File No. 333-64049 CIK #1025261
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 Focus Portfolio, Series 115
(Exact Name of Trust)
Van Kampen Funds Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
VAN KAMPEN FUNDS INC. CHAPMAN AND CUTLER
Attention: A. Thomas Smith III, General Counsel 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 January 25, 2000 pursuant to paragraph (b) of Rule 485.
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 115
The Dow 30 Index Trust, Series 5
The Dow 30 Index & Treasury Trust, Series 7
Great International Firms Trust, Series 6
Brand Name Equity Trust, Series 7
- --------------------------------------------------------------------------------
PROSPECTUS PART ONE
NOTE: Part I of this Prospectus may not be distributed unless accompanied by
Part II. Please retain both parts of this Prospectus for future reference.
- --------------------------------------------------------------------------------
THE TRUST
Van Kampen Focus Portfolios, Series 115 includes the separate
underlying unit investment trusts described above (the "Trusts"). The Trusts
invest in stocks issued by companies diversified within a specific industry
sector, which may include securities of foreign issuers in American Depository
Receipt ("ADRs") form.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THE
UNITS OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is January 25, 2000
Van Kampen Focus Portflios (SM)
A Division of Van Kampen Funds Inc.
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 115
The Dow 30 Index Trust, Series 5
The Dow 30 Index & Treasury Trust, Series 7
Great International Firms Trust, Series 6
Brand Name Equity Trust, Series 7
Summary of Essential Financial Information
As of November 2, 1999
Sponsor: Van Kampen Funds Inc.
Supervisor: Van Kampen Investment Advisory Corp.
(An affiliate of the Sponsor)
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
The Dow 30 Great Brand
The Dow 30 Index & International Name
Index Treasury Firms Equity
Trust Trust Trust Trust
----------- ----------- ----------- -----------
General Information
<S> <C> <C> <C> <C>
Number of Units 134,425.000 384,321.781 225,476.000 1,069,938.046
Fractional Undivided Interest in Trust per Unit 1/134,425.000 1/384,321.781 1/225,476.000 1/1,069,938.046
Public Offering Price:
Aggregate Value of Securities in Portfolio (1) $1,699,949.41 $3,978,816.21 $2,966,425.64 $10,437,658.98
Aggregate Value of Securities per Unit
(including accumulated dividends) $ 12.65 $ 10.35 $ 13.16 $ 9.76
Sales charge 4.00% (4.167% of Aggregate
Value of Securities excluding principal
cash) per Unit (3) $ .55 $ .46 $ .54 $ .40
Public Offering Price per Unit (2) $ 13.20 $ 10.81 $ 13.70 $ 10.16
Redemption Price per Unit $ 12.65 $ 10.35 $ 13.16 $ 9.76
Secondary Market Repurchase Price per Unit $ 12.65 $ 10.35 $ 13.16 $ 9.76
Excess of Public Offering Price per Unit
Over Redemption Price per Unit $ .55 $ .46 $ .54 $ .40
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Mandatory Termination Date October 6, 2008, August 15, 2015, October 6, 2003, October 6, 2003
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
Initial Date of Deposit October 6, 1998
</TABLE>
Minimum Termination Value 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 Agreement may be terminated if
the net asset value of such Trust is less than $3,000,000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Estimated Annual Dividends per Unit $ .17820 $ .10110 $ .14283 $ .16255
Trustee's Annual fee $.008 per Unit
Income Distribution Record Date TENTH day of March, June, September and December.
Income Distribution Date TWENTY-FIFTH day of March, June, September and December.
Capital Account Record Date TENTH day of March, June, September and December.
Capital Account Distribution Date TWENTY-FIFTH day of March, June, September and December.
</TABLE>
(1) Equity Securities listed on a national securities exchange are value 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.
(2) Anyone ordering Units will have added to the Public Offering Price a pro
rata share of any cash in the Income and Capital Accounts.
(3) Effective on each October 6, the secondary sales charge will decrease by .5
of 1% to a minimum sales charge of 3.0%. See "Public Offering - Offering
Price" in Part Two.
<TABLE>
<CAPTION>
THE DOW 30 INDEX TRUST, SERIES 5
PER UNIT INFORMATION
1999 (1)
------------
<S> <C>
Net asset value per Unit at beginning of period........................................................ $ 9.55
============
Net asset value per Unit at end of period.............................................................. $ 12.44
============
Distributions to Unitholders of investment income including accumulated dividends paid
on Units redeemed (average Units outstanding for entire period)..................................... $ 0.19
============
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period)...................................................................... $ --
============
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at
end of period)...................................................................................... $ 1.44
============
Distributions of investment income by frequency of payment
Quarterly........................................................................................ $ 0.18
Units outstanding at end of period..................................................................... 138,461
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period from October 6, 1998 (date of deposit) through September 30,
1999.
<TABLE>
<CAPTION>
THE DOW 30 INDEX & TREASURY TRUST, SERIES 7
PER UNIT INFORMATION
1999 (1)
------------
<S> <C>
Net asset value per Unit at beginning of period........................................................ $ 9.63
============
Net asset value per Unit at end of period.............................................................. $ 10.26
============
Distributions to Unitholders of investment income including accumulated dividends paid
on Units redeemed (average Units outstanding for entire period)..................................... $ 0.09
============
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period)...................................................................... $ --
============
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at
end of period)...................................................................................... $ 0.35
============
Distributions of investment income by frequency of payment
Quarterly........................................................................................ $ 0.09
Units outstanding at end of period..................................................................... 389,952
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period from October 6, 1998 (date of deposit) through September 30,
1999.
<TABLE>
<CAPTION>
GREAT INTERNATIONAL FIRMS TRUST, SERIES 6
PER UNIT INFORMATION
1999 (1)
------------
<S> <C>
Net asset value per Unit at beginning of period........................................................ $ 9.90
============
Net asset value per Unit at end of period.............................................................. $ 12.79
============
Distributions to Unitholders of investment income including accumulated dividends paid
on Units redeemed (average Units outstanding for entire period)..................................... $ 0.18
============
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period)...................................................................... $ --
============
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at
end of period)...................................................................................... $ 1.55
============
Distributions of investment income by frequency of payment
Quarterly........................................................................................ $ 0.16
Units outstanding at end of period..................................................................... 228,272
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period from October 6, 1998 (date of deposit) through September 30,
1999.
<TABLE>
<CAPTION>
BRAND NAME EQUITY TRUST, SERIES 7
PER UNIT INFORMATION
1999 (1)
------------
<S> <C>
Net asset value per Unit at beginning of period........................................................ $ 9.90
============
Net asset value per Unit at end of period.............................................................. $ 9.12
============
Distributions to Unitholders of investment income including accumulated dividends paid
on Units redeemed (average Units outstanding for entire period)..................................... $ 0.15
============
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period)...................................................................... $ 0.03
============
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at
end of period)...................................................................................... $ (1.81)
============
Distributions of investment income by frequency of payment
Quarterly........................................................................................ $ 0.14
Units outstanding at end of period..................................................................... 1,245,966
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period from October 6, 1998 (date of deposit) through September 30,
1999.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of Van
Kampen Focus Portfolios, Series 115 (The Dow 30 Index Trust, Series 5, The Dow
30 Index & Treasury Trust, Series 7, Great International Firms Trust, Series 6
and Brand Name Equity Trust, Series 7):
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Van Kampen Focus
Portfolios, Series 115 (The Dow 30 Index Trust, Series 5, The Dow 30 Index &
Treasury Trust, Series 7, Great International Firms Trust, Series 6 and Brand
Name Equity Trust, Series 7) as of September 30, 1999 and the related statements
of operations and changes in net assets for the period from October 6, 1998
(date of deposit) through September 30, 1999. 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 September 30, 1999 by correspondence with
the Trustee. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee and the Sponsor, as well as evaluating
the overall financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen Focus Portfolios,
Series 115 (The Dow 30 Index Trust, Series 5, The Dow 30 Index & Treasury Trust,
Series 7, Great International Firms Trust, Series 6 and Brand Name Equity Trust,
Series 7) as of September 30, 1999 and the results of operations and changes in
net assets for the period from October 6, 1998 (date of deposit) through
September 30, 1999, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
November 12, 1999
<TABLE>
<CAPTION>
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 115
Statements of Condition
September 30, 1999
The Dow 30
The Dow 30 Index &
Index Treasury
Trust Trust
----------------- ---------------
Trust property
<S> <C> <C>
Cash $ -- $ --
Securities at market value, (cost $1,529,350 and $3,861,293) (note 1) 1,728,966 3,999,658
Accumulated dividends 2,790 3,930
Receivables for securities sold -- 41,718
Organizational Expenses -- --
------------------- -----------------
$ 1,731,756 $ 4,045,306
=================== =================
Liabilities and interest to Unitholders
Cash Overdraft $ 8,882 $ 2,575
Redemptions payable 87 41,926
Interest to Unitholders 1,722,787 4,000,805
------------------- -----------------
$ 1,731,756 $ 4,045,306
=================== =================
Analyses of Net Assets
Interest of Unitholders (138,461 and 389,952 Units of fractional
undivided interest outstanding)
Cost to original investors of 283,852 and 556,114 Units (note 1) $ 3,201,689 $ 5,768,452
Less initial underwriting commission (note 3) 145,677 277,830
------------------- -----------------
3,056,012 5,490,622
Less redemption of 145,391 and 166,162 Units 1,844,750 1,724,106
------------------- -----------------
1,211,262 3,766,516
Undistributed net investment income
Net Investment Income 4,383 2,943
Less distributions to Unitholders 39,154 42,171
------------------- -----------------
(34,771) (39,228)
Realized gain (loss) on Securities sale or redemption 346,680 135,152
Unrealized appreciation (depreciation) of Securities (note 2) 199,616 138,365
Distributions to Unitholders of Security sale proceeds -- --
Deferred Sales Charges -- --
------------------- -----------------
Net asset value to Unitholders $ 1,722,787 $ 4,000,805
=================== =================
Net asset value per Unit (138,461 and 389,952 Units outstanding) $ 12.44 $ 10.26
=================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 115
Statement of Condition
September 30, 1999
Great Brand
International Name
Firms Equity
Trust Trust
----------------- ---------------
Trust property
<S> <C> <C>
Cash $ -- $ --
Securities at market value, (cost $2,571,257 and $13,599,015) (note 1) 2,925,827 11,348,264
Accumulated dividends 3,464 18,982
Receivables for securities sold -- 46,689
Organizational Expenses -- --
------------------- -----------------
$ 2,929,291 $ 11,413,935
=================== =================
Liabilities and interest to Unitholders
Cash Overdraft $ 9,062 $ 47,712
Redemptions payable 216 1,774
Interest to Unitholders 2,920,013 11,364,449
------------------- -----------------
$ 2,929,291 $ 11,413,935
=================== =================
Analyses of Net Assets
Interest of Unitholders (228,272 and 1,245,996 Units of fractional
undivided interest outstanding)
Cost to original investors of 249,479 and 1,550,414 Units (note 1) $ 3,120,672 $ 18,577,574
Less initial underwriting commission (note 3) 240,414 1,395,854
------------------- -----------------
2,880,258 17,181,720
Less redemption of 21,207 and 304,448 Units 270,005 3,249,311
------------------- -----------------
2,610,253 13,932,409
Undistributed net investment income
Net Investment Income 12,961 181,488
Less distributions to Unitholders 39,205 187,095
------------------- -----------------
(26,244) (5,607)
Realized gain (loss) on Securities sale or redemption 50,697 171,954
Unrealized appreciation (depreciation) of Securities (note 2) 354,570 (2,250,751)
