File No. 333-00585
CIK #896992
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 2
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Van Kampen American Capital Equity
Opportunity Trust, Series 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
/ X / Check box if it is proposed that this filing will become
effective on February 22, 1996 at 2:00 P.M. pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
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 trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trust
trust's securities and ) Tax Status
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolios
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating
Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) *
underwriter, trustee or any ) Trust Portfolios
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolios
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's) Cover Page
securities ) Trust Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio)
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Tax Status
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
) Statements 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 22, 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 March
1, 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 of the Units of the Trust
during the initial offering period includes the aggregate underlying value of
the Securities in the Trust's portfolio, a sales charge equal to 4.5% of the
Public Offering Price which is equivalent to 4.712% of the aggregate
underlying value of the Securities, and cash, if any, in the Income and
Capital Accounts held or owned by the Trust. After the initial public offering
period, the secondary market Public Offering Price of the Trust will include
the aggregate underlying value of the Securities in the Trust, the applicable
sales charge as described herein, and cash, if any, in the Income and Capital
Accounts held or owned by the Trust. During the initial offering period, the
sales charge is reduced on a graduated scale for sales involving at least
10,000 Units. If Units were available for purchase at the close of business on
the day before the Initial Date of Deposit, the Public Offering Price per Unit
would have been $10.03. 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 $.18 per Unit and will be made on June 25, 1996 to
Unitholders of record on June 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 to
each Unitholder his pro rata share of the Trust's assets, less expenses, in
the manner set forth under "Rights of Unitholders--Distributions of Income
and Capital."
Secondary Market for Units. After the initial offering period, although not
obligated to do so, the Managing Underwriter intends to maintain a market for
Units of the Trust and offer to repurchase such Units at prices which are
based on the 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...................................................................................................... 200,000
Fractional Undivided Interest in the Trust per Unit.................................................................. 1/200,000
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>.................................................................... $ 1,916,984
Aggregate Value of Securities per Unit............................................................................. $ 9.58
Sales Charge 4.5% (4.712% of the Aggregate Value of Security per Unit)............................................. $ .45
Public Offering Price per Unit <F2><F3>............................................................................ $ 10.03
Redemption Price per Unit............................................................................................ $ 9.58
Secondary Market Repurchase Price per Unit........................................................................... $ 9.58
Excess of Public Offering Price per Unit over Redemption Price per Unit.............................................. $ .45
Supervisor's Annual Supervisory Fee...........Maximum of $.0025 per Unit
Evaluator's Annual Evaluation Fee.............Maximum of $.0025 per Unit
Evaluation Time...............................4:00 P.M. New York time
Mandatory Termination Date....................March 1, 2000
Minimum Termination Value.....................The 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............................................................................ $ .73429
Less: Estimated Annual Expense per Unit.............................................................................. $ .03054
Estimated Net Annual Dividends per Unit.............................................................................. $ .70375
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee............................$.008 per Unit
Estimated Annual Organizational Expenses <F5>...$.01124 per Unit
Income Account Record Date......................Tenth day of March, June, September and December
Income Account Distribution Date................Twenty-fifth day of March, June, September 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 27, commencing February 27, 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 REIT dividends. Such dividends include amounts representing ordinary
income of the related REIT and any return of capital. Such dividends do not
include amounts representing capital gains of the REITs.
<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 $5,000,000. To
the extent the Trust is larger or smaller, the actual organizational expenses
paid by the Trust (and therefore by Unitholders) will vary from the estimated
amount set forth above.
<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 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 are
geographically diversified among 45 states and Washington, D.C., 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 in 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.
Cali Realty Corporation, headquartered in Cranford, New Jersey, is a
self-administered, self-managed real estate investment trust specializing in
leasing and management of office buildings in Northern and Central New Jersey.
Cali's portfolio consists of 13 buildings totaling approximately 2.3 million
square feet and one residential property of 327 apartments in Burlington
County, New Jersey.
Camden Property Trust, headquartered in Houston, Texas, is a real estate
investment trust which owns and operates 50 apartment properties containing
16,742 units in Houston, Dallas, Austin, Corpus Christi, San Antonio and El
Paso, Texas and Tucson, Arizona. Camden has announced plans to develop eight
properties which would add approximately 3,036 units.
CBL & Associates Properties, Inc., headquartered in Chattanooga, Tennessee, is
a real estate investment trust which owns regional malls and community
shopping centers, primarily in the Southeast and select markets in the
northeastern United States. The company has a portfolio of 105 properties
totaling 18.9 million square feet, manages an additional 2.1 million square
feet of non-owned shopping centers, and presently has four new shopping
centers and one mall redevelopment and expansion under construction.
