File No. 333-10897 CIK #897008
Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Van Kampen American Capital Equity Opportunity Trust, Series 42
(Exact Name of Trust)
Van Kampen American Capital Distributors, Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
Van Kampen American Capital Distributors, Inc. Chapman and Cutler
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on November 20, 1997 pursuant to paragraph (b) of Rule 485.
MICHIGAN SELECT TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 42
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.Please retain both parts of this Prospectus for future reference.
THE TRUST
The Michigan Select Trust, Series 1 (the "Trust" ) is a unit investment
trust in the Van Kampen American Capital Equity Opportunity Trust, Series 42.
The Trust offers investors the opportunity to purchase Units representing
proportionate interests in a fixed, diversified portfolio primarily consisting
of actively traded equity securities issued by companies based or
headquartered in Michigan. Unless terminated earlier, the Trust will terminate
on April 23, 2001 ("Mandatory Termination Date" ) and any securities
then held will, within a reasonable time thereafter, be liquidated or
distributed by the Trustee. Any Securities liquidated at termination will be
sold at the then current market value for such Securities; therefore, the
amount distributable in cash to a Unitholder upon termination may be more or
less than the amount such Unitholder paid for his Units.
PUBLIC OFFERING PRICE
The Public Offering Price per Unit is equal to the aggregate underlying value
of the Equity Securities plus or minus cash, if any, in the Capital and Income
Accounts, plus the applicable sales charge as described herein divided by the
number of Units outstanding. See "Summary of Essential Financial
Information" in this Part One.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Date of this Prospectus is November 21, 1997
First Of Michigan
MICHIGAN SELECT TRUST, SERIES 1
Van Kampen American Capital Equity Opportunity Trust, Series 42
Summary of Essential Financial Information
As of August 29, 1997
Managing Underwriter
and Supervisor: First of Michigan Corporation
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
Michigan
Select
Trust
-------------
<S> <C>
General Information
Number of Units........................................................... 542,753
Fractional Undivided Interest in Trust per Unit........................... 1/542,753
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>.......................... $ 6,042,622
Aggregate Value Securities per Unit (including accumulated dividends).... $ 11.81
Maximum Sales Charge <F2><F3> ........................................... $ .53
Less Deferred Sales Charge............................................... $ (.03)
Public Offering Price per Unit <F2><F3>.................................. $ 12.31
Redemption Price per Unit<F4>............................................. $ 11.78
Secondary Market Repurchase Price per Unit<F4>............................ $ 11.78
Excess of Public Offering Price per Unit over Redemption Price per Unit... $ .53
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee...Maximum of $.0025 per Unit
Evaluator's Annual Fee................Maximum of $.0025 per Unit
Evaluation Time.......................Close of the New York Stock Exchange
Date of Deposit.......................September 24, 1996
Mandatory Termination Date............April 23, 2001
The Trust may be terminated if the net asset value of such Trust is less than $500,000
unless the net asset value of such Trust deposits has exceeded $15,000,000, then the Trust
Minimum Termination Value.............Agreement may be terminated if the net asset value of such Trust is less than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Estimated Annual Dividends per Unit... $.17268
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee............................$.008 per Unit
Estimated Annual Organizational Expenses <F5>...$.00781 per Unit
Income Distribution Record Date.................TENTH day of June and December.
Income Distribution Date........................TWENTY-FIFTH day of June and December.
Capital Account Record Date.....................TENTH day of December.
Capital Account Distribution Date...............TWENTY-FIFTH day of December.
<FN>
<F1>Equity Securities listed on a national securities exchange are valued at the
closing sale price, or if no such price exists, or if the Equity Securities
are not listed, at the closing bid price thereof.
<F2>Anyone ordering Units will have added to the Public Offering Price a pro rata
share of any cash in the Income and Capital Accounts.
<F3>The Maximum Sales Charge consists of an initial sales charge and a deferred
sales charge. The initial sales charge is applicable to all Units and
represents an amount equal to the difference between the Maximum Sales Charge
of 4.5% of the Public Offering Price and the amount of the maximum deferred
sales charge of $0.20 per Unit. Subsequent to the Initial Date of Deposit, the
amount of the initial sales charge will vary with changes in the aggregate
value of the Securities in the Trust. In addition to the initial sales charge,
Unitholders will pay a deferred sales charge of $0.0333 per Unit per month
which will begin accruing on a daily basis on March 24, 1997 and will continue
to accrue through September 23, 1997. The monthly deferred sales charge will
be charged to the Trust, in arrears, commencing April 24, 1997 and will be
charged on the 24th day of each month thereafter through September 24, 1997.
Units purchased subsequent to the initial deferred sales charge payment will
be subject only to the portion of the deferred sales charge payments not yet
collected. These deferred sales charge payments will be paid from funds in the
Capital Account, if sufficient, or from the periodic sale of Securities. The
total maximum sales charge will be 4.5% of the Public Offering Price (4.712%
of the aggregate value of the Securities in the Trust less the deferred sales
charge). Effective on each Septermber 24, 1997, the secondary sales charge
will decrease by .5 of 1% to a minimum sales charge of 3.5%. See "Public
Offering- Offering Price" in Part Two.
<F4>The Redemption Price per Unit and the Secondary Market Repurchase Price per
Unit are reduced by the unpaid portion of the deferred sales charge.
<F5>The Trust (and therefore Unitholders) will bear all or a portion of
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 the life of the
Trust. "See Expenses of the Trust" in Part Two and "Statement of
Condition" . Historically, the sponsors of the unit investment trusts have
paid all the costs of establishing such trusts.
</TABLE>
PORTFOLIO
The Michigan Select Trust, Series 1 consists of 29 different issues of Equity
Securities, which are primarily actively traded equities issued by companies
based or headquartered in Michigan. All of the Equity Securities are listed
on a national securities exchange, or are traded in the over-the-counter
market as of the Initial Date of Deposit.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1997<F1>
-----------
<S> <C>
Net asset value per Unit at beginning of period........................................................................ $ 9.75
===========
Net asset value per Unit at end of period.............................................................................. $ 11.94
===========
Distributions to Unitholders of investment income including accrued dividends paid on Units redeemed (average Units
outstanding for entire period)......................................................................................... $ 0.27
===========
Distributions to Unitholders from Security sale proceeds (average Units outstanding for entire period)................ $ 0.54
===========
Unrealized appreciation (depreciation) of Securities (per Unit outstanding at end of period)........................... $ 2.41
===========
Distributions of investment income by frequency of payment.............................................................