Deferred Sales Charges (69,263) (445,307)
Distributions to Unitholders of Security sale proceeds -- (38,249)
------------------- -----------------
Net asset value to Unitholders $ 2,920,013 $ 11,364,449
=================== =================
Net asset value per Unit (228,272 and 1,245,966 Units outstanding) $ 12.79 $ 9.12
=================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
THE DOW 30 INDEX TRUST, SERIES 5
Statements of Operations
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Investment income
<S> <C>
Dividend income.................................................................................. $ 40,730
Expenses
Trustee fees and expenses..................................................................... 4,733
Evaluator fees................................................................................ 562
Organizational fees........................................................................... 30,490
Supervisory fees.............................................................................. 562
--------------
Total expenses............................................................................. 36,347
--------------
Net investment income......................................................................... 4,383
Realized gain (loss) from Security sale
Proceeds......................................................................................... 1,885,506
Cost............................................................................................. 1,538,826
--------------
Realized gain (loss).......................................................................... 346,680
Net change in unrealized appreciation (depreciation) of Securities.................................. 199,616
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 550,679
==============
Statements of Changes in Net Assets
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Increase (decrease) in net assets Operations:
Net investment income............................................................................ $ 4,383
Realized gain (loss) on Securities sales......................................................... 346,680
Net change in unrealized appreciation (depreciation) of Securities............................... 199,616
--------------
Net increase (decrease) in net assets resulting from operations............................... 550,679
Distributions to Unitholders from:
Net investment income............................................................................ (39,154)
Security sale or redemption proceeds............................................................. --
Redemption of Units................................................................................. (1,844,750)
--------------
Total increase (decrease)..................................................................... (1,333,225)
Net asset value to Unitholders
Beginning of period.............................................................................. 144,418
Additional Securities purchased from the proceeds of Unit Sales.................................. 2,911,594
--------------
End of period (including (overdistributed) net investment income of $ (34,771)).................. $ 1,722,787
==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
THE DOW 30 INDEX & TREASURY TRUST, SERIES 7
Statements of Operations
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Investment income
<S> <C>
Dividend income.................................................................................. $ 45,119
Expenses
Trustee fees and expenses..................................................................... 4,939
Evaluator fees................................................................................ 1,117
Organizational fees........................................................................... 35,003
Supervisory fees.............................................................................. 1,117
--------------
Total expenses............................................................................. 42,176
--------------
Net investment income......................................................................... 2,943
Realized gain (loss) from Security sale
Proceeds......................................................................................... 1,764,509
Cost............................................................................................. 1,629,357
--------------
Realized gain (loss).......................................................................... 135,152
Net change in unrealized appreciation (depreciation) of Securities.................................. 138,365
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 276,460
==============
Statements of Changes in Net Assets
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Increase (decrease) in net assets Operations:
Net investment income............................................................................ $ 2,943
Realized gain (loss) on Securities sales......................................................... 135,152
Net change in unrealized appreciation (depreciation) of Securities............................... 138,365
--------------
Net increase (decrease) in net assets resulting from operations............................... 276,460
Distributions to Unitholders from:
Net investment income............................................................................ (42,171)
Security sale or redemption proceeds............................................................. --
Redemption of Units................................................................................. (1,724,106)
--------------
Total increase (decrease)..................................................................... (1,489,817)
Net asset value to Unitholders
Beginning of period.............................................................................. 143,914
Additional Securities purchased from the proceeds of Unit Sales.................................. 5,346,708
--------------
End of period (including overdistributed net investment income of $(39,228))..................... $ 4,000,805
==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
GREAT INTERNATIONAL FIRMS TRUST, SERIES 6
Statements of Operations
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Investment income
<S> <C>
Dividend income.................................................................................. $ 49,067
Expenses
Trustee fees and expenses..................................................................... 4,165
Evaluator fees................................................................................ 485
Organizational fees........................................................................... 30,971
Supervisory fees.............................................................................. 485
--------------
Total expenses............................................................................. 36,106
--------------
Net investment income......................................................................... 12,961
Realized gain (loss) from Security sale
Proceeds......................................................................................... 353,316
Cost............................................................................................. 302,619
--------------
Realized gain (loss).......................................................................... 50,697
Net change in unrealized appreciation (depreciation) of Securities.................................. 354,570
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 418,228
==============
Statements of Changes in Net Assets
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Increase (decrease) in net assets Operations:
Net investment income............................................................................ $ 12,961
Realized gain (loss) on Securities sales......................................................... 50,697
Net change in unrealized appreciation (depreciation) of Securities............................... 354,570
--------------
Net increase (decrease) in net assets resulting from operations............................... 418,228
Distributions to Unitholders from:
Net investment income............................................................................ (39,205)
Security sale or redemption proceeds............................................................. --
Deferred Sales Charge............................................................................... (69,263)
Redemption of Units................................................................................. (270,005)
--------------
Total increase (decrease)..................................................................... 39,755
Net asset value to Unitholders
Beginning of period.............................................................................. 188,203
Additional Securities purchased from the proceeds of Unit Sales.................................. 2,692,055
--------------
End of period (including (overdistributed) net investment income of $(26,244))................... $ 2,920,013
==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
BRAND NAME EQUITY TRUST, SERIES 7
Statements of Operations
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Investment income
<S> <C>
Dividend income.................................................................................. $ 243,405
Expenses
Trustee fees and expenses..................................................................... 11,560
Evaluator fees................................................................................ 2,953
Organizational fees........................................................................... 44,451
Supervisory fees.............................................................................. 2,953
--------------
Total expenses............................................................................. 61,917
--------------
Net investment income......................................................................... 181,488
Realized gain (loss) from Security sale
Proceeds......................................................................................... 3,760,961
Cost............................................................................................. 3,589,007
--------------
Realized gain (loss).......................................................................... 171,954
Net change in unrealized appreciation (depreciation) of Securities.................................. (2,250,751)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ (1,897,309)
==============
Statements of Changes in Net Assets
Period from October 6, 1998 (date of deposit) through September 30, 1999
1999
--------------
Increase (decrease) in net assets Operations:
Net investment income............................................................................ $ 181,488
Realized gain (loss) on Securities sales......................................................... 171,954
Net change in unrealized appreciation (depreciation) of Securities............................... (2,250,751)
--------------
Net increase (decrease) in net assets resulting from operations............................... (1,897,309)
Distributions to Unitholders from:
Net investment income............................................................................ (187,095)
Security sale or redemption proceeds............................................................. (38,249)
Redemption of Units................................................................................. (3,249,311)
Deferred Sales Charge............................................................................... (445,307)
--------------
Total increase (decrease)..................................................................... (5,817,271)
Net asset value to Unitholders
Beginning of period.............................................................................. 144,874
Additional Securities purchased from the proceeds of Unit Sales.................................. 17,036,846
--------------
End of period (including overdistributed net investment income of $(5,607))...................... $ 11,364,449
==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
DOW 30 INDEX TRUST, SERIES 5 PORTFOLIO as of September 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation of
Number Market Value Securities
of Shares Name of Issuer Per Share (Note 1)
- --------------- ------------------------------------------------------------------------------------ ---------------
<S> <C> <C> <C>
1,380 ALCOA Incorporated $ 62.0625 $ 85,646
- --------------------------------------------------------------------------------------------------------------------------
694 AlliedSignal, Incorporated 59.9375 41,597
- --------------------------------------------------------------------------------------------------------------------------
694 American Express Company 134.6250 93,430
- --------------------------------------------------------------------------------------------------------------------------
1,038 AT&T Corporation 43.5000 45,153
- --------------------------------------------------------------------------------------------------------------------------
694 Boeing Company 42.6250 29,582
- --------------------------------------------------------------------------------------------------------------------------
694 Caterpillar, Incorporated 54.8125 38,040
- --------------------------------------------------------------------------------------------------------------------------
694 Chevron Corporation 88.7500 61,593
- --------------------------------------------------------------------------------------------------------------------------
1,040 Citigroup Incorporated 44.0000 45,760
- --------------------------------------------------------------------------------------------------------------------------
694 Coca Cola Company 48.0625 33,355
- --------------------------------------------------------------------------------------------------------------------------
694 DuPont (E.I.) de Nemours and Company 60.8750 42,248