Chateau Properties, Inc., headquartered in Clinton Township, Michigan, is a
fully integrated real estate investment trust engaged in the long-term
ownership, management, development and acquisition of high-quality
manufactured housing communities. Its portfolio comprises 44 communities
located in Michigan, Florida, Minnesota and North Dakota and contains 19,594
sites.
Crescent Real Estate Equities, Inc., headquartered in New York, New York, is a
real estate investment trust which, through its subsidiary entities, owns a
portfolio of real estate assets, including 31 office properties and two retail
centers totaling approximately nine million square feet, three hotels totaling
1,303 rooms and economic interests in six single family residential land
developments. The rental properties are located in 16 metropolitan submarkets
in Texas, Colorado, Arizona and New Mexico. Crescent is a fully integrated
real estate company that provides management and leasing services with respect
to its rental properties.
Duke Realty Investments, Inc., headquartered in Indianapolis, Indiana, is a
self-administered real estate investment trust which provides leasing,
management, development, construction and other tenant-related services. The
company's portfolio consists of approximately 168 office and industrial
properties located throughout the Midwest.
First Industrial Realty Trust, Inc., headquartered in Chicago, Illinois, is a
real estate investment trust which owns, manages, acquires and develops bulk
warehouse and light industrial properties located in the central portion of
the United States with a significant midwestern presence. The company
currently owns 271 in-service properties comprising approximately 22.6 million
square feet. The company is a self-administered and fully integrated
industrial real estate company and is one of the largest industrial property
REITs in the United States.
HGI Realty, Inc. "Horizon" , headquartered in Muskegon, Michigan, is
one of the largest developers, owners and operators of outlet centers in the
United States. It is a self-administered real estate investment trust which
operates as a fully integrated real estate company that has 33 outlet centers
with approximately 7.8 million square feet of gross leasable area in 19 states.
Health and Retirement Properties Trust, headquartered in Newton,
Massachusetts, is a real estate investment trust which invests primarily in
retirement communities, assisted living centers and nursing homes. The company
has approximately 141 properties located in 27 states.
Hospitality Properties Trust, headquartered in Newton, Massachusetts, is a
real estate investment trust which provides equity financing to hotel
owners/operators through the purchase and leaseback of hotel properties. The
company has over $330 million dollars of real estate investments in 37
Courtyard by Marriott hotels located in 20 states.
Liberty Property Trust, headquartered in Malvern, Pennsylvania, is a
self-administered real estate investment trust which owns and manages one of
the largest portfolios of suburban industrial and office properties in the
United States.
Oasis Residential, Inc., headquartered in Henderson, Nevada, is a
self-administered real estate investment trust focused on the development,
acquisition, ownership and operation of upscale apartment communities in
Nevada and Colorado. The company currently operates a portfolio of 11,067
apartment units.
Reckson Associates Realty Corp., headquartered in Melville, New York, is a
self-administered and self-managed real estate investment trust which owns and
manages office and industrial properties on Long Island, New York.
Simon Property Group, Inc., headquartered in Indianapolis, Indiana, is a real
estate investment trust which owns, develops, manages, leases, expands and
acquires regional malls, community shopping centers and specialty and
mixed-use properties throughout the continental United States, Alaska and
Mexico. The company has approximately 115 existing properties, 24 managed
properties, and eight properties under construction.
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
Real Estate Investment Trusts. 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 the 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 underlying
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 a REIT 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.
General. 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
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986 (the "Code" ). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from the Trust asset when such income is received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, taxable exchange, liquidation, redemption, or
payment at maturity) or upon the sale or redemption of Units by such
Unitholder. The price a Unitholder pays for his Units 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 tax basis 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 (other than capital gains dividends of a REIT, as described below)
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 exceeds 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. The issuers of the Securities intend to qualify
under special Federal income tax rules as "real estate investment
trusts" (each a "REIT," shares of such issuers held by the Trust
shall be referred to collectively as the "REIT Shares" ). Because
Unitholders are deemed to directly own a pro rata portion of the REIT Shares
as discussed above, Unitholders are advised to consult their tax advisers for
information relating to the tax consequences of owning the REIT Shares.
Provided an issuer qualifies as a REIT, certain distributions by such issuers
on the REIT Shares may qualify as "capital gain dividends," taxable to
shareholders (and, accordingly, to the Unitholders as owners of a pro rata
portions of the REIT Shares) as long-term capital gains, regardless of how
long a shareholders has owned such shares. In addition, distributions of
income or capital gains declared on REIT Shares in October, November or
December will be deemed to have been paid to shareholders (and, accordingly,
to the Unitholders as owners of a pro rata portion of the REIT Shares) on
December 31 of the year they are declared, even when paid by a REIT during the
following January and received by shareholders or Unitholders in such
following 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 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.
