitholders will receive cash in lieu of any fractional shares. To be
effective, the election form, and other documentation required by the Trustee,
must be returned to the Trustee at least ten business days prior to the
Mandatory Termination Date. Unitholders not electing a distribution of shares
of Securities 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."
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. See "Rights of Unitholders--Reinvestment Option."
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 financial condition of the issuers or the
general condition of the stock market, volatile interest rates, economic
recession and the condition of the real estate market. The Trust is not
actively managed and Securities will not be sold by the Trust to take
advantage of market fluctuations or changes in anticipated rates of
appreciation. Units of the Trust are not deposits or obligations of, or
guaranteed or endorsed by, any bank and are not federally insured or otherwise
protected by the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other agency and involve investment risk, including the possible
loss of principal. See "Risk Factors."
<TABLE>
Summary of Essential Financial Information
As of the Close of Business on the Day Before the Initial Date of Deposit: February 21, 1996
Managing Underwriter and Supervisor: First of Michigan Corporation
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
<S> <C>
GENERAL INFORMATION
Number of Units..........................................................................................................
Fractional Undivided Interest in the Trust per Unit...................................................................... 1/
Public Offering Price: ..................................................................................................
Aggregate Value of Securities in Portfolio <F1>.......................................................................... $
Aggregate Value of Securities per Unit................................................................................... $
Sales Charge 4.5% (4.712% of the Aggregate Value of Security per Unit)................................................... $
Anticipated Public Offering Price per Unit <F2><F3>...................................................................... $ 10.00
Redemption Price per Unit................................................................................................ $
Secondary Market Repurchase Price per Unit .............................................................................. $
Excess of Public Offering Price per Unit over Redemption Price per Unit.................................................. $
Supervisor's Annual Supervisory FeeMaximum of $.0025 per Unit............................................................
Evaluator's Annual Evaluation FeeMaximum of $.0025 per Unit..............................................................
Evaluation Time4:00 P.M. New York time...................................................................................
Mandatory Termination DateMarch 1, 2000..................................................................................
Minimum Termination ValueThe Trust may be terminated if the net asset value of the Trust is less than 40% of the total
value of Securities deposited in the Trust during the primary offering period..........................................
Calculation of Estimated Net Annual Dividends per Unit <F4>..............................................................
Estimated Gross Annual Dividends per Unit................................................................................ $
Less: Estimated Annual Expense per Unit ................................................................................. $
Estimated Net Annual Dividends per Unit ................................................................................. $
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee............................$.008 per Unit
Estimated Annual Organizational Expenses <F5>...$ per Unit
Income Account Record Date......................Tenth day of June and December
Income Account Distribution Date................Twenty-fifth day of June and December
Capital Account Record Date.....................Tenth day of December
Capital Account Distribution Date <F6>..........Twenty-fifth day of December
<FN>
<F1> Each Security listed on a national securities exchange is valued at the last
closing sale price, or if the Security is not so listed, at the closing asked
price thereof.
<F2> On the Initial Date of Deposit there will be no cash in the Income or Capital
Accounts. Anyone ordering Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts.
<F3> Effective on each February 22, commencing February 22, 1997, the secondary
market sales charge will decrease by .5 of 1% to a minimum sales charge of
3.5%. See "Public Offering--Offering Price."
<F4> Estimated annual dividends are based on annualizing the most recently paid
quarterly or semi-annual ordinary dividends.
<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 the life of the
Trust. See "Trust Operating Expenses" and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts. Estimated Annual Organizational
Expenses have been estimated based on a projected trust size of $
. To the extent the Trust is larger or smaller, the actual organizational
expenses paid by the Trust (and therefore by Unitholders) will vary from the
estimated amount set forth above.
<F6> If the amount available for distribution in the Capital Account equals at
least $0.01 per Unit, a distribution from the Capital Account will be made
monthly on the twenty-fifth day of the month to Unitholders of record on the
tenth day of such month.
</TABLE>
THE TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 27 is comprised
of one unit investment trust, First of Michigan Real Estate Income and Growth
Trust, Series 1 (the "Trust" ). The Trust was created under the laws of
the State of New York pursuant to a Trust Indenture and Agreement (the "
Trust Agreement" ), dated the date of this Prospectus (the "Initial
Date of Deposit" ), 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, First of Michigan
Corporation, as Supervisor and The Bank of New York, as Trustee.
The Trust may be an appropriate medium for investors who desire to participate
in a diversified portfolio of common stocks issued by publicly traded equity
real estate investment trusts. Diversification of assets in the Trust will not
eliminate the risk of loss always inherent in the ownership of securities. For
a breakdown of the portfolio see "Trust Portfolio."
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio" herein, including delivery
statements relating to contracts for the purchase of certain such Securities
and an irrevocable letter of credit issued by a financial institution in the
amount required for such purchases. Thereafter, the Trustee, in exchange for
such Securities (and contracts) so deposited, delivered to the Sponsor
documentation evidencing the ownership of that number of Units of the Trust
indicated in "Summary of Essential Financial Information." Unless
otherwise terminated as provided in the Trust Agreement, the Trust will
terminate on the Mandatory Termination Date and Securities then held will
within a reasonable time thereafter be liquidated or distributed by the
Trustee.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Securities, contracts to purchase securities or irrevocable
letters of credit or cash with instructions to purchase additional Securities
in exchange for the corresponding number of additional Units. As additional
Units are issued by the Trust as a result of the deposit of additional
Securities by the Sponsor, the aggregate value of the securities in the Trust
will be increased and the fractional undivided interest in the Trust
represented by each Unit will be decreased. The Sponsor may continue to make
additional deposits of Securities (or cash or a letter of credit with
instructions to purchase additional Securities) into the Trust for a period of
up to 6 months following the Initial Date of Deposit. Such additional deposits
may be made provided that for the first 90 days such additional deposits will
be in amounts which will maintain, as nearly as practicable, an equal
percentage relationship among the Securities in the Trust's portfolio based on
market value, and thereafter such additional deposits will be in amounts which
will maintain the proportionate relationship based on the number of shares of
each Security in the Trust's portfolio as exists immediately preceding such
additional deposit. The required percentage relationship among the Securities
will be adjusted, to the extent necessary, to reflect the occurrence of a
stock dividend, a stock split or a similar event which affects the capital
structure of the issuer of a Security but which does not affect the Trust's
percentage ownership of the common stock equity of such issuer at the time of
such event. The portion of Securities represented by each Unit will not change
as a result of the deposit of additional Securities in the Trust.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee or
additional Units are issued as a result of additional Security being deposited
by the Sponsor, the fractional undivided interest in the Trust represented by
each unredeemed Unit will increase or decrease accordingly, although the
actual interest in the Trust represented by such fraction will remain
unchanged. Units will remain outstanding until redeemed upon tender to the
Trustee by Unitholders, which may include the Managing Underwriter, 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
income and capital appreciation. The portfolio is described under "Trust
Portfolio" and "Portfolio" herein. The Securities were selected by
First of Michigan Corporation, the Managing Underwriter and Supervisor. In
selecting the Securities, the Managing Underwriter considered the following
factors, among others: (1) the degree to which dividends are protected based
on current FFO (funds from operation), FAD (funds available for distribution)
and FFO and FAD growth estimates; (2) diversification of the Trust portfolio
based on real estate sectors; (3) the degree to which the Security provides
diversity and market liquidity without becoming unmanageable or severely
diluting the effect of its performance in relation to the Trust portfolio; (4)
the Security offers an attractive investment based on (a) valuation factors
(such as price/FFO ratio, dividend yield, dividend to FFO and FAD, and
dividend growth potential) and (b) operating fundamentals (such as vacancy
rates, revenue growth, debt levels and debt to equity ratios); and (5) the
position of the issuer within its real estate sector. In selecting the
Securities, the Managing Underwriter considered the degree to which the
portfolio of the Trust provides diversification among the types of underlying
properties owned by the REITs and the geographic location of such properties.
