File No. 33-00585
CIK #896992
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Van Kampen American Capital Equity Opportunity Trust, Series 27
(Exact Name of Trust)
Van Kampen American Capital Distributors, Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
Van Kampen American Capital Distributors, Inc. Chapman and Cutler
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on April 24, 1997 pursuant to paragraph (b) of Rule 485.
FIRST OF MICHIGAN REAL ESTATE INCOME AND GROWTH TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 27
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.Please retain both parts of this Prospectus for future reference.
THE TRUST
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 primarily 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.
PUBLIC OFFERING PRICE
The Public Offering Price per Unit of the Trust is equal to the aggregate
underlying value of the Equity Securities plus or minus cash, if any, in the
Capital and Income Accounts divided by the number of Units outstanding plus
the applicable sales charge. See "Summary of Essential Financial
Information" in this Part One.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Date of this Prospectus is April 16, 1997
Van Kampen American Capital
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 27First of
Michigan Real Estate Income and Growth Trust, Series 1
Summary of Essential Financial Information
As of March 5, 1997
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor: Van Kampen American Capital Investment Advisory Corp.
(A subsidiary of the Sponsor)
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
First of
Michigan
Real Estate
Income and
Growth
Trust
----------------
<S> <C>
General Information
Number of Units..................................................................................... 450,000
Fractional Undivided Interest in Trust per Unit..................................................... 1/450,000
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>.................................................... $ 5,334,792
Aggregate Value Securities per Unit (including accumulated dividends).............................. $ 12.05
Sales charge 4.0% (4.167% of Aggregate Value of Securities excluding principal cash per Unit)<F3>... $ .50
Public Offering Price per Unit <F2><F3>............................................................ $ 12.55
Redemption Price per Unit........................................................................... $ 12.05
Secondary Market Repurchase Price per Unit.......................................................... $ 12.05
Excess of Public Offering Price per Unit over Redemption Price per Unit............................. $ .50
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee.............Maximum of $.0025 per Unit
Evaluator's Annual Fee..........................Maximum of $.0025 per Unit
Evaluations for purpose of sale, purchase or
redemption of Units are made as of 4:00 P.M. Eastern
time on days of trading on the New York Stock Exchange
next following receipt of an order for a sale or
purchase of Units or receipt by The Bank of New York
of Units tendered for redemption.
Date of Deposit.................................February 22, 1996
Mandatory Termination Date......................March 1, 2000
Trustee's Annual Fee............................$.008 per Unit
Estimated Annual Organizational Expenses <F4>...$.011 per Unit
Income Distribution Record Date.................TENTH day of March, June, September, and December.
Income Distribution Date........................TWENTY-FIFTH day of March, June, September and December.
Capital Account Record Date.....................TENTH day of December.
Capital Account Distribution Date...............TWENTY-FIFTH day of December.
- ----------
<FN>
<F1>Equity Securities listed on a national securities exchange are valued at the
closing sale price, or if the Equity Securities are not so listed, at the bid
price thereof.
<F2>Anyone ordering Units will have added to the Public Offering Price a pro rata
share of any cash in the Income and Capital Accounts.
<F3>Effective on each February 27, commencing February 27, 1997, the secondary
sales charge will decrease by .5 of 1% to a minimum sales charge of 3.5%. See
"Public Offering-Offering Price" in Part Two.
<F4>The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration statement,
the trust indenture and other closing documents, registering Units with the
Securities and Exchange Commission and states, the initial audit of the Trust
portfolio and the initial fees and expenses of the Trustee but not including
the expenses incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses) as is common for mutual
funds. Total organizational expenses will be amortized over the life of the
Trust. See "Expenses of the Trust" and "Statement of Condition." Historically,
the sponsors of unit investment trusts have paid all the costs of establishing
such trusts.