Semiannual............................................................................................................ $ 0.13
Units outstanding at end of period..................................................................................... 557,222
- ----------
<FN>
<F1>For the period from September 24, 1996 (date of deposit) through July 31, 1997.
</TABLE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Michigan Select Trust, Series 1 (Van Kampen
American Capital Equity Opportunity Trust, Series 42) :
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Michigan Select Trust,
Series 1 (Van Kampen American Capital Equity Opportunity Trust, Series 42) as
of July 31, 1997 and the related statements of operations and changes in net
assets for the period from September 24, 1996 (date of deposit) through July
31, 1997. These statements are the responsibility of the Trustee and the
Sponsor. Our responsibility is to express an opinion on such statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at July 31, 1997 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Michigan Select Trust, Series
1 (Van Kampen American Capital Equity Opportunity Trust, Series 42) as of July
31, 1997, and the related statements of operations and changes in net assets
for the period from September 24, 1996 (date of deposit) through July 31,
1997, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
September 19, 1997
<TABLE>
MICHIGAN SELECT TRUST, SERIES 1
Statements of Condition
July 31, 1997
<CAPTION>
Michigan
Select
Trust
-------------
<S> <C>
Trust property
Securities at market value, (cost $5,266,782) (note 1)................................ $ 6,611,000
Accumulated dividends................................................................. 4,977
Receivable for securities sold........................................................ 19,437
Organizational costs.................................................................. 19,582
$ 6,654,996
=============
Liabilities and interest to Unitholders
Cash overdraft........................................................................ $ 3,026
Interest to Unitholders............................................................... 6,651,970
$ 6,654,996
=============
Analyses of Net Assets
Interest of Unitholders (557,222 Units of fractional undivided interest outstanding)
Cost to original investors of 15,000 Units (note 1)................................... $ 5,960,809
Less initial underwriting commission (note 3)......................................... 265,653
-------------
5,695,156
Less redemption of 20,000 Units....................................................... 232,717
-------------
5,462,439
Undistributed net investment income
Net investment income................................................................. 85,886
Less distributions to Unitholders..................................................... 150,383
-------------
(64,497)
Realized gain (loss) on Security sale................................................. 208,828
Unrealized appreciation (depreciation) of Securities (note 2)......................... 1,344,218
Distributions to Unitholders of Security sale proceeds................................ (299,018)
Net asset value to Unitholders........................................................ $ 6,651,970
=============
Net asset value per Unit (557,222 Units outstanding)................................... $ 11.94
=============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
MICHIGAN SELECT TRUST, SERIES 1
Statements of Operations
Period from September 24, 1996 (date of deposit) through July 31, 1997
<CAPTION>
1997
-------------
<S> <C>
Investment income
Dividend income..................................................... $ 95,741
Expenses
Trustee fees and expenses........................................... 4,407
Evaluator fees...................................................... 1,097
Organizational fees................................................. 4,351
-------------
Total expenses...................................................... 9,855
-------------
Net investment income............................................... 85,886
Realized gain (loss) from Securities sale or redemption
Proceeds............................................................ 637,202
Cost................................................................ 428,374
-------------
Realized gain (loss)................................................ 208,828
Net change in unrealized appreciation (depreciation) of Securities... 1,344,218
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......$ 1,638,932
=============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Period from September 24, 1996 (date of deposit) through July 31, 1997
<CAPTION>
1997
-------------
<S> <C>
Increase (decrease) in net assets
Operations:
Net investment income....................................................... $ 85,886
Realized gain (loss) on Securities sale or redemption....................... 208,828
Net change in unrealized appreciation (depreciation) of Securities.......... 1,344,218
-------------
Net increase (decrease) in net assets resulting from operations............. 1,638,932
Distributions to Unitholders from:
Net investment income....................................................... (150,383)
Securities sale or redemption proceeds...................................... (299,018)
Redemption of Units (232,717)
-------------
Total increase (decrease)................................................... 956,814
Net asset value to Unitholders
Beginning of period......................................................... 146,315
Additional Securities purchased from proceeds of Unit Sales................. 5,548,841
-------------
End of period (including undistributed net investment income of $(64,497)... $ 6,651,970
=============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
MICHIGAN SELECT TRUST, SERIES 1
PORTFOLIO as of July 31, 1997
<CAPTION>
Valuation of Securities
at
Number July 31,
of Market Value 1997
Shares Name of Issuer Per Share (Note 1)
- ---------- -------------------------------------------------- ----------------- ----------------------------
<S> <C> <C> <C>
12,081 Arbor Drugs, Incorporated $ 24.6250 $ 297,494
- ------------------------------------------------------------------------------------------------------------
9,574 Borders Group, Incorporated 25.5000 244,137
- ------------------------------------------------------------------------------------------------------------
9,533 Champion Enterprises, Incorporated 16.4375 156,699
- ------------------------------------------------------------------------------------------------------------
6,363 Chrysler Corporation 37.1250 236,226
- ------------------------------------------------------------------------------------------------------------
6,315 CMS Energy Corporation 37.0000 233,655
- ------------------------------------------------------------------------------------------------------------
13,345 Core Industries, Incorporated 25.0625 334,459
- ------------------------------------------------------------------------------------------------------------
13,313 D & N Financial Corporation 19.0000 252,947
- ------------------------------------------------------------------------------------------------------------
1,335 Dow Chemical Company 95.0000 126,825
- ------------------------------------------------------------------------------------------------------------
6,691 DTE Energy Corporation 29.9375 200,312
- ------------------------------------------------------------------------------------------------------------
8,036 Gentex Corporation 22.6250 181,815
- ------------------------------------------------------------------------------------------------------------
6,823 Herman Miller, Incorporated 49.6250 338,591
- ------------------------------------------------------------------------------------------------------------
9,028 Horizon Group, Incorporated 13.3125 120,185
- ------------------------------------------------------------------------------------------------------------
19,011 Kmart Corporation 11.8750 225,756
- ------------------------------------------------------------------------------------------------------------
4,358 Lear Corporation 47.8750 208,639
- ------------------------------------------------------------------------------------------------------------
5,555 Masco Corporation 46.8750 260,391
- ------------------------------------------------------------------------------------------------------------
13,272 Masco Tech, Inc. 21.3750 283,689
- ------------------------------------------------------------------------------------------------------------
6,922 MCN Corporation 31.6875 219,341
- ------------------------------------------------------------------------------------------------------------
7,113 Meadowbrook Insurance Group, Incorporated 25.6250 182,271
- ------------------------------------------------------------------------------------------------------------
22,517 Nematron Corporation 6.5000 146,360
- ------------------------------------------------------------------------------------------------------------
6,941 Perceptron, Incorporated 32.6250 226,450
- ------------------------------------------------------------------------------------------------------------
9,284 Professional Insurance Company Management Group 28.0000 259,952
- ------------------------------------------------------------------------------------------------------------
17,102 Republic Bancorp, Incorporated 15.1250 258,668
- ------------------------------------------------------------------------------------------------------------
6,861 Stryker Corporation 39.0000 267,579
- ------------------------------------------------------------------------------------------------------------
6,636 Sun Communities, Incorporated 36.1875 240,140
- ------------------------------------------------------------------------------------------------------------
7,939 TriMas Corporation 29.1875 231,720
- ------------------------------------------------------------------------------------------------------------
14,745 Universal Forest Products, Incorporated 14.6250 215,646
- ------------------------------------------------------------------------------------------------------------
9,519 Walbro Corporation 21.7500 207,038
- ------------------------------------------------------------------------------------------------------------
9,212 Wolverine World Wide, Incorporated 27.3125 251,603
- ------------------------------------------------------------------------------------------------------------
10,314 X-Rite, Incorporated 19.6250 202,412
- ----------- ----------------------------
279,738 $ 6,611,000
========== ============================
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
MICHIGAN SELECT TRUST, SERIES 1
Notes to Financial Statements
July 31, 1997
- --------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the closing sales price or, if no such price exists, or if the
Equity Securities are not listed at the bid price thereof.