In selecting the Securities, First of Michigan also selected only REITs that
have had dividend increases in the last year (the average of such increases
for all Securities being over 5%). First of Michigan believes that the
potential exists for further increases in dividend levels and that the REITs
appear to be well positioned to experience an increase in FFO (funds from
operations) growth. Based on First of Michigan 1996 FFO estimates, as of the
date of this preliminary prospectus, the REITs were selling at approximately
ten times such estimates.
Other than owning a primary residence, individual investors often have few
practical opportunities to invest in the real estate market. The Trust seeks
to offer a more affordable, practical and liquid alternative to owning
individual properties. The Trust's portfolio seeks to provide greater
diversification in several respects: each REIT in the portfolio is operated by
a different management team; various regions of the country -- each with its
own economic conditions and cycles -- are represented in the Trust's
portfolio; and different REITs specialize in different sectors, such as
apartment complexes, office buildings, shopping malls, industrial parks and
hotels. First of Michigan believes that income-oriented investors should
consider a diversified portfolio of REITs, such as the Trust, for a variety of
reasons: potential for high current yields are available providing dividend
income and a degree of protection in declining markets; solid dividend growth
is possible due to recent strength in industry earnings (funds from
operations); and REIT stock valuations are currently low relative to the yield
on U.S. Treasury securities, providing the potential for capital appreciation.
The underlying properties held by the REITs included in the Trust will be
geographically diversified among 46 states and Washington, D.C., represent 7
to 8 different major real estate sectors and represent over 1,000 properties.
These REITs have a total market capitalization of over $9.5 billion.
An investor will be subjected to taxation on the dividend income received from
the Trust and on gains from the sale or liquidation of Securities (see "
Tax Status" ). Investors should be aware that there is not any guarantee
that the objectives of the Trust will be achieved because they are subject to
the continuing ability of the respective Security issuers to continue to
declare and pay dividends and because the market value of the Securities can
be affected by a variety of factors. The Securities may be especially
susceptible to general stock market movements and to volatile increases and
decreases of value as market confidence in and perceptions of the issuers
change. Investors should be aware that there can be no assurance that the
value of the underlying Securities will increase or that the issuers of the
Securities will pay dividends on outstanding common shares. Any distributions
of income will generally depend upon the declaration of dividends by the
issuers of the Securities and the declaration of any dividends depends upon
several factors including the financial condition of the issuers 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 a company under extraordinary
circumstances may result in its elimination from the portfolio (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 prior to the Initial
Date of Deposit. Neither the Sponsor nor the Trustee have participated in the
selection of the Securities or in establishing the criteria utilized in such
selection. There can be no assurance that the objectives of the Trust,
expected yields, growth in dividends or growth in funds from operations will
be achieved. 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 the following issues of Securities issued by
publicly traded equity real estate investment trusts. The Securities are all
listed on a national securities exchange, the NASDAQ National Market System or
traded in the over-the-counter market. Each of the Securities included in the
portfolio were selected based upon those factors referred to under "
Objectives and Securities Selection" above. The following is a general
description of each of the REITs included in the Trust. It is anticipated that
the final portfolio will include 12 to 15 REIT stocks.
General. The Trust consists of such of the Securities listed under "
Portfolio" as may continue to be held from time to time in the Trust and
any additional Securities acquired and held by the Trust pursuant to the
provisions of the Trust Agreement together with cash held in the Income and
Capital Accounts. Neither the Sponsor nor the Trustee shall be liable in any
way for any failure in any of the Securities. However, should any contract for
the purchase of any of the Securities initially deposited hereunder fail, the
Sponsor will, unless substantially all of the moneys held in the Trust to
cover such purchase are reinvested in substitute Securities in accordance with
the Trust Agreement, refund the cash and sales charge attributable to such
failed contract to all Unitholders on the next distribution date.
Because certain of the Securities 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 Securities under certain limited circumstances. Pursuant
to the Trust Agreement and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Securities such as those
acquired in connection with a merger or other transaction. If offered such new
or exchanged securities or property, the Trustee shall reject the offer.
However, in the event such securities or property are nonetheless acquired by
the Trust, they may be accepted for deposit in the Trust and either sold by
the Trustee or held in the Trust pursuant to the direction of the Sponsor (who
may rely on the advice of the Supervisor). See "Trust
Administration--Portfolio Administration." Securities, however, will not
be sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Securities as such and
will not be able to vote the Securities. As the holder of the Securities, the
Trustee will have the right to vote all of the voting stocks in the Trust and
will vote such stocks in accordance with the instructions of the Sponsor. In
the absence of any such instructions by the Sponsor, the Trustee will vote
such stocks so as to insure that the stocks are voted as closely as possible
in the same manner and the same general proportion as are shares held by
owners other than the Trust.
The Managing Underwriter may acquire the Securities for the Sponsor. The
Managing Underwriter in its general securities business acts as agent or
principal in connection with the purchase and sale of Securities, including
the Securities in the Trust, and may act as a market maker in certain of the
Securities. The Managing Underwriter may also, from time to time, issue
reports on and make recommendations relating to Securities, which may include
the Securities. From time to time the Managing Underwriter may act as
investment banker or an employee or affiliate may be a director of a company
whose shares are included among the Securities; nonpublic information
concerning such a company would not be disclosed to the Managing Underwriter
or for the benefit of the Trust under such circumstances.
RISK FACTORS
An investment in the Trust should be make with an understanding of the risks
inherent in an investment in REITs specifically and in real estate generally
(in addition to securities market risks). REITs are financial vehicles that
have as their objective the pooling of capital from a number of investors in
order to participate directly in real estate ownership or financing. REITs are
generally fully integrated operating companies that have interests in
income-producing real estate. REITs are differentiated by the types of real
estate properties held and the actual geographic location of properties and
fall into two major categories: equity REITs emphasize direct property
investment, holding their invested assets primarily in the ownership of real
estate or other equity interests, while mortgage REITs concentrate on real
estate financing, holding their assets primarily in mortgages secured by real
estate. As of the Initial Date of Deposit, the Trust contains only equity
REITs. REITs obtain capital funds for investment in underlying real estate
assets by selling debt or equity securities on the public or institutional
capital markets or by bank borrowing. Thus, the returns on common equities of
the REITs in which the Trust invests will be significantly affected by changes
in costs of capital and, particularly in the case of highly "leveraged"
REITs (i.e., those with large amounts of borrowings outstanding) by changes
in the level of interest rates. The objective of an equity REIT is to purchase
income-producing real estate properties in order to generate high levels of
cash flow from rental income and a gradual asset appreciation, and they
typically invest in properties such as office, retail, industrial, hotel and
apartment buildings and health care facilities.
