File No. 333-07015
CIK #897002
Securities and Exchange Commission
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: Van Kampen American Capital Equity Opportunity
Trust, Series 36
B. Name of Depositor: Van Kampen American Capital Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
Chapman and Cutler Van Kampen American Capital Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: An indefinite number of
Units of proportionate interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee: $500 (previously paid)
H. Approximate date of proposed sale to the public:
As Soon As Practicable After the Effective Date of the
Registration Statement
/ x / Check box if it is proposed that this filing will become effective
on July 26, 1996 at 2:00 P.M. pursuant to Rule 487.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
Van Kampen American Capital Equity Opportunity Trust
Series 36
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) Underwriting
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trust
trust's securities and ) Federal Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating
Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) Trust Portfolio
underwriter, trustee or any )
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's ) Cover Page
securities ) Trust Operating Expenses
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Federal Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
Certified
1(c) to Form S-6) ) Public Accountants
) Statement of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
July 26, 1996
Van Kampen American Capital
Van Kampen American Capital Equity Opportunity Trust, Series 36
Van Kampen American Capital Blue Chip Opportunity and Treasury Trust, Series 4
The Fund. Van Kampen American Capital Equity Opportunity Trust, Series 36 (the
"Fund") is comprised of one unit investment trust, Van Kampen American
Capital Blue Chip Opportunity and Treasury Trust, Series 4 (the "Trust").
The Trust offers investors the opportunity to purchase Units representing
proportionate interests in a fixed, diversified portfolio of the 30 actively
traded "blue chip" equity securities which currently are components of
the Dow Jones Industrial Average* plus "zero coupon" U.S. Treasury
obligations. Dow Jones & Company, Inc. has not participated in any way in the
creation of the Trust or in the selection of stocks included in the Trust and
has not approved any information herein relating thereto. Unless terminated
earlier, the Trust will terminate on February 15, 2008 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 Units.
Attention Foreign Investors. If you are not a United States citizen or
resident, distributions from the Trust will generally be subject to U.S.
Federal withholding taxes; however, under certain circumstances treaties
between the United States and other countries may reduce or eliminate such
withholding tax. See "Federal Taxation." Such investors should consult
their tax advisers regarding the imposition of U.S. withholding on
distributions.
Objectives of the Trust. The objectives of the Trust are to provide the
potential for capital appreciation and income, consistent with the
preservation of invested capital, by investing in a portfolio of actively
traded, New York Stock Exchange listed equity securities which currently are
components of the Dow Jones Industrial Average* ("Equity Securities")
and to protect Unitholders' capital by investing a portion of its portfolio in
"zero coupon" U.S. Treasury obligations ("Treasury Obligations").
Collectively, the Treasury Obligations and the Equity Securities are
referred to herein as the "Securities." See "Portfolio." There
is, of course, no guarantee that the objectives of the Trust will be achieved.
Units are not designed so that their prices will parallel or correlate with
movements in the Dow Jones Industrial Average, and it is expected that their
prices will not parallel or correlate with such movements. The Treasury
Obligations evidence the right to receive a fixed payment at a future date
from the U.S. Government and are backed by the full faith and credit of the
U.S. Government. The guarantee of the U.S. Government does not apply to the
market value of the Treasury Obligations or the Units of the Trust whose net
asset value will fluctuate and may be worth more or less than a purchaser's
acquisition cost. It is anticipated that upon maturity the Treasury
Obligations will represent an amount of at least $11.00 per Unit.
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 loss of the principal
amount invested.
Public Offering Price. The Public Offering Price of the Units of the Trust
during the initial offering period includes the aggregate underlying value of
the Equity Securities and the aggregate offering price of the Treasury
Obligations in the Trust's portfolio, a sales charge equal to 4.9% of the
Pubic Offering Price (which is equivalent to 5.152% of the aggregate value of
the Securities), and cash, if any, in the Income and Capital Accounts held or
owned by the Trust. During the initial offering period, the sales charge is
reduced on a graduated scale for sales involving at least 5,000 Units. If
Units were available for purchase at the close of business on the day before
the Initial Date of Deposit, the Public Offering Price per Unit would have
been $10.02. For sales charges in the secondary market, see "Public
Offering." The minimum purchase is 100 Units except for certain
transactions described under "Public Offering--Unit Distribution".
Principal Protection. The Trust has been organized so that purchasers of Units
should receive, at the termination of the Trust, an amount per Unit at least
equal to $11.00 (which is equal to the per Unit value upon maturity of the
Treasury Obligations), even if the Trust never paid a dividend and the value
of the Equity Securities were to decrease to zero, which the Sponsor considers
highly unlikely. This feature of the Trust provides Unitholders who purchase
Units at the price of $11.00 or less per Unit with total principal protection,
including any sales charges paid, although they might forego any earnings on
the amount invested. To the extent that Units are purchased at a price less
than $11.00 per Unit, this feature may also provide a potential for capital
appreciation.
The Treasury Obligations will mature on February 15, 2008. The Treasury
Obligations have a maturity value equal to or greater than the aggregate
Public Offering Price (which includes the sales charge) of the Units of the
Trust on the Initial Date of Deposit; however, the value of the Treasury
Obligations may fluctuate before maturity due to fluctuations in interest
rates. The Equity Securities deposited in the Trust's portfolio have no fixed
maturity date and the value of these underlying Equity Securities will
fluctuate with changes in the values of stocks in general and with changes in
the conditions and performance of the specific Securities owned by the Trust.
See "Trust Portfolio."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
* The Dow Jones Industrial Average is the property of Dow Jones & Company,
Inc. Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
Additional Deposits. The Sponsor may, from time to time during a period of up
to approximately 12 months after the Initial Date of Deposit, deposit
additional Securities in the Trust as provided under "The Trust."
Dividend and Capital Distributions. Distributions of dividends and capital, if
any, received by the Trust will be paid in cash on the applicable Distribution
Date to Unitholders of record on the record date as set forth in the "
Summary of Essential Financial Information." The initial estimated
distribution will be $.01 per Unit and will be made on September 25, 1996 to
Unitholders of record on September 10, 1996. Income with respect to the
amortization of original issue discount on the Treasury Obligations in the
Trust will not be distributed currently, although Unitholders will be subject
to income tax at ordinary income rates as if a distribution had occurred.
Gross dividends received by the Trust will be distributed to Unitholders.
Expenses of the Trust will be paid with proceeds from the sale of Securities.
For the consequences of such sales, see "Federal Taxation."
Additionally, upon termination of the Trust, the Trustee will distribute, upon
surrender of Units for redemption, to each Unitholder his pro rata share of
the Trust's assets, less expenses, in the manner set forth under "Rights
of Unitholders--Distributions of Income and Capital."
Secondary Market for Units. After the initial offering period, although not
obligated to do so, the Sponsor 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 Equity Securities in the Trust (generally
determined by the closing sale or bid prices of the Equity Securities) plus
the aggregate bid side evaluation of the Treasury Obligations, plus or minus
cash, if any, in the Capital and Income Accounts of the Trust. If a secondary
market is maintained during the initial offering period, the prices at which
Units will be repurchased will be based upon the aggregate underlying value of
the Securities in the Trust (generally determined by the closing sale or asked
prices of the Equity Securities and the aggregate offer side evaluation of the
Treasury Obligations) plus or minus cash, if any, in the Capital and Income
Accounts of the Trust. If a secondary market is not maintained, a Unitholder
may redeem Units through redemption at prices based upon the aggregate
underlying value of the Equity Securities in the Trust plus the aggregate bid
side evaluation of the Treasury Obligations, plus or minus a pro rata share of
cash, if any, in the Capital and Income Accounts of the Trust. A Unitholder
tendering 1,000 or more Units for redemption may request a distribution of
shares of Equity Securities (reduced by customary transfer and registration
charges) in lieu of payment in cash. All Unitholders will receive their pro
rata portion of the Treasury Obligations in cash upon redemption. See "Rights
of Unitholders--Redemption of Units."
Termination. Commencing on the Mandatory Termination Date Equity 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
Equity Securities. Written notice of any termination of the Trust specifying
the time or times at which Unitholders may surrender their certificates for
cancellation shall be given by the Trustee to each Unitholder at his address
appearing on the registration books of the Trust maintained by the Trustee. At
least 30 days prior to the Mandatory Termination Date the Trustee will provide
written notice thereof to all Unitholders and will include with such notice a
form to enable Unitholders to elect a distribution of shares of Equity
Securities if such Unitholder owns at least 1,000 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 Equity Securities. All
Unitholders will receive cash in lieu of any fractional shares and cash
representing their pro rata portion of the Treasury Obligations. To be
effective, the election form, together with surrendered certificates if
issued, and other documentation required by the Trustee, must be returned to
the Trustee at least five business days prior to the Mandatory Termination
Date. Unitholders not electing a distribution of shares of Equity 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 of any Van Kampen American Capital-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase units of any other Van Kampen American Capital trust in the initial
offering period accepting rollover investments subject to a reduced sales
charge to the extent stated in the related prospectus (which may be deferred
in certain cases). Unitholders also 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 the possible deterioration of
either the financial condition of the issuers, the general condition of the
stock market and volatile interest rates. See "Risk Factors" and "
Trust Portfolio."
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 36
Summary of Essential Financial Information
At the Close of Business on the day before the Initial Date of Deposit: July 25, 1996
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor: Van Kampen American Capital Investment Advisory Corp.
(An affiliate of the Sponsor)
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
General Information
<S> <C>
Aggregate Maturity Value of Treasury Obligations Initially Deposited................... $ 165,000
Number of Units........................................................................ 15,000
Fractional Undivided Interest in the Trust per Unit.................................... 1/15,000
Public Offering Price: ................................................................
Aggregate Value of Securities in Portfolio <F1>....................................... $ 142,920
Aggregate Value of Securities per Unit ............................................... $ 9.53
Sales Charge 4.9% (5.152% of the Aggregate Value of Securities per Unit).............. $ .49
Public Offering Price Per Unit <F2><F3>............................................... $ 10.02
Redemption Price per Unit <F3>......................................................... $ 9.51
Secondary Market Repurchase Price per Unit............................................. $ 9.53
Excess of Public Offering Price per Unit over Maximum Redemption Price per Unit........ $ .51
Excess of Sponsor's Initial Repurchase Price per Unit over Redemption Price per Unit... $ .02
Estimated Annual Dividends per Unit <F4>.............................................. $ .09877
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee... Maximum of $.0025 per Unit
Evaluator's Annual Evaluation Fee..... Maximum of $.0025 per Unit
Evaluation Time....................... 4:00 P.M. New York time
Mandatory Termination Date............ February 15, 2008
The Trust may be terminated if the net asset value of the Trust is less than
$500,000 unless the net asset value of the Trust deposits has exceeded $15,000,000,
then the Trust Agreement may be terminated if the net asset value of the Trust is
Minimum Termination Value............. less than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee............................ $.008 per Unit
Estimated Annual Organizational Expenses <F5>... $.00716 per Unit
Income Distribution Record Date................. Tenth day of March, June, September and December
Income Distribution Date........................ Twenty-fifth 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>Each Equity Security listed on a national securities exchange is valued at the
closing sale price or, if the Equity Security is not listed, at the closing
ask price thereof. The Treasury Obligations are valued at the offering side
evaluation.
<F2>On the Initial Date of Deposit there will be no cash in the Income or Capital
Accounts. Anyone ordering Units after such date will have included in the
Public Offering Price a pro rata share of any cash in such Accounts.
<F3>Effective on each July 26, commencing July 26, 1997, the secondary market
sales charge will decrease by .3 of 1% to a minimum sales charge of 1.5%. See
"Public Offering."
<F4>Estimated annual dividends are based on annualizing the most recently declared
dividends. Estimated Annual Dividends per Unit are based on the number of
Units, the fractional undivided interest in the Securities per Unit and the
aggregate value of the Securities per Unit as of the Initial Date of Deposit.
Investors should note that the actual annual dividends received per Unit will
vary from the estimated amount due to changes in the factors described in the
preceding sentence and actual dividends declared and paid by the issuers of
the Securities.
<F5>The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration statement,
the trust indenture and other closing documents, registering Units with the
Securities and Exchange Commission and states, the initial audit of the
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 material and any other selling expenses) as is common for mutual
funds. Total organizational expenses will be amortized over a five year
period. See "Trust Operating Expenses" and "Statement of
Condition." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts. Estimated Annual Organizational
Expenses have been estimated based on a projected trust size of $10,000,000.