Security Cost - The original cost to the Trust of the Securities was based,
for Securities listed on a national securities exchange on the closing sale
prices on the exchange or, if not so listed, on the asked price. The cost was
determined on the day of the various Dates of Deposit.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder is considered to be the owner of a pro
rata portion of the Trust and, accordingly, no provision has been made for
Federal Income Taxes.
Organizational Costs - The Trust will bear all or a portion of its
organizational costs, which will be deferred and amortized over the life of
the Trust.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at July 31, 1997 is as follows:
<TABLE>
<CAPTION>
Michigan
Select
Trust
-------------
<S> <C>
Unrealized Appreciation $ 1,514,468
Unrealized Depreciation (170,250)
-------------
$ 1,344,218
=============
</TABLE>
NOTE 3 - OTHER
Cost to Investors - The cost to original investors was based on adding to the
underlying value of the Securities per Unit on the date of an investor's
purchase, plus an amount equal to the difference between the maximum sales
charge of 4.5% of the Public Offering Price which is equivalent to 4.712% of
the aggregate underlying value of the Securities and the maximum sales charge
of ($.20 per Unit) and were assessed a deferred sales charge. Effective on
each September 24, commencing September 24, 1997, the secondary sales charge
will decrease by .5 of 1% to a minimum sales charge of 3.5%.
Compensation of Evaluator and Supervisor - The Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.0025 per Unit, not
to exceed the aggregate cost of the Supervisor for providing such services to
all applicable Trusts). The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. Both fees may be adjusted for increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index.
NOTE 4 - REDEMPTION OF UNITS
During the period ended July 31, 1997, 20,000 Units, were presented for
redemption.
First of Michigan
Prospectus Part TwoMichigan Select Trust
The Fund. Michigan Select Trust (the "Trust" ) is a separate and
distinct unit investment trust included in a series of the Van Kampen American
Capital Equity Opportunity Trust (the "Fund" ). The Trust offers
investors the opportunity to purchase Units representing proportionate
interests in a fixed portfolio of equity securities issued by companies based
or headquartered in Michigan ("Equity Securities" or "
Securities" ). See "Trust Portfolio" . Unless terminated earlier,
the Trust will terminate on the Mandatory Termination Date set forth under
"Summary of Essential Information" in Part One 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 by investing in a portfolio of
equity securities of companies based or headquartered in Michigan. See "
Objectives and Securities Selection." There is, of course, no guarantee
that the objectives of the Trust will be achieved.
Public Offering Price. The Public Offering Price of the Units of the Trust
includes the aggregate underlying value of the Securities in the Trust's
portfolio, the sales charge described herein, and cash, if any, in the Income
and Capital Accounts held or owned by the Trust. For sales charges in the
secondary market, see "Public Offering." The minimum purchase is 200
Units (100 Units for a tax-sheltered retirement plan). See "Public
Offering" .
Dividend and Capital Distributions. Distributions of dividends and capital, if
any, received by the Trust will be paid in cash on the applicable Distribution
Date to Unitholders of record on the record date as set forth in the "
Summary of Essential Financial Information" in Part One. 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."
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.
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
Both parts of this Prospectus should be retained for future reference
This prospectus is dated as of the date of the Prospectus Part One
accompanying this Prospectus Part Two
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Secondary Market for Units. Although not obligated to do so, the Managing
Underwriter intends to maintain a market for Units of the Trust and offer to
repurchase such Units at prices which are based on the aggregate underlying
value of Equity Securities in the Trust (generally determined by the closing
sale or bid prices of the Securities) 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
or minus a pro rata share of cash, if any, in the Capital and Income Accounts
of the Trust.
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 2,500 Units of the Trust, rather
than to receive payment in cash for such Unitholder's pro rata share of the
amounts realized upon the disposition by the Trustee of Equity Securities. All
Unitholders will receive cash in lieu of any fractional shares. 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 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 the
financial condition of the issuers, the general condition of the stock market
and the economy, volatile interest rates and economic conditions in the state
of Michigan. See "Risk Factors."
THE TRUST
- --------------------------------------------------------------------------
Van Kampen American Capital Equity Opportunity Trust is comprised of separate
and distinct unit investment trusts, including series of the Michigan Select
Trust. The Trust was created under the laws of the State of New York pursuant
to a Trust Indenture and Agreement (the "Trust Agreement" ), dated the
Initial Date of Deposit, among Van Kampen American Capital Distributors, Inc.,
as Sponsor, American Portfolio Evaluation Services, a division of Van Kampen
American Capital Investment Advisory Corp., as Evaluator, First of Michigan
Corporation, as Supervisor, and The Bank of New York, as Trustee.
The Trust may be an appropriate medium for investors who desire to participate
in a diversified portfolio of common stocks issued by companies based or
headquartered in Michigan. Diversification of assets in the Trust will not
eliminate the risk of loss always inherent in the ownership of securities.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities including delivery statements relating to contracts for the
purchase of certain such Securities and an irrevocable letter of credit issued
by a financial institution in the amount required for such purchases.