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from corporate
income taxes provided the REIT satisfies the requirements of Sections 856
through 860 of the Internal Revenue Code. The major tests for tax-qualified
status are that the REIT (i) be managed by one or more trustees or directors,
(ii) issue shares of transferable interest to its owners, (iii) have at least
100 shareholders, (iv) have no more than 50% of the shares held by five or
fewer individuals, (v) invest substantially all of its capital in real estate
related assets and derive substantially all of its gross income from real
estate related assets and (vi) distributed at least 95% of its taxable income
to its shareholders each year. If any REIT in the Trust's portfolio should
fail to qualify for such tax status, the related shareholders (including the
Trust) could be adversely affected by the resulting tax consequences.
The underlying value of the Securities and the Trust's ability to make
distributions to Unitholders may be adversely affected by changes in national
economic conditions, changes in local market conditions due to changes in
general or local economic conditions and neighborhood characteristics,
increased competition from other properties, obsolescence of property, changes
in the availability, cost and terms of mortgage funds, the impact of present
or future environmental legislation and compliance with environmental laws,
the ongoing need for capital improvements, particularly in older properties,
changes in real estate tax rates and other operating expenses, regulatory and
economic impediments to raising rents, adverse changes in governmental rules
and fiscal policies, dependency on management skill, civil unrest, acts of
God, including earthquakes and other natural disasters (which may result in
uninsured losses), acts of war, adverse changes in zoning laws, and other
factors which are beyond the control of the issuers of the REITs in the Trust.
The value of the REITs may at times be particularly sensitive to devaluation
in event of rising interest rates. Equity REITs are less likely to be affected
by interest rate fluctuations than Mortgage REITs and the nature of the
underlying assets of an Equity REIT may be considered more tangible than that
of a Mortgage REIT. Equity REITs are more likely to be adversely affected by
changes in the value of the underlying property it owns than Mortgage REITs.
REITs may concentrate investments in specific geographic areas or in specific
property types, i.e., hotels, shopping malls, residential complexes, and
office buildings. The impact of economic conditions on REITs can also be
expected to vary with geographic location and property type. Investors should
be aware the REITs may not be diversified and are subject to the risks of
financing projects. REITs are also subject to defaults by borrowers,
self-liquidation, the market's perception of the REIT industry generally, and
the possibility of failing to qualify for pass-through of income under the
Internal Revenue Code, and to maintain exemption from the Investment Company
Act of 1940. A default by a borrower or lessee may cause the REIT to
experience delays in enforcing its right as mortgagee or lessor and to incur
significant costs related to protecting its investments. In addition, because
real estate generally is subject to real property taxes the REITs in the Trust
may be adversely affected by increases or decreases in property tax rates and
assessments or reassessments of the properties underlying the REITs by taxing
authorities. Futhermore, because real estate is relatively illiquid, the
ability of REITs to vary their portfolios in response to changes in economic
and other conditions may be limited and may adversely affect the value of the
Units. There can be no assurance that any REIT will be able to dispose of its
underlying real estate assets when advantageous or necessary. In an effort to
reduce the impact of the risks discussed above, the Managing Underwriter has
selected REITs that are diversified among various real estate sectors and
geographic locations.
The issuer of REITs generally maintains comprehensive insurance on presently
owned and subsequently acquired real property assets, including liability,
fire and extended coverage. However, certain types of losses may be
uninsurable or not be economically insurable as to which the REITs properties
are at risk in their particular locales. There can be no assurance that
insurance coverage will be sufficient to pay the full current market value or
current replacement cost of any lost investment. Various factors might make it
impracticable to use insurance proceeds to replace a facility after it has
been damaged or destroyed. Under such circumstances, the insurance proceeds
received by REITs might not be adequate to restore its economic position with
respect to such property.
Under various environmental laws, a current or previous owner or operator of
real property may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under or in such property. Such laws often
impose liability whether or not the owner or operator caused or knew of the
presence of such hazardous or toxic substances and whether or not the storage
of such substances was in violation of a tenant's lease. In addition, the
presence of hazardous or toxic substances, or the failure to remediate such
property properly, may adversely affect the owner's ability to borrow using
such real property as collateral. No assurance can be given that one or more
of the REITs in the Trust may not be presently liable or potentially liable
for any such costs in connection with real estate assets they presently own or
subsequently acquire while such REITs are held in the Trust.
An investment in Units should be made with an understanding of the risks which
an investment in common stocks entail, including the risk that the financial
condition of the issuers of the Securities or the general condition of the
common stock market may worsen and the value of the Securities and therefore
the value of the Units may decline. Common stocks are especially susceptible
to general stock market movements and to volatile increases and decreases of
value as market confidence in and perceptions of the issuers change. The
perceptions are based on unpredictable factors including expectations
regarding government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or regional
political, economic or banking crises. Shareholders of common stocks have
rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or preferred stocks of, such issuers. Shareholders of common stocks of the
type held by the Trust have a right to receive dividends only when and if, and
in the amounts, declared by the issuer's board of directors and have a right
to participate in amounts available for distribution by the issuer only after
all other claims on the issuer have been paid or provided for. Common stocks
do not represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock or the rights of holders of
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks is subject to market fluctuations for
as long as the common stocks remain outstanding, and thus the value of the
Securities may be expected to fluctuate over the life of the Trust to values
higher or lower than those prevailing on the Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity,
generally have inferior rights to receive payments from the issuer in
comparison with the rights of creditors of, or holders of debt obligations or
preferred stocks issued by, the issuer. Cumulative preferred stock dividends
must be paid before common stock dividends and any cumulative preferred stock
dividend omitted is added to future dividends payable to the holders of
cumulative preferred stock. Preferred stockholders are also generally entitled
to rights of liquidation which are senior to those of common stockholders.
TAX STATUS
Federal Taxation. The following is a general discussion of certain of the
federal income tax consequences of the purchase, ownership and disposition of
the Units. The summary is limited to investors who hold the Units as "
capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Internal Revenue Code of 1986 (the "
Code" ). Unitholders should consult their tax advisers in determining the
federal, state, local and any other tax consequences of the purchase,
ownership and disposition of Units in the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of 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 received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, redemption, or payment at maturity) or
upon the sale or redemption of Units by such Unitholder. The price a
Unitholder pays for his Units, including sales charges, is allocated among his
pro rata portion of each Security held by the Trust (in proportion to the fair
market values thereof on the date the Unitholder purchase his Units) in order
to determine his initial cost for his pro rata portion of each Security held
by the Trust. For federal income tax purposes, a Unitholder's pro rata portion
of dividends as defined by Section 316 of the Code paid with respect to a
Security held by the Trust are taxable as ordinary income to the extent of
such corporation's current and accumulated "earnings and profits" . A
Unitholder's pro rata portion of dividends paid on such Security which exceed
such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Security shall generally be treated as
capital gain. In general, any such capital gain will be short-term unless a
Unitholder has held his Units for more than one year.