To the extent the Trust is larger or smaller, the actual organizational
expenses paid by the Trust (and therefore by Unitholders) will vary from the
estimated amount set forth above.
</TABLE>
THE TRUST
Van Kampen American Capital Equity Opportunity Trust, Series 36 is comprised
of one unit investment trust, Van Kampen American Capital Blue Chip
Opportunity and Treasury Trust, Series 4. The Trust was created under the laws
of the State of New York pursuant to a Trust Indenture and Agreement (the "
Trust Agreement"), dated the date of this Prospectus (the "Initial
Date of Deposit"), among Van Kampen American Capital Distributors, Inc.,
as Sponsor, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., as Evaluator, Van Kampen American
Capital Investment Advisory Corp., 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 portfolio of equity securities and zero-coupon U.S. Treasury obligations
with greater diversification with regard to the equity securities than they
might be able to acquire individually. 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 "Portfolio."
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio" herein, including delivery
statements relating to contracts for the purchase of certain such Securities
and an irrevocable letter of credit issued by a financial institution in the
amount required for such purchases. Thereafter, the Trustee, in exchange for
such Securities (and contracts) so deposited, delivered to the Sponsor
documentation evidencing the ownership of that number of Units of the Trust
indicated in "Summary of Essential Financial Information." Unless
otherwise terminated as provided in the Trust Agreement, the Trust will
terminate on the Mandatory Termination Date, and Securities then held will
within a reasonable time thereafter be liquidated or distributed by the
Trustee.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Securities or contracts to purchase securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trust as a result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Securities
into the Trust for a period of up to 12 months following the Initial Date of
Deposit, provided that such additional deposits will be in amounts which will
maintain the same percentage relationship among the number of shares of each
Equity Security in the Trust and the same percentage relationship among the
number of shares of Equity Securities and the Treasury Obligations that
existed immediately prior to any such subsequent deposit. Such deposits of
additional Securities will, therefore, be done in such a manner that the
maturity value of the Treasury Obligations represented by each Unit should
always be an amount at least equal to $11.00. Thus, although additional Units
will be issued, each Unit will continue to represent approximately the same
number of shares and the percentage relationship among each Security in the
Trust will remain the same. The required percentage relationship among the
Securities will be adjusted to reflect the occurrence of a stock dividend, a
stock split or a similar event which affects the capital structure of the
issuer of a Security but which does not affect the Trust's percentage
ownership of the common stock equity of such issuer at the time of such event.
On a cost basis to the Trust, the original percentage relationship on the
Initial Date of Deposit was approximately 51.9% Treasury Obligations and
approximately 48.1% Equity Securities. Since the prices of the underlying
Treasury Obligations and Equity Securities will fluctuate daily, the ratio, on
a market value basis, will also change daily. The maturity value of the
Treasury Obligations and the portion of Equity Securities represented by each
Unit will not change as a result of the deposit of additional Securities in
the Trust.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee or
additional Units are issued as a result of additional Securities being
deposited by the Sponsor, the fractional undivided interest in the Trust
represented by each unredeemed Unit will increase or decrease accordingly,
although the actual interest in the Trust represented by such fraction will
remain unchanged. Units will remain outstanding until redeemed upon tender to
the Trustee by Unitholders, which may include the Sponsor, or until the
termination of the Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objectives of the Trust are to provide the potential for capital
appreciation and income and protect Unitholders' capital. The portfolio is
described under "Trust Portfolio" and in "Portfolio". The
Trust has been organized so that investors would receive, at termination, an
amount per Unit at least equal to $11.00 (which is equal to the per Unit value
upon maturity of the Treasury Obligations), even if the Trust never paid a
distribution and the value of the Equity Securities were to decrease to zero,
which the Sponsor considers highly unlikely.
In selecting Securities for the Trust, the following factors, among others,
were considered: (a) for the portion of the Securities that are Equity
Securities, the Sponsor selected those Equity Securities that currently are
components of the Dow Jones Industrial Average and the dollar value of the
shares of such securities with the intent to have approximately equal dollar
amounts initially invested in each such security, and (b) for the portion of
the Securities that are Treasury Obligations, the evidence of the right to
receive a fixed payment at a future date from the U.S. Government, backed by
the full faith and credit of the U.S. Government.
The following chart shows $100 invested in selected asset classes over the
period 1970 - 1995, compared to inflation (as measured by the Consumer Price
Index) over the same period. As the chart indicates, common stocks may offer
the potential to keep ahead of inflation over time. Of course, this chart
represents past performance of these investment categories and there is no
guarantee of future results, either of these categories or of the Trust.
Unitholders will be subject to sales charges, expenses and taxes which are not
reflected in the chart.
<TABLE>
<CAPTION>
Stocks (Dow Jones
Industrial Average)
<S> <C>
$100 $1,784.93
</TABLE>
<TABLE>
<CAPTION>
Long-term U.S.
Government Bonds
<S> <C>
$100 $984.04
</TABLE>
<TABLE>
<CAPTION>
U.S. Treasury
bills (short term)
<S> <C>
$100 $539.56
</TABLE>
<TABLE>
<CAPTION>
Consumer Price
Index
<S> <C>
$100 $386.84
</TABLE>
Source: Ibbotson Associates and Micropal, Inc.
An investor will be subject to taxation on the dividend income received from
the Trust and on gains from the sale or liquidation of Securities (see
"Federal Taxation"). Investors should be aware that there is not any
guarantee that the objectives of the Trust will be achieved because 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. Common stocks may be
especially susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of
the issuers change. Investors should be aware that there can be no assurance
that the value of the underlying Securities will increase or that the issuers
of the Equity 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 Equity Securities and the declaration of any
dividends depends upon several factors including the financial condition of
the issuers and general economic conditions.
Investors should note that the above criteria were applied to the Securities
selected for inclusion in the Trust as of the Initial Date of Deposit.
Subsequent to the Initial Date of Deposit, the Securities may no longer meet
such criteria and the Equity Securities may no longer be included in the Dow
Jones Industrial Average. Should a Security no longer meet such criteria or
not be included in the Dow Jones Industrial Average, such Security will not,
simply as a result of such fact, be removed from the portfolio of the Trust.
Investors should be aware that the Trust is not a "managed" fund and
as a result the adverse financial condition of a company will not result in
its elimination from the portfolio except under extraordinary circumstances
(see "Trust Administration--Portfolio Administration"). In addition,
Securities will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation. Investors should
note in particular that the Securities were selected by the Sponsor as of the
Initial Date of Deposit. The Trust may continue to purchase or hold Securities
originally selected through this process even though the evaluation of the
attractiveness of the Securities may have changed and, if the evaluation were
performed again at that time, the Securities would not be selected for the
Trust.
TRUST PORTFOLIO
The Trust consists of (a) 30 different issues of Equity Securities, all of
which are actively traded, blue-chip securities issued by large, well
established corporations and all of which, taken together, currently are
components of the Dow Jones Industrial Average and (b) zero-coupon U.S.
Treasury Obligations. Each issue, as of the Initial Date of Deposit,
represented approximately the same dollar value of the portfolio since the
Sponsor utilized a dollar weighted average approach in acquiring such Equity
Securities. Dow Jones & Company, Inc., owner of the Dow Jones Industrial
Average, has not granted to the Fund or the Sponsor a license to use the Dow
Jones Industrial Average. Units are not designed so that their prices will
parallel or correlate with movements in the Dow Jones Industrial Average, and
it is expected that their prices will not parallel or correlate with such
movements. Dow Jones & Company, Inc. has not participated in any way in the
creation of the Trust or in the selection of stocks included in the Trust and
has not approved any information herein relating thereto.
The Dow Jones Industrial Average is composed of 30 common stocks chosen by the
editors of The Wall Street Journal, a publication of Dow Jones & Company, Inc.
The companies are major factors in their industries and their stocks are
widely held by individuals and industrial investors. Changes in the components
are made entirely by the editors of The Wall Street Journal without
consultation with the companies, the stock exchange or any official agency.
Dow Jones & Company, Inc. expressly reserves the right to change the
components of the Dow Jones Industrial Average at any time for any reason. Any
changes in the components of the Dow Jones Industrial Average after the
Initial Date of Deposit will not cause a change in the identity of the common
stocks included in the Trust, including any additional Equity Securities
deposited in the Trust. The following is a general description of the Equity
Securities contained in the Dow Jones Industrial Average.
AlliedSignal, Inc. AlliedSignal, Inc. and its subsidiaries operates in the
aerospace, automotive and engineered materials segments worldwide. The company
produces primary propulsion and gas turbine engines, avionics, wheels, brakes
for aerospace and automotive use, friction materials, turbochargers, synthetic
fibers, fluorine products, plastics and other items.
Aluminum Company of America (ALCOA). ALCOA, with its subsidiaries, produces
alumina, primary aluminum products and finished products, components and
systems for industrial applications. ALCOA sells its products to packaging,
transportation, building and construction customers worldwide. In addition,
ALCOA produces aluminum based chemicals, vinyl products and plastic products.
American Express Company. American Express Company provides a variety of
diversified travel and financial services. The company offers charge cards,
travelers cheques, travel, financial planning, investment products, insurance
and international banking services.
A T & T Corporation. A T & T Corporation provides communication services and
products. The company's products consist of network equipment and computer
systems, which service businesses, consumers, communication services providers
and government agencies. A T & T is involved in basic research as well as
product and service development and offers a general purpose credit card and
financial and leasing services.
Bethlehem Steel Corporation. Bethlehem Steel Corporation is an integrated
steel producer which manufactures and sells a variety of steel products.
Products include sheet, strip and tin mill, plates and structural shapes and
piling. Bethlehem Steel also provides oil field services and constructs and
repairs offshore drilling ships and rigs. The company's markets include
service centers, transportation, construction and others.
The Boeing Company. The Boeing Company is a major aerospace firm which
produces products in the area of commercial and military transportation,
missiles and space. The company manufactures commercial jets, military
aircraft and missiles for commercial customers as well as the United States
and international governments.
Caterpillar, Inc. Caterpillar, Inc. designs, manufactures and markets
earthmoving, construction and materials handling machinery. Products include
track and wheel loaders, lift trucks, backhoe loaders and related equipment.
The company also produces diesel and natural gas engines and turbines and
electric power generation systems. Products are sold through a worldwide
network of independent dealers.
Chevron Corporation. Chevron Corporation is an international oil company with
activities in the United States and abroad. The company is involved in
worldwide, integrated petroleum operations which consist of exploring for,
developing and producing petroleum liquids and natural gas as well as
transporting the products. Chevron is also active in the mineral and chemical
industry.
Coca-Cola Company. Coca-Cola Company manufactures, markets and distributes
soft drinks, soft drink syrups and concentrates worldwide, including
"Coca-Cola", "Diet Coke", "Tab", "Sprite", "Diet Sprite", "Fanta", "Fresca",
"Cherry Coke", "Diet Cherry Coke", "PowerAde", "Fruitopia" and
"Minute Maid" sodas. Other products include juices, juice-drinks and mixers
like "Minute Maid", "Hi-C" and "Bacardi" brands.
Du Pont (E.I.) de Nemours and Company. Du Pont (E.I.) de Nemours and Company
is a research and technology based company offering products including
chemicals, polymers, fibers and petroleum. The company serves worldwide
markets in the aerospace, agriculture, apparel, automotive, construction,
electronics, packaging, refining and transportation industries. Du Pont's
brands consist of "TEFLON", "LYCRA", and others.
Eastman Kodak Company. Eastman Kodak Company develops, manufactures and
markets consumer and commercial imaging products. The various segments provide
a number of products and services including cameras, photofinishing, film,
audiovisual equipment and plastics. The company's products and services are
offered worldwide.
Exxon Corporation. Exxon Corporation explores for and produces crude oil and
natural gas and manufactures petroleum products. The company explores for and
mines coal and minerals and sells and transports crude oil, natural gas and
petroleum products. Exxon operates worldwide.
General Electric Company. General Electric Company has business interests in
appliances, broadcasting, communications and transportation. The company
manufactures home appliances, lightbulbs, satellites, jet engines, electricity
distribution products, diagnostic imaging systems and diesel locomotives.
General Electric also owns the National Broadcasting Company.
General Motors Corporation. General Motors Corporation manufactures and sells
vehicles worldwide under the brands "Chevrolet", "Buick",
"Cadillac", "Oldsmobile", "Pontiac", "Saturn", and
"GMC" trucks.