Dividends Received Deduction. Dividends received on the Securities (so long as
such Securities qualify as REIT shares) are not eligible for the dividends
received deduction.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholders to the same extent as though the expense had been paid
directly by him. It should be noted that as a result of the Tax Reform Act of
1986, certain miscellaneous itemized deductions, such as investment expenses,
tax return preparation fees and employee business expenses will be deductible
by an individual only to the extent they exceed 2% of such individual's
adjusted gross income. Unitholders may be required to treat some or all of the
expenses of the Trust as miscellaneous itemized deductions subject to this
limitation.
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. However, any loss realized by a Unitholder with
respect to the disposition of his pro rata portion of the REIT Shares, to the
extent such Unitholder has owned his Units for less than six months or the
Trust has held the REIT Shares for less than six months, will be treated as
long-term capital loss to the extent of such Unitholder's pro rata portion of
any capital gain dividends received (or deemed to have been received) with
respect to the REIT Shares. For taxpayers other than corporations, net capital
gains are subject to a maximum stated marginal tax rate of 28%. However, it
should be noted that legislative proposals are introduced from time to time
that affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Act" ) raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
If the Unitholder disposes of a Unit, he is deemed thereby to have disposed of
his entire pro rata interest in all assets of the Trust involved including his
pro rata portion of all the Securities represented by the Unit.
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 will
result in a Unitholder receiving an undivided interest in whole shares of
Securities plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind Distribution
will depend on whether or not a Unitholder receives cash in addition to
Securities. A "Security" for this purpose is a particular class of
stock issued by a particular REIT. A Unitholder will not recognize gain or
loss if a Unitholder only receives Securities in exchange for his or her pro
rata portion in the Securities held by the Trust. However, if a Unitholder
also receives cash in exchange for a fractional share of a Security held by
the Trust, such Unitholder will generally recognize gain or loss based upon
the difference between the amount of cash received by the Unitholder and his
tax basis in such fractional share of a Security held by the Trust.
Because the Trust will own many Securities, a Unitholder who requests an In
Kind Distribution will have to analyze the tax consequences with respect to
each Security owned by the Trust. The amount of taxable gain (or loss)
recognized upon such exchange will generally equal the sum of the gain (or
loss) recognized under the rules described above by such Unitholder with
respect to each Security owned by the Trust. Unitholders who request an In
Kind Distribution are advised to consult their tax advisers in this regard.
Computation of the Unitholders' Tax Basis. Initially, a Unitholder's tax basis
in his Units will generally equal the price paid by such Unitholders for his
Units. The cost of the Units is allocated among the Securities held in the
Trust in accordance with the proportion of the fair market values of such
Securities on the valuation date nearest the date the Units are purchased in
order to determine such Unitholder's tax basis for his pro rata portion of
each Security.
A Unitholder's tax basis in his Units and his pro rata portion of a Security
held by the Trust will be reduced to the extent dividends paid with respect to
such Security are received by the Trust which are not taxable as ordinary
income and are not capital gain dividends as described above.
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 by the Internal Revenue Service 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. On December 7, 1995, the U.S.
Treasury Department released proposed legislation that, if adopted, could
affect the United States federal income taxation of non-United States
Unitholders and the portion of the Trust's income allocable to non-United
States Unitholders.
Unitholders will be notified annually of the amount of dividends includable in
the Unitholder's gross income and amounts of Trust expenses which may be
claimed as itemized deductions.
The foregoing discussion relates only to United States federal income taxation
of Unitholders; Unitholders may be subject to state and local taxation.
Unitholders should consult their tax advisers regarding potential state and
local taxation with respect to the Units, and foreign investors should consult
their tax advisers with respect to United States tax consequences of ownership
of Units.
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, in its capacity as Supervisor, 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 Supervisor for providing portfolio
supervision services to unit investment trusts for which First of Michigan
Corporation is the principal Supervisor 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. Such fees will be paid as described under
"General" below. The Sponsor and the Managing Underwriter will receive
sales commissions and may realize other profits (or losses) in connection with
the sale of Units and the deposit of the Securities as described under "
Public Offering--Sponsor and Managing Underwriter Compensation."