</TABLE>
PORTFOLIO
The First of Michigan Real Estate Income and Growth Trust consists of the
following issues of Securities primarily issued by publicly traded equity real
estate investment trusts: Cali Realty Corporation, Camden Property Trust, CBL
& Associates Properties, Inc., Chateau Properties, Inc., Crescent Real Estate
Equities, Inc., Duke Realty Investments, Inc., First Industrial Realty Trust,
Inc., HGI Realty, Inc. "Horizon", Health and Retirement Properties Trust,
Hospitality Properties Trust, Liberty Property Trust, Oasis Residential, Inc.,
Reckson Associates Realty Corp., Simon Property Group, Inc. The Securities are
all listed on a national securities exchange, the NASDAQ National Market
System or traded in the over-the-counter market.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1996<F1>
-----------
<S> <C>
Net asset value per Unit at beginning of period........................................................................ $ 9.58
===========
Net asset value per Unit at end of period.............................................................................. $ 11.77
===========
Distributions to Unitholders of investment income including accumulated dividends paid on Units redeemed (average
Units outstanding for entire period)................................................................................... $ 0.57
===========
Distributions to Unitholders from Security redemption proceeds (average Units outstanding for entire period)........... $ --
===========
Unrealized appreciation (depreciation) of Securities (per Unit outstanding at end of period)........................... $ 2.07
===========
Units outstanding at end of period..................................................................................... 450,000
</TABLE>
- ----------
For the period from February 22, 1996 (date of deposit) through December 31,
1996.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 27 (First of Michigan Real Estate Income and Growth Trust):
We have audited the accompanying statements of condition (including the
analyses of net assets) and the related portfolio of Van Kampen American
Capital Equity Opportunity Trust, Series 27 (First of Michigan Real Estate
Income and Growth Trust) as of December 31, 1996 and the related statements of
operations and changes in net assets for the period from February 22, 1996
(date of deposit) through December 31, 1996. These statements are the
responsibility of the Trustee and the Sponsor. Our responsibility is to
express an opinion on such statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1996 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen American Capital
Equity Opportunity Trust, Series 27 (First of Michigan Real Estate Income and
Growth Trust) as of December 31, 1996, and the related statements of
operations and changes in net assets for the period from February 22, 1996
(date of deposit) through December 31, 1996, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
March 14, 1997
<TABLE>
FIRST OF MICHIGAN REAL ESTATE INCOME AND GROWTH TRUST, SERIES 1
Statements of Condition
December 31, 1996
<CAPTION>
First of
Michigan
Real Estate
Income and
Growth
Trust
<S> <C>
Trust property
Securities at market value, (cost $4,316,913) (note 1)................................ $ 5,249,017
Accumulated dividends................................................................. 50,392
Organizational costs.................................................................. 19,716
$ 5,319,125
================
Liabilities and interest to Unitholders
Cash overdraft........................................................................ $ 20,889
Interest to Unitholders............................................................... 5,298,236
$ 5,319,125
================
Analyses of Net Assets
Interest of Unitholders (450,000 Units of fractional undivided interest outstanding)
Cost to original investors of 450,000 Units (note 1).................................. $ 4,517,500
Less initial underwriting commission (note 3)......................................... 200,587
----------------
4,316,913
Less redemption of 0 Units............................................................ --
----------------
4,316,913
Undistributed net investment income
Net investment income................................................................. 294,307
Less distributions to Unitholders..................................................... 245,088
----------------
49,219
Realized gain (loss) on Security sale or redemption................................... --
Unrealized appreciation (depreciation) of Securities (note 2)......................... 932,104
Distributions to Unitholders of Security sale or redemption proceeds.................. --
Net asset value to Unitholders........................................................ $ 5,298,236
================
Net asset value per Unit (450,000 Units outstanding)................................... $ 11.77
================
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
FIRST OF MICHIGAN REAL ESTATE INCOME AND GROWTH TRUST, SERIES 1
Statements of Operations
Period from February 22, 1996 (date of deposit) through
December 31, 1996
<CAPTION>
1996
-------------
<S> <C>
Investment income
Dividend income..................................................... $ 305,802
Expenses
Trustee fees and expenses........................................... 4,813
Evaluator fees...................................................... 813
Organizational fees................................................. 5,188