Thereafter, the Trustee, in exchange for such Securities (and contracts) so
deposited, delivered to the Sponsor documentation evidencing the ownership of
Units of the Trust. Unless otherwise terminated as provided in the Trust
Agreement, the Trust will terminate on the Mandatory Termination Date, and
Securities then held will within a reasonable time thereafter be liquidated or
distributed by the Trustee.
Each Unit of the Trust initially offered represents an undivided interest in
the Trust. To the extent that any Units are redeemed by the Trustee, the
fractional undivided interest in the Trust represented by each unredeemed Unit
will increase, although the actual interest in the Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the Managing
Underwriter, or until the termination of the Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
- --------------------------------------------------------------------------
The objectives of the Trust are to provide the potential for capital
appreciation and income. The portfolio is described under "Trust
Portfolio" and in "Portfolio" in Part One. The Securities were
selected by First of Michigan Corporation, the Managing Underwriter and
Supervisor. In selecting the Securities, the Managing Underwriter considered
the following factors, among others: (a) diversification by industry and
market capitalization, (b) valuation in terms of growth potential and other
factors and (c) the relative standing of the issuer within its sector. The
Trust is diversified by market capitalization, including both large,
established companies and smaller, more entrepreneurial firms. The Trust also
targets several industries including auto manufacturers, auto suppliers, basic
materials, consumer products and services, financial services, insurance,
manufacturing, medical technology, real estate investment trusts, retail,
technology and utilities/energy.
The Managing Underwriter believes that Michigan is showing strong economic
growth. The State has benefited from the revitalization of the automobile
industry but there is much more to the State's economic strength than a single
industry. Michigan has cut taxes approximately 20 times in the past five
years, the unemployment rate has been below the national average for more than
2 1/2 years and Michigan's Gross Domestic Product growth has outpaced national
averages for the last several years. The Trust seeks to benefit from this
positive economic climate.
Michigan's unique business-friendly environment has helped attract, retain and
strengthen companies across the State, from the Big Three automotive firms to
smaller cutting-edge technology companies. Michigan's largest city, Detroit,
appears to be showing signs of the beginning of new business development and
growth. In addition to the three major auto manufacturers, more than 11,000
companies supply technology or parts to the auto industry. With more than 500
auto-related research and development facilities in Michigan, the Managing
Underwriter believes that the State is likely to remain a business innovator.
Michigan's business prominence also stretches much farther than the automobile
industry. The State's growing leadership in healthcare, technology and
financial services is apparent throughout the State. Fourteen of the Fortune
500 companies are headquartered in Michigan and five of the top 50 are
Michigan companies. In addition, the strength of Michigan companies reaches
outside of the State's borders and nearly 1,000 foreign-owned companies do
business in the State.
General. 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 Securities and the declaration of any
dividends depends upon several factors including the financial condition of
the issuers and general economic conditions.
Investors should be aware that the Trust is not a "managed" fund, and
as a result, the adverse financial condition of a company under extraordinary
circumstances may result in its elimination from the portfolio (see "Trust
Administration--Portfolio Administration" ). In addition, Securities will
not be sold by the Trust to take advantage of market fluctuations or changes
in anticipated rates of appreciation. Investors should note in particular that
the Securities were selected by the Managing Underwriter prior to the Initial
Date of Deposit. 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 Equity Securities which are primarily issued by
companies based or headquartered in Michigan. All of the Equity Securities are
listed on a national securities exchange, the NASDAQ National Market System or
are traded in the over-the-counter market. Each of the Securities included in
the portfolio were selected based upon those factors referred to under "
Objectives and Securities Selection" above.
General. The Trust consists of (a) the Securities listed under "
Portfolio" in Part One 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. Pursuant to the Trust Agreement and with
limited exceptions, the Trustee may sell any securities or other property
acquired in exchange for Securities such as those acquired in connection with
a merger or other transaction. If offered such new or exchanged securities or
property, the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by the Trust, they may be
accepted for deposit in the Trust and either sold by the Trustee or held in
the Trust pursuant to the direction of the Sponsor (who may rely on the advice
of the Supervisor). See "Trust Administration--Portfolio
Administration." 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.
Unitholders will be unable to dispose of any of the Equity Securities in the
portfolio, as such, and will not be able to vote the Equity Securities. As the
holder of the Equity Securities, the Trustee will have the right to vote all
of the voting stocks in the Trust and will vote such stocks in accordance with
the instructions of the Sponsor. In the absence of any such instructions by
the Sponsor, the Trustee will vote such stocks so as to insure that the stocks
are voted as closely as possible in the same manner and the same general
proportion as are shares held by owners other than the Trust.
The Managing Underwriter will acquire the Securities for the Sponsor. The
Managing Underwriter in its general securities business acts as agent or
principal in connection with the purchase and sale of securities, including
the Securities in the Trust, acts as a market maker in certain of the
Securities and participates in underwriting syndicates for equity and debt
securities, which may include the Securities. The Managing Underwriter may
also, from time to time, issue reports on and make recommendations relating to
securities, which may include the Securities. From time to time the Managing
Underwriter may act as investment banker or an employee or affiliate may be a
director of a company whose shares are included among the Securities;
non-public information concerning such a company would not be disclosed to the
Managing Underwriter or for the benefit of the Trust under such circumstances.
RISK FACTORS
- --------------------------------------------------------------------------
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. 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.
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for the Equity Securities may depend on whether dealers will make a market in
the Equity Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity Securities
will be maintained or of the liquidity of the Equity Securities in any markets
made. In addition, the Trust may be restricted under the Investment Company
Act of 1940 from selling Equity Securities to the Sponsor. The price at which
the Equity Securities may be sold to meet redemptions, and the value of the
Trust, will be adversely affected if trading markets for the Equity 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."
The principal trading market for certain of the Equity Securities may be in
the over-the-counter market. As a result, the existence of a liquid trading
market for the Equity Securities may depend on whether dealers will make a
market in the Equity Securities. There can be no assurance that a market will
be made for any of the Equity Securities, that any market for the Equity
Securities will be maintained or of the liquidity of the Equity Securities in
any markets made. In addition, the Trust may be restricted under the
Investment Company Act of 1940 from selling Equity Securities to the Managing
Underwriter or the Sponsor. The price at which the Equity Securities may be
sold to meet redemptions, and the value of the Trust, will be adversely
affected if trading markets for the Equity Securities are limited or absent.