Trustee's Fee. For its services the Trustee will receive 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 as described under "General" below. The
Trustee benefits to the extent there are funds for future distributions,
payment of expenses and redemptions in the Capital and Income Accounts since
these accounts are non-interest bearing and the amounts earned by the Trustee
are retained by the Trustee. Part of the Trustee's compensation for its
services to the Trust is expected to result from the use of these funds. Such
fees may be increased without approval of the Unitholders by amounts not
exceeding proportionate increases under the category "All Services Less
Rent of Shelter" in the Consumer Price Index published by the United
States Department of Labor or, if such category is no longer published, in a
comparable category. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration."
Miscellaneous Expenses. Expenses incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over the 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. Such expenses will be
paid as described under "General" below.
General. The fees and expenses set forth herein are payable out of the Income
Account of the Trust or, if insufficient, from the Capital Account. 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. During the initial
offering period the Public Offering Price is based on the aggregate underlying
value of the Securities in the Trust's portfolio, 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, and cash, if any, in the Income and
Capital Accounts held or owned by the Trust. After the initial public offering
period, the secondary market public offering price is based on the aggregate
underlying value of the Securities in the Trust, an applicable sales charge
(which will be reduce by .5 of 1% on each February 27 commencing February 27,
1997, to a minimum sales charge of 3.5%), and cash, if any, in the Income and
Capital Accounts held or owned by the Trust.
The sales charge applicable to quantity purchases is, during the initial
offering period, reduced on a graduated basis to any person acquiring 10,000
or more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number 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. In addition, the Public Offering Price per
Unit 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.
The aggregate underlying 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 asked 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 "Notes to 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 Account Distribution Dates to
Unitholders of record on the preceding Income Account 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 income, capital gains and/or capital 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
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 unit investment 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 five business days prior to the Mandatory Termination
Date. On the Mandatory Termination Date (or on the next business day
thereafter if a holiday) the Trustee will deliver each requesting Unitholder's
pro rata number of 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
December 31, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,165,000 (unaudited). (This paragraph
relates only to the Sponsor and not to the Trust or to 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
<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>...... $ 1,916,984
Organizational costs <F2>.................. 22,482
Total................................... $ 1,939,466
LIABILITY AND INTEREST OF UNITHOLDERS
Liability-- ...............................
Accrued organizational costs <F2>........ $ 22,482
Interest of Unitholders-- .................
Cost to investors <F3>................... $ 2,006,000
Less: Gross underwriting commission <F3>... 89,016
Net interest to Unitholders <F3>........ 1,916,984
Total...................................... $ 1,939,466
<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 $1,916,984 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 $5,000,000. To the
extent the Trust is larger or smaller, the estimate will vary.
<F3>The aggregate public offering price and the aggregate sales charge of 4.5% 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
Annual Cost of
Number Market Value Dividends per Securities
of Shares Name of Issuer <F1> per Share <F2> Share <F2> to Trust <F2>
<S> <C> <C> <C> <C>
5,932 Cali Realty Corporation $ 22.125 $ 1.70 $ 131,245.50
5,685 Camden Property Trust 24.125 1.84 137,150.63
6,696 CBL & Associates Properties, Inc. 20.375 1.58 136,431.00
5,775 Chateau Properties, Inc. 23.875 1.60 137,878.13
4,027 Crescent Real Estate Equities, Inc. 33.750 2.20 135,911.25
4,366 Duke Realty Investments, Inc. 31.125 1.94 135,891.75
5,775 First Industrial Realty Trust, Inc. 24.125 1.95 139,321.88
6,309 HGI Realty, Inc. "Horizon" 21.625 2.02 136,432.13
8,206 Health and Retirement Properties Trust 17.000 1.40 139,502.00
5,100 Hospitality Properties Trust 27.000 2.20 137,700.00
6,309 Liberty Property Trust 21.750 1.60 137,220.75
5,714 Oasis Residential, Inc. 24.000 1.74 137,136.00
4,473 Reckson Associates Realty Corp. 30.500 2.31 136,426.50
6,132 Simon Property Group, Inc. 22.625 1.97 138,736.50
80,499 1,916,984.02
</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 February 21, 1996 and
are expected to settle on February 27, 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
$1,916,984. Estimated annual dividends are based on annualizing the most
recently paid quarterly REIT dividends. Such dividends include amounts
representing ordinary income of the related REIT and any return of capital.
Such dividends do not include amounts representing capital gains of the REITs.