Supervisory fees.................................................... 681
-------------
Total expenses...................................................... 11,495
-------------
Net investment income............................................... 294,307
Realized gain (loss) from Securities sale or redemption
Proceeds............................................................ --
Cost................................................................ --
-------------
Realized gain (loss)................................................ --
Net change in unrealized appreciation (depreciation) of Securities... 932,104
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......$ 1,226,411
=============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Period from February 22, 1996 (date of deposit) through
December 31, 1996
<CAPTION>
1996
-------------
<S> <C>
Increase (decrease) in net assets
Operations:
Net investment income...................................................... $ 294,307
Realized gain (loss) on Securities sale or redemption...................... --
Net change in unrealized appreciation (depreciation) of Securities......... 932,104
-------------
Net increase (decrease) in net assets resulting from operations............ 1,226,411
Distributions to Unitholders from:
Net investment income...................................................... (245,088)
Securities sale or redemption proceeds..................................... --
Redemption of Units --
-------------
Total increase (decrease).................................................. 981,323
Net asset value to Unitholders
Beginning of period........................................................ 1,916,984
-------------
Additional Securities purchased from proceeds of Unit Sales................ 2,399,929
-------------
End of period (including undistributed net investment income of $49,219)... $ 5,298,236
=============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
FIRST OF MICHIGAN REAL ESTATE INCOME AND GROWTH TRUST SERIES 1
PORTFOLIO as of December 31, 1996
<CAPTION>
Valuation of Securities
at
Number December 31,
of Market Value Per 1996
Shares Name of Issuer Share (Note 1)
- ---------- ---------------------------------------------- --------------------- ----------------------------
<S> <C> <C> <C>
13,585 Cali Realty Corporation $ 30.875 $ 419,437
- ------------------------------------------------------------------------------------------------------------
12,864 Camden Property Trust 28.625 368,232
- ------------------------------------------------------------------------------------------------------------
14,960 CBL & Associates Properties, Incorporated 25.875 387,090
- ------------------------------------------------------------------------------------------------------------
12,920 Chateau Properties, Incorporated 26.500 342,380
- ------------------------------------------------------------------------------------------------------------
9,151 Crescent Real Estate Equities, Incorporated 52.750 482,715
- ------------------------------------------------------------------------------------------------------------
9,826 Duke Realty Investments, Incorporated 38.500 378,301
- ------------------------------------------------------------------------------------------------------------
12,940 First Industrial Realty Trust, Incorporated 30.375 393,052
- ------------------------------------------------------------------------------------------------------------
14,174 HGI Realty, Incorporated "Horizon" 19.875 281,708
- ------------------------------------------------------------------------------------------------------------
18,354 Health and Retirement Properties Trust 19.375 355,609
- ------------------------------------------------------------------------------------------------------------
11,460 Hospitality Properties Trust 29.000 332,340
- ------------------------------------------------------------------------------------------------------------
14,312 Liberty Property Trust 25.750 368,534
- ------------------------------------------------------------------------------------------------------------
12,918 Oasis Residential, Incorporated 22.750 293,885
- ------------------------------------------------------------------------------------------------------------
10,148 Reckson Associates Realty Corporation 42.250 428,753
- ------------------------------------------------------------------------------------------------------------
13,451 Simon Property Group, Incorporated 31.000 416,981
- ------------------------------------------------------------------------------------------------------------
181,063 $ 5,249,017
========== ===========================
</TABLE>
The accompanying notes are an integral part of these statements.
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST SERIES 27
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the last closing sales price or, if not so listed, at the bid price.
Security Cost - The original cost to the Trust of the Securities was based,
for Securities listed on a national securities exchange on the closing sale
prices on the exchange or, if not so listed, at the asked price. The cost was
determined on the day of the various Dates of Deposit.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal Income Taxes.
Distributions to Unitholders of the Trust's taxable income will be taxable as
ordinary or capital gain income to Unitholders.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an average cost basis.