Goodyear Tire & Rubber Company. Goodyear Tire & Rubber Company manufactures
tires and rubber automotive parts. The company produces new and retread tires,
inner tubes, automotive belts and hoses, molded parts and foam cushioning.
Goodyear sells its tires to automobile manufacturers and through retail stores
to the replacement market.
International Business Machines Corporation (IBM). IBM manufactures micro and
personal computers. The company also supplies mainframe computers and other
information processing equipment, software and networking products and
peripheral equipment. Products are sold or leased for use in business,
government, science, education, space, medicine and other areas on a worldwide
basis.
International Paper Company. International Paper Company manufactures paper,
paperboard, packaging products, wood pulp, lumber, photosensitive films and
chemicals. The company produces writing and office supply products, envelopes,
business forms, photographic supplies and building products. International
Paper sells its products in the United States, Europe and the Pacific Rim.
J.P. Morgan & Company, Inc. J.P. Morgan & Company, Inc. through subsidiaries,
offers financial services to corporations, governments, financial
institutions, institutional investors, professional firms, privately held
companies and individuals. The company offers loans, advises on mergers,
acquisitions and privatizations, underwrites debt and equity issues and deals
in government issued securities worldwide.
McDonald's Corporation. McDonald's Corporation develops, operates, franchises
and services a worldwide system of restaurants. These restaurants prepare,
assemble, package and sell a limited menu of quickly prepared, moderately
priced foods. There are over 18,700 restaurants in the United States and 94
countries worldwide. Food items include hamburgers, chicken, salads, breakfast
foods and beverages.
Merck & Company, Inc. Merck & Company, Inc. manufactures and produces a wide
range of human and animal health products and services. The company also has a
human health managed prescription drug program. Products include
anti-hypertensives, cardiovasculars, anti-inflammatories, vaccines and
glaucoma treatments. Animal products include preventions for canine heartworm
disease and poultry disease.
Minnesota Mining and Manufacturing Company (3M). Minnesota Mining and
Manufacturing Company is a diversified manufacturer of industrial, commercial
and health care products. The company produces and markets more than 60,000
products worldwide.
Philip Morris Companies, Inc. Philip Morris Companies, Inc. has five principal
operating companies which include Philip Morris U.S.A., Philip Morris
International, Inc., Kraft Foods, Inc., Miller Brewing Company and Philip
Morris Capital Corporation. Philip Morris Capital Corporation provides
financial services.
The Procter & Gamble Company. The Procter & Gamble Company manufactures and
distributes household products. Its laundry and cleaning, personal care and
food and beverage segments are distributed primarily through grocery stores
and other retail outlets. Products of the pulp and chemicals segment are sold
directly to the users. The company's products are sold throughout the United
States and abroad.
Sears, Roebuck & Company. Sears, Roebuck & Company is a retailer of apparel,
home and automotive products and services. The company operates approximately
1,100 department and specialty stores across the United States, including "
Homelife" furniture and "Sears Hardware" stores. Sears also
operates a network of about 2,500 automotive product and service outlets which
include "Sears Auto Centers" and "Western Auto".
Texaco, Inc. Texaco, Inc., and its subsidiaries, explore for, produce,
transport, refine and market crude oil, natural gas and petroleum products,
including petrochemicals, worldwide. The company owns, leases or has interests
in extensive production, manufacturing, marketing, transportation and other
facilities throughout the world.
Union Carbide Corporation. Union Carbide Corporation manufactures chemicals
and plastics. The company's products include fabricated plastic products,
specialty polymers, industrial chemicals, solvents and coatings and specialty
chemicals such as biocides, silicone and plastic additives. Union Carbide's
products are sold worldwide.
United Technologies Corporation. United Technologies Corporation manufactures
and sells products and services to the aerospace, building and automobile
industries. The company produces jet engines, helicopters, air conditioning
equipment, elevators and escalators and automobile products. United
Technologies sells its products internationally.
The Walt Disney Company. The Walt Disney Company is a diversified
international entertainment company. The company, through its subsidiaries,
owns and operates theme parks and resorts, film studios, consumer products,
television networks, radio networks, cable networks, newspapers and magazines.
Disney owns, among others, ABC Television, ABC radio, The Disney Channel,
Disney Land and Disney MGM Studios.
Westinghouse Electric Corporation. Westinghouse Electric Corporation operates
broadcasting, industrial and technology businesses. The company owns CBS, Inc.
and runs approximately 39 radio stations and 14 television stations.
Westinghouse also serves the mobile transport refrigeration, power generation,
energy systems, government operations, and security and communication systems.
Woolworth Corporation. Woolworth Corporation is a multinational retailer of
general merchandise. The company operates more than 8,200 stores in North
America, Europe, Australia and Asia under names such as "Foot Locker",
"Northern Reflections", "Woolworth", "After Thoughts"
and "Champs Sports".
General. The Trust consists of (a) the Securities listed under
"Portfolio" as may continue to be held from time to time in the Trust, (b)
any additional Securities acquired and held by the Trust pursuant to the
provisions of the Trust Agreement and (c) any 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 Equity Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from such
events will in most cases 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 Equity Securities under
certain limited circumstances. See "Trust Administration--Portfolio
Administration." Equity Securities, however, will not be sold by the Trust
to take advantage of market fluctuations or changes in anticipated rates of
appreciation or depreciation.
RISK FACTORS
Equity Securities. An investment in Units should be made with an understanding
of the risks which an investment in common stocks entails, including the risk
that the financial condition of the issuers of the Equity Securities or the
general condition of the common stock market may worsen and the value of the
Equity 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. These perceptions are based on
unpredictable factors including expectations regarding government economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, 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. Certain of the issuers may currently be
in arrears with respect to preferred stock dividend payments. 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
Equity Securities in the portfolio 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 or at the time a Unitholder purchases Units.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, have
generally 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
on liquidation which are senior to those of common stockholders.
Treasury Obligations. The Treasury Obligations deposited in the Trust consist
of U.S. Treasury bonds which have been stripped of their unmatured interest
coupons. The Treasury Obligations evidence the right to receive a fixed
payment at a future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. The guarantee of the U.S. Government
does not apply to the market value of the Treasury Obligations or to Units of
the Trust. Treasury Obligations are purchased at a deep discount because the
buyer obtains only the right to a fixed payment at a fixed date in the future
and does not receive any periodic interest payments. The effect of owning deep
discount bonds which do not make current interest payments (such as the
Treasury Obligations) is that a fixed yield is earned not only on the original
investment, but also, in effect on all earnings during the life of the
discount obligation. This implicit reinvestment of earnings at the same time
eliminates the risk of being unable to reinvest the income on such obligations
at a rate as high as the implicit yield on the discount obligation, but at the
same time eliminates the holder's ability to reinvest at higher rates in the
future. For this reason, the Treasury Obligations are subject to substantially
greater price fluctuations during periods of changing interest rates than are
securities of comparable quality which make regular interest payments. The
effect of being able to acquire the Treasury Obligations at a lower price is
to permit more of the Trust's portfolio to be invested in Equity Securities.
General. Whether or not the Securities are listed on a national securities
exchange, the principal trading market for the Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for the Securities may depend on whether dealers will make a market in the
Securities. There can be no assurance that a market will be made for any of
the Securities, that any market for the Securities will be maintained or of
the liquidity of the Securities in any markets made. In addition, the Trust
may be restricted under the Investment Company Act of 1940 from selling
Securities to the Sponsor. The price at which the Securities may be sold to
meet redemptions, and the value of the Trust, will be adversely affected if
trading markets for the Securities are limited or absent.
As described under "Trust Operating Expenses," all of the expenses of
the Trust will be paid from the sale of Securities from the Trust. It is
expected that such sales will be made at the end of the initial offering
period and each month thereafter through termination of the Trust. Such sales
will result in capital gains and losses and may be made at times and prices
which adversely affect the Trust. For a discussion of the tax consequences of
such sales, see "Federal Taxation."
Unitholders will be unable to dispose of any of the Securities in the
portfolio, 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 to vote on matters relating to the Treasury
Obligations and will vote in accordance with the instructions of the Sponsor.
In the absence of any such instructions by the Sponsor, the Trustee will vote
so as to insure that the Securities are voted as closely as possible in the
same manner and the same general proportion as are securities held by owners
other than the Trust.
FEDERAL TAXATION
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986 (the "Code"). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro
rata portion of each of the assets of the Trust under the Code; and the income
of the Trust will be treated as income of the Unitholders thereof under the
Code. Each Unitholder will be considered to have received his pro rata share
of income derived from the Trust asset when such income is considered to be
received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, or payment at
maturity) or upon the sale or redemption of Units by such Unitholder. The
price a Unitholder pays for his Units, generally including sales charges, is
allocated among his pro rata portion of each Security held by the Trust (in
proportion to the fair market values thereof on the valuation date closest to
the date the Unitholder purchases his Units) in order to determine his initial
tax basis for his pro rata portion of each Security held by the Trust. The
Treasury Obligations are treated as stripped bonds and may be treated as bonds
issued at an original issue discount as of the date a Unitholder purchases his
Units. Because the Treasury Obligations represent interests in "
stripped" U.S. Treasury bonds, a Unitholder's initial cost for his pro
rata portion of each Treasury Obligation held by the Trust shall be treated as
its "purchase price" by the Unitholder. Original issue discount is
effectively treated as interest for federal income tax purposes and the amount
of original issue discount in this case is generally the difference between
the bond's purchase price and its stated redemption price at maturity. A
Unitholder will be required to include in gross income for each taxable year
the sum of his daily portions of original issue discount attributable to the
Treasury Obligations held by the Trust as such original issue discount accrues
and will in general be subject to federal income tax with respect to the total
amount of such original issue discount that accrues for such year even though
the income is not distributed to the Unitholders during such year to the
extent it is not less than a "de minimis" amount as determined under a
Treasury Regulation issued on December 28, 1992 relating to stripped bonds. To
the extent the amount of such discount is less than the respective "de
minimis" amount, such discount shall be treated as zero. In general,
original issue discount accrues daily under a constant interest rate method
which takes into account the semi-annual compounding of accrued interest. In
the case of the Treasury Obligations, this method will generally result in an
increasing amount of income to the Unitholders each year. Unitholders should
consult their tax advisers regarding the federal income tax consequences and
accretion of original issue discount under the stripped bond rules. For
federal income tax purposes, a Unitholder's pro rata portion of dividends as
defined by Section 316 of the Code paid with respect to an Equity Security
held by the Trust are taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits". A
Unitholder's pro rata portion of dividends paid on such Equity Security which
exceed such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Equity Security, and to the extent that such
dividends exceed a Unitholder's tax basis in such Equity Security shall
generally be treated as capital gain. In general, any such capital gain will
be short-term unless a Unitholder has held his Units for more than one year.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain except in the case of a dealer or a financial
institution and will be long-term if the Unitholder has held his Units for
more than one year (the date on which the Units are acquired (i.e. the
"trade date") is excluded for purposes of determining whether the Units
have been held for more than one year). A Unitholder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of Securities
held by the Trust will generally be considered a capital loss (except in the
case of a dealer or a financial institution) and, in general, will be
long-term if the Unitholder has held his Units for more than one year.
Unitholders should consult their tax advisers regarding the recognition of
such capital gains and losses for federal income tax purposes.
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such
Unitholder's pro rata portion of dividends received by the Trust (to the
extent such dividends are taxable as ordinary income, as discussed above) in
the same manner as if such corporation directly owned the Equity Securities
paying such dividends (other than corporate shareholders, such as "S"
corporations, which are not eligible for the deduction because of their
special characteristics and other than for purposes of special taxes such as
the accumulated earnings tax and the personal holding corporation tax).
However, a corporation owning Units should be aware that Sections 246 and 246A
of the Code impose additional limitations on the eligibility of dividends for
the 70% dividends received deduction. These limitations include a requirement
that stock (and therefore Units) must generally be held at least 46 days (as
determined under Section 246(c) of the Code). Final regulations have been
issued which address special rules that must be considered in determining
whether the 46 day holding requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable
to indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. Unitholders should consult with their tax advisers with
respect to the limitations on and possible modifications to the dividends
received deductions.
Limitation on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by such Unitholder. 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. For taxpayers other than corporations, net
capital gains are subject to a maximum marginal stated tax rate of 28%.