- --------------------------------------------------------------------------------------------------------------------------
694 Eastman Kodak Company 75.4375 52,354
- --------------------------------------------------------------------------------------------------------------------------
694 Exxon Corporation 75.9375 52,701
- --------------------------------------------------------------------------------------------------------------------------
694 General Electric Company 118.5625 82,282
- --------------------------------------------------------------------------------------------------------------------------
831 General Motors Corporation 62.9375 52,301
- --------------------------------------------------------------------------------------------------------------------------
694 Goodyear Tire & Rubber Company 48.1250 33,399
- --------------------------------------------------------------------------------------------------------------------------
694 Hewlett-Packard Company 92.0000 63,848
- --------------------------------------------------------------------------------------------------------------------------
1,385 International Business Machines Corporation 121.3750 168,104
- --------------------------------------------------------------------------------------------------------------------------
694 International Paper Company 48.0625 33,355
- --------------------------------------------------------------------------------------------------------------------------
694 J.P. Morgan & Company, Incorporated 114.2500 79,289
- --------------------------------------------------------------------------------------------------------------------------
694 Johnson & Johnson 91.8750 63,761
- --------------------------------------------------------------------------------------------------------------------------
1,380 McDonald's Corporation 43.0000 59,340
- --------------------------------------------------------------------------------------------------------------------------
1,380 Merck & Company, Incorporated 64.8125 89,441
- --------------------------------------------------------------------------------------------------------------------------
694 Minnesota Mining and Manufacturing Company 96.0625 66,667
- --------------------------------------------------------------------------------------------------------------------------
694 Philip Morris Companies, Incorporated 34.1875 23,726
- --------------------------------------------------------------------------------------------------------------------------
694 Proctor & Gamble Company 93.7500 65,062
- --------------------------------------------------------------------------------------------------------------------------
694 Sears, Roebuck & Company 31.3750 21,774
- --------------------------------------------------------------------------------------------------------------------------
694 Union Carbide Corporation 56.8125 39,428
- --------------------------------------------------------------------------------------------------------------------------
1,384 United Technologies Corporation 59.3125 82,089
- --------------------------------------------------------------------------------------------------------------------------
1,381 Wal-Mart Stores, Incorporated 47.5625 65,684
- --------------------------------------------------------------------------------------------------------------------------
694 Walt Disney Company 25.8750 17,957
- --------------- ----------------
25,773 $ 1,728,966
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
THE DOW 30 INDEX & TREASURY TRUST, SERIES 7 PORTFOLIO as of September 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation of
Number Market Value Securities
of Shares Name of Issuer Per Share (Note 1)
- --------------- ------------------------------------------------------------------------------------ ---------------
<S> <C> <C> <C>
1,976 ALCOA Incorporated $ 62.0625 $ 122,635
- --------------------------------------------------------------------------------------------------------------------------
993 AlliedSignal, Incorporated 59.9375 59,518
- --------------------------------------------------------------------------------------------------------------------------
993 American Express Company 134.6250 133,683
- --------------------------------------------------------------------------------------------------------------------------
1,485 AT&T Corporation 43.5600 64,684
- --------------------------------------------------------------------------------------------------------------------------
993 Boeing Company 42.6250 42,327
- --------------------------------------------------------------------------------------------------------------------------
993 Caterpillar, Incorporated 54.8125 54,429
- --------------------------------------------------------------------------------------------------------------------------
993 Chevron Corporation 88.7500 88,129
- --------------------------------------------------------------------------------------------------------------------------
1,487 Citigroup Incorporated 44.0000 65,428
- --------------------------------------------------------------------------------------------------------------------------
993 Coca Cola Company 48.0625 47,726
- --------------------------------------------------------------------------------------------------------------------------
694 Delphi Automotive Systems Corporation 16.0162 11,115
- --------------------------------------------------------------------------------------------------------------------------
993 DuPont (E.I.) de Nemours and Company 60.8750 60,449
- --------------------------------------------------------------------------------------------------------------------------
993 Eastman Kodak Company 75.4375 74,909
- --------------------------------------------------------------------------------------------------------------------------
993 Exxon Corporation 75.9375 75,406
- --------------------------------------------------------------------------------------------------------------------------
993 General Electric Company 118.5625 117,733
- --------------------------------------------------------------------------------------------------------------------------
993 General Motors Corporation 62.9375 62,497
- --------------------------------------------------------------------------------------------------------------------------
993 Goodyear Tire & Rubber Company 48.1250 47,788
- --------------------------------------------------------------------------------------------------------------------------
993 Hewlett-Packard Company 92.0000 91,356
- --------------------------------------------------------------------------------------------------------------------------
1,980 International Business Machines Corporation 121.3750 240,322
- --------------------------------------------------------------------------------------------------------------------------
993 International Paper Company 48.0620 47,726
- --------------------------------------------------------------------------------------------------------------------------
993 J.P. Morgan & Company, Incorporated 114.2500 113,450
- --------------------------------------------------------------------------------------------------------------------------
993 Johnson & Johnson 91.8750 91,232
- --------------------------------------------------------------------------------------------------------------------------
1,976 McDonald's Corporation 43.0000 84,968
- --------------------------------------------------------------------------------------------------------------------------
1,976 Merck & Company, Incorporated 64.8125 128,070
- --------------------------------------------------------------------------------------------------------------------------
993 Minnesota Mining and Manufacturing Company 96.0625 95,390
- --------------------------------------------------------------------------------------------------------------------------
993 Philip Morris Companies, Incorporated 34.1875 33,948
- --------------------------------------------------------------------------------------------------------------------------
993 Proctor & Gamble Company 93.7500 93,094
- --------------------------------------------------------------------------------------------------------------------------
993 Sears, Roebuck & Company 31.3750 31,155
- --------------------------------------------------------------------------------------------------------------------------
993 Union Carbide Corporation 56.8125 56,415
- --------------------------------------------------------------------------------------------------------------------------
1,979 United Technologies Corporation 59.3125 117,379
- --------------------------------------------------------------------------------------------------------------------------
1,977 Wal-Mart Stores, Incorporated 47.5625 94,031
- --------------------------------------------------------------------------------------------------------------------------
993 Walt Disney Company 25.8750 25,694
- --------------- ----------------
37,376 $ 2,472,686
=============== ===============
Maturity
Value Name of Issuer and Title of Security
$ 4,290,000 "Zero coupon" U.S. Treasury bonds maturing August 15, 2015 $ 1,526,972
- --------------- ---------------
- ---------------
$ 3,999,658
===============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
GREAT INTERNATIONAL FIRMS TRUST, SERIES 6 PORTFOLIO as of September 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation of
Number Market Value Securities
of Shares Name of Issuer Per Share (Note 1)
- --------------- ------------------------------------------------------------------------------------ ---------------
<S> <C> <C> <C>
2,415 Akzo Nobel, N.V. $ 42.7853 $ 103,327
- --------------------------------------------------------------------------------------------------------------------------
199 AXA - UAP 127.0724 25,287
- --------------------------------------------------------------------------------------------------------------------------
6,000 Bank of Tokyo - Mitsubishi, Ltd. 15.3694 92,217
- --------------------------------------------------------------------------------------------------------------------------
6,335 Bass Plc 12.0595 76,398
- --------------------------------------------------------------------------------------------------------------------------
1,501 Bayer AG 40.0577 60,127
- --------------------------------------------------------------------------------------------------------------------------
7,566 British Airways Plc 5.6140 42,476
- --------------------------------------------------------------------------------------------------------------------------
4,325 British Petroleum Company Plc 18.2581 78,966
- --------------------------------------------------------------------------------------------------------------------------
4,885 British Telecommunications Plc 15.1382 73,951
- --------------------------------------------------------------------------------------------------------------------------
735 Den Danske Bank 113.8642 83,690
- --------------------------------------------------------------------------------------------------------------------------
3,335 Deutsche Lufthansa, AG 18.3762 61,285
- --------------------------------------------------------------------------------------------------------------------------
4,401 Electrolux, AB 18.8164 82,811
- --------------------------------------------------------------------------------------------------------------------------
2,390 Glaxo Wellcome Plc 26.0783 62,327
- --------------------------------------------------------------------------------------------------------------------------
332 Groupe Danone (France) 244.4111 81,145
- --------------------------------------------------------------------------------------------------------------------------
8,067 Imperial Chemical Industries Plc 11.0882 89,449
- --------------------------------------------------------------------------------------------------------------------------
142 L'Oreal, SA 641.2450 91,057
- --------------------------------------------------------------------------------------------------------------------------
875 Mannesmann AG 160.4449 140,389
- --------------------------------------------------------------------------------------------------------------------------
1,429 Metro AG 52.3050 74,744
- --------------------------------------------------------------------------------------------------------------------------
48 Nestle, SA 1,886.1614 90,536
- --------------------------------------------------------------------------------------------------------------------------
13,731 News Corporation, Ltd. 7.0136 96,305
- --------------------------------------------------------------------------------------------------------------------------
1,884 Nokia Oyj 89.9561 169,477
- --------------------------------------------------------------------------------------------------------------------------
46 Novartis, AG 1,488,8636 68,488
- --------------------------------------------------------------------------------------------------------------------------
1,371 Philips Electronics 101.4012 139,021
- --------------------------------------------------------------------------------------------------------------------------
9,444 Reuters Holdings, Plc 11.2858 106,583
- --------------------------------------------------------------------------------------------------------------------------
1,861 Rhone Poulenc S.A. 51.8772 96,543
- --------------------------------------------------------------------------------------------------------------------------
1,771 Royal Dutch Petroleum Company 58.4019 103,430
- --------------------------------------------------------------------------------------------------------------------------
218 SAP, AG 387.2071 84,411
- --------------------------------------------------------------------------------------------------------------------------
1,499 Siemens AG 82.9500 124,342
- --------------------------------------------------------------------------------------------------------------------------
1,300 Sony Corporation 149.5581 194,426
- --------------------------------------------------------------------------------------------------------------------------