In the opinion of the Managing Underwriter, certain of the Equity Securities
included in the Trust which may have the highest potential for capital
appreciation also from time to time may experience limited purchase or sale
availability in the market place. In anticipation of this possibility, the
Managing Underwriter may make a market in said Equity Securities to facilitate
the creation of subsequent deposits for this Trust which may have an impact on
the price at which Units are valued during the initial offering period. In
addition, upon termination of the Trust, this potential limited daily trading
volume may result in negative market price consequences for the Trust stemming
from the liquidation of a significant amount of these Equity Securities. The
Sponsor will attempt to mitigate these consequences with a longer liquidation
period (not to exceed 30 days) for these Equity Securities at the Trust's
termination than might be required for the other Equity Securities included in
the Trust. However, these procedures may be insufficient or unsuccessful in
avoiding such negative price consequences.
Michigan Risk Factors. Because all of the issuers of the Securities will be
affected by economic factors in the state of Michigan, an investment in Units
should be made with an understanding of risks affecting Michigan issuers.
Investors should be aware that the economy of the state of Michigan has, in
the past, proven to be cyclical, due primarily to the fact that the leading
sector of the State's economy is the manufacturing of durable goods. While the
State's efforts to diversify its economy have proven successful, as reflected
by the fact that the share of employment in the State in the durable goods
sector has fallen from 33.1 percent in 1960 to 17 percent in 1994, durable
goods manufacturing still represents a sizable portion of the State's economy.
As a result, any substantial national economic downturn is likely to have an
adverse effect on the economy and on the revenues of the State and of the
issuers of the Securities.
The State's economy could continue to be affected by changes in the auto
industry, notably consolidation and plant closings resulting from competitive
pressures and over-capacity. Such actions could adversely affect certain of
the issuers of the Securities and the financial impact on issuers in the areas
in which plants are closed could be more severe.
Historically, the average monthly unemployment rate in the State has been
higher than the average figures for the United States. However, for 1994, the
average monthly unemployment rate in the State was 5.9% as compared to a
national average of 6.1% and for 1995, the average monthly unemployment rate
in the State was 5.3% as compared to a national average of 6.1%
There can be no assurance that any financial difficulties the State may
experience will not adversely affect the market value or marketability of the
Securities or the ability of the respective issuers to pay dividends.
FEDERAL TAXATION
- --------------------------------------------------------------------------
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221
of the Internal Revenue Code of 1986 (the "Code" ). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust. For purposes of the following discussion and opinions, it is
assumed that each Equity Security is equity for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from the Trust asset when such income is considered to be
received by the Trust.
2. A Unitholder will be considered to have received all of the dividends paid
on his pro rata portion of each Equity Security when such dividends are
considered to be received by the Trust regardless of whether such dividends
are used to pay a portion of the deferred sales charge. Unitholders will be
taxed in this manner regardless of whether distributions from the Trust are
actually received by the Unitholder or are automatically reinvested.
3. Each Unitholder will have a taxable event when the Trust disposes of an
Equity Security (whether by sale, exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unitholder (except
to the extent an in kind distribution of stock is received by such Unitholder
as described below). The price a Unitholder pays for his Units, generally
including sales charges, is allocated among his pro rata portion of each
Equity Security held by the Trust (in proportion to the fair market values
thereof on the valuation date nearest the date the Unitholder purchase his
Units) in order to determine his initial tax basis for his pro rata portion of
each Equity Security held by the Trust. It should be noted that certain
legislative proposals have been made which could affect the calculation of
basis for Unitholders holding securities that are substantially identical to
the Equity Securities. Unitholders should consult their own tax advisers with
regard to calculation of basis. For federal income tax purposes, a
Unitholder's pro rata portion of dividends 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 exceeds 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, the holding period for such capital gain will be determined by the
period of time a Unitholder has held his Units.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Equity Securities held by the Trust will generally
be considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held by the Trust
will generally be considered a capital loss (except in the case of a dealer or
a financial institution). 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, and
are attributable to domestic corporations) in the same manner as if such
corporation directly owned the Equity Securities paying such dividends (other
than corporate Unitholders, such as "S" corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and
the personal holding corporation tax). However, a corporation owning Units
should be aware that Sections 246 and 246A of the Code impose additional
limitations on the eligibility of dividends for the 70% dividends received
deduction. These limitations include a requirement that stock (and therefore
Units) must generally be held at least 46 days (as determined under Section
246(c) of the Code). Final regulations have been issued which address special
rules that must be considered in determining whether the 46 day holding
requirement is met. Moreover, the allowable percentage of the deduction will
be reduced from 70% if a corporate Unitholder owns certain stock (or Units)
the financing of which is directly attributable to indebtedness incurred by
such corporation. It should be noted that various legislative proposals that
would affect the dividends received deduction have been introduced.
Unitholders should consult with their tax advisers with respect to the
limitations on and possible modifications to the dividends received deduction.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income. Unitholders may be required to treat some or all of the expenses
of the Trust as miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Equity Securities by
the Trust or Disposition of Units. As discussed above, a Unitholder may
recognize taxable gain (or loss) when an Equity Security is disposed of by the
Trust or if the Unitholder disposes of a Unit. For taxpayers other than
corporations, net capital gains (which is defined as net long-term capital
gain over net short-term capital loss for the taxable year) are subject to a
maximum marginal stated tax rate of either 28% or 20%, depending upon the
holding period of the capital assets. In particular, net capital gain,
excluding net gain from property held more than one year but not more than 18
months and gain on certain other assets, is subject to a maximum marginal
stated tax rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Net capital gain that is not taxed at the maximum marginal stated
tax rate of 20% (or 10%) as described in the preceding sentence, is generally
subject to a maximum marginal stated tax rate of 28%. The date on which a Unit
is acquired (i.e., the "trade date" ) is excluded for purposes of
determining the holding period of the Unit. Generally, capital gain or loss is
long-term if the holding period for the asset is more than one year, and is
short-term if the holding period for the asset is one year or less. Net
short-term capital gain is taxed at the same rates as ordinary income. 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.
In addition, please note that capital gains may be recharacterized as ordinary
income in the case of certain financial transactions that are considered "
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 have disposed of
his entire pro rata interest in all assets of the Trust including his pro rata
portion of all Equity Securities represented by a Unit. The Taxpayer Relief
Act of 1997 (the "1997 Tax Act" ) includes provisions that treat
certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, off-setting notional principal
contracts, futures or forward contracts, or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss) and for
purposes of determining the holding period. Unitholders should consult their
own tax advisers with regard to any such constructive sales rules.