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
Managing Managing Aggregate Estimated
Underwriter Underwriter Annual Dividends
<S> <C> <C>
$1,917,814 $(830) $146,857
</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
Information 3
The Trust 4
Objective and Securities Selection 4
Trust Portfolio 6
Risk Factors 8
Tax Status 10
Trust Operating Expenses 12
Public Offering 14
Rights of Unitholders 17
Trust Administration 20
Other Matters 23
Report of Independent Certified Public
Accountants 24
Statement of Condition 25
Portfolio 26
Notes to Portfolio 27
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
February 22, 1996
FOM
Investments
First of Michigan
CORPORATION
FIRST OF MICHIGAN REAL ESTATE
INCOME AND GROWTH 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.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of Counsel as to the Federal Income tax status of securities
being registered.
3.3 Opinion and consent of counsel as to New York tax status of
securites being registered.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Independent Certified Public Acountants.
4.3 Financial Data Schedule.
Signatures
The Registrant, Van Kampen American Capital Equity Opportunity
Trust, Series 27, hereby identifies Van Kampen Merritt Equity Opportunity
Trust, Series 4, Van Kampen american Capital Equity Opportunity Trust,
Series 13 and Van Kampen American Capital Equity Opportunity Trust,
Series 14 for purposes of the representations required by Rule 487 and
represents the following: (1) that the portfolio securities deposited in
the series as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from those
deposited in such previous series; (2) that, except to the extent
necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect
to the securities of which this Registration Statement is being filed,
this Registration Statement does not contain disclosures that differ in
any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined by
the Commission or the staff; and (3) that it has complied with Rule 460
under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
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 22nd day of February,
1996.
Van Kampen American Capital Equity
Opportunity Trust, Series 27
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on February 22, 1996.
Signature Title
Don G. Powell Chairman and Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
Exhibit 1.1
Van Kampen American Capital Equity Opportunity Trust
Series 27
Trust Agreement
Dated: February 22, 1996
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of
Van Kampen American Capital Investment Advisory Corp., as Evaluator,
First of Michigan Corporation, as Supervisory Servicer, and The Bank of
New York, as Trustee, sets forth certain provisions in full and
incorporates other provisions by reference to the document entitled "Van
Kampen Merritt Equity Opportunity Trust, Series 1 and Subsequent Series,
Standard Terms and Conditions of Trust, Effective November 21, 1991"
(herein called the "Standard Terms and Conditions of Trust") and such
provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references
herein to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee
agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(22), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
3. Section 1.01(19) will be inapplicable for this Trust.
4. Notwithstanding anything to the contrary appearing in the
Standard Terms and Conditions of Trust, "First of Michigan Real
Estate Income and Growth Trust" will replace "Select Equity Trust."
5. The second sentence in the second paragraph of Section
3.11 shall be revised as follows: "However, should any issuance,
exchange or substitution be effected notwithstanding such rejection
or without an initial offer, any securities, cash and/or property
received shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee unless the Depositor advises
the Trustee to keep such securities, cash or properties."
6. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the requisite number of Units needed
to be tendered to exercise an In Kind Distribution as set forth in
Sections 5.02 and 8.02 shall be that number set forth in the
Prospectus.
7. Section 8.02 is hereby revised to require one affirmative
vote of Unitholders representing 66 2/3% of the then outstanding
Units to terminate the Trust rather than the 51% indicated therein.
8. Section 1.01(1) shall be amended to read as follows:
"(1) "Depositor" shall mean Van Kampen American Capital
Distributors, Inc. and its successors in interest, or any
successor depositor appointed as hereinafter provided."
9. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean American Portfolio
Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp. and its successors in
interest, or any successor evaluator appointed as
hereinafter provided."
10. Section 1.01(4) shall be amended to read as follows:
"(4) "Supervisory Servicer" shall mean First of Michigan
Corporation and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided."
11. Section 3.01 of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"Section 3.01. Initial Costs. The following
organization and regular and recurring expenses of the
Trust shall be borne by the Trustee: (a) to the extent
not borne by the Depositor, expenses incurred in
establishing a Trust, including the cost of the initial
preparation and typesetting of the registration statement,
prospectuses (including preliminary prospectuses), the
indenture, and other documents relating to the Trust,
Securities and Exchange Commission and state blue sky
registration fees, the costs of the initial valuation of
the portfolio and audit of the Trust, the initial fees and
expenses of the Trustee, and legal and other out-of-pocket
expenses related thereto, but not including the expenses
incurred in the printing of preliminary prospectuses and
prospectuses, expenses incurred in the preparation and
printing of brochures and other advertising materials and
any other selling expenses, (b) the amount specified in
Section 3.05 and Article VIII, (c) to the extent permitted
by Section 6.02, auditing fees and, to the extent not
borne by the Depositor, expenses incurred in connection
with maintaining the Trust's registration statement
current with Federal and State authorities, (d) any
Certificates issued after the Initial Date of Deposit ;
and (e) expenses of any distribution agent. The Trustee
shall be reimbursed for those organizational expenses
referred to in clause (a) as provided in the Prospectus.