17,000 Toshiba Corporation 7.4544 126,725
- --------------------------------------------------------------------------------------------------------------------------
4,290 Toyota Motor Corporation 31.8668 136,709
- --------------------------------------------------------------------------------------------------------------------------
1,017 Unilever, N.V. 68.0286 69,185
- --------------- ----------------
110,412 $ 2,925,827
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPTION>
BRAND NAME EQUITY TRUST, SERIES 7 PORTFOLIO as of September 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation of
Number Market Value Securities
of Shares Name of Issuer Per Share (Note 1)
- --------------- ------------------------------------------------------------------------------------ ---------------
<S> <C> <C> <C>
7,560 American Home Products Corporation $ 41.5000 $ 313,740
- --------------------------------------------------------------------------------------------------------------------------
13,662 Avon Products, Incorporated 24.8125 338,988
- --------------------------------------------------------------------------------------------------------------------------
7,765 Benckiser NV 62.0000 481,430
- --------------------------------------------------------------------------------------------------------------------------
7,765 Bestfoods 48.5000 376,603
- --------------------------------------------------------------------------------------------------------------------------
9,229 Clorox Company 38.2500 353,009
- --------------------------------------------------------------------------------------------------------------------------
6,616 The Coca-Cola Company 48.0625 317,982
- --------------------------------------------------------------------------------------------------------------------------
15,456 Coca Cola Enterprises Incorporated 22.5625 348,726
- --------------------------------------------------------------------------------------------------------------------------
10,972 Colgate-Palmolive Company 45.7500 501,969
- --------------------------------------------------------------------------------------------------------------------------
14,359 ConAgra, Incorporated 22.5625 323,975
- --------------------------------------------------------------------------------------------------------------------------
19,078 The Dial Corporation 25.5000 486,489
- --------------------------------------------------------------------------------------------------------------------------
9,961 Gillette Company 33.9375 338,052
- --------------------------------------------------------------------------------------------------------------------------
5,567 Hershey Foods Corporation 48.6875 271,043
- --------------------------------------------------------------------------------------------------------------------------
5,032 Johnson & Johnson 91.8750 462,315
- --------------------------------------------------------------------------------------------------------------------------
11,449 Kellogg Company 37.4375 428,622
- --------------------------------------------------------------------------------------------------------------------------
13,814 Mattel, Incorporated 19.0000 262,466
- --------------------------------------------------------------------------------------------------------------------------
6,015 Merck & Company, Incorporated 64.8125 389,847
- --------------------------------------------------------------------------------------------------------------------------
11,229 Nabisco Holdings Corporation 34.5625 388,102
- --------------------------------------------------------------------------------------------------------------------------
4,247 Nestle SA 94.3100 400,535
- --------------------------------------------------------------------------------------------------------------------------
12,566 PepsiCo, Incorporated 30.2500 380,122
- --------------------------------------------------------------------------------------------------------------------------
8,322 Phillip Morris Companies, Incorporated 34.1875 284,508
- --------------------------------------------------------------------------------------------------------------------------
5,286 Proctor & Gamble Company 93.7500 495,563
- --------------------------------------------------------------------------------------------------------------------------
6,424 Quaker Oats Company 61.8750 397,485
- --------------------------------------------------------------------------------------------------------------------------
13,422 Ralston-Ralston Purina Group 27.8125 373,299
- --------------------------------------------------------------------------------------------------------------------------
13,786 Sara Lee Corporation 23.4375 323,109
- --------------------------------------------------------------------------------------------------------------------------
7,911 Schering-Plough Corporation 43.6250 345,117
- --------------------------------------------------------------------------------------------------------------------------
5.699 Unilever NV 68.1250 388,244
- --------------------------------------------------------------------------------------------------------------------------
15,541 The Walt Disney Company 25.8750 402,123
- --------------------------------------------------------------------------------------------------------------------------
5,368 Warner- Lambert Company 66.3750 356,301
- --------------------------------------------------------------------------------------------------------------------------
17,028 Wendy's International, Incorporated 26.3750 449,114
- --------------------------------------------------------------------------------------------------------------------------
5,368 Wrigley (WM) Jr. Company 68.8125 369,386
- --------------- ----------------
296,497 $ 11,348,264
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 115
Notes to Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the last closing sales price or, if no such price exists, or if the
Equity Securities are not listed at the closing 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 the closing asked prices if not listed. 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 of the Dow 30 Index & Treasury Trust
and Brand Name Equity Trust are considered to be the owner of a pro rata portion
of the trusts and, accordingly, no provision has been made for Federal Income
Taxes. The Dow 30 Index Trust and Great International Firms Trust have elected
and intend to qualify on a continuing basis for special federal income tax
treatment as a "regulated investment company" under the Internal Revenue Code
(the "Code"). If a Trust so qualifies and timely distributes to Unitholders 90%
or more of its taxable income (without regard to its net capital gain, i.e., the
excess of its net long-term capital gain over its het short-term capital loss),
it will not be subject to federal income tax on the portion of its taxable
income (including any net capital gain) that it distributes to Unitholders.
Distributions to Unitholders of such Trust's taxable income will be taxable as
ordinary or capital income to Unitholders.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an identified cost basis.
NOTE 2 - PORTFOLIO
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at September 30, 1999 is as follows:
<TABLE>
<CAPTION>
The Dow 30 Great
The Dow 30 Index & International Brand Name
Index Treasury Firms Equity
Trust Trust Trust Trust
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Unrealized Appreciation $ 261,468 $ 407,481 $ 497,299 $ 219,814
Unrealized Depreciation (61,852) (269,116) (142,729) (2,470,565)
-------------- -------------- -------------- ---------------
$ 199,616 $ 138,365 $ 354,570 $(2,250,751)
============== ============== ============== ===============
</TABLE>
NOTE 3- OTHER
Marketability - Although it is not obligated to do so, the Sponsor intends to
maintain a market for Units and to continuously offer to purchase Units at
prices, subject to change at any time, based upon the value of the Securities in
the portfolio of the Trust valued as described in Note 1, plus accumulated
dividends to the date of settlement. If the supply of Units exceeds demand, or
for other business reasons, the Sponsor may discontinue purchases of Units at
such prices. In the event that a market is not maintained for the Units, a
Unitholder desiring to dispose of his Units may be able to do so only by
tendering such units to the Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on 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. The Great International Firms and
Brand Name Equity Trusts had a maximum deferred sales charge of $0.35 per Unit.
Investors in these Trusts paid a deferred sales charge of $0.35 per Unit.
Effective October 6, commencing October 6, 1999, the secondary sales charge will
decrease by .5 of 1% to a minimum sales charge of 3.00% for all Trusts.
Compensation of Evaluator and Supervisor - The Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.0025 per Unit, not to
exceed the aggregate cost of the Supervisor for providing such services to all
applicable Trusts). The Evaluator receives and 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 Units were presented for redemption as follows:
Period Ended
September 30, 1999
---------------------
The Dow 30 Index Trust 145,391
The Dow 30 Index & Treasury Trust 166,162
Great International Firms Trust 21,207
Brand Name Equity Trust 304,448
Van Kampen
Focus Portfolios(SM)
A Division of Van Kampen Funds Inc.
The Dow 30SM Index Trust
The Dow 30SM Index & Treasury Trust
Prospectus Part II
You should read this prospectus and retain it for future reference.
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
This Prospectus is dated as of the date of the
Prospectus Part I accompanying this Prospectus Part II.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has not approved or disapproved of the
Units or passed upon the adequacy or accuracy of this prospectus. Any contrary
representation is a criminal offense.
THE TRUSTS
- --------------------------------------------------------------------------------
The Trusts were created under the laws of the State of New York pursuant to a
Trust Indenture and Trust Agreement (the "Trust Agreement"), dated the Initial
Date of Deposit, among Van Kampen Funds Inc., as Sponsor, Van Kampen Investment
Advisory Corp., as Supervisor, The Bank of New York, as Trustee, and American
Portfolio Evaluation Services, a division of Van Kampen Investment Advisory
Corp., as Evaluator.
The Trusts offer investors the opportunity to purchase Units representing
proportionate interests in portfolios of actively traded securities. A Trust may
be an appropriate medium for investors who desire to participate in a portfolio
of securities with greater diversification than they might be able to acquire
individually.
On the Initial Date of Deposit, the Sponsor deposited delivery statements
relating to contracts for the purchase of the Securities and an irrevocable
letter of credit in the amount required for these purchases with the Trustee. In
exchange for these contracts the Trustee delivered to the Sponsor documentation
evidencing the ownership of Units of the Trusts. Unless otherwise terminated as
provided in the Trust Agreement, the Trusts will terminate on the Mandatory
Termination Date and any remaining Securities will be liquidated or distributed
by the Trustee within a reasonable time. As used in this Prospectus the term
"Securities" means the securities (including contracts to purchase these
securities) listed in "Portfolio" in Part One for each Trust and any additional
securities deposited into each Trust.
Additional Units of a Trust may be issued at any time by depositing in the
Trust (i) additional Securities, (ii) contracts to purchase Securities together
with cash or irrevocable letters of credit or (iii) cash (or a letter of credit)
with instructions to purchase additional Securities. As additional Units are
issued by a Trust, the aggregate value of the Securities will be increased and
the fractional undivided interest represented by each Unit will be decreased.
The Sponsor may continue to make additional deposits into a Trust following the
Initial Date of Deposit provided that the additional deposits will be in amounts
which will maintain, as nearly as practicable, the same percentage relationship
among the number of shares (or percentage of par value) of each Security in the
Trust's portfolio that existed immediately prior to the subsequent deposit.
Investors may experience a dilution of their investments and a reduction in
their anticipated income because of fluctuations in the prices of the Securities
between the time of the deposit and the purchase of the Securities and because
the Trusts will pay the associated brokerage or acquisition fees.
Each Unit of a Trust initially offered represents an undivided interest in
that Trust. To the extent that any Units are redeemed by the Trustee or
additional Units are issued as a result of additional Securities being deposited
by the Sponsor, the fractional undivided interest in that Trust represented by
each unredeemed Unit will increase or decrease accordingly, although the actual
interest in the Trust will remain unchanged. Units will remain outstanding until
redeemed upon tender to the Trustee by Unitholders, which may include the
Sponsor, or until the termination of the Trust Agreement.
Each Trust consists of (a) the Securities (including contracts for the
purchase thereof) listed under the applicable "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 related Income and Capital
Accounts. Neither the Sponsor nor the Trustee shall be liable in any way for any
failure in any of the Securities.
OBJECTIVES AND SECURITIES SELECTION
- --------------------------------------------------------------------------------
Each Trust seeks to increase the value of your investment and provide
dividend income by investing in a diversified portfolio of stocks. The Dow 30SM
Index & Treasury Trust also seeks to preserve capital by investing a portion of
its portfolio in U.S. Treasury obligations. We cannot guarantee that a Trust
will achieve its objective.