However, it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Act") raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that recharacterizes capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions"
effective for transactions entered into after April 30, 1993. Unitholders and
prospective investors should consult with their tax advisers regarding the
potential effect of this provision on their investment in Units.
If a Unitholder disposes of a Unit, he is deemed thereby to dispose of his
entire pro rata interest in all assets of the Trust involved, including his
pro rata portion of all Securities represented by a Unit.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of the Trust. As discussed in "Rights of
Unitholders--Redemption of Units", under certain circumstances a
Unitholder tendering Units for redemption may request an In Kind Distribution
of Equity Securities. A Unitholder may also under certain circumstances
request an In Kind Distribution of Equity Securities upon the termination of
the Trust. See "Rights of Unitholders--Redemption of Units." Treasury
Obligations will not be distributed to a Unitholder as part of an In Kind
Distribution. The tax consequences relating to the sale of Treasury
Obligations are discussed above. As previously discussed, prior to the
redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust assets for
federal income tax purposes. The receipt of an In Kind Distribution will
result in a Unitholder receiving an undivided interest in whole shares of
stock plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind Distribution
will depend on whether a Unitholder receives cash in addition to Equity
Securities. An "Equity Security" for this purpose is a particular
class of stock issued by a particular corporation (and does not include the
Treasury Obligations). A Unitholder will not recognize gain or loss with
respect to the Equity Security if a Unitholder only receives Equity Securities
in exchange for his pro rata portion in each share of the Securities held by
the Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of an Equity 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 for the fractional share and his tax basis
in such fractional share of an Equity Security held by the Trust. In either
case, a Unitholder who receives cash in exchange for his interest in the
Treasury Obligations will generally recognize gain or loss based upon the
difference between the amount of cash received by the Unitholder for the
Treasury Obligations.
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 Unitholder's Tax Basis. Initially, a Unitholder's tax basis
in his Units will generally equal the price paid by such Unitholder 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 an Equity
Security will be reduced to the extent dividends paid with respect to such
Equity Security are received by the Trust which are not taxable as ordinary
income as described above. A Unitholder's tax basis in his Units and his pro
rata portion of a Treasury Obligation is increased by the amount of original
issued discount thereon properly included in the Unitholder's gross income for
Federal income tax purposes.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified that payments to the Unitholder are subject
to back-up withholding. If the proper taxpayer identification number and
appropriate certification are not provided when requested, distributions by
the Trust to such Unitholder (including amounts received upon the redemption
of Units) will be subject to back-up withholding. Distributions by the Trust
will generally be subject to United States income taxation and withholding in
the case of Units held by non-resident alien individuals, foreign corporations
or other non-United States persons (accrual of original issue discount on the
Treasury Obligations may not be subject to taxation or withholding provided
certain requirements are met). Such persons should consult their tax advisers.
On December 7, 1995, the U.S. Treasury Department released proposed
legislation, that, if adopted could affect the United States federal income
taxation of such non-United States Unitholders and the portion of the Trust's
income allocable to non-United States Unitholders. Similar language, which
would be effective on the date of enactment, was included in the Health
Insurance Reform Bill passed by the U.S. Senate on April 23, 1996.
Unitholders will be notified annually of the amounts of original issue
discount, income, dividends and long-term capital gain distributions
includable in the Unitholder's gross income and amounts of Trust expenses
which may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original issue
discount may also be subject to state and local taxes. Foreign investors may
be subject to different Federal income tax consequences than those described
above. Investors should consult their tax advisers for specific information on
the tax consequences of particular types of distributions.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker for details on establishing such accounts. Units may also
be purchased by persons who already have self-directed plans established.
In the opinion of Kroll & Tract, special counsel to the Trust for New York tax
matters, the Trust is not an association taxable as a corporation and the
income of the Trust will be treated as the income of the Unitholders under the
existing income tax laws of the State and City of New York.
TRUST OPERATING EXPENSES
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, Van Kampen
American Capital Investment Advisory Corp., which is an affiliate of the
Sponsor, will receive an annual supervisory fee which is not to exceed the
amount set forth under "Summary of Essential Financial Information,"
for providing portfolio supervisory services for the Trust. Such fee (which is
based on the number of Units outstanding on January 1 of each year for which
such compensation relates except during the initial offering period in which
event the calculation is based on the number of Units outstanding at the end
of the month of such calculation) may exceed the actual costs of providing
such supervisory services for this Trust, but at no time will the total amount
received for portfolio supervisory services rendered to Series 1 and
subsequent series of Van Kampen Merritt Equity Opportunity Trust (and its
successors) and to any other unit investment trusts sponsored by the Sponsor
for which the Supervisor provides portfolio supervisory services in any
calendar year exceed the aggregate cost to the Supervisor of supplying such
services in such year. In addition, the Evaluator, which is a division of Van
Kampen American Capital Investment Advisory Corp., shall receive the annual
per Unit evaluation fee set forth under "Summary of Essential Financial
Information" (which amount is based on the number of Units outstanding on
January 1 of each year for which such compensation relates except during the
initial offering period in which event the calculation is based on the number
of Units outstanding at the end of the month of such calculation) for
regularly evaluating the Trust portfolio. The foregoing fees are payable as
described under "General" below. Both of the foregoing fees may be
increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a
comparable category. The Sponsor 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
Compensation."
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial
Information" (which amount is based on the number of Units outstanding on
January 1 of each year for which such compensation relates except during the
initial offering period in which event the calculation is based on the number
of Units outstanding at the end of the month of such calculation). The
Trustee's fees are payable 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 a five year period. The
following additional charges are or may be incurred by the Trust: (a) normal
expenses (including the cost of mailing reports to Unitholders) incurred in
connection with the operation of the Trust, (b) fees of the Trustee for
extraordinary services, (c) expenses of the Trustee (including legal and
auditing expenses) and of counsel designated by the Sponsor, (d) various
governmental charges, (e) expenses and costs of any action taken by the
Trustee to protect the Trust and the rights and interests of Unitholders, (f)
indemnification of the Trustee for any loss, liability or expenses incurred in
the administration of the Trust without negligence, bad faith or wilful
misconduct on its part and (g) expenditures incurred in contacting Unitholders
upon termination of the Trust. The expenses set forth herein are payable as
described under "General" below.
General. During the initial offering period of the Trust, all of the fees and
expenses will accrue on a daily basis and will be charged to the Trust, in
arrears, at the end of the initial offering period. After the initial offering
period of the Trust, all of the fees and expenses of the Trust will accrue on
a daily basis and will be charged to the Trust, in arrears, on a monthly basis
as of the tenth day of each month. The fees and expenses are payable out of
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. If the balance
in the Capital Account is insufficient to provide for amounts payable by the
Trust, the Trustee has the power to sell Equity Securities (but not Treasury
Obligations unless the maturity value of the Treasury Obligations is not less
than $11.00 per Unit) to pay such amounts. These sales may result in capital
gains or losses to Unitholders. See "Federal Taxation."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate underlying value of the Equity Securities and,
during the initial offering period, the offering side evaluation of the
Treasury Obligations (bid side evaluation in the secondary market), a sales
charge of 4.9% of the Public Offering Price which is equivalent to 5.152% of
the aggregate underlying value of the Securities, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. The sales charge for
secondary market transactions is described under "Offering Price"
below. The sales charge applicable to quantity purchases is, during the
initial offering period, reduced on a graduated basis to any person acquiring
5,000 or more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number Dollar Amount of Sales
of Units Purchased Charge Reduction Per Unit
<S> <C>
5,000-9,999 $0.03
10,000-24,999 $0.05
25,000-49,999 $0.10
50,000-99,999 $0.15
100,000 or more $0.20
</TABLE>
The sales charge reduction will primarily be the responsibility of the selling
broker, dealer or agent. This reduced sales charge structure will apply on all
purchases by the same person from any one dealer of units of Van Kampen
American Capital-sponsored unit investment trusts which are being offered in
the initial offering period (a) on any one day (the "Initial Purchase
Date") or (b) on any day subsequent to the Initial Purchase Date if (1)
the units purchased are of a unit investment trust purchased on the Initial
Purchase Date, and (2) the person purchasing the units purchased a sufficient
amount of units on the Initial Purchase Date to qualify for a reduced sales
charge on such date. In the event units of more than one trust are purchased
on the Initial Purchase Date, the aggregate dollar amount of such purchases
will be used to determine whether purchasers are eligible for a reduced sales
charge. Such aggregate dollar amount will be divided by the public offering
price per unit (on the day preceding the date of purchase) of each respective
trust purchased to determine the total number of units which such amount could
have purchased of each individual trust. Purchasers must then consult the
applicable trust's prospectus to determine whether the total number of units
which could have been purchased of a specific trust would have qualified for a
reduced sales charge and, if so qualified, the amount of such reduction.
Assuming a purchaser qualifies for a sales charge reduction or reductions, to
determine the applicable sales charge reduction or reductions it is necessary
to accumulate all purchases made on the Initial Purchase Date and all
purchases made in accordance with (b) above. Units purchased in the name of
the spouse of a purchaser or in the name of a child of such purchaser under 21
years of age will be deemed for the purposes of calculating the applicable
sales charge to be additional purchases by the purchaser. The reduced sales
charges will also be applicable to a trustee or other fiduciary purchasing
securities for one or more trust estate or fiduciary accounts.
Employees of Van Kampen American Capital Distributors, Inc. and its affiliates
may purchase Units of the Trust at the current Public Offering Price less the
underwriting commission or the dealer's concession in the absence of an
underwriting commission. Registered representatives of selling brokers,
dealers, or agents may purchase Units of the Trust at the current Public
Offering Price less the dealer's concession during the initial offering period
and for secondary market transactions.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Public Offering--Unit
Distribution") by (1) investors who purchase Units through registered
investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management service, or provide such
services in connection with the establishment of an investment account for
which a comprehensive "wrap fee" charge is imposed, (2) bank trust
departments investing funds over which they exercise exclusive discretionary
investment authority and that are held in a fiduciary, agency, custodial or
similar capacity, (3) any person who for at least 90 days, has been an
officer, director or bona fide employee of any firm offering Units for sale to
investors or their immediate family members (as described above) and (4)
officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything
to the contrary in this Prospectus, such investors, bank trust departments,
firm employees and bank holding company officers and directors who purchase
Units through this program will not receive sales charge reductions for
quantity purchases.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
accordance with fluctuations in the prices of the underlying Securities in the
Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
equal to 5.152% of such value and dividing the sum so obtained by the number
of Units outstanding. The Public Offering Price shall also include the
proportionate share of any cash held in the Income and Capital Accounts. This
computation produced a gross underwriting profit equal to 4.9% 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. After the close of business on the day before the
Initial Date of Deposit, the Evaluator will appraise or cause to be appraised
daily the value of the underlying Securities as of the Evaluation Time on days
the New York Stock Exchange is open and will adjust the Public Offering Price
of the Units commensurate with such valuation. Such Public Offering Price will
be effective for all orders received prior to the Evaluation Time on each such
day. Orders received by the Trustee or Sponsor for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price. Effective on each
July 26, commencing July 26, 1997, the secondary market sales charge will be
reduced by .3 of 1% to a minimum sales charge of 1.5%.
The value of the Equity Securities during the initial offering period is
determined on each business day by the Evaluator in the following manner: if
the Equity 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 ask prices. If the Equity 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 ask price on the
over-the-counter market (unless it is determined that these prices are
inappropriate as a basis for evaluation). If current ask prices are
unavailable, the evaluation is generally determined (a) on the basis of
current ask prices for comparable securities, (b) by appraising the value of
the Equity Securities on the ask side of the market or (c) by any combination
of the above. During the initial offering period, the Treasury Obligations
will be valued at their net offering prices. If net offering prices are not
available for the Treasury Obligations, then such evaluations will be based on
(1) offering prices for comparable securities, (2) by determining the value of
the Treasury Obligations on the offer side of the market by appraisal or (3)
by any combination of the above. After the completion of the initial offering
period, the Treasury Obligations will be valued on the bid prices thereof. The
offering price of the Treasury Obligations may be expected to be greater than
the bid price of the Treasury Obligations by less than 2%.
In offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities in the Trust
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Sponsor, broker-dealers and others at the
Public Offering Price. Upon the completion of the initial offering period,
Units repurchased in the secondary market, if any, may be offered by this
Prospectus at the secondary market Public Offering Price in the manner
described above.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of 3.50% per Unit. Volume concessions or agency commissions of an additional
.20% of the Public Offering Price will be given to any broker/dealer or bank,
who purchases from the Sponsor at least $100,000 on the Initial Date of
Deposit or $250,000 on any day thereafter. Any quantity discount provided to
investors will be borne by the selling dealer or agent as indicated under "
General" above. For secondary market transactions, such concession or
agency commission will amount to 70% of the sales charge applicable to the
transaction.
Certain commercial banks 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.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 100 Units except as stated
herein. In connection with fully disclosed transactions with the Sponsor, the
minimum purchase requirement will be that number of Units set forth in the
contract between the Sponsor and the related broker or agent. The Sponsor
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.
Sponsor Compensation. The Sponsor will receive a gross sales commission equal
to 4.9% of the Public Offering Price of the Units (equivalent to 5.152% of the
aggregate value of Securities), less any reduced sales charge for quantity
purchases (as described under "General" above). Any quantity discount
provided to investors will be borne by the selling broker, dealer or agent as
indicated under "General" above.
In addition, the Sponsor will realize a profit or will sustain a loss, as the
case may be, as a result of the difference between the price paid for the
Securities by the Sponsor and the cost of such Securities to the Trust on the
Initial Date of Deposit as well as on subsequent deposits. See "Notes to
Portfolio." The Sponsor has not participated as sole underwriter or as
manager or as a member of the underwriting syndicates or as an agent in a
private placement for any of the Securities in the Trust portfolio. The
Sponsor may further realize additional profit or loss during the initial
offering period as a result of the possible fluctuations in the market value
of the Securities in the Trust after a date of deposit, since all proceeds
received from purchasers of Units (excluding dealer concessions and agency
commissions allowed, if any) will be retained by the Sponsor. Broker-dealers
or others (each "a distributor") who distribute 1,000,000 - 1,999,999
Units during the initial offering period will receive additional compensation
from the Sponsor, after the close of the initial offering period, of $0.01 for
each Unit it distributes; or each distributor who distributes 2,000,000 -
2,999,999 Units will receive additional compensation of $0.015 for each Unit
it distributes; or each distributor who distributes 3,000,000 or more Units
will receive additional compensation of $0.02 for each Unit it distributes.
Broker-dealers of the Trust, banks and/or others may be eligible to
participate in a program in which such firms receive from the Sponsor a
nominal award for each of their representatives who have sold a minimum number
of units of unit investment trusts created by the Sponsor during a specified
time period. In addition, at various times the Sponsor 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 Sponsor will reallow to such brokers, dealers, banks and/or
others that sponsor sales contests or recognition programs conforming to
criteria established by the Sponsor, or participate in sales programs
sponsored by the Sponsor, an amount not exceeding the total applicable sales
charges on the sales generated by such persons at the public offering price
during such programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor pay fees to
qualifying entities for certain services or activities which are primarily
intended to result in sales of Units of the Trust. Such payments are made by
the Sponsor 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.
A person will become the owner of Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor prior
to the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor, subject
to the limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor intends to maintain
a secondary market for Units of the Trust. In so maintaining a market, 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 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 obligated to do so, the Sponsor intends to
maintain a market for the Units offered hereby and offer continuously to
purchase Units at prices, subject to change at any time, based upon the
aggregate underlying value of the Equity Securities in the Trust plus the
aggregate bid price of the Treasury Obligations (offer price during the
initial offering period). If the supply of Units exceeds demand or if some
other business reason warrants it, the Sponsor 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 may be
able to dispose of such Units only by tendering them to the Trustee for
redemption at the Redemption Price. See "Rights of Unitholders--Redemption
of Units." A Unitholder who wishes to dispose of his 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 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.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust will be evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee that ownership be in book entry form. Units are
transferable by making a written request to the Trustee and, in the case of
Units evidenced by a certificate, by presentation and surrender of such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign such written
request, and such certificate or transfer instrument, exactly as his 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 or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Income and Capital. Any dividends received by the Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, return of principal, etc.) are credited to the Capital Account of
the Trust. Proceeds from the sale of Securities made to meet redemptions of
Units shall be segregated within the Capital Account of the Trust from
proceeds from the sale of Securities made to satisfy the fees, expenses and
charges of the Trust.
The Trustee will distribute any income received with respect to any of the
Securities in the Trust on or about the Income Distribution Dates to
Unitholders of record on the preceding Income Record Dates. See "Summary
of Essential Financial Information." Proceeds received on the sale of any
Securities in the Trust, to the extent not used to meet redemptions of Units
or pay fees and expenses, will be distributed annually on the Capital Account
Distribution Date to Unitholders of record on the preceding Capital Account
Record Date. Income with respect to the original issue discount on the
Treasury Obligations will not be distributed currently, although Unitholders
in the Trust will be subject to federal income tax as if a distribution had
occurred. See "Federal Taxation." Proceeds received from the
disposition of any of the Securities after a record date and prior to the
following distribution date will be held in the Capital Account and not
distributed until the next distribution date applicable to such Capital
Account. The Trustee is not required to pay interest on funds held in the
Capital or Income Accounts (but may itself earn interest thereon and therefore
benefits from the use of such funds).
The distribution to Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income Account. 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.
At the end of the initial offering period and on or before the tenth day of
each month thereafter, the Trustee will deduct 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 the Income and Capital Accounts such amounts, if any, as it
deems necessary to establish a reserve for any governmental charges payable
out of the Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any part of
such amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Income and Capital Accounts such amounts as may be necessary
to cover redemptions of Units.
Reinvestment Option. Unitholders may elect to have each distribution of
income, capital gains and/or capital 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 Trust. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois
60181. 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
income, capital gains and/or capital 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 adviser shall have the
right to suspend or terminate the reinvestment plan at any time.
Reports Provided. The Trustee shall furnish Unitholders in connection with
each distribution a statement of the amount of income and the amount of other
receipts (received since the preceding distribution), if any, being
distributed, expressed in each case as a dollar amount representing the pro
rata share of each Unit outstanding. For as long as the Sponsor deems it to be
in the best interest of the Unitholders, the accounts of the Trust shall be
audited, not less frequently than annually, by independent certified public
accountants, and the report of such accountants shall be furnished by the
Trustee to Unitholders upon request. Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a registered Unitholder a statement (i)
as to the Income Account: income received (including amortization of original
issue discount with respect to the Treasury Obligations), deductions for
applicable taxes and for fees and expenses of the Trust, for redemptions of
Units, if any, and the balance remaining after such distributions and
deductions, expressed in each case both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (ii) as to the Capital Account: the
dates of disposition of any Securities and the net proceeds received
therefrom, deductions for payment of applicable taxes, fees and expenses of
the Trust held for distribution to Unitholders of record as of a date prior to
the determination and the balance remaining after such distributions and
deductions expressed both as a total dollar amount and as a dollar amount
representing the pro rata share of each Unit outstanding on the last business
day of such calendar year; (iii) a list of the Securities held and the number
of Units outstanding on the last business day of such calendar year; (iv) the
Redemption Price per Unit based upon the last computation thereof made during
such calendar year; and (v) amounts actually distributed during such calendar
year from the Income and Capital Accounts, separately stated, expressed as
total dollar amounts.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its unit investment trust division office at 101
Barclay Street, 20th Floor, New York, New York 10286 and, in the case of Units
evidenced by a certificate, by tendering such certificate to the Trustee, duly
endorsed or accompanied by proper instruments of transfer with signature
guaranteed (or by providing satisfactory indemnity, as in connection with
lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. No redemption fee will be charged. On the third
business day following such tender, the Unitholder will be entitled to receive
in cash an amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after the Evaluation Time the
date of tender is the next day on which the New York Stock Exchange is open
for trading and such Units will be deemed to have been tendered to the Trustee
on such day for redemption at the redemption price computed on that day.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions. The Securities to be sold will be selected by
the Trustee from those designated on a current list provided by the Supervisor
for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering 1,000 Units or more for redemption may request from the
Trustee a distribution in kind ("In Kind Distribution") of an amount
and value of Equity Securities (and cash representing Treasury Obligations)
per Unit equal to the Redemption Price per Unit as determined as of the
evaluation next following the tender. An In Kind Distribution on redemption of
Units will be made by the Trustee through the distribution of each of the
Equity Securities in book-entry form to the account of the Unitholder's bank
or broker-dealer at Depository Trust Company. The tendering Unitholder will
receive his pro rata number of whole shares of each of the Equity Securities
comprising the portfolio and cash from the Capital Account equal to the
fractional shares and the pro rata portion of the Treasury Obligations to
which the tendering Unitholder is entitled. In implementing these redemption
procedures, the Trustee shall make any adjustments necessary to reflect
differences between the Redemption Price of the Securities distributed in kind
as of 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. For the tax
consequences related to an In Kind Distribution see "Federal Taxation."
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 Securities would not otherwise be sold and may result
in lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the portfolio at the time of
redemption.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the aggregate underlying value of
the Equity Securities in the Trust plus the bid price of the Treasury
Obligations, plus or minus cash, if any, in the Income and Capital Accounts.
On the Initial Date of Deposit, the Public Offering Price per Unit (which
includes the sales charge) exceeded the values at which Units could have been
redeemed by the amounts shown under "Summary of Essential Financial
Information." While the Trustee has the power to determine the Redemption
Price per Unit when Units are tendered for redemption, such authority has been
delegated to the Evaluator which determines the price per Unit on a daily
basis. The Redemption Price per Unit is the pro rata share of each Unit in the
Trust determined on the basis of (i) the cash on hand in the Trust, (ii) the
value of the Securities in the Trust and (iii) dividends receivable on the
Equity 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 fees, charges and expenses of the Trust. The
Evaluator may determine the value of the Equity Securities in the Trust in the
following manner: if the Equity 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 Equity 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, the evaluation is
generally determined (a) on the basis of current bid prices for comparable
securities, (b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above. See "Public
Offering--Offering Price" for a description of the method of evaluating
the Treasury Obligations.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor'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 Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor 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 Sponsor 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. The Trust, however, will not be managed. The Trust Agreement,
however, provides that the Sponsor may (but need not) direct the Trustee to
dispose of an Equity Security in certain events such as the issuer having
defaulted on the payment on any of its outstanding obligations or the price of
an Equity 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 Securities
would be detrimental to the Trust. Pursuant to the Trust Agreement, the
Sponsor is not authorized to direct the reinvestment of the proceeds of the
sale of Securities in replacement securities except in the event the sale is
the direct result of serious adverse credit factors affecting the issuer of
the Security which, in the opinion of the Sponsor, would make the retention of
such Security 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 Equity 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). Treasury Obligations may be sold by the
Trustee only pursuant to the liquidation of the Trust, to meet redemption
requests or to pay expenses provided that the maturity value of the Treasury
Obligations is not less than $11 per Unit. Therefore, except as stated under
"Trust Portfolio" for failed securities and as provided in this
paragraph, the acquisition by the Trust of any securities other than the
Securities is prohibited. Proceeds from the sale of Securities (or any
securities or other property received by the Trust in exchange for Equity
Securities), unless held for reinvestment as herein provided, are credited to
the Capital Account for distribution to Unitholders, to meet redemptions or to
pay charges and expenses of the Trust.
As indicated under "Rights of Unitholders--Redemption of Units" above,
the Trustee may also sell Securities designated by the Supervisor, or if not
so directed, in its own discretion, for the purpose of redeeming Units of the
Trust tendered for redemption and the payment of expenses; provided, however,
that in the case of Securities sold to meet redemption requests, Treasury
Obligations may only be sold if the Trust is assured of retaining a sufficient
principal amount of Treasury Obligations to provide funds upon maturity of the
Trust at least equal to $11.00 per Unit.
The Supervisor, in designating Equity 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 Equity Securities. To the extent this is not practicable,
the composition and diversity of the Equity Securities 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 Equity 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 of 51% of the Units then outstanding, provided that no
such amendment or waiver will reduce the interest in the Trust of any
Unitholder without the consent of such Unitholder or reduce the percentage of
Units required to consent to any such amendment or waiver without the consent
of all Unitholders. The Trustee shall advise the Unitholders of any amendment
promptly after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Trust Units then outstanding or by the Trustee when the value
of the Trust, as shown by any evaluation, is less than that amount set forth
under Minimum Termination Value in "Summary of Essential Financial
Information." The Trust will be liquidated by the Trustee in the event
that a sufficient number of Units not yet sold are tendered for redemption by
the Sponsor so that the net worth of the Trust would be reduced to less than
40% of the value of the Securities at the time they were deposited in the
Trust. If the Trust is liquidated because of the redemption of unsold Units
the Sponsor will refund to each purchaser of Units the entire sales charge
paid by such purchaser. The Trust Agreement will terminate upon the sale or
other disposition of the last Security held thereunder, but in no event will
it continue beyond the Mandatory Termination Date stated under "Summary of
Essential Financial Information."