Organizational Costs - The Trust will bear all or a portion of its
organizational costs, which will be deferred and amortized over the life of
the Trust.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
First of
Michigan
Real Estate
Income and
Growth
Trust
----------------
<S> <C>
Unrealized Appreciation $ 971,601
Unrealized Depreciation (39,497)
----------------
$ 932,104
================
</TABLE>
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Sponsor intends to
maintain a market for Units and to continuously offer to purchase Units at
prices, subject to change at any time, based upon the value of the Securities
in the portfolio of the Trust valued as described in Note 1, plus accumulated
dividends to the date of settlement. If the supply of Units exceeds demand, or
for other business reasons, the Sponsor may discontinue purchases of Units at
such prices. In the event that a market is not maintained for the Units, a
Unitholder desiring to dispose of his Units may be able to do so only by
tendering such Units to the Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the underlying
value of the Securities per Unit on the date of an investor's purchase, plus a
sales charge of 4.9% of the public offering price which is equivalent to
5.152% of the aggregate underlying value of the Securities. The secondary
market cost to investors is based on the determination of the underlying value
of the Securities per Unit on the date of an investor's purchase plus a sales
charge of 4.9% of the public offering price which is 5.152% of the underlying
value of the Securities. Effective on each February 27, commencing February
27, 1997, the secondary sales charge will decrease by .5 of 1% to a minimum
sales charge of 3.5%.
Compensation of Evaluator and Supervisor - the Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.0025 per Unit, not
to exceed the aggregate cost of the Supervisor for providing such services to
all applicable Trusts). The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. Both fees may be adjusted for increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index.
NOTE 4 - REDEMPTION OF UNITS
During the period ended December 31, 1996, 0 Units, were presented for
redemption.
First of Michigan Real Estate Income and Growth Trust, Series 1
Prospectus Part Two
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" in Prospectus Part One. 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 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. The minimum purchase
is 200 Units (100 Units for a tax-sheltered retirement plan). See "Public
Offering."
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" in Prospectus Part One. 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. 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 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."
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
Both parts of this Prospectus should be retained for future reference.
This Prospectus is dated as of the date of the Prospectus Part One
accompanying this Prospectus Part Two.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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."
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 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
Securities 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
Units of the Trust. Unless otherwise terminated as provided in the Trust
Agreement, the Trust will terminate on the Mandatory Termination Date and
Securities then held will within a reasonable time thereafter be liquidated or
distributed by the Trustee.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in the Trust represented by each unredeemed Unit
will increase accordingly, although the actual interest in the Trust
represented by such fraction will remain unchanged. Units will remain
outstanding until redeemed upon tender to the Trustee by Unitholders, which
may include the 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" herein and "Portfolio" in Prospectus Part One. 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 FFO estimates, the REITs are selling at approximately eleven
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.
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
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The Trust consists 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.
General. The Trust consists of such of the Securities listed under "
Portfolio" in Prospectus Part One as may continue to be held from time to
time in the Trust and any additional Securities acquired and held by the Trust
pursuant to the provisions of the Trust Agreement together with cash held in
the Income and Capital Accounts. Neither the 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 have acquired 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
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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
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The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986 (the "Code" ). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust. For purposes of the following discussion and opinion, it is assumed
that each Security is considered a share of a real estate investment trust as
defined in the Code.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from the Trust asset when such income is considered to be
received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, taxable exchange, liquidation, redemption, or
otherwise) 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. It
should be noted that certain legislative proposals have been made which could
affect the calculation of basis for Unitholders holding securities that are
substantially identical to the Securities. Unitholders should consult their
own tax advisers with regard to calculation of basis. 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 is 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 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 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
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 (which is defined as net long-term capital gain over net short-term
capital loss for a taxable year) 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. Legislative
proposals have been made that would treat certain transactions designed to
reduce or eliminate risk of loss and opportunities for gain as constructive
sales for purposes of recognition of gain (but not loss). Unitholders should
consult their own tax advisers with regard to any such constructive sales
rules.
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.
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 foreign,
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 special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the
Trust will be treated as the income of the Unitholders under the existing
income tax laws of the State and City of New York.
TRUST OPERATING EXPENSES
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Compensation of Sponsor, Evaluator and Managing Underwriter. The Sponsor will
not receive any fees in connection with its activities relating to the Trust.