The Dow 30SM Index Trust. The Trust seeks to increase the value of your Units
over time and provide dividend income by investing in a portfolio of common
stocks of the companies in the Dow Jones Industrial AverageSM. These stocks are
some of the most widely-held and well-capitalized companies in the world. We
believe that The Dow 30SM stocks have historically provided a consistent and
more conservative source of dividend income and capital appreciation than many
other types of equity securities.
o Portfolio of "blue chip" stocks
o Cross section of American industrial companies
o May help outpace inflation
The Trust initially includes a portfolio that replicates the Dow Jones
Industrial AverageSM except to the extent necessary to comply with applicable
regulatory requirements. During the Trust's life, we will change the portfolio
to reflect any change in the component stocks in The DowSM. We will not change
the portfolio to reflect any change in the weightings of the components within
The DowSM during the Trust's life. However, the Dow Jones Industrial AverageSM
has always been based on one share of each component stock. Due to regulatory
restrictions, the Trust may not be permitted to replicate the index weighting of
certain issuers in the securities industry.
As with any investment, we cannot guarantee that the Trust will achieve its
objective. The value of your Units may fall below the price you paid for the
Units. The performance of the Trust will differ from the performance of The
DowSM because the Trust includes expenses and a sales charge. You should read
the "Risk Factors" section before you invest.
The Dow Jones Industrial AverageSM. Charles H. Dow first unveiled his
industrial stock average on May 26, 1896. Dow Jones & Company, Inc. first
published the Dow Jones Industrial AverageSM in The Wall Street Journal on
October 7, 1896. Initially consisting of just 12 stocks, The DowSM expanded to
20 stocks in 1916 and its present size of 30 stocks on October 1, 1928. The
companies included in The DowSM have remained relatively constant over time.
The DowSM stocks are all major factors in their industries and are widely
held by individuals and institutions. The stocks represent about one-fifth of
the market value of all U.S. stocks. All of The DowSM stocks currently trade on
the New York Stock Exchange. These stocks represent about one-fourth of the
value of all stocks listed on the Exchange. The value of The DowSM at the
beginning of 1929 was 248.8 and had risen to a level of 10,970.80 by the end of
June 30, 1999.
The editors of The Wall Street Journal select the components of The DowSM.
The editors have traditionally considered all companies that are not in the
transportation or utilities sectors for inclusion in the index. In choosing a
new component, the editors look among substantial industrial companies with a
history of successful growth and wide interest among investors. They believe
that stability of composition enhances the index. Whenever the editors change
one stock, they typically review the other stocks. Of course, we cannot
guarantee that they will follow this process or consider these factors in the
future.
"Dow JonesSM", "Dow Jones Industrial AverageSM", "The Dow 30SM", "The DowSM"
and "DJIASM" are proprietary to and service marks of Dow Jones & Company, Inc.
and have been licensed for use for certain purposes by the Trust. The Trust is
not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advisability of investing in the Trust.
The Dow 30SM Index & Treasury Trust. The Trust seeks to increase the value of
your Units over time and provide dividend income while also providing protection
of principal. The Trust invests in a portfolio of common stocks of the companies
in the Dow Jones Industrial AverageSM on the day before the Initial Date of
Deposit and U.S. Treasury obligations. The Trust seeks to provide protection of
your principal by combining an investment in blue chip stocks with U.S. Treasury
obligations.
The Dow Jones Industrial AverageSM. The DowSM stocks are all major factors in
their industries and are widely held by individuals and institutions. These
stocks are some of the most widely-held and well-capitalized companies in the
world. We believe that The DowSM stocks have historically provided a consistent
and more conservative source of dividend income and capital appreciation than
many other types of equity securities. All of The DowSM stocks currently trade
on the New York Stock Exchange. More information about The DowSM is presented
under "The Dow 30SM Index Trust".
Approximately half of the initial portfolio replicates the Dow Jones
Industrial AverageSM on the day before the Initial Date of Deposit. The
component stocks or the weightings of the stocks in The DowSM may change from
time to time. We will not change the Trust portfolio to reflect any change in
The DowSM.
"Dow JonesSM", "Dow Jones Industrial AverageSM", "The Dow 30SM", "The DowSM"
and "DJIASM" are proprietary to and service marks of Dow Jones & Company, Inc.
and have been licensed for use for certain purposes by the Trust. The Trust is
not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no
representation regarding the advesability of investing in the Trust.
Principal Protection. By investing approximately half of the initial
portfolio in U.S. Treasury obligations, the Trust offers an investment similar
to The Dow 30SM Index Trust while also seeking protection of principal. We
structured the portfolio so that you should receive at least $11 per Unit if you
hold your Units through maturity of the Treasury obligations. This feature
provides you with total principal protection if you purchase Units for $11 or
less (including any sales charge).
The Treasury obligations do not pay interest while they are outstanding.
However, you will be subject to tax with respect to amortization of original
issue discount on the Treasury obligations as if a distribution had occurred.
You should read the "Taxation" section for more information.
As with any investment, we cannot guarantee that the Trust will achieve its
objective. The value of your Units may fall below the price you paid for the
Units. You should read the "Risk Factors" section before you invest.
You should note that we applied the selection criteria to the Securities for
inclusion in the Trusts as of the Initial Date of Deposit. After this date, the
Securities may no longer meet the selection criteria. Should a Security no
longer meet the selection criteria, we will generally not remove the Security
from its Trust portfolio. However, we will adjust the portfolio of The Dow 30SM
Index Trust to reflect changes in the components of the Dow Jones Industrial
AverageSM.
A balanced investment portfolio incorporates various style and capitalization
characteristics. We offer unit trusts with a variety of styles and
capitalizations to meet your needs. We determine style characteristics (growth
or value) based on the criteria used in selecting the Trust portfolio.
Generally, a growth portfolio includes companies in a growth phase of their
business with increasing earnings. A value portfolio generally includes
companies with low relative price-earnings ratios that we believe are
undervalued. We determine market capitalizations as follows based on the
weighted median market capitalization of a portfolio: Small-Cap-- less than $1
billion; Mid-Cap-- $1 billion to $5 billion; and Large-Cap-- over $5 billion. We
determine all style and capitalization characteristics as of the Initial Date of
Deposit and the characteristics may vary thereafter. We will not remove a
Security from a Trust as a result of any change in characteristics.
RISK FACTORS
- --------------------------------------------------------------------------------
Price Volatility. The Trusts invest primarily in stocks of U.S. companies.
The value of Units will fluctuate with the value of these stocks and may be more
or less than the price you originally paid for your Units. The market value of
stocks sometimes moves up or down rapidly and unpredictably. Because the Trusts
are unmanaged, the Trustee will not sell stocks in response to market
fluctuations as is common in managed investments. As with any investment, we
cannot guarantee that the performance of a Trust will be positive over any
period of time.
Dividends. Stocks represent ownership interests in the issuers and are not
obligations of the issuers. Common stockholders have a right to receive
dividends only after the company has provided for payment of its creditors,
bondholders and preferred stockholders. Common stocks do not assure dividend
payments. Dividends are paid only when declared by an issuer's board of
directors and the amount of any dividend may vary over time.
Treasury Obligations. The U.S. Treasury obligations in The Dow 30SM Index &
Treasury Trust are U.S. Treasury Strips. These are bonds that have been stripped
of their unmatured interest coupons. These bonds represent the right to receive
a fixed payment from the U.S. government at the bond's maturity date. These
securities are backed by the full faith and credit of the U.S. government. This
guarantee does not apply to the market value of the Treasury obligations or
Units of the Trust. The U.S. government issues these Treasury obligations at a
deep discount to par value because the obligations do not make periodic interest
payments. In effect, these obligations implicitly reinvest earnings during their
life at a fixed yield. This eliminates the ability to reinvest earnings at
higher rates in the future, if available. The value of the Treasury obligations
may also fluctuate to a greater extent than securities that make regular
interest payments.
No FDIC Guarantee. An investment in your Trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
Year 2000 Readiness Disclosure. The following two paragraphs constitute
"Year 2000 Readiness Disclosure" within the meaning of the Year 2000 Information
and Readiness Disclosure Act of 1998. If computer systems used by the Sponsor,
Evaluator, Supervisor or Trustee or other service providers to the Trusts do not
properly process date-related information after December 31, 1999, the resulting
difficulties could adversely impact the Trusts. This is commonly known as the
"Year 2000 Problem". The Sponsor, Evaluator, Supervisor and Trustee are taking
steps to address this problem and to obtain reasonable assurances that other
service providers to the Trusts are taking comparable steps. We cannot guarantee
that these steps will be sufficient to avoid any adverse impact on the Trusts.
This problem may impact corporations to varying degrees based on factors such as
industry sector and degree of technological sophistication. We cannot predict
what impact, if any, this problem will have on the issuers of the Securities.
In addition, computer failures throughout the financial services industry
beginning January 1, 2000 could have a detrimental affect on the markets for the
Securities. Improperly functioning trading systems may result in settlement
problems and liquidity issues. Moreover, corporate and governmental data
processing errors may adversely affect issuers and overall economic
uncertainties. Remediation costs will affect the earnings of individual issuers.
These costs could be substantial. Issuers may report these costs inconsistently
in U.S. and foreign financial markets. All of these issuers could adversely
affect the Securities and the Trusts.
PUBLIC OFFERING
- --------------------------------------------------------------------------------
General. Units are offered at the Public Offering Price which includes the
underlying value of the Securities, the sales charge, and cash, if any, in the
Income and Capital Accounts. The "Summary of Essential Financial Information" in
Part One describes the sales charge in detail.
Units may be purchased in the primary or secondary market at the Public
Offering Price less the concession the Sponsor typically allows to brokers and
dealers for purchases by (1) investors who purchase Units through registered
investment advisers, certified financial planners and registered broker-dealers
who in each case either charge periodic fees for financial planning, investment
advisory or asset management service, or provide such services in connection
with the establishment of an investment account for which a comprehensive "wrap
fee" charge is imposed, (2) bank trust departments investing funds over which
they exercise exclusive discretionary investment authority and that are held in
a fiduciary, agency, custodial or similar capacity, (3) any person who for at
least 90 days, has been an officer, director or bona fide employee of any firm
offering Units for sale to investors or their immediate family members (as
described above) and (4) officers and directors of bank holding companies that
make Units available directly or through subsidiaries or bank affiliates.