12. Section 6.01(i) of the Standard Terms and Conditions of
Trust shall be amended by adding the following to the beginning of
such Section:
"except as provided in Sections 3.01 and 3.05,"
13. Section 8.04 is hereby amended by deleting the first word
of such Section and replacing it with the following:
"Except as provided in Sections 3.01 and 3.05, the"
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., and Principal Financial Securities, Inc., have each caused this
Trust Indenture and Agreement to be executed by their respective
President or other officer and the corporate seal of each to be hereto
affixed and attested to by the Secretary, Assistant Secretary or one of
their respective Vice Presidents or Assistant Vice Presidents and The
Bank of New York, has caused this Trust Agreement to be executed by one
of its Vice Presidents and its corporate seal to be hereto affixed and
attested to by one of its Assistant Treasurers all as of the day, month
and year first above written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation
Services, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. McDonnell
President
Attest:
By Scott E. Martin
Assistant Secretary
First of Michigan Corporation
By Steve Gasper, Jr.
President
Attest:
By Conrad W. Koski
Treasurer
The Bank of New York
By Jeffrey Bieselin
Vice President
Attest:
By Norbert Loney
Assistant Treasurer
Schedule A to Trust Agreement
Securities Initially Deposited
in
Van Kampen American Capital Equity Opportunity Trust, Series 27
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
February 22, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re:Van Kampen American Capital Equity Opportunity Trust,
Series 27
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc. as Sponsor and Depositor of Van Kampen American
Capital Equity Opportunity Trust, Series 27 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated February 22, 1996, among Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., as Evaluator, First of Michigan Corporation, as Supervisory
Servicer, and The Bank of New York, as Trustee, pursuant to which the
Depositor has delivered to and deposited the Securities listed in the
Schedule to the Trust Agreement with the Trustee and pursuant to which
the Trustee has provided to or on the order of the Depositor
documentation evidencing ownership of Units of fractional undivided
interest in and ownership of the Trust (hereinafter referred to as the
"Units"), created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Trust have been duly authorized; and
2. The certificates evidencing the Units in the Trust,
when duly executed and delivered by the Depositor and the
Trustee in accordance with the aforementioned Trust Agreement,
will constitute valid and binding obligations of such Trust and
the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-00585) relating to the Units
referred to above and to the use of our name and to the reference to our
firm in said Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/cjw
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
February 22, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re:Van Kampen American Capital Equity Opportunity Trust,
Series 27
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 27 (the "Fund"), in connection with the
issuance of Units of fractional undivided interest in the Fund, under a
Trust Agreement dated February 22, 1996 (the "Indenture") among Van
Kampen American Capital Distributors, Inc., as Depositor, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
Investment Advisory Corp., as Evaluator, First of Michigan Corporation,
as Supervisory Servicer, and The Bank of New York, as Trustee. The Fund
is comprised of one unit investment trust, First of Michigan Real Estate
Income and Growth Trust, Series 1 (the "Trust").
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of the Trust will consist of a portfolio of equity
securities (the "Equity Securities") as set forth in the Prospectus.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) The Trust is not an association taxable as a
corporation but will be governed by the provisions of
subchapter J (relating to Trusts) of chapter 1, Internal
Revenue Code of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata
share of each asset of the Trust in the proportion that the
number of Units held by him bears to the total number of Units
outstanding. Under subpart E, subchapter J of chapter 1 of the
Code, income of the Trust will be treated as income of each
Unitholder in the proportion described, and an item of Trust
income will have the same character in the hands of a
Unitholder as it would have in the hands of the Trustee. Each
Unitholder will be considered to have received his pro rata
share of income derived from each Trust asset when such income
is considered to be received by the Trust. A Unitholder's pro
rata portion of distributions of cash or property by a
corporation with respect to an Equity Security ("dividends" as
defined by Section 316 of the Code ), except for capital gains
dividends of a REIT as described below, 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 which exceeds such current and accumulated
earnings and profits will first reduce the Unitholder's tax
basis in such Equity Security, and to the extent that such
dividends exceed a Unitholder's tax basis in such Equity
Security, shall be treated as gain from the sale or exchange of
property. The issuers of the Equity Securities intend to
qualify under special Federal income tax rules as "real-estate
investment trusts" (each a "REIT," shares of such issuers held
by the Trust shall be referred to collectively as the "REIT
Shares"). Because Unitholders are deemed to directly own a pro
rata portion of the REIT Shares as discussed above, Unitholders
are advised to consult their tax advisers for information
relating to the tax consequences of owning the REIT Shares.