Special Tax Consequences of In Kind Distributions Upon Redemption of Units or
Termination of the Trust. As discussed in "Rights of
Unitholders--Redemption of Units" , under certain circumstances a
Unitholder tendering Units for redemption may request an In Kind Distribution.
A Unitholder may also under certain circumstances request an In Kind
Distribution upon the termination of the Trust. See "Rights of
Unitholders--Redemption of Units." As previously discussed, prior to the
redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust assets for
federal income tax purposes. The receipt of an In Kind Distribution will
result in a Unitholder receiving an undivided interest in whole shares of
stock plus, possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
will depend on whether or not a Unitholder receives cash in addition to 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 loss if a Unitholder only receives Equity Securities in
exchange for his or her 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 by the Unitholder and his tax basis in such fractional share
of an Equity Security held by the Trust.
Because the Trust will own many Equity Securities, a Unitholder who requests
an In Kind Distribution will have to analyze the tax consequences with respect
to each Equity 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 Equity 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 of his
Units. The cost of the Units is allocated among the Equity Securities held in
the Trust in accordance with the proportion of the fair market values of such
Equity 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 Equity Security.
A Unitholder's tax basis in his Units and his pro rata portion of an Equity
Security held by the Trust 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.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified by the Internal Revenue Service that payments
to the Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up withholding.
Distributions by the Trust (other than those that are not treated as United
States source income, if any) will generally be subject to United States
income taxation and withholding in the case of Units held by non-resident
alien individuals, foreign corporations or other non-United States persons.
Such persons should consult their tax advisers.
In general, income that is not effectively connected to the conduct of a trade
or business within the United States that is earned by non-U.S. Unitholders
and derived from dividends of foreign corporations will not be subject to U.S.
withholding tax provided that less than 25 percent of the gross income of the
foreign corporation for a three-year period ending with the close of its
taxable year preceding payment was not effectively connected to the conduct of
a trade or business within the United States. In addition, such earnings may
be exempt from U.S. withholding pursuant to a specific treaty between the
United States and a foreign country. Non-U.S. Unitholders should consult their
own tax advisers regarding the imposition of U.S. withholding on distributions
from the Trust.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof
will nevertheless be treated as income to the Unitholders. Because, under the
grantor trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax purposes
with respect to such taxes. The 1997 Tax Act imposes a required holding period
for such credits. Investors should consult their tax advisers with respect to
foreign withholding taxes and foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the Equity Securities, the gross proceeds received by
the Trust from the disposition of any Equity Security (resulting from
redemption or the sale of any Equity Security), and the fees and expenses paid
by the Trust. The Trustee will also furnish annual information returns to
Unitholders and to the Internal Revenue Service.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the
Trust will be treated as the income of the Unitholders under the existing
income tax laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S. Unitholders
("U.S. Unitholders" ) with regard to federal and certain aspects of New
York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers
in this regard. As used herein, the term "U.S. Unitholder" means an
owner of a Unit of the Trust that (a) is (i) for United States federal income
tax purposes a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, or (iii) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unitholder in
paragraph (a) but whose income from a Unit is effectively connected with such
Unitholder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and gain on
the Units will be taxable.
TRUST OPERATING EXPENSES
- --------------------------------------------------------------------------
Compensation of Sponsor, Evaluator and Managing Underwriter. The Sponsor will
not receive any fees in connection with its activities relating to the Trust.
However, 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) for regularly evaluating the Trust
portfolio. The Managing Underwriter, in its capacity as Supervisor, will
receive an annual supervisory fee, which is not to exceed the amount set forth
under "Summary of Essential Financial Information" (which is based on
the number of Units outstanding on January 1 of each year for which such
compensation relates) for providing portfolio supervisory services for the
Trust. Such fee may exceed the actual cost of providing such supervision
services for this Trust, but at no time will the total amount paid to the
Supervisor for providing supervision services to unit investment trusts for
which First of Michigan Corporation is the principal underwriter in any
calendar year exceed the aggregate cost to the Supervisor of supplying such
services in such year. 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 and
Managing Underwriter will receive sales commissions and may realize other
profits (or losses) in connection with the sale of Units and the deposit of
the Securities as described under "Public Offering--Sponsor and Managing
Underwriter Compensation."
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial
Information" (which amount is based on the number of Units outstanding on
January 1 of each year for which such compensation relates). The Trustee's
fees are payable as described under "General" below. The Trustee
benefits to the extent there are funds for future distributions, payment of
expenses and redemptions in the Capital and Income Accounts since these
Accounts are non-interest bearing and the amounts earned by the Trustee are
retained by the Trustee. Part of the Trustee's compensation for its services
to the Trust is expected to result from the use of these funds. Such fees may
be increased without approval of the Unitholders by amounts not exceeding
proportionate increases under the category "All Services Less Rent of
Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a
comparable category. For a discussion of the services rendered by the Trustee
pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders--Reports Provided" and "Trust Administration."
Miscellaneous Expenses. Expenses incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over the life of the Trust.
The following additional charges are or may be incurred by the Trust: (a)
normal expenses (including the cost of mailing reports to Unitholders)
incurred in connection with the operation of the Trust, (b) fees of the
Trustee for extraordinary services, (c) expenses of the Trustee (including
legal and auditing expenses) and of counsel designated by the Sponsor, (d)
various governmental charges, (e) expenses and costs of any action taken by
the Trustee to protect the Trust and the rights and interests of Unitholders,
(f) indemnification of the Trustee for any loss, liability or expenses
incurred in the administration of the Trust without negligence, bad faith or
wilful misconduct on its part, (g) accrual of costs of liquidating securities
and (h) expenditures incurred in contacting Unitholders upon termination of
the Trust. The expenses set forth herein are payable as described under "
General" below.
General. 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. It is expected that the
balance in the Capital Account will be insufficient to provide for amounts
payable by the Trust and that Equity Securities will be sold from the Trust to
pay such amounts. These sales will 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 Securities in the
Trust's portfolio, the sales charge described below, 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 "Summary of Essential
Financial Information" in Part One and will be reduced by .5 of 1%
annually to a minimum sales charge of 3.5%.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
Part One in accordance with fluctuations in the prices of the underlying
Securities in the Trust.
As indicated above, the price of the Units was established by adding to the
determination of the aggregate underlying value of the Securities an amount
equal to the total sales charge 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 the total sales
charge. 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, Sponsor or Managing Underwriter for
purchases, sales or redemptions after that time, or on a day when the New York
Stock Exchange is closed, will be held until the next determination of price.
The Managing Underwriter currently does not intend to maintain a secondary
market during the final seven months of the Trust's life.