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 or a financial
institution and, in general, will be long-term if the Unitholder has held his
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 or a financial institution and, in general, will be long-term
if the Unitholder has held his 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 purpose.
4. The Code provides that "miscellaneous itemized deductions" are
allowable only to the extent that they exceed two percent of an individual
taxpayer's adjusted gross income. Miscellaneous itemized deductions subject to
this limitation under present law include a Unitholder's pro rata share of
expenses paid by the Trust, including fees of the Trustee, Supervisor and the
Evaluator.
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such
Unitholder's pro rata portion of dividends received by the Trust (to the
extent such dividends are taxable as ordinary income, as discussed above) in
the same manner as if such corporation directly owned the Security paying such
dividends (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 the
accumulated earnings tax and the personal holding corporation tax). However, a
corporation owning Units should be aware that Sections 246 and 246A of the
Code impose additional limitations on the eligibility of dividends for the 70%
dividends received deduction. These limitations include a requirement that
stock (and therefore Units) must generally be held at least 46 days (as
determined under Section 246(c) of the Code). Final regulations have been
recently issued which address special rules that must be considered in
determining whether the 46 day holding requirement is met. Moreover, the
allowable percentage of the deduction will be reduced from 70% if a corporate
Unitholder owns certain stock (or Units) the financing of which is directly
attributable to indebtedness incurred by such corporation. It should be noted
that various legislative proposals that would affect the dividends received
deduction have been introduced. Unitholders should consult with their tax
advisers with respect to the limitations on and possible modifications to the
dividends received deduction.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by the
Trust or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by the Trust or if the
Unitholder disposes of a Unit. For taxpayers other than corporations, net
capital gains are subject to a maximum marginal stated tax rate of 28%.
However, it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "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 would recharacterize 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.
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." 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 would be
deemed an exchange of such Unitholder's pro rata portion of each of the shares
of stock and other assets held by the Trust in exchange for an undivided
interest in whole shares of stock plus, possibly, cash.
There are generally three different potential tax consequences which may occur
under an In Kind Distribution with respect to each Security owned by the
Trust. A "Security" for this purpose is a particular class of stock
issued by a particular corporation. If the Unitholder receives only whole
shares of a Security in exchange for his or her pro rata portion in each share
of such Security held by the Trust, there is not taxable gain or loss
recognized upon such deemed exchange pursuant to Section 1036 of the Code. If
the Unitholder receives whole shares of a particular Security plus cash in
lieu of a fractional share of such Security, and if the fair market value of
the Unitholder's pro rata portion of the shares of such Security exceeds his
tax basis in his pro rata portion of such Security, taxable gain would be
recognized in an amount not to exceed the amount of such cash received,
pursuant to Section 1031(b) of the Code. No taxable loss would be recognized
upon such an exchange pursuant to Section 1031(c) of the Code, whether or not
cash is received in lieu of a fractional share. Under either of these
circumstances, special rules will be applied under Section 1031(d) of the Code
to determine the Unitholder's tax basis in the shares of such particular
Security which he receives as part of the In Kind Distribution. Finally, if a
Unitholder's pro rata interest in a Security does not equal a whole share, he
may receive entirely cash in exchange for his pro rata portion of a particular
Security. In such case, taxable gain or loss is measured by comparing the
amount of cash received by the Unitholder with his tax basis in such Security.
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. 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. Such persons should consult their tax
advisers.
Unitholders will be notified annually of the amount of income dividends
includable in the Unitholder's gross income and amounts of Trust expenses
which may be claimed as itemized deductions.
Dividend income and long-term capital gains may also be subject to state and
local taxes. Investors should consult their tax advisers for specific
information on the tax consequences of particular types of distributions.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of Tanner Propp LLP, special counsel to the Trust for New York
tax matters, the Trust is not an association taxable as a corporation and the
income of the Trust will be treated as the income of the Unitholders under the
existing income tax laws of the State and City of New York.
TRUST OPERATING EXPENSES
Compensation of Sponsor, Evaluator and Managing Underwriter. The Sponsor will
not receive any fees in connection with its activities relating to the Trust.
The Evaluator shall receive that evaluation fee, payable in any month
incurred, set forth under "Summary of Essential Financial Information"
(which is based on the number of Units outstanding on January 1 of each year
for which such compensation relates except during the initial offering period
in which event the calculation is based on the number of Units outstanding at
the end of the month of such calculation) for regularly evaluating the Trust
portfolio. Such fee may exceed the actual cost of providing such evaluation
services for this Trust, but at no time will the total amount paid to the
Evaluator for providing evaluation services to unit investment trusts of which
Van Kampen American Capital Distributors, Inc. acts as Sponsor in any calendar
year exceed the aggregate cost to the Evaluator of supplying such services in
such year. The Managing Underwriter will receive an annual supervisory fee,
payable in monthly installments, which is not to exceed the amount set forth
under "Summary of Essential Financial Information" (which is based on
the number of Units outstanding on January 1 of each year for which such
compensation relates except during the initial offering period in which event
the calculation is based on the number of the Units outstanding at the end of
the month of such calculation) for providing portfolio supervisory services
for the Trust. Such fee may exceed the actual cost of providing such
supervision services for this Trust, but at no time will the total amount paid
to the Managing Underwriter for providing portfolio supervision services to
unit investment trusts for which First of Michigan Corporation is the
principal underwriter in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. Both of the foregoing fees
may be increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a
comparable category. The Sponsor and the Managing Underwriter will receive
sales commissions and 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 an annual fee from
the Trust as set forth under "Summary of Essential Financial
Information" (which amount is based on the number of Units outstanding on
January 1 of each year for which such compensation relates except during the
initial offering period in which event the calculation is based on the number
of Units outstanding at the end of the month of such calculation). The
Trustee's fees are payable in monthly installments on or before the
twenty-fifth day of each month from the Income Account to the extent funds are
available and then from the Capital Account. The Trustee benefits to the
extent there are funds for future distributions, payment of expenses and
redemptions in the Capital and Income Accounts since these accounts are
non-interest bearing and the amounts earned by the Trustee are retained by the
Trustee. Part of the Trustee's compensation for its services to the Trust is
expected to result from the use of these funds. Such fees may be increased
without approval of the Unitholders by amounts not exceeding proportionate
increases under the category "All Services Less Rent of Shelter" in
the Consumer Price Index published by the United States Department of Labor
or, if such category is no longer published, in a comparable category. For a
discussion of the services rendered by the Trustee pursuant to its obligations
under the Trust Agreement, see "Rights of Unitholders--Reports
Provided" and "Trust Administration."
Miscellaneous Expenses. 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 life of the Trust.