The Evaluator shall receive that evaluation fee, payable in any month
incurred, set forth under "Summary of Essential Financial Information"
in Prospectus Part One (which is based on the number of Units outstanding on
January 1 of each year for which such compensation relates except) 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" in Prospectus Part One (which
is based on the number of Units outstanding on January 1 of each year for
which such compensation relates) for 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
underwriter in any calendar year exceed the aggregate cost to the Supervisor
of supplying such services in such year. Both of the foregoing fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a
comparable category. 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" in Prospectus Part One (which amount is based on the number
of Units outstanding on January 1 of each year for which such compensation
relates). The Trustee's fees are payable in monthly installments on or before
the twenty-fifth day of each month as described under "General" below.
The Trustee benefits to the extent there are funds for future distributions,
payment of expenses and redemptions in the Capital and Income Accounts since
these accounts are non-interest bearing and the amounts earned by the Trustee
are retained by the Trustee. Part of the Trustee's compensation for its
services to the Trust is expected to result from the use of these funds. Such
fees may be increased without approval of the Unitholders by amounts not
exceeding proportionate increases under the category "All Services Less
Rent of Shelter" in the Consumer Price Index published by the United
States Department of Labor or, if such category is no longer published, in a
comparable category. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration."
Miscellaneous Expenses. Expenses incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over the 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
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General. Units are offered at the Public Offering Price. 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.
Any 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 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 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
Prospectus Part One in accordance with fluctuations in the prices of the
underlying Securities in the Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
initially equal to 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 initially 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 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 bid 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 bid prices on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for evaluation). If
current bid prices are unavailable, the evaluation is 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.
In offering the Units to the public, neither the Sponsor, the Managing
Underwriter nor any broker-dealers are recommending any of the individual
Securities in the Trust but rather the entire pool of Securities, taken as a
whole, which are represented by the Units.
Unit Distribution. Units 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.
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 or Managing Underwriter
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 the sales charge imposed on 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.
In addition, the Managing Underwriter realized a profit or sustained 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.
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 have further realized additional profit or loss 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
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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" in Prospectus Part One.
Proceeds received on the sale of any Securities in the Trust, to the extent
not used to meet redemptions of Units or pay expenses, will (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 may elect to have each distribution of
interest income, capital gains and/or principal on their Units automatically
reinvested in shares of any Van Kampen American Capital mutual funds (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 Trusts. The prospects 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. Texas residents who desire to reinvest may request that a broker-dealer
registered in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units
will, on the applicable distribution date, automatically be applied, as
directed by such person, as of such distribution date by the Trustee to
purchase shares (or fractions thereof) of the applicable Reinvestment Fund at
a net asset value as computed as of the close of trading on the New York Stock
Exchange on such date. Unitholders with an existing Guaranteed Reinvestment
Option (GRO) Program account (whereby a sales charge is imposed on
distribution reinvestments) may transfer their existing account into a new GRO
account which allows purchases of Reinvestment Fund shares at net asset value
as described above. 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 advisor 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 Division, 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" in Prospectus Part One. 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" in Prospectus Part One. 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
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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" in Prospectus Part One. The
Trust Agreement will terminate upon the sale or other disposition of the last
Security held thereunder, but in no event will it continue beyond the
Mandatory Termination Date stated under "Summary of Essential Financial
Information" in Prospectus Part One.
Commencing on the Mandatory Termination Date, 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 31 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. The Sponsor is an indirect
subsidiary of VK/AC Holding, Inc. Prior to October 31, 1996, VK/AC Holding,
Inc. was controlled, through the ownership of a substantial majority of its
common stock, by The Clayton & Dubilier Private Equity IV Limited Partnership.
On October 31, 1996, VK/AC Holding, Inc. became a wholly owned indirect
subsidiary of Morgan Stanley Group Inc. pursuant to the closing of an
Agreement and Plan of Merger among Morgan Stanley Group Inc., MSAM Holding II,
Inc. and MSAM Acquisition Inc., whereby MSAM Acquisition Inc. was merged with
and into VK/AC Holding, Inc. and VK/AC Holding, Inc. was the surviving
corporation (the "Acquisition" ).