Commencing on the Mandatory Termination Date, Equity 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 Equity
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. Written notice of any termination specifying the time or
times at which Unitholders may surrender their certificates for cancellation,
if any are then issued and outstanding, shall be given by the Trustee to each
Unitholder so holding a certificate at his address appearing on the
registration books of the Trust maintained by the Trustee. At least 30 days
before the Mandatory Termination Date the Trustee will provide written notice
thereof to all Unitholders and will include with such notice a form to enable
Unitholders owning 1,000 or more Units to request an In Kind Distribution of
the Equity Securities 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 Equity Securities in the portfolio 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 Equity
Securities and the pro rata portion of the Treasury Obligations will be paid
in cash. Unitholders with less than 1,000 Units and those not requesting an In
Kind Distribution will receive a cash distribution from the sale of the
remaining Equity Securities and the pro rata portion of the Treasury
Obligations 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
Equity 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 his pro rata share of the
balance of the Income and Capital Accounts.
Within 60 days of the final distribution Unitholders will be furnished a final
distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, 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 (negligence in the case of
the Trustee) 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 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.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. On June 21, 1996
VK/AC Holding, Inc., the indirect corporate parent of the Sponsor, entered
into an Agreement and Plan of Merger among Morgan Stanley Group Inc., MSAM
Holdings II, Inc. and MSAM Acquisition Inc., pursuant to which MSAM
Acquisition Inc. will be merged with and into VK/AC Holding, Inc. and VK/AC
Holding, Inc. will be the surviving corporation. MSAM Acquisition Inc. is a
wholly owned subsidiary of MSAM Holdings II, Inc. which, in turn, is a wholly
owned subsidiary of Morgan Stanley Group Inc. Subject to a number of
conditions being met, it is currently anticipated that a closing will occur in
November of 1996. Thereafter, VK/AC Holding, Inc. and its affiliated entities,
including the Sponsor, shall be part of the Morgan Stanley Group Inc. Van
Kampen American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds with roots in money
management dating back to 1926. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and has offices at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (708) 684-6000 and 2800 Post Oak Boulevard,
Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of March 31, 1996 the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$123,020,000 (unaudited). (This paragraph relates only to the Sponsor and not
to the Trust or to any other Series thereof. The information is included
herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of March 31, 1996, the Sponsor and its affiliates managed or supervised
approximately $57.2 billion of investment products, of which over $24.8
billion is invested in municipal securities. The Sponsor and its affiliates
managed $45.4 billion of assets, consisting of $22.5 billion for 63 open-end
mutual funds (of which 47 are distributed by Van Kampen American Capital
Distributors, Inc.), $11.9 billion for 38 closed-end funds and $5.6 billion
for 93 institutional accounts. The Sponsor has also deposited approximately
$26 billion of unit investment trusts. All of Van Kampen American Capital's
open-end funds, closed-end funds and unit investment trusts are professionally
distributed by leading financial firms nationwide. Based on cumulative assets
deposited, the Sponsor believes that it is the largest sponsor of insured
municipal unit investment trusts, primarily through the success of its Insured
Municipals Income Trust(R)or the IM-IT(R)trust. The Sponsor also
provides surveillance and evaluation services at cost for approximately $13
billion of unit investment trust assets outstanding. Since 1976, the Sponsor
has serviced over two million investor accounts, opened through retail
distribution firms.
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 unit investment trust
division offices at 101 Barclay Street, New York, New York 10286 (800)
221-7668. The Bank of New York is subject to supervision and examination by
the Superintendent of Banks of the State of New York and the Board of
Governors of the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided").
The Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date
specified in such notice when such resignation is to take effect. The Sponsor
upon receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Kroll & Tract has acted as counsel for the Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Equity Opportunity Trust,
Series 36 (Blue Chip Opportunity and Treasury Trust):
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Equity Opportunity Trust, Series 36
(Blue Chip Opportunity and Treasury Trust) as of July 26, 1996. The statement
of condition and portfolio are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of an irrevocable letter of credit
deposited to purchase securities by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Van Kampen American
Capital Equity Opportunity Trust, Series 36 (Blue Chip Opportunity and
Treasury Trust) as of July 26, 1996, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
July 26, 1996
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST,
SERIES 36
STATEMENT OF CONDITION
As of July 26, 1996
<CAPTION>
<S> <C>
Investment in Securities:
Contracts to purchase securities <F1>.......... $ 142,920
Organizational costs <F2>...................... 35,806
............................................... $ 178,726
Liability and Interest of Unitholders:
Liability--....................................
Accrued organizational costs <F2>.............. $ 35,806
Interest of Unitholders-- .....................
Cost to investors <F3>......................... 150,300
Less: Gross underwriting commission <F3><F4>... 7,380
Net interest to Unitholders <F3>............... 142,920
Total.......................................... $ 178,726
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio" and
their cost to the Trust are the same. The value of the Securities is
determined by Interactive Data Corporation on the bases set forth under "
Public Offering--Offering Price". The contracts to purchase Securities are
collateralized by an irrevocable letter of credit of $142,920 which has been
deposited with the Trustee.
<F2>The Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over five years. Organizational costs have been
estimated based on a projected trust size of $10,000,000. To the extent the
Trust is larger or smaller, the estimate will vary.
<F3>The aggregate public offering price and the aggregate sales charge of 4.9% are
computed on the bases set forth under "Public Offering--Offering Price"
and "Public Offering--Sponsor Compensation" and assume all single
transactions involve less than 5,000 Units. For single transactions involving
5,000 or more Units, the sales charge is reduced (see "Public
Offering--General") resulting in an equal reduction in both the Cost to
investors and the Gross underwriting commission while the Net interest to
Unitholders remains unchanged.
</TABLE>
<TABLE>
VAN KAMPEN AMERICAN CAPITAL BLUE CHIP OPPORTUNITY AND TREASURY TRUST, SERIES 4
PORTFOLIO (VAN KAMPEN AMERICAN CAPITAL EQUITY OPPORTUNITY TRUST, SERIES 36)
as of the Initial Date of Deposit: July 26, 1996
<CAPTION>
Estimated
Annual
Dividends Cost of
Number of Market Value per Securities
Shares Name of Issuer<F1> per Share<F2> Share<F2> to Trust<F2>
<S> <C> <C> <C> <C>
40 AlliedSignal, Inc................................. $ 57.875 $ 0.90 $ 2,315.00
41 Aluminum Company of America (ALCOA)............... 56.500 0.90 2,316.50
53 American Express Company.......................... 43.250 0.90 2,292.25
44 A T & T Corporation............................... 51.125 1.32 2,249.50
237 Bethlehem Steel Corporation....................... 9.500 0.00 2,251.50
26 The Boeing Company................................ 88.125 1.12 2,291.25
36 Caterpillar, Inc.................................. 64.125 1.60 2,308.50
39 Chevron Corporation............................... 58.750 2.00 2,291.25
49 Coca-Cola Company................................. 46.125 0.50 2,260.13
29 Du Pont (E.I.) de Nemours and Company............. 79.250 2.28 2,298.25
31 Eastman Kodak Company............................. 73.750 1.60 2,286.25
28 Exxon Corporation................................. 83.875 3.16 2,348.50
28 General Electric Company.......................... 80.500 1.84 2,254.00
48 General Motors Corporation........................ 47.500 1.60 2,280.00
53 Goodyear Tire & Rubber Company.................... 42.750 1.00 2,265.75
23 International Business Machines Corp. (IBM)....... 103.625 1.40 2,383.38
61 International Paper Company....................... 37.125 1.00 2,264.63
27 J.P. Morgan & Company, Inc........................ 85.125 3.24 2,298.38
50 McDonald's Corporation............................ 45.875 0.30 2,293.75
36 Merck & Company, Inc.............................. 63.750 1.36 2,295.00
36 Minnesota Mining and Manufacturing Company (3M)... 63.500 1.96 2,286.00
23 Phillip Morris Companies, Inc..................... 100.250 4.00 2,305.75
27 The Procter & Gamble Company...................... 85.375 1.80 2,305.13
55 Sears, Roebuck & Company.......................... 41.500 0.92 2,282.50
27 Texaco, Inc....................................... 84.500 3.20 2,281.50
58 Union Carbide Corporation......................... 39.625 0.75 2,298.25
21 United Technologies Corporation................... 108.000 2.20 2,268.00
42 The Walt Disney Company........................... 54.125 0.44 2,273.25
136 Westinghouse Electric Corporation................. 17.000 0.20 2,312.00
115 Woolworth Corporation............................. 19.875 0.00 2,285.63
1,519 $ 68,741.78
</TABLE>
<TABLE>
<CAPTION>
Maturity
Value Name of Issuer and Title of Security <F1><F3>
<S> <C> <C>
$165,000 "Zero coupon" U.S. Treasury bonds maturing February 15, 2008........... $ 74,177.90
$ 142,919.68
</TABLE>
NOTES TO PORTFOLIO
(1) All of the Securities are represented by "regular way" contracts
for the performance of which an irrevocable letter of credit has been
deposited with the Trustee. At the Initial Date of Deposit, Securities may
have been delivered to the Sponsor pursuant to certain of these contracts; the
Sponsor has assigned to the Trustee all of its right, title and interest in
and to such Securities. Contracts to acquire Securities were entered into on
July 25, 1996 and are expected to settle on July 30, 1996 (see "The
Trust").
(2) The market value of each of the Equity Securities is based on the closing
sale price of each listed Equity Security on the applicable exchange, or if
not so listed, on the ask price on the day prior to the Initial Date of
Deposit. The cost of the Treasury Obligations represents the offering side
evaluation as determined by Interactive Data Corporation. The offering side
evaluation of the Treasury Obligations is greater than the bid side evaluation
of such Treasury Obligations which is the basis on which the Redemption Price
per Unit will be determined. The aggregate value of the Trust, based on the
bid side evaluation of the Treasury Obligations and the aggregate underlying
value of the Equity Securities therein on the Initial Date of Deposit, was
$142,589. Estimated annual dividends are based on annualizing the most
recently declared dividends. Other information regarding the Securities in the
Trust, as of the Initial Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Estimated
Profit Annual
(Loss) to
Cost to Sponsor Sponsor Dividends
<S> <C> <C>
$142,934 $(14) $1,482
</TABLE>
(3) The Treasury Obligations are being purchased at a discount from their par
value because there is no stated interest income thereon (such securities are
often referred to as zero coupon bonds). Over the life of the Treasury
Obligations the value increases, so that upon maturity the holders will
receive 100% of the principal amount thereof.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Fund
or the Sponsor. 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>
TABLE OF CONTENTS
<CAPTION>
Title Page
<S> <C>
Summary of Essential Financial
Information 3
The Trust 5
Objectives and Securities Selection 6
Trust Portfolio 7
Risk Factors 11
Federal Taxation 12
Trust Operating Expenses 16
Public Offering 17
Rights of Unitholders 21
Trust Administration 25
Other Matters 29
Report of Independent Certified Public
Accountants 30
Statement of Condition 31
Portfolio 32
Notes to Portfolio 33
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund 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
July 26, 1996
Van Kampen
American Capital
Equity Opportunity
Trust, Series 36
Van Kampen American Capital
Blue Chip Opportunity
and Treasury Trust, Series 4
A Wealth of Knowledge A Knowledge of Wealth
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
This Amendment of Registration Statement comprises the following
papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to the Federal income tax status of securities
being registered.
3.3 Opinion and consent of counsel as to New York income tax status of
the Fund under New York law.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Independent Certified Public Acountants.
Financial Data Schedule.
Signatures
The Registrant, Van Kampen American Capital Equity Opportunity
Trust, Series 36, hereby identifies Van Kampen Merritt Equity Opportunity
Trust, Series 4 and Van Kampen American Capital Equity Opportunity Trust,
Series 13 for purposes of the representations required by Rule 487 and
represents the following: (1) that the portfolio securities deposited in
the series as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from those
deposited in such previous series; (2) that, except to the extent
necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect
to the securities of which this Registration Statement is being filed,
this Registration Statement does not contain disclosures that differ in
any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined by
the Commission or the staff; and (3) that it has complied with Rule 460
under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
36 has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 26th day of July, 1996.