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 gross negligence, bad
faith or wilful misconduct on its part and (g) expenditures incurred in
contacting Unitholders upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When such
fees and expenses are paid by or owing to the Trustee, they are secured by a
lien on the Trust's portfolio. Since the Securities are all common stocks, and
the income stream produced by dividend payments is unpredictable, the Sponsor
cannot provide any assurance that dividends will be sufficient to meet any or
all 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 Securities to pay such amounts. These sales may result in
capital gains or losses to Unitholders. See "Tax Status."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price (which is based on the
aggregate underlying value of the Securities and includes a sales charge of
4.5% of the Public Offering Price which is equivalent to 4.712% of the
aggregate underlying value of the Securities). Such underlying value shall
include the proportionate share of any undistributed cash held in the Capital
and Income Accounts of the Trust.
The sales charge applicable to quantity purchases is, during the initial
offering period, reduced on a graduated basis to any person acquiring 10,000
or more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number of
Units Purchased Percentage of Sales Charge Per Unit
<S> <C>
10,000-24,999......... 4.00%
25,000-49,999......... 3.50%
50,000-74,999......... 2.75%
75,000-99,999......... 2.00%
100,000 or more....... 1.25%
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
Managing Underwriter, broker, dealer or agent. Registered representatives of
the Managing Underwriter may purchase Units of the Trust at the current Public
Offering Price less the underwriting commission during the initial offering
period, and less the dealer's concession for secondary market transactions.
Registered representatives of selling brokers, dealers, or agents may purchase
Units of the Trust at the current Public Offering Price less the dealer's
concession during the initial offering period and for secondary market
transactions.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in the
Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
equal to 4.712% of such value and dividing the sum so obtained by the number
of Units in the Trust outstanding. Such underlying value shall include the
proportionate share of any cash held in the Income and Capital Accounts. This
computation produced a gross underwriting profit equal to 4.5% of the Public
Offering Price. Such price determination as of the close of business on the
day before the Initial Date of Deposit was made on the basis of an evaluation
of the Securities in the Trust prepared by Interactive Data Corporation, a
firm regularly engaged in the business of evaluating, quoting or appraising
comparable securities. Thereafter, the Evaluator on each business day will
appraise or cause to be appraised the value of the underlying Securities 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 Managing Underwriter 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 February 27
commencing February 27,1997 such sales charge will be reduced by .5 of 1% to a
minimum sales charge of 3.5%.
The value of the Securities during the initial offering period is determined
on each business day by the Evaluator in the following manner: if the
Securities are listed on a national securities exchange, this evaluation is
generally based on the closing sale prices on that exchange (unless it is
determined that these prices are inappropriate as a basis for valuation) or,
if there is no closing sale price on that exchange, at the closing asked
prices. If the Securities are not so listed or, if so listed and the principal
market therefor is other than on the exchange, the evaluation shall generally
be based on the current asked prices on the over-the-counter market (unless it
is determined that these prices are inappropriate as a basis for evaluation).
If current asked prices are unavailable, the evaluation is generally
determined (a) on the basis of current asked prices for comparable securities,
(b) by appraising the value of the Securities on the ask side of the market or
(c) by any combination of the above.
In offering the Units to the public, neither the Sponsor, the Managing
Underwriter nor any broker-dealers are recommending any of the individual
Securities in the Trust but rather the entire pool of Securities, taken as a
whole, which are represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Managing Underwriter, broker-dealers and
others at the Public Offering Price. Upon the completion of the initial
offering period, Units repurchased in the secondary market, if any, may be
offered by this Prospectus at the secondary market Public Offering Price in
the manner described above.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
as shown in the table below:
<TABLE>
<CAPTION>
Aggregate Number of
Units Purchased Dealer Concession or
Agency Commission Per Unit*
<S> <C>
0-9,999............... 3.70%
10,000-24,999......... 3.20%
25,000-49,999......... 2.70%
50,000-74,999......... 1.95%
75,000-99,999......... 1.20%
100,000 or more....... 1.00%
</TABLE>
*Dealer concession or agency commission from the Public Offering
Price does not include any reduction for quantity purchases--see
"General" above.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act. In addition, state securities
laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. Any quantity discount provided to
investors will be borne by the selling dealer, agent, Managing Underwriter or
the Sponsor as indicated under "General" above. For secondary market
transactions, the dealer concession or agency commission will amount to 70% of
the sales charge applicable to the transaction.
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 Managing Underwriter reserves the right to
reject, in whole or in part, any order for the purchase of Units and to change
the amount of the concession or agency commission to dealers and others from
time to time. Brokers and dealers of the Trust, banks and/or others are
eligible to participate in a program in which such firms receive from the
Managing Underwriter a nominal award for each of their registered
representatives who have sold a minimum number of units of unit investment
trusts created by the Managing Underwriter during a specified time period. In
addition, at various times the Managing Underwriter may implement other
programs under which the sales forces of brokers, dealers, banks and/or others
may be eligible to win other nominal awards for certain sales efforts, or
under which the Managing Underwriter will reallow to any such brokers,
dealers, banks and/or others that sponsor sales contests or recognition
programs conforming to criteria established by the Managing Underwriter, or
participate in sales programs sponsored by the Managing Underwriter, an amount
not exceeding the total applicable sales charges on the sales generated by
such person at the public offering price during such programs. Also, the
Managing Underwriter in its discretion may from time to time pursuant to
objective criteria established by the Managing Underwriter pay fees to
qualifying brokers, dealers, banks and/or others for certain services or
activities which are primarily intended to result in sales of Units of the
Trust. Such payments are made by the Managing Underwriter out of its own
assets and not out of the assets of the Trust. These programs will not change
the price Unitholders pay for their Units or the amount that the Trust will
receive from the Units sold.
Sponsor and Managing Underwriter Compensation. The Managing Underwriter will
receive a gross sales commission equal to 4.5% of the Public Offering Price of
the Units, less any reduced sales charge for quantity purchases as described
under "General" above. Any such quantity discounts provided to
investors will be borne by the selling dealer or agent. The Sponsor will
receive from the Managing Underwriter the excess of such gross sales
commission over the Managing Underwriter's discount. The Managing Underwriter
will be allowed a discount in connection with the distribution of Units
underwritten during the initial offering period of 3.7% per Unit for up to
$15,000,000 of Units distributed and 3.8% per Unit in excess of $15,000,000 of
Units distributed. For individual trades of 100,000 Units or more, the
Managing Underwriter shall purchase the Units from the Sponsor at the Public
Offering Price minus 3.7% or 3.8% as the case may be. Any quantity discount
provided to investors will be borne by the selling Managing Underwriter,
dealer or agent as indicated under "General" above.
In addition, the Managing Underwriter will realize a profit or will sustain a
loss, as the case may be, as a result of the difference between the price paid
for the Securities by the Managing Underwriter and the cost of such Securities
to the Trust on the Initial Date of Deposit as well as on subsequent deposits.
See "Portfolio." The Sponsor has not participated as sole underwriter
or as manager or as a member of the underwriting syndicates or as an agent in
a private placement for any of the Securities in the Trust portfolio. The
Sponsor and the Managing Underwriter may further realize additional profit or
loss during the initial offering period as a result of the possible
fluctuations in the market value of the Securities in the Trust after a date
of deposit, since all proceeds received from the sale of Units (excluding
dealer concessions and agency commissions allowed, if any) will be retained by
the Sponsor or Managing Underwriter.