The value of the Equity Securities 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 bid 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 bid price
on the over-the-counter market (unless it is determined that these prices are
inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the value of
the Equity Securities on the bid side of the market or (c) by any combination
of the above.
In offering the Units to the public, neither the Sponsor, the Managing
Underwriter nor any broker-dealers are recommending any of the individual
Securities in the Trust but rather the entire pool of Securities, taken as a
whole, which are represented by the Units.
Unit Distribution. Units will be distributed to the public by the Managing
Underwriter, broker-dealers and others at the Public Offering Price. Units
repurchased in the secondary market, if any, may be offered by this Prospectus
at the secondary market Public Offering Price in the manner described above.
The Sponsor intends to qualify the Units for sale in a number of states.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 200 Units (100 Units for a
tax-sheltered retirement plan). The Managing Underwriter reserves the right to
reject, in whole or in part, any order for the purchase of Units and to change
the amount of the concession or agency commission to dealers and others from
time to time.
Sponsor and Managing Underwriter Compensation. The Managing Underwriter will
receive a gross sales commission equal to the total sales charge imposed on
Units.
In addition, the Managing Underwriter realized a profit or sustained a loss,
as the case may be, as a result of the difference between the price paid for
the Securities by the Managing Underwriter and the cost of such Securities to
the Trust on the Initial Date of Deposit as well as on subsequent deposits.
The Managing Underwriter may further realize additional profit or loss as a
result of the possible fluctuations in the market value of the Securities in
the Trust after a date of deposit, since all proceeds received from purchasers
of Units (excluding dealer concessions and agency commissions allowed, if any)
will be retained by the Managing Underwriter.
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 and
Managing Underwriter prior to the date of settlement for the purchase of Units
may be used in the Sponsor's or Managing Underwriter's business and may be
deemed to be a benefit to the Sponsor or Managing Underwriter, subject to the
limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Managing Underwriter
intends to maintain a secondary market for Units of the Trust for the period
indicated. In so maintaining a market, the Managing Underwriter will also
realize profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are resold
(which price includes the applicable sales charge). In addition, the Managing
Underwriter will also realize profits or sustain losses resulting from a
redemption of such repurchased Units at a price above or below the purchase
price for such Units, respectively.
Public Market. Although it is not obligated to do so, the Managing Underwriter
intends to maintain a 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. If
the supply of Units exceeds demand or if some other business reason warrants
it, the Managing Underwriter may either discontinue all purchases of Units or
discontinue purchases of Units at such prices. It is the current intention of
the Managing Underwriter not to maintain a market for Units during the final
seven months of the Trust's life. 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. Units sold prior to such time
as the entire deferred sales charge on such Units has been collected will be
assessed the amount of the remaining deferred sales charge at the time of sale.
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. The minimum purchase in connection with
a tax-sheltered retirement plan is 100 Units.
RIGHTS OF UNITHOLDERS
- --------------------------------------------------------------------------
Units. The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee. Ownership
of Units of the Trust will be evidenced by book entry unless a Unitholder or
the Unitholder's registered broker-dealer makes a written request to the
Trustee that ownership be evidenced by certificates. Units are transferable by
making a written request to the Trustee and, in the case of Units evidenced by
a certificate, by presentation and surrender of such certificate to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. A Unitholder must sign such written request, and such
certificate or transfer instrument, exactly as his name appears on the records
of the Trustee and on the face of any certificate representing the Units to be
transferred with the signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP" ) or such other signature
guarantee program in addition to, or in substitution for, STAMP as may be
accepted by the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Certificates will be issued in
denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer 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, etc.) are credited to the Capital Account of the Trust. Proceeds
from the sale of Securities to meet redemptions of Units shall be segregated
within the Capital Account 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" in Part One. Proceeds received on the
sale of any Securities in the Trust, to the extent not used to meet
redemptions of Units, or pay fees and expenses, will be distributed annually
on the Capital Account Distribution Date to Unitholders of record on the
preceding Capital Account Record Date. Proceeds received from the disposition
of any of the Securities after a record date and prior to the following
distribution date will be held in the Capital Account and not distributed
until the next distribution date applicable to such Capital Account. Proceeds
received on the sale of any Securities in the Trust, to the extent not used to
meet redemptions of Units or pay expenses or charges of the Trust, will,
however, be distributed on the twenty-fifth day of each month to holders of
record on the tenth day of such month if the amount available for distribution
equals or exceeds at least $0.01 per Unit. The Trustee is not required to pay
interest on funds held in the Capital or Income Accounts (but may itself earn
interest thereon and therefore benefits from the use of such funds).
The distribution to Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income Account. 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.
As of the tenth day of each month, 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 Class A shares of certain Van Kampen American Capital or Morgan Stanley
mutual funds 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, 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.
To the extent that Securities are sold, the size of the Trust will be, and the
diversity of the Trust may be, reduced. Sales may be required at a time when
Securities would not otherwise be sold and may result in lower prices than
might otherwise be realized. The price received upon redemption may be more or
less than the amount paid by the Unitholder depending on the value of the
Securities in the portfolio at the time of redemption.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the aggregate underlying value of
the Equity Securities in the Trust, plus or minus cash, if any, in the Income
and Capital Accounts. On the Initial Date of Deposit, the Public Offering
Price per Unit (which includes the sales charge) exceeded the values at which
Units could have been redeemed by the amounts shown under "Summary of
Essential Financial Information" in Part One. While the Trustee has the
power to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which
determines the price per Unit on a daily basis. The Redemption Price per Unit
is the pro rata share of each Unit in the Trust determined on the basis of (i)
the cash on hand in the Trust, (ii) the value of the Securities in the Trust
and (iii) dividends 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 sales
charges or 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.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
- --------------------------------------------------------------------------
Managing Underwriter Purchases of Units. The Trustee shall notify the Managing
Underwriter of any tender of Units for redemption. If the Managing
Underwriter's bid in the secondary market at that time equals or exceeds the
Redemption Price per Unit, it may purchase such Units by notifying the Trustee
before the close of business on the next succeeding business day and by making
payment therefor to the Unitholder not later than the day on which the Units
would otherwise have been redeemed by the Trustee. Units held by the Managing
Underwriter may be tendered to the Trustee for redemption as any other Units.