As a result of the Acquisition, VK/AC Holding, Inc. became a wholly owned
subsidiary of MSAM Holdings II, Inc. which, in turn, is a wholly owned
subsidiary of Morgan Stanley Group Inc. Morgan Stanley Group Inc. and various
of its directly or indirectly owned subsidiaries, including Morgan Stanley
Asset Management Inc., an investment adviser ("MSAM" ), Morgan Stanley
& Co. Incorporated, a registered broker-dealer and investment adviser, and
Morgan Stanley International, are engaged in a wide range of financial
services. Their principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring and other
corporate finance advisory activities; merchant banking; stock brokerage and
research services; asset management; trading of futures, options, foreign
exchange commodities and swaps (involving foreign exchange, commodities,
indices and interest rates); real estate advice, financing and investing; and
global custody, securities clearance services and securities lending. As of
September 30, 1996, MSAM, together with its affiliated investment advisory
companies, had approximately $103.5 billion of assets under management and
fiduciary advice.
On February 5, 1997, Morgan Stanley Group Inc. and Dean Witter, Discover & Co.
announced that they had entered into an Agreement and Plan of Merger to form
Morgan Stanley, Dean Witter, Discover & Co. Subject to certain conditions
being met, it is currently anticipated that the transaction will close in
mid-1997. Thereafter, Van Kampen American Capital Distributors, Inc. will be
an indirect subsidiary of Morgan Stanley, Dean Witter, Discover & Co.
Dean Witter, Discover & Co. is a financial services company with three major
businesses: full service brokerage, credit services and asset management.
Van Kampen American Capital Distributors, Inc. specializes in the underwriting
and distribution of unit investment trusts and mutual funds with roots in
money management dating back to 1926. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has offices at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas, 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Fund or to any Series thereof. The information is included herein only
for the purpose of informing investors as to the financial responsibility of
the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the 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. Kroll & Tract LLP has acted as counsel for the
Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or the Managing Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, securities
in any state to any person to whom it is not lawful to make such offer in such
state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C>
The Trust 2
Objective and Securities Selection 2
Trust Portfolio 3
Risk Factors 4
Tax Status 5
Trust Operating Expenses 7
Public Offering 8
Rights of Unitholders 10
Trust Administration 12
Other Matters 15
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
Part Two
FIRST OF MICHIGAN REAL ESTATE INCOME AND GROWTH TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 27
Note: This Prospectus May Be Used Only When Accompanied by Part One. Both
Parts of this Prospectus should be retained for future reference.
Dated as of the date of the Prospectus Part One accompanying this Prospectus
Part Two.
First of Michigan Corporation
100 Renaissance Center, 26th Floor
Detroit, Michigan 48243
Please retain this Prospectus for future reference.
Contents of Post-Effective Amendment
to Registration Statement
This Post-Effective Amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
27, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Chicago and State of Illinois on the 24th
day of April, 1997.
Van Kampen American Capital Equity Opportunity
Trust, Series 27
(Registrant)
By Van Kampen American Capital Distributors,
Inc.
(Depositor)
By: Sandra A. Waterworth
Vice President
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on
April 24, 1997 by the following persons who constitute a majority of the
Board of Directors of Van Kampen American Capital Distributors, Inc.:
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
William R. Molinari President and Chief Operating )
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Sandra A. Waterworth ) (Attorney in Fact)*
____________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 203
(File No. 33-65744) and with the Registration Statement on Form S-6
of Insured Municipals Income Trust, 170th Insured Multi-Series (File
No. 33-55891) and the same are hereby incorporated herein by this
reference.
Consent of Independent Certified Public Accountants
We have issued our report dated March 21, 1997 accompanying the
financial statements of Van Kampen American Capital Equity Opportunity
Trust, Series 27 as of December 31, 1996, and for the period then ended,
contained in this Post-Effective Amendment No. 1 to Form S-6.
We consent to the use of the aforementioned report in the Post-
Effective Amendment and to the use of our name as it appears under the
caption "Auditors".
Grant Thornton LLP
Chicago, Illinois
April 24, 1997
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-22-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4316913
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