A person will become the owner of the Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor or
Managing Underwriter prior to the date of settlement for the purchase of Units
may be used in the Sponsor's or Managing Underwriter's business and may be
deemed to be a benefit to the Sponsor or Managing Underwriter, subject to the
limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Managing Underwriter
intends to maintain a secondary market for Units of the Trust for the period
indicated. In so maintaining a market, the Managing Underwriter or the Sponsor
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 it is not obligated to do so, the Managing Underwriter
intends to maintain a secondary market for the Units offered hereby and offer
continuously to purchase Units at prices subject to change at any time, based
upon the aggregate underlying value of the Securities in the Trust (computed
as indicated under "Offering Price" above and "Rights of
Unitholders--Redemption of Units" ). If the supply of Units exceeds demand
or if some other business reason warrants it, the Managing Underwriter may
either discontinue all purchases of Units or discontinue purchases of Units at
such prices. In the event that a market is not maintained for the Units and
the Unitholder cannot find another purchaser, a Unitholder desiring to dispose
of his Units will be able to dispose of such Units by tendering them to the
Trustee for redemption at the Redemption Price. It is the current intention of
the Managing Underwriter not to maintain a secondary market in the Trust's
final year of existence. A Unitholder who wishes to dispose of his Units
should inquire of his broker as to current market prices in order to determine
whether there is in existence any price in excess of the Redemption Price and,
if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for the individuals, Simplified Employee
Pension Plans for employees, qualified plans for self-employed individuals,
and qualified corporate pension and profit sharing plans for employees. The
purchase of Units of the Trust may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-shelter retirement plan is 100 Units.
RIGHTS OF UNITHOLDERS
General. The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee. Ownership
of Units of the Trust will be evidenced by book entry unless a Unitholder or
the Unitholder's registered broker-dealer makes a written request to the
Trustee that ownership be evidenced by certificates. Units are transferable by
making a written request to the Trustee and, in the case of Units evidenced by
a certificate, by presentation and surrender of such certificate to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. A Unitholder must sign such written request, and such
certificate or transfer instrument, exactly as his name appears on the records
of the Trustee and on the face of any certificate representing the Units to be
transferred with the signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP" ) or such other signature
guarantee program in addition to, or in substitution for, STAMP as may be
accepted by the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Certificates will be issued in
denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer of 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 dividends received by the Trust with
respect to the Securities therein are credited by the Trustee to the Income
Account. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, etc.) are credited to the Capital Account.
The Trustee will distribute any net income with respect to any of the
Securities in the Trust on or about the Income Distribution Dates to
Unitholders of record on the preceding Income Record Dates. See "Summary
of Essential Financial Information." 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 (except as hereinafter provided) be distributed annually
on the Capital Account Distribution Date to Unitholders of record on the
preceding Capital Account Record Date. Proceeds received from the disposition
of any of the Securities after a record date and prior to the following
distribution date will be held in the Capital Account of the Trust and not
distributed until the next distribution date applicable to such Capital
Account. 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, however,
be distributed on the twenty-fifth day of each month to holders of record on
the tenth day of such month if the amount available for distribution equals at
least $0.01 per Unit. 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 dividends are not received by the Trust at a
constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate from distribution to distribution. Persons who purchase
Units will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business such
notice is provided by the selling broker-dealer.
Each month 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 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 accounts. In
addition, the Trustee may withdraw from the Income and Capital Accounts such
amounts as may be necessary to cover redemptions of Units.
Reinvestment Option. Unitholders of the Trust may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any of the mutual funds of which Van
Kampen American Capital Distributors, Inc. acts as Advisor (except for B
shares) which are registered in the Unitholder's state of residence. Such
mutual funds are hereinafter collectively referred to as the "Reinvestment
Funds."
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trust. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois
60181.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units
will, on the applicable distribution date, automatically be applied, as
directed by such person, as of such distribution date by the Trustee to
purchase shares (or fractions thereof) of the applicable Reinvestment Fund at
net asset value as computed as of the close of trading on the New York Stock
Exchange on such date, plus a sales charge of $1.00 per $100 of reinvestment
except if the participant selects the Van Kampen American Capital Reserve
Fund, the Van Kampen American Capital Tax Free Money Fund, the Van Kampen
American Capital Florida Insured Tax Free Income Fund, the Van Kampen American
Capital New Jersey Tax Free Income Fund or the Van Kampen American Capital New
York Tax Free Income Fund in which case no sales charge applies. A minimum of
one-half of such sales charge would be paid to Van Kampen American Capital
Distributors, Inc. for all Reinvestment Funds. Confirmations of all
reinvestments by a Unitholder into a Reinvestment Fund will be mailed to the
Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next succeeding
distribution date, by so notifying the Trustee in writing, elect to terminate
his or her reinvestment plan and receive future distributions on his or her
Units in cash. There will be no charge or other penalty for such termination.
The Sponsor, each Reinvestment Fund, and its investment adviser shall have the
right to suspend or terminate the reinvestment plan at any time.
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. Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a registered Unitholder of the Trust a
statement (i) as to the Income Account: income received, 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 by the Trust
and the number of Units outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit based upon the last computation
thereof made during such calendar year; and (v) amounts actually distributed
during such calendar year from the Income and Capital Accounts, separately
stated, expressed as total dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his or her
Units by tender to the Trustee at its corporate trust office at 101 Barclay
Street, 20th Floor, New York, New York 10286 of a request for redemption duly
endorsed or accompanied by proper instruments of transfer with signature
guaranteed as described above 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
(unless the redeeming Unitholder elects an "In Kind Distribution" as
described below) an amount for each Unit equal to the Redemption Price per
Unit next computed after receipt by the Trustee of such tender of Units as of
the Evaluation Time set forth under "Summary of Essential Financial
Information." The "date of tender" is deemed to be the date on
which Units are received by the Trustee, except that with respect to Units
received after the applicable Evaluation Time the date of tender is the next
day on which such 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 of the Trust 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 Supervisor for this purpose. Units so redeemed shall be
cancelled.
Unitholders in the Trust tendering 2,500 or more Units for redemption may
request from the Trustee in lieu of a cash redemption a distribution in kind
("In Kind Distribution" ) of an amount and value of Securities per Unit
equal to the Redemption Price per Unit as determined as of the next evaluation
following the tender. An In Kind Distribution on redemption of Units will be
made by the Trustee through the distribution of each of the Securities in
book-entry form to the account of the Unitholder's broker-dealer at Depository
Trust Company. The tendering Unitholder will receive his pro rata number of
whole shares of each of the Securities comprising the Trust portfolio and cash
from the Capital Account equal to the fractional shares to which the tendering
Unitholder is entitled. The Trustee may adjust the number of shares of any
issue of Securities included in a Unitholder's In Kind Distribution to
facilitate the distribution of whole shares, such adjustment to be made on the
basis of the value of the Securities on the date of tender. If funds in the
Capital Account are insufficient to cover the required cash distribution to
the tendering Unitholder, the Trustee may sell Securities according to the
criteria discussed above.
To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be, and the diversity of the Trust may be, reduced. Sales may be
required at a time when the Securities would not otherwise be sold and may
result in lower prices than might otherwise be realized. The price received
upon redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the portfolio at the time of
redemption. Special federal income tax consequences will result if a
Unitholder requests an In Kind Distribution. See "Tax Status."