Van Kampen American Capital
Equity Opportunity Trust,
Series 36
By Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on July 26, 1996.
Signature Title
Don G. Powell Chairman, Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth ) (Attorney-in-fact*)
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trtust, Multi-Series 203 (File No. 33-
65744) and Insured Municipals Income Trust, 170th Insured Multi-Series
(File No. 33-55891) and the same are hereby incorporated herein by this
reference.
Exhibit 1.1
Van Kampen American Capital Equity Opportunity Trust
Series 36
Trust Agreement
Dated: July 26, 1996
This Trust Agreement among Van Kampen American Capital Distributors,
Inc., as Depositor, American Portfolio Evaluation Services, a division of
Van Kampen American Capital Investment Advisory Corp., as Evaluator, Van
Kampen American Capital Investment Advisory Corp., as Supervisory
Servicer, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Van Kampen American Capital Equity Opportunity Trust,
Series 1 and Subsequent Series, Standard Terms and Conditions of Trust,
Effective November 21, 1991" (herein called the "Standard Terms and
Conditions of Trust") and such provisions as are set forth in full and
such provisions as are incorporated by reference constitute a single
instrument. All references herein to Articles and Sections are to
Articles and Sections of the Standard Terms and Conditions of Trust.
Witnesseth That:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee
agree as follows:
Part I
Standard Terms and Conditions of Trust
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein
incorporated by reference in their entirety and shall be deemed to be a
part of this instrument as fully and to the same extent as though said
provisions had been set forth in full in this instrument.
Part II
Special Terms and Conditions of Trust
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(22), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of the
Trust represented by each Unit is the amount set forth under
"Summary of Essential Financial Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
3. Section 1.01(19) will be inapplicable for this Trust.
4. "Van Kampen American Capital Blue Chip Opportunity and
Treasury Trust" will replace "Select Equity and Treasury Trust" in
Section 1.01(23).
5. The second sentence in the second paragraph of Section
3.11 shall be revised as follows: "However, should any issuance,
exchange or substitution be effected notwithstanding such rejection
or without an initial offer, any securities, cash and/or property
received shall be deposited hereunder and shall be promptly sold, if
securities or property, by the Trustee unless the Depositor advises
the Trustee to keep such securities, cash or properties."
6. The last sentence of the eighth paragraph of Section 5.02
shall be revised as follows: "Any balance remaining after such
disbursements shall be credited to the Capital Account and may be
used to acquire additional Securities (or, if permitted by
applicable rules and regulations as indicated by an opinion of
counsel, in other securities) or for any of the other purposes set
forth under the Indenture."
7. Section 1.01(1) shall be amended to read as follows:
"(1) "Depositor" shall mean Van Kampen American Capital
Distributors, Inc. and its successors in interest, or any
successor depositor appointed as hereinafter provided."
8. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean American Portfolio
Evaluation Services, a division of Van Kampen American
Capital Investment Advisory Corp. and its successors in
interest, or any successor evaluator appointed as
hereinafter provided."
9. Section 1.01(4) shall be amended to read as follows:
"(4) "Supervisory Servicer" shall mean Van Kampen
American Capital Investment Advisory Corp. and its
successors in interest, or any successor portfolio
supervisor appointed as hereinafter provided."
10. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the requisite number of Units needed
to be tendered to exercise an In Kind Distribution as set forth in
Sections 5.02 and 8.02 shall be that number set forth in the
Prospectus.
11. Section 8.02 is hereby revised to require an affirmative
vote of Unitholders representing 66 2/3% of the then outstanding
Units to terminate the Trust rather than the 51% indicated therein.
12. Section 3.01 of the Standard Terms and Conditions of Trust
shall be replaced in its entirety with the following:
"Section 3.01. Initial Costs. The following
organization and regular and recurring expenses of the
Trust shall be borne by the Trustee: (a) to the extent
not borne by the Depositor, expenses incurred in
establishing a Trust, including the cost of the initial
preparation and typesetting of the registration statement,
prospectuses (including preliminary prospectuses), the
indenture, and other documents relating to the Trust,
Securities and Exchange Commission and state blue sky
registration fees, the costs of the initial valuation of
the portfolio and audit of the Trust, the initial fees and
expenses of the Trustee, and legal and other out-of-pocket
expenses related thereto, but not including the expenses
incurred in the printing of preliminary prospectuses and
prospectuses, expenses incurred in the preparation and
printing of brochures and other advertising materials and
any other selling expenses, (b) the amount specified in
Section 3.05 and Article VIII, (c) to the extent permitted
by Section 6.02, auditing fees and, to the extent not
borne by the Depositor, expenses incurred in connection
with maintaining the Trust's registration statement
current with Federal and State authorities, (d) any
Certificates issued after the Initial Date of Deposit ;
and (e) expenses of any distribution agent. The Trustee
shall be reimbursed for those organizational expenses
referred to in clause (a) as provided in the Prospectus.
13. Section 6.01(i) of the Standard Terms and Conditions of
Trust shall be amended by adding the following to the beginning of
such Section:
"Except as provided in Sections 3.01 and 3.05,"
14. Section 8.04 is hereby amended by deleting the first word
of such Section and replacing it with the following:
"Except as provided in Sections 3.01 and 3.05, the"
15. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, Zero Coupon Obligations may be sold
to pay the fees, expenses and charges of the Trust, provided,
however, that the principal value of such Zero Coupon Obligations
shall not be reduced below $11 per Unit.
16. Notwithstanding anything to the contrary in the Standard
Terms and Conditions of Trust, the maturity value per Unit
("$10.00") of the Zero Coupon Obligations referred to in the second
paragraph of Section 2.01(b) and in the second paragraph of Section
5.02 shall be $11.00 per Unit.
In Witness Whereof, Van Kampen American Capital Distributors, Inc.
has caused this Trust Agreement to be executed by one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be
hereto affixed and attested by its Secretary or one of its Vice
Presidents or Assistant Secretaries, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., and Van Kampen American Capital Investment Advisory Corp., have
each caused this Trust Indenture and Agreement to be executed by their
respective President or one of their respective Vice Presidents and the
corporate seal of Van Kampen American Capital Investment Advisory Corp.
to be hereto affixed and attested to by the Secretary, Assistant
Secretary or one of the Assistant Vice Presidents of Van Kampen American
Capital Investment Advisory Corp. and The Bank of New York, has caused
this Trust Agreement to be executed by one of its Vice Presidents and its
corporate seal to be hereto affixed and attested to by one of its
Assistant Treasurers all as of the day, month and year first above
written.
Van Kampen American Capital
Distributors, Inc.
By Sandra A. Waterworth
Vice President
Attest:
By Gina M. Scumaci
Assistant Secretary
American Portfolio Evaluation Service
s, a division of Van Kampen
American Capital Investment
Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
Van Kampen American Capital
Investment Advisory Corp.
By Dennis J. McDonnell
President
Attest
By Scott E. Martin
Assistant Secretary
The Bank of New York
By Ted Rudish
Vice President
Attest
By Norbert Loney
Assistant Treasurer
Schedule A to Trust Agreement
Securities Initially Deposited
in
Van Kampen American Capital Equity Opportunity Trust, Series 36
(Note: Incorporated herein and made a part hereof is the "Portfolio" as
set forth in the Prospectus.)
Exhibit 3.1
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
July 26, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Van Kampen American Capital Equity Opportunity Trust, Series 36
Gentlemen:
We have served as counsel for Van Kampen American Capital
Distributors, Inc. as Sponsor and Depositor of Van Kampen American
Capital Equity Opportunity Trust, Series 36 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery
of a Trust Agreement dated July 26, 1996, among Van Kampen American
Capital Distributors, Inc., as Depositor, American Portfolio Evaluation
Services, a division of Van Kampen American Capital Investment Advisory
Corp., as Evaluator, Van Kampen American Capital Investment Advisory
Corp., as Supervisory Servicer, and The Bank of New York, as Trustee,
pursuant to which the Depositor has delivered to and deposited the
Securities listed in the Schedule to the Trust Agreement with the Trustee
and pursuant to which the Trustee has provided to or on the order of the
Depositor documentation evidencing ownership of Units of fractional
undivided interest in and ownership of the Trust (hereinafter referred to
as the "Units"), created under said Trust Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to
enable us to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Trust have been duly authorized; and
2. The certificates evidencing the Units in the Trust,
when duly executed and delivered by the Depositor and the
Trustee in accordance with the aforementioned Trust Agreement,
will constitute valid and binding obligations of such Trust and
the Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-07015) relating to the Units
referred to above and to the use of our name and to the reference to our
firm in said Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/ch
Exhibit 3.2
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
July 26, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Van Kampen American Capital Equity Opportunity Trust, Series 36
Gentlemen:
We have acted as counsel for Van Kampen American Capital
Distributors, Inc., Depositor of Van Kampen American Capital Equity
Opportunity Trust, Series 36 (the "Fund"), in connection with the
issuance of Units of fractional undivided interest in the Fund, under a
Trust Agreement dated July 26, 1996 (the "Indenture") between Van Kampen
American Capital Distributors, Inc., as Depositor, Van Kampen American
Capital Investment Advisory Corp., as Evaluator, Van Kampen American
Capital Investment Advisory Corp., as Supervisory Servicer, and The Bank
of New York, as Trustee. The Fund is comprised of one separate unit
investment trust, Van Kampen American Capital Blue Chip Opportunity and
Treasury Trust, Series 4 (the "Trust").
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we
have deemed pertinent.
The assets of the Trust will consist of a portfolio of equity
securities (the "Equity Securities") and "Zero coupon" U.S. Treasury
bonds (the "Treasury Bonds") (collectively, the "Securities") as set
forth in the Prospectus.
Based upon the foregoing and upon an investigation of such matters
of law as we consider to be applicable, we are of the opinion that, under
existing Federal income tax law:
(i) The Trust is not an association taxable as a
corporation for Federal income tax purposes; each Unitholder
will be treated as the owner of a pro rata portion of each
asset of the Trust under the Internal Revenue Code of 1986, as
amended (the "Code"); the income of the Trust will be treated
as income of each Unitholder thereof under the Code, and an
item of Trust income will have the same character in the hands
of a Unitholder as it would have in the hands of the Trustee.
Each Unitholder will be considered to have received his pro
rata share of income derived from each Trust asset when such
income is considered to be received by the Trust.
(ii) For Federal income tax purposes a Unitholder's pro
rata portion of dividends as defined by Section 316 of the Code
paid by a corporation with respect to an Equity Security held by
the Trust are taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits.".
A Unitholder's pro rata portion of dividends paid on such Equity
Security which exceed such current and accumulated earnings and
profits will first reduce the Unitholder's tax basis in such
Equity Security, and to the extent that such dividends exceed a
Unitholder's tax basis in such Equity Security, shall be treated
as capital gain. In general, any such capital gain will be
short term unless a Unitholder has held his Units for more than
one year. Each Unitholder will also be required to include in
taxable income for federal income tax purposes, original issue
discount with respect to his interest in any Treasury Bond held
by the Trust which was treated as issued with original issue
discount (as described below) at the same time and in the same
manner as though the Unitholder were the direct owner of such
interest. Based upon a Treasury Regulation (the "Regulation")
which was issued on December 28, 1992 regarding the stripped
bond rules of the Code, original issue discount with respect to
a Treasury Bond will be treated as zero if it is "de minimis" as
determined thereunder.
(iii) The price a Unitholder pays for his Units, is
allocated among his pro rata portion of each Security held by
the Trust (in the proportion to the fair market values thereof
on the valuation date nearest the date the Unitholder purchases
his Units), in order to determine his initial tax basis for his
pro rata portion of each Security held by the Trust. The
Treasury Bonds are treated as stripped bonds and may be treated
as bonds issued at an original issue discount as of the date a
Unitholder purchases his Units. Because the Treasury Bonds
represent interests in "stripped" U.S. Treasury bonds, a
Unitholder's initial cost for his pro rata portion of each
Treasury Bonds held by the Trust (determined at the time he
acquires his units, in the manner described above) shall be
treated as its "purchase price" by the Unitholder. Under the
special rules relating to stripped bonds, original issue
discount is effectively treated as interest for Federal income
tax purposes and the amount of original issue discount in this
case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A
Unitholder will be required to include in gross income for each
taxable year the sum of his daily portions of original issue
discount attributable to the Treasury Bonds held by the Trust
as such original issue discount accrues and will in general be
subject to Federal income tax with respect to the total amount
of such original issue discount that accrues for such year even
though the income is not distributed to the Unitholders during
such year to the extent it is greater than or equal to the "de
minimis" amount determined under a Treasury Regulation (the
"Regulation") issued on December 28, 1992 as described below.