Notwithstanding anything to the contrary in this Prospectus, such investors,
bank trust departments, firm employees and bank holding company officers and
directors who purchase Units through this program will not receive sales charge
reductions for quantity purchases.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law, and trustees, custodians or fiduciaries for the
benefit of such persons) of the Van Kampen Funds Inc. and its affiliates,
dealers and their affiliates and vendors providing services to the Sponsor may
purchase Units at the Public Offering Price less the applicable dealer
concession.
The minimum purchase is 100 Units (25 Units for retirement accounts) but may
vary by selling firm. However, in connection with fully disclosed transactions
with the Sponsor, the minimum purchase requirement will be that number of Units
set forth in the contract between the Sponsor and the related broker or agent.
Offering Price. The Public Offering Price of 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
Trusts. The initial price of the Securities was determined by Interactive Data
Corporation, a firm regularly engaged in the business of evaluating, quoting or
appraising comparable securities. The Evaluator will generally determine the
value of the Securities as of the Evaluation Time on each business day and will
adjust the Public Offering Price of Units accordingly. This Public Offering
Price will be effective for all orders received prior to the Evaluation Time on
each business day. The Evaluation Time is the close of the New York Stock
Exchange on each Trust business day. Orders received by the Trustee or Sponsor
for purchases, sales or redemptions after that time, or on a day which is not a
business day, will be held until the next determination of price. The term
"business day", as used herein and under "Rights of Unitholders--Redemption of
Units", excludes Saturdays, Sundays and holidays observed by the New York Stock
Exchange. The term "business day" also excludes any day on which more than 33%
of the Securities are not traded on their principal trading exchange due to a
customary business holiday on that exchange.
The aggregate underlying value of the equity securities in a Trust during the
initial offering period is determined on each business day by the Evaluator in
the following manner: If the equity securities are listed on a national or
foreign securities exchange, this evaluation is generally based on the closing
sale prices on that exchange (unless it is determined that these prices are
inappropriate as a basis for valuation) or, if there is no closing sale price on
that exchange, at the closing ask prices. If the equity securities are not
listed on a national or foreign securities exchange or, if so listed and the
principal market therefor is other than on the exchange, the evaluation shall
generally be based on the current ask price on the over-the-counter market
(unless it is determined that these prices are inappropriate as a basis for
evaluation). If current ask prices are unavailable, the evaluation is generally
determined (a) on the basis of current ask prices for comparable securities, (b)
by appraising the value of the equity securities on the ask side of the market
or (c) by any combination of the above. The aggregate underlying value of U.S.
Treasury obligations during the initial offering period is determined on each
business day by the Evaluator based on their net offering prices. If net
offering prices are unavailable, then the evaluations will be based on (1)
offering prices for comparable securities, (2) by determining the value of the
obligations on the offer side of the market or (3) by any combination of the
above. The value of any foreign securities is based on the applicable currency
exchange rate as of the Evaluation Time. The value of the Securities for
purposes of secondary market transactions and redemptions is described under
"Rights of Unitholders--Redemption of Units".
In offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities but rather the
entire pool of Securities in a Trust, taken as a whole, which are represented by
the Units.
Unit Distribution. Units will be distributed to the public by the Sponsor,
broker-dealers and others at the Public Offering Price.
The Sponsor intends to qualify Units for sale in a number of states. Brokers,
dealers and others will be allowed a concession or agency commission in
connection with the distribution of Units of 70% of the sales charge.
Any discount provided to investors will be borne by the selling dealer or
agent as indicated under "General" above. Notwithstanding anything to the
contrary herein, in no case shall the total of any concessions, agency
commissions and any additional compensation allowed or paid to any broker,
dealer or other distributor of Units with respect to any individual transaction
exceed the total sales charge applicable to such transaction. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units and to change the amount of the concession or agency commission to dealers
and others from time to time.
Broker-dealers of the Trusts, banks and/or others may be eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their representatives who have sold a minimum number of units
of unit investment trusts created by the Sponsor during a specified time period.
In addition, at various times the Sponsor may implement other programs under
which the sales forces of brokers, dealers, banks and/or others may be eligible
to win other nominal awards for certain sales efforts, or under which the
Sponsor will reallow to such brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by the
Sponsor, or participate in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales generated by such
persons at the public offering price during such programs. Also, the Sponsor in
its discretion may from time to time pursuant to objective criteria established
by the Sponsor pay fees to qualifying entities for certain services or
activities which are primarily intended to result in sales of Units of the
Trusts. Such payments are made by the Sponsor out of its own assets, and not out
of the assets of any Trust. These programs will not change the price Unitholders
pay for their Units or the amount that a Trust will receive from the Units sold.
Sponsor Compensation. The Sponsor will receive a gross sales commission equal
to the total sales charge applicable to each transaction. Any sales charge
discount provided to investors will be borne by the selling dealer or agent. In
addition, the Sponsor will realize a profit or loss as a result of the
difference between the price paid for the Securities by the Sponsor and the cost
of the Securities to each Trust on the Initial Date of Deposit as well as on
subsequent deposits. The Sponsor has not participated as sole underwriter or as
manager or as a member of the underwriting syndicates or as an agent in a
private placement for any of the Securities. The Sponsor may realize profit or
loss as a result of the possible fluctuations in the market value of the
Securities, since all proceeds received from purchasers of Units are retained by
the Sponsor. In maintaining a secondary market, the Sponsor will realize profits
or 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) or from a redemption of repurchased Units at a price
above or below the purchase price. Cash, if any, made available to the Sponsor
prior to the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor, subject to
the limitations of the Securities Exchange Act of 1934.
An affiliate of the Sponsor may have participated in a public offering of one
or more of the Securities. The Sponsor, an affiliate or their employees may have
a long or short position in these Securities or related securities. An affiliate
may act as a specialist or market maker for these Securities. An officer,
director or employee of the Sponsor or an affiliate may be an officer or
director for issuers of the Securities.
Market for Units. Although it is not obligated to do so, the Sponsor
currently intends to maintain a market for Units and to purchase Units at the
secondary market repurchase price (which is described under "Right of
Unitholders--Redemption of Units"). The Sponsor may discontinue purchases of
Units or discontinue purchases at this price at any time. In the event that a
secondary market is not maintained, a Unitholder will be able to dispose of
Units by tendering them to the Trustee for redemption at the Redemption Price.
See "Rights of Unitholders--Redemption of Units". Unitholders should contact
their broker to determine the best price for Units in the secondary market. The
Trustee will notify the Sponsor of any tendered of Units for redemption. If the
Sponsor's bid in the secondary market equals or exceeds the Redemption Price per
Unit, it may purchase the Units not later than the day on which Units would have
been redeemed by the Trustee. The Sponsor may sell repurchased Units at the
secondary market Public Offering Price per Unit.
Tax-Sheltered Retirement Plans. Units are available for purchase in
connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for the individuals, Simplified Employee Pension
Plans for employees, qualified plans for self-employed individuals, and
qualified corporate pension and profit sharing plans for employees. The minimum
purchase for these accounts is reduced to 25 Units but may vary by selling firm.
The purchase of Units may be limited by the plans' provisions and does not
itself establish such plans.
RIGHTS OF UNITHOLDERS
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Distributions. Dividends and any net proceeds from the sale of Securities
received by a Trust will generally be distributed to Unitholders on each
Distribution Date to Unitholders of record on the preceding Record Date. These
dates are listed under "Summary of Essential Financial Information" in Part One.
A person becomes a Unitholder of record on the date of settlement (generally
three business days after Units are ordered). Unitholders may elect to receive
distributions in cash or to have distributions reinvested into additional Units.
Distributions may also be reinvested into Van Kampen mutual funds.
See "Rights of Unitholders--Reinvestment Option".
Dividends received by a Trust are credited to the Income Account of the
Trust. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, etc.) are credited to the Capital Account. Proceeds received on the
sale of any Securities, to the extent not used to meet redemptions of Units or
pay deferred sales charges, fees or expenses, will be distributed to
Unitholders. Proceeds received from the disposition of any 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. Any
distribution to Unitholders consists of each Unitholder's pro rate share of the
available cash in the Income and Capital Accounts as of the related Record Date.
Reinvestment Option. Unitholders may have distributions automatically
reinvested in additional Units under the Automatic Reinvestment Option (to the
extent Units may be lawfully offered for sale in the state in which the
Unitholder resides) through two options. Brokers and dealers can use the
Dividend Reinvestment Service through Depository Trust Company or purchase the
Automatic Reinvestment Option CUSIP, if available. Unitholders will be subject
to any remaining deferred sales charge payments due on Units. To participate in
this reinvestment option, a Unitholder must file with the Trustee a written
notice of election, together with any certificate representing Units and other
documentation that the Trustee may then require, at least five days prior to the
related Record Date. A Unitholder's election will apply to all Units owned by
the Unitholder and will remain in effect until changed by the Unitholder. If
Units are unavailable for reinvestment, distributions will be paid in cash.
Purchases of additional Units made pursuant to the reinvestment plan will be
made at the net asset value for Units as of the Evaluation Time on the
Distribution Date.
In addition, under the Guaranteed Reinvestment Option Unitholders may elect
to have distributions automatically reinvested in certain Van Kampen mutual
funds (the "Reinvestment Funds"). Each Reinvestment Fund has investment
objectives which differ from those of the Trusts. The prospectus relating to
each Reinvestment Fund describes its investment policies and how to begin
reinvestment. A Unitholder may obtain a prospectus for the Reinvestment Funds
from the Sponsor. Purchases of shares of a Reinvestment Fund will be made at a
net asset value computed on the Distribution Date. Unitholders with an existing
Guaranteed Reinvestment Option account (whereby a sales charge is imposed on
distribution reinvestments) may transfer their existing account into a new
account which allows purchases of Reinvestment Fund shares at net asset value.
A participant may elect to terminate his or her reinvestment plan and receive
future distributions in cash by notifying the Trustee in writing no later than
five days before a distribution date. The Sponsor, each Reinvestment Fund, and
its investment adviser shall have the right to suspend or terminate these
reinvestment plans at any time.