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the aggregate underlying value of
the Securities in the Trust, plus or minus cash, if any, in the Income and
Capital Accounts of the Trust. 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." 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 (ii) the value of the Securities and (iii) dividends
receivable on the Securities trading ex-dividend as of the date of
computation, less (a) amounts representing taxes or other governmental charges
payable out of the Trust and (b) the accrued expenses of the Trust. The
Evaluator may determine the value of the Securities in the following manner:
if the Securities are listed on a national securities exchange, this
evaluation is generally based on the closing sale prices on that exchange
(unless it is determined that these prices are inappropriate as a basis for
valuation) or, if there is no closing sale price on that exchange, at the
closing bid prices. If the Securities are not so listed or, if so listed and
the principal market therefore is other than on the exchange, the evaluation
shall generally be based on the current bid price on the over-the-counter
market (unless these prices are inappropriate as a basis for evaluation). If
current bid prices are unavailable or inappropriate as a basis for valuation,
the evaluations generally determined (a) on the basis of current bid prices
for comparable securities, (b) by appraising the value of the Securities on
the bid side of the market or (c) by any combination of the above.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Managing Underwriter Purchases of Units. The Trustee shall notify the Managing
Underwriter of any Units tendered for redemption. If the Managing
Underwriter's bid in the secondary market at that time equals or exceeds the
Redemption Price per Unit, it may purchase such Units by notifying the Trustee
before the close of business on the next succeeding business day and by making
payment therefor to the Unitholder not later than the day on which the Units
would otherwise have been redeemed by the Trustee. Units held by the Managing
Underwriter may be tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Managing Underwriter will be
in accord with the Public Offering Price described in the then currently
effective prospectus describing such Units. Any profit resulting from the
resale of such Units will belong to the Managing Underwriter which likewise
will bear any loss resulting from a lower offering or redemption price
subsequent to its acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed"
by the Sponsor, Supervisor or the Trustee; their activities described herein
are governed solely by the provisions of the Trust Agreement. Traditional
methods of investment management for a managed fund typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. While the Trust will not be managed, the Trust Agreement does
provide that the Sponsor may (but need not) direct the Trustee to dispose of a
Security in certain events such as the issuer having defaulted on the payment
on any of its outstanding obligations or the price of a Security has declined
to such an extent or other such credit factors exist so that in the opinion of
the Sponsor the retention of such Security would be detrimental to the Trust.
Pursuant to the Trust Agreement and with limited exceptions, the Trustee may
sell any securities or other properties acquired in exchange for Securities
such as those acquired in connection with a merger or other transaction. If
offered such new or exchanged securities or property, the Trustee shall reject
the offer. However, in the event such securities or property are nonetheless
acquired by the Trust, they may be accepted for deposit in the Trust and
either sold by the Trustee or held in such Trust pursuant to the direction of
the Sponsor (who may rely on the advice of the Supervisor). Proceeds from the
sale of Securities (or any securities or other property received by the Trust
in exchange for Securities) are credited to the Capital Account for
distribution to Unitholders or to meet redemptions. Except as stated under
"Trust Portfolio--General" for failed securities and as provided in
this paragraph, the acquisition by the Trust of any securities other than the
Securities is prohibited.
As indicated under "Rights of Unitholders--Redemption of Units" above,
the Trustee may also sell Securities designated by the Supervisor, or if no
such designation has been made, in its own discretion, for the purpose of
redeeming Units of the Trust tendered for redemption and the payment of
expenses.
The Supervisor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent practicable, the
proportionate relationship among the number of shares of individual issues of
Securities in the Trust. To the extent this is not practicable, the
composition and diversity of the Securities in such Trust may be altered. In
order to obtain the best price for the Trust, it may be necessary for the
Supervisor to specify minimum amounts (generally 100 shares) in which blocks
of Securities are to be sold.
Amendment or Termination. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders (1) to cure any
ambiguity or to correct or supplement any provision thereof which may be
defective or inconsistent, or (2) to make such other provisions as shall not
adversely affect the Unitholders (as determined in good faith by the Sponsor
and the Trustee), provided, however, that the Trust Agreement may not be
amended to increase the number of Units (except as provided in the Trust
Agreement). The Trust Agreement may also be amended in any respect by the
Trustee and Sponsor, or any of the provisions thereof may be waived, with the
consent of the holders representing 51% of the Units of the Trust then
outstanding, provided that no such amendment or waiver will reduce the
interest in such Trust of any Unitholder without the consent of such
Unitholder or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Unitholders. The Trustee shall
advise the Unitholders of any amendment promptly after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of such Trust then outstanding or by the Trustee when the
value of the Securities owned by the Trust, as shown by any evaluation, is
less than that amount set forth under Minimum Termination Value in the "
Summary of Essential Financial Information." The Trust will be liquidated
by the Trustee in the event that a sufficient number of Units of such Trust
not yet sold are tendered for redemption by the Managing Underwriter or the
Sponsor, so that the net worth of the Trust would be reduced to less than 40%
of the value of the Securities at the time they were deposited in the Trust.
If the Trust is liquidated because of the redemption of unsold Units by the
Sponsor and/or the Managing Underwriter, the Sponsor will refund to each
purchaser of Units the entire sales charge paid by such purchaser. The Trust
Agreement will terminate upon the sale or other disposition of the last
Security held thereunder, but in no event will it continue beyond the
Mandatory Termination Date stated under "Summary of Essential Financial
Information."
Commencing on the Mandatory Termination Date, Securities will begin to be sold
in connection with the termination of the Trust. The Sponsor will determine
the manner, timing and execution of the sales of the Securities. The Sponsor
shall direct the liquidation of the Securities in such manner as to effectuate
orderly sales and a minimal market impact. In the event the Sponsor does not
so direct, the Securities shall be sold within a reasonable period and in such
manner as the Trustee, in its sole discretion, shall determine. At least 60
days before the Mandatory Termination Date the Trustee will provide written
notice of any termination to all Unitholders of the Trust and will include
with such notice a form to enable Unitholders owning 2,500 or more Units to
request an In Kind Distribution rather than payment in cash upon the
termination of the Trust. To be effective, this request must be returned to
the Trustee at least ten business days prior to the Mandatory Termination
Date. On the Mandatory Termination Date (or on the next business day
thereafter if a holiday) the Trustee will deliver each requesting Unitholder's
pro rata number of whole shares of each of the Securities in the Trust to the
account of the broker-dealer or bank designated by the Unitholder at
Depository Trust Company. The value of the Unitholder's fractional shares of
the Securities will be paid in cash. Unitholders with less than 2,500 Units
and Unitholders not requesting an In Kind Distribution will receive a cash
distribution from the sale of the remaining Securities within a reasonable
time following the Mandatory Termination Date. Regardless of the distribution
involved, the Trustee will deduct from the funds of the Trust any accrued
costs, expenses, advances or indemnities provided by the Trust Agreement,
including estimated compensation of the Trustee, costs of liquidation and any
amounts required as a reserve to provide for payment of any applicable taxes
or other governmental charges. Any sale of Securities in the Trust upon
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time. The Trustee will then distribute to
each Unitholder of the Trust his pro rata share of the balance of the Income
and Capital Accounts.