Provided an issuer qualifies as a REIT, certain distributions
by such issuers on the REIT Shares may qualify as "capital gain
dividends," taxable to shareholders (and, accordingly, to the
Unitholders as owners of a pro rata portion of the REIT Shares)
as long-term capital gains, regardless of how long a
shareholder has owned such shares. In addition, distributions
of income or capital gains declared on REIT Shares in October,
November, or December will be deemed to have been paid to
shareholders (and, accordingly, to the Unitholders as owners of
a pro rata portion of the REIT Shares) on December 31 of the
year they are declared, even when paid by a REIT during the
following January and received by a shareholders or Unitholders
in such following year.
(iii) The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata
portion of each Security held by the Trust (in the proportion
to the fair market values thereof on the valuation date closest
to the date the Unitholder purchases his Units), in order to
determine his tax basis for his pro rata portion of each
Security held by the Trust.
(iv) Gain or loss will be recognized to a Unitholder
(subject to various non-recognition provisions of the Code)
upon redemption or sale of his Units, except to the extent an
in kind distribution of stock is received by such Unitholder
from the Trust as discussed below. Such gain or loss is
measured by comparing the proceeds of such redemption or sale
with the adjusted basis of his Units. Before adjustment, such
basis would normally be cost if the Unitholder had acquired his
units by purchase. Such basis will be reduced, but not below
zero, by the Unitholder's pro rata portion of dividends with
respect to each Equity Security which are not taxable as
ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, liquidation, redemption, payment on maturity or
otherwise) gain or loss will be recognized to the Unitholder
(subject to various non-recognition provisions of the Code) and
the amount thereof will be measured by comparing the
Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning
the tax basis for his Units (as of the date on which his Units
were acquired) among each of the Trust assets of the Trust (as
of the date on which his Units were acquired) ratably according
to their values as of the valuation date nearest the date on
which he purchased such Units. A Unitholder's basis in his
Units and of his fractional interest in each Trust asset must
be reduced, but not below zero, by the Unitholder's pro rata
portion of dividends with respect to each Security which are
not taxable as ordinary income and are not capital gain
dividends as described above.
(vi) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in
kind distribution of Securities upon the redemption of Units or
upon the termination of the Trust. As previously discussed,
prior to the redemption of Units or the termination of the
Trust, a Unitholder is considered as owning a pro rata portion
of each of the Trust's assets. The receipt of an in kind
distribution will result in a Unitholder receiving an undivided
interest in whole shares of stock and possibly cash. The
potential federal income 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 REIT. A Unit holder will not
recognize gain or loss if a Unit holder only receives Equity
Securities in exchange for his or her pro rata portion in the
Equity Securities held by the Trust. However, if a Unit holder
also receives cash in exchange for a fractional share of an
Equity Security held by the Trust, such Unit holder will
generally recognize gain or loss based upon the difference
between the amount of cash received by the Unit holder and his
tax basis in such fractional share of an Equity Security held
by the Trust. The total amount of taxable gains (or losses)
recognized upon such redemption will generally equal the sum of
the gain (or loss) recognized under the rules described above
by the redeeming Unitholder with respect to each Security owned
by a Trust.
Dividends received on the REIT Shares are not eligible for the
dividends received deduction.
Section 67 of the Code provides that certain itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by individuals only to the extent
they exceed 2% of such individual's adjusted gross income. Temporary
regulations have been issued which require Unitholders to treat certain
expenses of a Trust as miscellaneous itemized deductions subject to this
limitation.
A Unitholder will recognize taxable gain (or loss) when all or part
of the pro rata interest in a Security is either sold by the Trust or
redeemed or when a Unitholder disposes of his Units in a taxable
transaction, in each case for an amount greater (or less) than his tax
basis therefor, subject to various non-recognition provisions of the
Code.
Any gain recognized on a sale or exchange will, under current law,
generally be capital gain or loss and will be long term if the Unitholder
has held his Units for more than one year. However, any loss realized by
a Unitholder with respect to the disposition of his pro rata portion of
the REIT Shares, to the extent such Unitholder has owned his Units for
less than six months or the Trust has held the REIT shares for less than
six months, will be treated as long-term capital loss to the extent of
such Unitholder's pro rata portion of any capital gain dividends received
(or deemed to have been received) with respect to the REIT Shares.