To the extent the amount of such discount is less than the
respective "de minimis" amount, such discount shall be treated
as zero. In general, original issue discount accrues daily
under a constant interest rate method which takes into account
the semi-annual compounding of accrued interest. In the case
of Treasury Bonds this method will generally result in an
increasing amount of income to the Unitholders each year.
(iv) Gain or loss will be recognized to a Unitholder upon
redemption or sale of his Units, except to the extent an in
kind distribution of stock is received by such Unitholder from
the Trust as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the
adjusted basis of his Units. Before adjustment, such basis
would normally be cost if the Unitholder had acquired his units
by purchase. Such basis will be reduced, but not below zero,
by the Unitholder's pro rata portion of dividends with respect
to each Equity Security which are not taxable as ordinary
income. In addition, such basis will be increased by the
Unitholder's aliquot share of the accrued original issue
discount with respect to each Treasury Bond held by the Trust.
(v) If the Trustee disposes of a Trust asset (whether by
sale, exchange, liquidation, redemption, payment on maturity or
otherwise) gain or loss will be recognized to the Unitholder
(subject to various non-recognition provisions under the Colde)
and the amount thereof will be measured by comparing the
Unitholder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in the
asset disposed of. Such basis is ascertained by apportioning
the tax basis for his Units (as of the date on which his Units
were acquired) among each of the Trust assets ratably according
to their values as of the valuation date nearest the date on
which he purchased such Units. A Unitholder's basis in his
Units and of his fractional interest in each Trust asset must
be reduced, but not below zero, by the Unitholder's pro rata
portion of dividends with respect to each Security which are
not taxable as ordinary income. A Unitholder's basis in his
Units and of his fractional interest in each Trust asset must
be increased by the Unitholder's share of the accrued original
issue discount with respect to each Treasury Bond.
(vi) Under the Indenture, under certain circumstances, a
Unitholder tendering Units for redemption may request an in
kind distribution of Securities upon the redemption of Units or
upon the termination of the Trust. As previously discussed,
prior to the redemption of Units or the termination of the
Trust, a Unitholder is considered as owning a pro rata portion
of each of the Trust's assets. The receipt of an in kind
distribution will result in United States Unitholders receiving
an undivided interest in whole shares of stock and possibly
cash. The potential federal income tax consequences which may
occur under an in kind distribution with respect to each
Security owned by the Trust will depend upon whether or not a
United States Unitholder receives cash in addition to Equity
Securities. An "Equity Security" for this purpose is a
particular class of stock issued by a particular corporation.
A Unitholder will not recognize gain or lose if a Unitholder
only receives Equity Securities in exchange for his pro rata
portion in the Equity Securities held by the Trust. However,
if a Unitholder also receives cash in exchange for a fractional
share of an Equity Security held by the Trust, such Unitholder
will generally recognize gain or loss based upon the difference
between the amount of cash received for the fractional share by
the Unitholder and his tax basis in such fractional share of an
Equity Security held by the Trust. The total amount of taxable
gains (or losses) recognized upon such redemption will
generally equal the sum of the gain (or loss) recognized under
the rules described above by the redeeming Unitholder with
respect to each Equity Security owned by a Trust.
Dividends received by the Trust which are attributable to a
corporation owning Units in the Trust and which are taxable as ordinary
income may be eligible for the 70% dividends received deduction pursuant
to Section 243(a) of the Code, subject to the limitations imposed by
Sections 246 and 246A of the Code. It should be noted that various
legislative proposals that would affect the dividend received deduction
have been introduced.
Section 67 of the Code provides that certain itemized deductions,
such as investment expenses, tax return preparation fees and employee
business expenses will be deductible by individuals only to the extent
they exceed 2% of such individual's adjusted gross income. Temporary
regulations have been issued which require Unitholders to treat certain
expenses of the Trust as miscellaneous itemized deductions subject to
this limitation.
The Code provides a complex set of rules governing the accrual of
original issue discount, including special rules relating to "stripped"
debt instruments such as the Treasury Bonds. These rules provide that
original issue discount generally accrues on the basis of a constant
compound interest rate over the term of the Security. Special rules
apply if the purchase price of a Treasury Obligation exceeds its original
issue price plus the amount of original issue discount which would have
previously accrued, based upon its issue price (its "adjusted issue
price"). Similarly, these special rules would apply to a Unitholder if
the tax basis of his pro rata portion of a Treasury Bond issued with
original issue discount exceeds his pro rata portion of its adjusted
issue price. In addition, as discussed above, the Regulation provides
that the amount of original issue discount on a stripped bond is
considered zero if the actual amount of original issue discount on such
stripped bond as determined under Section 1286 of the Code is less than a
"de minimis" amount, which, the Regulation provides, is the product of
(i) 0.25 percent of the stated redemption price at maturity and (ii) the
number of full years from the date the stripped bond is purchased
(determined separately for each new purchaser thereof) to the final
maturity date of the bond.
A Unitholder will recognize taxable gain (or loss) when all or part
of the pro rata interest in a Security is either sold by the Trust or
redeemed or when a Unitholder disposes of his Units in a taxable
transaction, in each case for an amount greater (or less) than his tax
basis therefor subject to various non-recognition provisions of the Code.
Any gain recognized on a sale or exchange will, under current law,
generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set
forth herein, and, except as expressly set forth above, we express no
opinion with respect to any other taxes, including state or local taxes
or collateral tax consequences with respect to the purchase, ownership
and disposition of Units.
Very truly yours
Chapman and Cutler
MJK/cjw
Exhibit 3.3
Kroll & Tract
520 Madison Avenue
New York, New York 10022
July 26, 1996
Van Kampen American Capital Equity
Opportunity Trust, Series 36
c/o The Bank of New York,
As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen American Capital
Equity Opportunity Trust, Series 36 (the "Fund") consisting of Van Kampen
American Capital Blue Chip Opportunity and Treasury Trust, Series 4
(individually a "Trust") for the purposes of determining the
applicability of certain New York taxes under the circumstances
hereinafter described.
The Fund is created pursuant to a Trust Agreement (the
"Indenture"), dated as of today (the "Date of Deposit") among Van Kampen
American Capital Distributors, Inc. (the "Depositor"), American Portfolio
Evaluation Services, a division of a subsidiary of Depositor, as
Evaluator, Van Kampen American Capital Investment Advisory Corp., as
Supervisory Servicer (the "Supervisory Servicer"), and The Bank of New
York as Trustee (the "Trustee"). As described in the prospectus relating
to the Fund dated today to be filed as an amendment to a registration
statement heretofore filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Prospectus") (File
Number 333-07015), the objectives of the Fund are to provide the
potential for capital appreciation from a portfolio of equity securities
involved in either the enabling technology or commnications services
areas of the Internet. It is noted that no opinion is expressed herein
with regard to the Federal tax aspects of the securities, units of the
Trust (the "Units"), or any interest, gains or losses in respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to each Trust the securities and/or contracts and cash for
the purchase thereof together with an irrevocable letter of credit in the
amount required for the purchase price of the securities comprising the
corpus of the Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities
to be deposited in the Trust, and, upon the receipt thereof, will deliver
to the Depositor a registered certificate for the number of Units
representing the entire capital of the Trust as more fully set forth in
the Prospectus. The Units, which are represented by certificates
("Certificates"), will be offered to the public upon the effectiveness of
the Registration Statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash
dividends received by the Fund and with the proceeds from the disposition
of securities held in the Fund and the proceeds of the treasury
obligation on maturity and the distribution of such cash dividends and
proceeds to the Unitholders. The Trustee will also maintain records of
the registered holders of Certificates representing an interest in the
Fund and administer the redemption of Units by such Certificateholders
and may perform certain administrative functions with respect to an
automatic investment option.
Generally, equity securities held in the Trust may be removed
therefrom by the Trustee at the direction of the Depositor upon the
occurrence of certain specified events which adversely affect the sound
investment character of the Fund, such as default by the issuer in
payment of declared dividends or of interest or principal on one or more
of its debt obligations..
Article 9-A of the New York Tax Law imposes a franchise tax on
business corporations, and, for purposes of that Article, Section 208(l)
defines the term "corporation" to include, among other things, "any
business conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in
which interest or ownership is evidenced by
certificate or other written instrument. includes,
but is not limited to, an association commonly
referred to as a "business trust" or "Massachusetts
trust". In determining whether a trustee or trustees
are conducting a business, the form of the agreement
is of significance but is not controlling. The
actual activities of the trustee or trustees, not
their purposes and powers, will be regarded as
decisive factors in determining whether a trust is
subject to tax under Article 9-A. The mere
investment of funds and the collection of income
therefrom, with incidental replacement of securities
and reinvestment of funds, does not constitute the
conduct of a business in the case of a business
conducted by the trustee or trustees. 20 NYCRR 1-
2.3(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that
where a trustee merely invests funds and collects and distributes the
income therefrom, the trust is not engaged in business and is not subject
to the franchise tax. Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171
(3rd Dept. 1948), order resettled, 274 A.D. 1073, 85 N.Y.S.2d 705 (1949).
An opinion of the Attorney General of the State of New York, 47 N.Y.
Atty. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee
of an unincorporated investment trust was without authority to reinvest
amounts received upon the sales of securities and could dispose of
securities making up the trust only upon the happening of certain
specified events or the existence of certain specified conditions, the
trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to sell
obligations contained in the corpus of the Fund and reinvest the proceeds
therefrom. Further, the power to sell such obligations is limited to
circumstances in which the creditworthiness or soundness of the issuer of
such equity security is in question or in which cash is needed to pay
redeeming Unit holders or to pay expenses, or where the Fund is
liquidated pursuant to the termination of the Indenture. In substance,
the Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to vary the
investment of any Unit holder in a Trust.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust
will be deemed to be the owner of the trust under certain circumstances,
and therefore taxable on his proportionate interest in the income
thereof. Where this Federal tax rule applies, the income attributed to
the grantor will also be income to him for New York income tax purposes.
See TSB-M-78(9)(c), New York Department of Taxation and Finance June 23,
1978.
By letter, dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be
considered as owning a share of each asset of a Trust in the proportion
that the number of Units held by such holder bears to the total number of
Units outstanding and the income of a Trust will be treated as the income
of each Unit holder in said proportion pursuant to Subpart E of Part 1,
subchapter J of Chapter 1 of the Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we
specifically rely, we are of the opinion that under existing laws,
rulings and court decisions interpreting the laws of the State and City
of New York.
1. Each Trust will not constitute an association taxable as a
corporation under New York law and, accordingly, will not be subject to
tax on its income under the New York State franchise tax or the New York
City general corporation tax.
2. The income of the Trust will be treated as the income of the
Unit holders under the income tax laws of the State and City of New York,
and
3. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any interest
or gain derived from the Fund or any gain from the sale or other
disposition of the Units, except to the extent that such interest or gain
is from property employed in a business trade profession or occupation
carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name
and the reference to our firm in the Registration Statement and in the
Prospectus.
Very truly yours,
Kroll & Tract
MNS:ac
Exhibit 4.1
Interactive Data
14 West Street
New York, NY 10005
July 25, 1996
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen American Capital Blue Chip Opportunity and Treasury
Trust, Series 4 (A Unit Investment Trust) Registered Under the
Securities Act of 1933, File No. 333-07015
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Services, Inc.,
as the Evaluator, and to the use of the Obligations prepared by us which
are referred to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
Exhibit 4.2
Independent Certified Public Accountants' Consent
We have issued our report dated July 26, 1996 on the statement of
condition and related securities portfolio of Van Kampen American Capital
Equity Opportunity Trust, Series 36 as of July 26, 1996 contained in the
Registration Statement on Form S-6 and Prospectus. We consent to the use
of our report in the Registration Statement and Prospectus and to the use
of our name as it appears under the caption "Other Matters-Independent
Certified Public Accountants'"
Grant Thornton LLP
Chicago, Illinois
July 26, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This report reflects the current period taken from 487 on July 26, 1996 it is
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</LEGEND>
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