The Sponsor will attempt to sell Securities as quickly as possible commencing
on the Mandatory Termination Date without in the judgment of the Sponsor
materially adversely affecting the market price of the Securities. The Sponsor
does not anticipate that the period will be longer than one month, and it
could be as short as one day, depending on the liquidity of the Securities
being sold. The liquidity of any Security depends on the daily trading volume
of the Security and the amount that the Sponsor has available on any
particular day.
It is expected (but not required) that the Sponsor will generally follow the
following guidelines in selling the Securities; for highly liquid Securities,
the Securities will generally be sold on the Mandatory Termination Date; for
less liquid Securities, on each of the first two days subsequent to the
Mandatory Termination Date, the amount of any underlying Securities will
generally be sold at a price no less than 1/2 of one point under the closing
sale price of those Securities on the preceding day. Thereafter, the Sponsor
intends to sell without any price restrictions at least a portion of the
remaining underlying Securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that
day) in the one month period following the Mandatory Termination Date.
Within 60 days of the final distribution Unitholders will be furnished a final
distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and the
Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and
duties hereunder.
The Trustee shall not be liable for depreciation or loss incurred by reason of
the sale by the Trustee of any of the Securities. In the event of the failure
of the Sponsor to act under the Trust Agreement, the Trustee may act
thereunder and shall not be liable for any action taken by it in good faith
under the Trust Agreement. The Trustee shall not be liable for any taxes or
other governmental charges imposed upon or in respect of the Securities or
upon the interest thereon or upon it as Trustee under the Trust Agreement or
upon or in respect of the Trust which the Trustee may be required to pay under
any present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor, Supervisor 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. First of Michigan Corporation, a member of the New York
Stock Exchange, is Michigan's largest full-service securities firm. Founded in
1933, First of Michigan Corporation specializes in a wide range of financial
services that include investment banking; investment products such as stocks,
bonds, unit trusts and mutual funds; and investment services such as
retirement plans, money management, underwriting and trading. First of
Michigan offers these services through its 550 employees located in 32 offices
throughout Michigan, as well as an office at 100 Wall Street, New York, New
York.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
September 30, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,413,000 (unaudited). (This paragraph
relates only to the Sponsor and not to the Trust or to the Managing
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor and its
ability to carry out its contractual obligations. More detailed financial
information will be made available by the Sponsor upon request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided" ).
The Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp LLP has acted as counsel for the Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 27 (First of Michigan Real Estate Income and Growth Trust, Series 1):
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Equity Opportunity Trust, Series 27
(First of Michigan Real Estate Income and Growth Trust, Series 1) as of
February 22, 1996. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of an irrevocable letter of credit deposited
to purchase securities by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 27 (First of Michigan Real Estate Income and
Growth Trust, Series 1) as of February 22, 1996, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
February 22, 1996
First of Michigan
CORPORATION
<TABLE>
First of Michigan Real Estate Income and Growth Trust
Series 1
STATEMENT OF CONDITION
As of February 22, 1996
<CAPTION>
<S> <C>
INVESTMENT IN SECURITIES
Contracts to purchase Securities <F1>...... $
Organizational costs <F2>..................
Total...................................... $
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued organizational costs <F2>.......... $
Interest of Unitholders-- .................
Cost to investors <F3>..................... $
Less: Gross underwriting commission <F3>...
Net interest to Unitholders <F3>...........
Total...................................... $
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" herein
and their cost to the Trust are the same. The value of the Securities is
determined by Interactive Data Corporation on the basis set forth under "
Public Offering--Offering Price." The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $ which has
been deposited with the Trustee.
<F2>The Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over the life of the Trust. Organizational costs
have been estimated based on a projected trust size of $ . To the
extent the Trust is larger or smaller, the estimate will vary.
<F3>The aggregate public offering price and the aggregate sales charge of 4.5% are
computed on the basis set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor and Managing Underwriter Compensation"
and assume all single transactions involve less than 10,000 Units. For single
transactions involving 10,000 or more Units, the sales charge is reduced (see
"Public Offering--General" ) resulting in an equal reduction in both
the Cost to investors and the Gross underwriting commission while the Net
interest to Unitholders remains unchanged.
</TABLE>
<TABLE>
FIRST OF MICHIGAN REAL ESTATE INCOME AND GROWTH TRUST, SERIES 1
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 27)
As of the Initial Date of Deposit: February 22, 1996
<CAPTION>
Estimated
Market Value Annual Cost of
Number per Share Dividends per Securities to
of Shares Name of Issuer <F1> <F2> Share <F2> Trust <F2>
<S> <C> <C> <C> <C>
</TABLE>
NOTES TO PORTFOLIO
(1) All of the Securities are represented by "regular way" contracts for
the performance of which an irrevocable letter of credit has been deposited
with the Trustee. At the Initial Date of Deposit, the Sponsor has assigned to
the Trustee all of its right, title and interest in and to such Securities.
Contracts to acquire the Securities were entered into on ,
1996 and are expected to settle on , 1996 (see "The
Trust" ).
(2) The market value of each of the Securities is based on the aggregate
underlying value of the Securities acquired (generally determined by the
closing sale prices of the listed Securities and the asked prices of
over-the-counter traded Securities on the business day prior to the Initial
Date of Deposit). The aggregate value of the Trust, based on the aggregate
underlying value of the Securities therein on the Initial Date of Deposit, was
$ . Estimated annual dividends are based on annualizing the
most recent quarterly or semi-annual ordinary dividends paid. Other
information regarding the Securities in the Trust, as of the Initial Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Cost To Profit (Loss) To Aggregate
Managing Managing Estimated Annual
Underwriter Underwriter Dividends
<S> <C> <C>
$ $ $
</TABLE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or the Managing Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, securities
in any state to any person to whom it is not lawful to make such offer in such
state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial 3
Information
The Trust 4
Objective and Securities Selection 4
Trust Portfolio 5
Risk Factors 9
Tax Status 12
Trust Operating Expenses 15
Public Offering 16
Rights of Unitholders 19
Trust Administration 22
Other Matters 27
Report of Independent Certified Public 27
Accountants
Statement of Condition 28
Portfolio 29
Notes to Portfolio 30
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
February 22, 1996
FIRST OF MICHIGAN REAL ESTATE AND INCOME TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 27
First of Michigan Corporation
100 Renaissance Center 26th Floor Detroit, Michigan 48243
Please retain this Prospectus for future reference.
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement (to be filed by amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be filed by amendment).
4.1 Consent of Interactive Data Corporation (to be filed by amendment).
4.2 Consent of Independent Certified Public Accountants (to be filed by
amendment).
4.3 Financial Data Schedule (to be filed by amendment).
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
27 has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 7th day of February,
1996.
Van Kampen American Capital Equity
Opportunity Trust, Series 27
(Registrant)
By Van Kampen American Capital
Distributors, Inc.
(Depositor)
Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on February 7, 1996.
Signature Title
Don G. Powell Chairman, Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact)*
_____________________________________________________________________
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