The scope of this opinion is expressly limited to the matters set
forth herein, and, except as expressly set forth above, we express no
opinion with respect to any other taxes, including state or local taxes
or collateral tax consequences with respect to the purchase, ownership
and disposition of Units.
Very truly yours
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Tanner Propp, LLP
99 Park Avenue
New York, New York 10016
February 22, 1996
Van Kampen American Capital Equity
Opportunity Trust, Series 27
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 27 (the "Fund") consisting of First of
Michigan Real Estate Income & Growth Trust, Series 1 (individually a
"Trust") for the purposes of determining the applicability of certain
New York taxes under the circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the
"Indenture"), dated as of today (the "Date of Deposit") among Van Kampen
American Capital Distributors, Inc. (the "Depositor"), American Portfolio
Evaluation Services, a division of a subsidiary of Depositor, as
Evaluator, First of Michigan Corporation, as Supervisory Servicer (the
"Supervisory Servicer"), and The Bank of New York as Trustee (the
"Trustee"). As described in the prospectus relating to the Fund dated
today to be filed as an amendment to a registration statement heretofore
filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Prospectus") (File Number 333-00585), the
objectives of the Fund are to provide the potential for dividend income
and capital appreciation through investment in a fixed portfolio of
actively traded equity securities. It is noted that no opinion is
expressed herein with regard to the Federal tax aspects of the
securities, units of the Trust (the "Units"), or any interest, gains or
losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trust the securities and/or contracts and cash for
the purchase thereof together with an irrevocable letter of credit in the
amount required for the purchase price of the securities comprising the
corpus of the Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities
to be deposited in the Trust, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of the Trust as more fully set forth in
the Prospectus. The Units, which are represented by certificates
("Certificates"), will be offered to the public upon the effectiveness of
the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash
dividends received by the Fund and with the proceeds from the disposition
of securities held in the Fund and the proceeds of the treasury
obligation on maturity and the distribution of such cash dividends and
proceeds to the Unitholders. The Trustee will also maintain records of
the registered holders of Certificates representing an interest in the
Fund and administer the redemption of Units by such Certificateholders
and may perform certain administrative functions with respect to an
automatic investment option.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations.
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(l)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in
which interest or ownership is evidenced by
certificate or other written instrument. includes,
but is not limited to, an association commonly
referred to as a "business trust" or "Massachusetts
trust". In determining whether a trustee or trustees
are conducting a business, the form of the agreement
is of significance but is not controlling. The
actual activities of the trustee or trustees, not
their purposes and powers, will be regarded as
decisive factors in determining whether a trust is
subject to tax under Article 9-A. The mere
investment of funds and the collection of income
therefrom, with incidental replacement of securities
and reinvestment of funds, does not constitute the
conduct of a business in the case of a business
conducted by the trustee or trustees. 20 NYCRR 1-
2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1073, 85 N.Y.S.2d 705 (1949).
In an opinion of the Attorney General of the State of New York,
47 N.Y. Atty. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the
trustee of an unincorporated investment trust was without authority to
reinvest amounts received upon the sales of securities and could dispose
of securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell
obligations contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the issuer of
such equity security is in question or in which cash is needed to pay
redeeming Unit holders or to pay expenses, or where the Fund is
liquidated pursuant to the termination of the Indenture. In substance,
the Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to vary the
investment of any Unit holder in a Trust.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance June 23,
1978.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be
considered as owning a share of each asset of a Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income
of each Unit holder in said proportion pursuant to Subpart E of Part 1,
subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York.
1. The Trust will not constitute an association taxable as a
corporation under New York law and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax.
2. The income of the Trust will be treated as the income of the
Unit holders under the income tax laws of the State and City of New York,
and
3. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business trade profession or occupation
carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
Tanner Propp, LLP
MNS:ac
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
February 19, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 27
(A Unit Investment Trust) Registered Under the Securities
Act of 1933, File No. 333-00585
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Services, Inc.,
as the Evaluator, and to the use of the Obligations prepared by us which
are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Independent Certified Public Accountants' Consent
We have issued our report dated February 22, 1996 on the statement
of condition and related securities portfolio of Van Kampen American
Capital Equity Opportunity Trust, Series 27 as of February 22, 1996
contained in the Registration Statement on Form S-6 and Prospectus. We
consent to the use of our report in the Registration Statement and
Prospectus and to the use of our name as it appears under the caption
"Other Matters-Independent Certified Public Accountants.'"
Grant Thornton LLP
Chicago, Illinois
February 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on February 22, 1996 it
is unaudited
</LEGEND>
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<S> <C>
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<PERIOD-START> FEB-22-1996
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