The offering price of any Units acquired by the Managing Underwriter will be
in accord with the Public Offering Price described in the then currently
effective prospectus describing such Units. Any profit resulting from the
resale of such Units will belong to the Managing Underwriter which likewise
will bear any loss resulting from a lower offering or redemption price
subsequent to its acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed"
by the Sponsor, Supervisor or the Trustee; their activities described herein
are governed solely by the provisions of the Trust Agreement. Traditional
methods of investment management for a managed fund typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. While the Trust will not be managed, the Trust Agreement does
provide that the Sponsor may (but need not) direct the Trustee to dispose of
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 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). 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.
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" in Part One. The Trust Agreement will terminate upon the
sale or other disposition of the last Security held thereunder, but in no
event will it continue beyond the Mandatory Termination Date stated under "
Summary of Essential Financial Information" in Part One.
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 2,500 or more Units to request an In Kind Distribution
rather than payment in cash upon the termination of the Trust. To be
effective, this request must be returned to the Trustee at least five business
days prior to the Mandatory Termination Date. On the Mandatory Termination
Date (or on the next business day thereafter if a holiday) the Trustee will
deliver each requesting Unitholder's pro rata number of whole shares of each
of the 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 will be paid in
cash. Unitholders with less than 2,500 Units and those not requesting an In
Kind Distribution will receive a cash distribution from the sale of the
remaining Equity Securities within a reasonable time following the Mandatory
Termination Date. Regardless of the distribution involved, the Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances or
indemnities provided by the Trust Agreement, including estimated compensation
of the Trustee, costs of liquidation and any amounts required as a reserve to
provide for payment of any applicable taxes or other governmental charges. Any
sale of 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.
The Sponsor will attempt to sell Securities as quickly as possible commencing
on the Mandatory Termination Date without in the judgement of the Sponsor
materially adversely affecting the market price of the Securities. The Sponsor
does not anticipate that the period will be longer than one month, and it
could be as short as one day, depending on the liquidity of the Securities
being sold. The liquidity of any Security depends on the daily trading volume
of the Security and the amount that the Sponsor has available on any
particular day.
It is expected (but not required) that the Sponsor will generally follow the
following guidelines in selling the Securities; for highly liquid Securities,
the Securities will generally be sold on the Mandatory Termination Date; for
less liquid Securities, on each of the first two days subsequent to the
Mandatory Termination Date, the amount of any underlying Securities will
generally be sold at a price no less than 1/2 of one point under the closing
sale price of those Securities on the preceding day. Thereafter, the Sponsor
intends to sell without any price restrictions at least a portion of the
remaining underlying Securities, the numerator of which is one and the
denominator of which is the total number of days remaining (including that
day) in the one month period following the Mandatory Termination Date.
Within 60 days of the final distribution Unitholders will be furnished a final
distribution statement, 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.
Managing Underwriter. First of Michigan Corporation, a member of the New York
Stock Exchange, is Michigan's largest full-service securities firm. Founded in
1933, First of Michigan Corporation specializes in a wide range of financial
services that include investment banking; investment products such as stocks,
bonds, unit trusts and mutual funds; and investment services such as
retirement plans, money management, underwriting and trading. First of
Michigan is a wholly owned subsidiary of Fahnstock Viner Holdings Corp.
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 June 30, 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 Managing Underwriter or the Trust. The information is included herein
only for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its 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. Winston and Strawn has acted as counsel for the
Trustee.
Independent Certified Public Accountants. The financial statements included in
this Prospectus have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report in this Prospectus, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the 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 OF CONTENTS
Title Page
The Trust 3
Objectives and Securities Selection 4
Trust Portfolio 5
Risk Factors 9
Federal Taxation 10
Trust Operating Expenses 14
Public Offering 15
Rights of Unitholders 17
Trust Administration 20
Other Matters 25
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
Part Two
MICHIGAN SELECT TRUST
Van Kampen American Capital Equity Opportunity Trust
NOTE: THIS PROSPECTUS MAY BE USEED ONLY WHEN ACCOMPANIED BY PART ONE.
Both parts of this Prospectus should be retained for future reference
This prospectus is dated as of the date of the Prospectus
Part One accompanying this Prospectus Part Two
First of Michigan Corporation
100 Renaissance Center
26th Floor
Detroit, Michigan 48243
Contents of Post-Effective Amendment
to Registration Statement
This Post-Effective Amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Equity Opportunity Trust, Series
42, certifies that it meets all of the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Chicago and State of Illinois on the 20th
day of November, 1997.
Van Kampen American Capital Equity Opportunity
Trust, Series 42
(Registrant)
By Van Kampen American Capital Distributors,
Inc.
(Depositor)
By Gina Costello
Assistant Secretary
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on November
20, 1997 by the following persons who constitute a majority of the Board
of Directors of Van Kampen American Capital Distributors, Inc.:
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
William R. Molinari President and Chief Operating)
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Gina Costello (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 Van Kampen American Capital
Equity Opportunity Trust, Series 64 (File No. 333-33087) and the
same are hereby incorporated herein by this reference.
Consent of Independent Certified Public Accountants
We have issued our report dated September 19, 1997 accompanying the
financial statements of Van Kampen American Capital Equity Opportunity
Trust, Series 42 as of July 31, 1997, and for the period then ended,
contained in this Post-Effective Amendment No. 1 to Form S-6.
We consent to the use of the aforementioned report in the Post-
Effective Amendment and to the use of our name as it appears under the
caption "Auditors".
Grant Thornton LLP
Chicago, Illinois
November 20, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> MSET
<CAPTION>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> SEP-24-1996
<PERIOD-END> JUL-31-1997
<INVESTMENTS-AT-COST> 5266782
<INVESTMENTS-AT-VALUE> 6611000
<RECEIVABLES> 19437
<ASSETS-OTHER> 24559
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6654996
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3026
<TOTAL-LIABILITIES> 3026
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6651970
<SHARES-COMMON-STOCK> 557222
<SHARES-COMMON-PRIOR> 577222
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (64497)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1344218
<NET-ASSETS> 6651970
<DIVIDEND-INCOME> 95741
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 9855
<NET-INVESTMENT-INCOME> 85886
<REALIZED-GAINS-CURRENT> 208828
<APPREC-INCREASE-CURRENT> 1344218
<NET-CHANGE-FROM-OPS> 1638932
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (150383)
<DISTRIBUTIONS-OF-GAINS> (299018)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 20000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 956814
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4351
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9855
<AVERAGE-NET-ASSETS> 6173563
<PER-SHARE-NAV-BEGIN> 9.75
<PER-SHARE-NII> 0.154
<PER-SHARE-GAIN-APPREC> 2.787
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.537
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.938
<EXPENSE-RATIO> 0.002
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