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, 101 Barclay Street,
20th Floor, New York, New York 10286. Certificates must be tendered to the
Trustee, duly endorsed or accompanied by proper instruments of transfer with
signature guaranteed (or by providing satisfactory indemnity in connection with
lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. On the seventh day following the tender, the
Unitholder will be entitled to receive in cash an amount for each Unit equal to
the Redemption Price per Unit next computed on the date of tender. The "date of
tender" is deemed to be the date on which Units are received by the Trustee,
except that with respect to Units received by the Trustee after the Evaluation
Time or on a day which is not a Trust business day, the date of tender is deemed
to be the next business day.
Unitholders tendering 1,000 or more Units of a Trust for redemption may
request an in kind distribution of equity securities equal to the Redemption
Price per Unit on the date of tender. Trusts generally do not offer in kind
distributions of portfolio securities that are held in foreign markets or U.S.
Treasury obligations. An in kind distribution will be made by the Trustee
through the distribution of each of the equity securities in book-entry form to
the account of the Unitholder's broker-dealer at Depository Trust Company.
Amounts representing fractional shares or U.S. Treasury obligations will be
distributed in cash. The Trustee may adjust the number of shares of any Security
included in a Unitholder's in kind distribution to facilitate the distribution
of whole shares.
The Trustee may sell Securities to satisfy Unit redemptions. To the extent
that Securities are redeemed in kind or sold, the size of a Trust will be, and
the diversity of a 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
at the time of redemption. Special federal income tax consequences will result
if a Unitholder requests an in kind distribution. See "Taxation".
The Redemption Price per Unit and the secondary market repurchase price per
Unit are equal to the pro rate share of each Unit in each 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 Securities in the Trust
trading ex-dividend as of the date of computation, less (a) amounts representing
taxes or other governmental charges payable out of the Trust, (b) the accrued
expenses of the Trust and (c) any unpaid deferred sales charge payments. During
the initial offering period, the redemption price and the secondary market
repurchase price will also include estimated organizational costs. For these
purposes, the Evaluator may determine the value of equity securities in the
following manner: If the equity securities are listed on a national or foreign
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 may be based on the current bid price on the
over-the-counter market. If current bid prices are unavailable or inappropriate,
the evaluation may be determined (a) on the basis of current bid prices for
comparable securities, (b) by appraising the equity securities on the bid side
of the market or (c) by any combination of the above. The Evaluator may
determine the value of U.S. Treasury obligations for these purposes in the same
manner as described under "Public Offering--Offering Price" on the bid side of
the market. The value of any foreign securities is based on the applicable
currency exchange rate as of the Evaluation Time.
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 SEC determines that
trading on that Exchange is restricted or an emergency exists, as a result of
which disposal or evaluation of the Securities is not reasonably practicable, or
for other periods as the SEC may permit.
Certificates. Ownership of Units is evidenced in book entry form unless a
Unitholder makes a written request to the Trustee that ownership be in
certificate form. Units are transferable by making a written request to the
Trustee and, in the case of Units in certificate form, by presentation of the
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign the written
request, and certificate or transfer instrument, exactly as his name appears on
the records of the Trustee and on the face of any certificate with the signature
guaranteed by a participant in the Securities Transfer Agents Medallion Program
("STAMP") or a signature guarantee program 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. Fractional certificates
will not be issued. 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 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.
Reports Provided. Unitholders will receive a statement of dividends and other
amounts received by a Trust for each distribution. Within a reasonable time
after the end of each year, each person who was a Unitholder during that year
will receive a statement describing dividends and capital received, actual Trust
distributions, Trust expenses, a list of the Securities and other Trust
information. Unitholders may obtain the Evaluator's evaluations of the
Securities upon request.
TRUST ADMINISTRATION
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Portfolio Administration. The Trusts are not managed funds and, except as
provided in the Trust Agreement, Securities generally will not be sold or
replaced. The Sponsor may, however, direct that Securities be sold in certain
limited circumstances to protect the Trust based on advice from the Supervisor.
These situations may include events such as the issuer having defaulted on
payment of any of its outstanding obligations or the price of a Security has
declined to such an extent or other credit factors exist so that in the opinion
of the Sponsor retention of the Security would be detrimental to the Trust. In
addition, the Trustee may sell Securities to redeem Units or pay Trust expenses
or deferred sales charges. The Trustee must reject any offer for securities or
property in exchange for the Securities. If securities or property are
nonetheless acquired by a Trust, the Sponsor may direct the Trustee to sell the
securities or property and distribute the proceeds to Unitholders or to accept
the securities or property for deposit in the Trust. Should any contract for the
purchase of any of the Securities fail, the Sponsor will (unless substantially
all of the moneys held in the Trust to cover the purchase are reinvested in
substitute Securities in accordance with the Trust Agreement) refund the cash
and sales charge attributable to the failed contract to all Unitholders on or
before the next distribution date.
With respect to The Dow 30SM Index Trust, purchases and sales of Securities
will generally be made in an effort to maintain, to the extent practical, a
portfolio that reflects the current components of the Dow Jones Industrial
AverageSM. If this Trust receives any securities or other property relating to
the Securities in the Trust (such as those acquired in a merger or spin-off),
the Trustee will sell the securities or other property and reinvest the proceeds
in shares of the Security related to the transaction. If a Security is removed
from the Dow Jones Industrial AverageSM, the Trustee will sell the Security and
may reinvest the proceeds into any new securities added as components of the Dow
Jones Industrial AverageSM or into the other Securities if a new component is
not added.
With respect to The Dow 30SM Index Trust, the Sponsor may direct the
reinvestment of proceeds of the sale of Securities if the sale is the direct
result of serious adverse credit factors which, in the opinion of the Sponsor,
would make retention of the Securities detrimental to the Trust. In such as
case, the Sponsor may, but is not obligated to, direct the reinvestment of sale
proceeds in any other securities that meet the criteria for inclusion in these
Trusts on the Initial Date of Deposit. The Sponsor may also instruct the Trustee
to take action necessary to ensure that these Trusts continue to satisfy the
qualifications of a regulated investment company and to avoid imposition of tax
on undistributed income of these Trusts.
When your Trust sells Securities, the composition and diversity of the
Securities in the Trust may be altered. In order to obtain the best price for a
Trust, it may be necessary for the Supervisor to specify minimum amounts
(generally 100 shares) in which blocks of Securities are to be sold. In
effecting purchases and sales of a Trust's portfolio securities, the Sponsor may
direct that orders be placed with and brokerage commissions be paid to brokers,
including brokers which may be affiliated with the Trusts, the Sponsor or
dealers participating in the offering of Units. In addition, in selecting among
firms to handle a particular transaction, the Sponsor may take into account
whether the firm has sold or is selling units of unit investment trusts which it
sponsors.
Amendment of the Trust Agreement. The Trustee and the Sponsor may amend the
Trust Agreement without the consent of Unitholders to correct any provision
which may be defective or to make other provisions that will not adversely
affect Unitholders (as determined in good faith by the Sponsor and the Trustee).
The Trust Agreement may not be amended to increase the number of Units or permit
acquisition of securities in addition to or substitution for the Securities
(except as provided in the Trust Agreement). The Trustee will notify Unitholders
of any amendment.
Termination. Each Trust will terminate on the Mandatory Termination Date or
upon the sale or other disposition of the last Security held in the Trust. A
Trust may be terminated at any time with consent of Unitholders representing
two-thirds of the outstanding Units or by the Trustee when the value of the
Trust is less than $500,000 ($3,000,000 if the value of the Trust has exceeded
$15,000,000) (the "Minimum Termination Value"). Unitholders will be notified of
any termination. The Trustee may begin to sell Securities in connection with a
Trust termination nine business days before, and no later than, the Mandatory
Termination Date. Approximately thirty days before this date, the Trustee will
notify Unitholders of the termination and provide a form enabling qualified
Unitholders to elect an in kind distribution of Securities. See "Rights of
Unitholders--Redemption of Units". This form must be returned at least five
business days prior to the Mandatory Termination Date. Unitholders will receive
a final cash distribution within a reasonable time after the Mandatory
Termination Date (unless the Unitholder has elected an in kind distribution or
is a participant in the final Rollover). All distributions will be net of Trust
expenses and costs. Unitholders will receive a final distribution statement
following termination. The Information Supplement contains further information
regarding termination of the Trusts. See "Additional Information".
Limitations on Liabilities. The Sponsor, Evaluator, Supervisor and Trustee
are under no liability 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 is 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 is not be liable for any action taken by it in good faith under
the Trust Agreement. The Trustee is not liable for any taxes or other
governmental charges imposed on the Securities, on it as Trustee under the Trust
Agreement or on a 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
and Supervisor may rely on any evaluation furnished by the Evaluator and have no
responsibility for the accuracy thereof. Determinations by the Evaluator shall
be made in good faith upon the basis of the best information available to it.
Sponsor. Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the
Trust. The Sponsor is an indirect subsidiary of Morgan Stanley Dean Witter & Co.
Van Kampen Funds Inc. specializes in the underwriting and distribution of unit
investment trusts and mutual funds with roots in money management dating back to
1926. The Sponsor is a member of the National Association of Securities Dealers,
Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
(630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1999, the total stockholders' equity of Van Kampen
Funds Inc. was $141,554,861 (audited). The Information Supplement contains
additional information about the Sponsor.
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 Trusts 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. Additional information
regarding the Trustee is set forth in the Information Supplement, including the
Trustee's qualifications and duties, its ability to resign, the effect of a
merger involving the Trustee and the Sponsor's ability to remove and replace the
Trustee. See "Additional Information".
Performance Information. The Sponsor may from time to time in its advertising
and sales materials compare the then current estimated returns on the Trusts and
returns over specified time periods on other trusts (which may show performance
net of expenses and charges which the Trusts would have charged) with returns on
other taxable investments such as the common stocks comprising the Dow Jones
Industrial Average, the S&P 500, other investment indices, corporate or U.S.
government bonds, bank CDs, money market accounts or money market funds, or with
performance data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc. or various publications, each of which has characteristics
that may differ from those of the Trusts. Information on percentage changes in
the dollar value of Units may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective Unitholders. Total return figures may not be averaged and may not
reflect deduction of the sales charge, which would decrease return. No provision
is made for any income taxes payable. Past performance may not be indicative of
future results. The Trust portfolios are not managed and Unit price and return
fluctuate with the value of common stocks in the portfolios, so there may be a
gain or loss when Units are sold. As with other performance data, performance
comparisons should not be considered representative of the Trust's relative
performance for any future period.
TAXATION
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The Dow 30SM Index Trust. The Trust intends to elect and qualify on a
continuing basis for special federal income tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). If the Trust so qualifies and timely distributes to Unitholders 90% or
more of its taxable income (without regard to its net capital gain, i.e., the
excess of its net long-term capital gain over its net short-term capital loss),
it will not be subject to federal income tax on the portion of its taxable
income (including any net capital gain) that it distributes to Unitholders. In
addition, to the extent the Trust timely distributes to Unitholders at least 98%
of its taxable income (including any net capital gain), it will not be subject
to the 4% excise tax on certain undistributed income of "regulated investment
companies." Because the Trust intends to timely distribute its taxable income
(including any net capital gain), it is anticipated that the Trust will not be
subject to federal income tax or the excise tax.
Distributions to Unitholders of the Trust's taxable income, other than
distributions which are designated as capital gain dividends, will be taxable as
ordinary income to Unitholders, except that to the extent that distributions to
a Unitholder in any year exceed the Trust's current and accumulated earnings and
profits, they will be treated as a return of capital and will reduce the
Unitholder's basis in his Units and, to the extent that they exceed his basis,
will be treated as a gain from the sale of his Units as discussed below.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December payable to Unitholders
of record on a specified date in one of those months and paid during January of
the following year will be treated as having been distributed by the Trust (and
received by the Unitholder) on December 31 of the year such distributions are
declared.
Distributions of the Trust's net capital gain which are properly designated
as capital gain dividends by the Trust will be taxable to Unitholders as
long-term capital gain, regardless of the length of time the Units have been
held by a Unitholder. A Unitholder may recognize a taxable gain or loss if the
Unitholder sells or redeems his Units. Any gain or loss arising from (or treated
as arising from) the sale or redemption of Units will generally be a capital
gain or loss, except in the case of a dealer or a financial institution. The
Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998 Tax
Act") provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term capital loss
for the taxable year) is generally subject to a maximum marginal stated tax rate
of 20% (10% in the case of certain taxpayers in the lowest tax bracket). 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.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes for determining the holding period of the Unit. Capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income. Note that if a Unitholder holds Units for six months or less and
subsequently sells such Units at a loss, the loss will be treated as a long-term
capital loss to the extent that any long-term capital gain distribution is made
with respect to such Units during the six-month period or less that the
Unitholder owns the Units.
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. 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, offsetting
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.
Generally, the tax basis of a Unitholder includes sales charges, and such
charges are not deductible. A portion of the sales charge for the Trust is
deferred. The income (or proceeds from redemption) a Unitholder must take into
account for federal income tax purposes is not reduced by amounts deducted to
pay the deferred sales charge.
Distributions which are taxable as ordinary income to Unitholders will
constitute dividends for federal income tax purposes. When Units are held by
corporate Unitholders, Trust distributions may qualify for the 70% dividends
received deduction, subject to limitations otherwise applicable to the
availability of the deduction, to the extent the distribution is attributable to
dividends received by the Trust from United States corporations (other than real
estate investment trusts) and is designated by the Trust as being eligible for
such 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. The Trust will provide
each Unitholder with information annually concerning what part of the Trust
distributions are eligible for the dividends received deduction.
The Trust may elect to pass through to the Unitholders the foreign income and
similar taxes paid by the Trust in order to enable such Unitholders to take a
credit (or deduction) for foreign income taxes paid by the Trust. If such an
election is made, Unitholders of the Trust, because they are deemed to own a pro
rata portion of the foreign securities held by the Trust, must include in their
gross income, for federal income tax purposes, both their portion of dividends
received by the Trust and also their portion of the amount which the Trust deems
to be the Unitholders' portion of foreign income taxes paid with respect to, or
withheld from, dividends, interest or other income of the Trust from its foreign
investments. Unitholders may then subtract from their federal income tax the
amount of such taxes withheld, or else treat such foreign taxes as deductions
from gross income; however, as in the case of investors receiving income
directly from foreign sources, the above described tax credit or deduction is
subject to certain limitations. The 1997 Tax Act imposes a required holding
period for such credits. Unitholders should consult their tax advisers regarding
this election and its consequences to them.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Trust so long as the Units
are held by or for 500 or more persons at all times during the taxable year or
another exception is met. In the event the Units are held by fewer than 500
persons, additional taxable income may be realized by the individual (and other
noncorporate) Unitholders in excess of the distributions received from the
Trust.
Distributions reinvested into additional Units of the Trust will be taxed to
a Unitholder in the manner described above (i.e., as ordinary income, long-term
capital gain or as a return of capital).
The federal tax status of each year's distributions will be reported to
Unitholders and to the Internal Revenue Service. Each Unitholder will be
requested to provide the Unitholder's taxpayer identification number to the
Trustee and to certify that the Unitholder has not been notified that payments
to the Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up withholding.
The foregoing discussion relates only to the federal income tax status of the
Trust and to the tax treatment of distributions by the Trust to United States
Unitholders.
A Unitholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or trust) should be aware that, generally, subject to applicable tax treaties,
distributions from the Trust which constitute dividends for Federal income tax
purposes (other than dividends which the Trust designates as capital gain
dividends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from the Trust that
are designated by the Trust as capital gain dividends should not be subject to
United States Federal income taxes, including withholding taxes, if all of the
following conditions are met (i) the capital gain dividend is not effectively
connected with the conduct by the foreign investor of a trade or business within
the United States, (ii) the foreign investor (if an individual) is not present
in the United States for 183 days or more during his or her taxable year, and
(iii) the foreign investor provides all certification which may be required of
his status (foreign investors may contact the Sponsor to obtain a Form W-8 which
must be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisers with respect to
United States tax consequences of ownership of Units. Units in the Trust and
Trust distributions may also be subject to state and local taxation and
Unitholders should consult their tax advisers in this regard.
The Dow 30SM Index & Treasury Trust. 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 discussions and opinions, it is
assumed that interest on the Treasury Obligations is included in gross income
for Federal income tax purposes and that the Treasury Obligations are debt for
Federal income tax purposes and that the Equity Securities are 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 each Trust asset when such income is considered to be received by
the Trust.
2. Each 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. 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 a
Security (whether by sale, exchange, liquidation, redemption, payment at
maturity or otherwise) or upon the sale or redemption of Units by such
Unitholder (except to the extent of an In-Kind distribution of stocks 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 Security held by the Trust (in proportion to the fair market
values thereof on the valuation date nearest to the date the Unitholder
purchases his Units) in order to determine his initial tax basis for his pro
rata portion of each Security held by the Trust. A Unitholder's tax basis in his
Units will equal his tax basis in his pro rata portion of all the assets of the
Trust. Such basis is determined (before adjustments described below) by
apportioning the tax basis for the Units among each of the Trust's assets,
according to the value as of the valuation date nearest the date of acquisition
of the Units. Unitholders should consult their own tax advisors with regard to
calculation of basis. The Treasury Obligations are treated as stripped bonds and
may be treated as bonds issued at an original issue discount as of the date a
Unitholder purchases his Units. Because the Treasury Obligations represent
interests in "stripped" U.S. Treasury bonds, a Unitholder's tax basis for his
pro rata portion of each Treasury Obligation held by the Trust shall be treated
as its "purchase price" by the Unitholder. Original issue discount is
effectively treated as interest for federal income tax purposes and the amount
of original issue discount in this case is generally the difference between the
bond's purchase price and its stated redemption price at maturity. A Unitholder
will be required to include in gross income for each taxable year the sum of his
daily portions of original issue discount attributable to the Treasury
Obligations held by the Trust as such original issue discount accrues and will
in general be subject to federal income tax with respect to the total amount of
such original issue discount that accrues for such year even though the income
is not distributed to the Unitholders during such year to the extent it is not
less than a "de minimis" amount as determined under Treasury Regulations
relating to stripped bonds. To the extent the amount of such discount is less
than the respective "de minimis" amount, such discount is generally treated as
zero. In general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual compounding of
accrued interest. In the case of Treasury Obligations, this method will
generally result in an increasing amount of income to the Unitholders each year.
Unitholders should consult their tax advisers regarding the federal income tax
consequences and accretion of original issue discount. For federal income tax
purposes, a Unitholder's pro rata portion of dividends as defined by Section 316
of the Code paid by a corporation with respect to an Equity Security held by the
Trust are taxable as ordinary income to the extent of such corporation's current
and accumulated "earnings and profits." A Unitholder's pro rata portion of
dividends paid on such Equity Security which exceed such current and accumulated
earnings and profits will first reduce 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 of 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 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 Securities held by the Trust will
generally be considered a capital loss (except in the case of a dealer or a
financial institution) and, in general, will be long-term if the Unitholder has
held his Units for more than one year. Unitholders should consult their tax
advisers regarding the recognition of such capital gains and losses for federal
income tax purposes.
Dividends Received Deduction. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such Unitholder's
pro rata portion of dividends received by the Trust (to the extent such
dividends are taxable as ordinary income, as discussed above 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 period 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. Unitholders should consult with their
tax advisers with respect to the limitations on the dividends received
deduction.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. As a result of the Tax Reform Act of 1986, certain miscellaneous
itemized deductions, such as investment expenses, tax return preparation fees
and employee business expenses will be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss upon Disposition of Securities by a Trust
or Disposition of Units. The Internal Revenue Service Restructuring and Reform
Act of 1998 (the "1998 Tax Act") provides that for taxpayers other than
corporations, net capital gain (which is defined as net long-term capital gain
over net short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax rate of
20% (10% in the case of certain taxpayers in the lowest tax bracket). 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.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes for determining the holding period of the Unit. Capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income.
The Revenue Reconciliation Act of 1993 recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after April
30, 1993. Unitholders and their prospective investors should consult with their
tax advisers regarding the potential effect of this provision on their
investment in Units.
If the Unitholder disposes of a Unit, he or she is deemed thereby to have
disposed of his or her entire pro rata interest in all assets of the Trust
involved, including his or her pro rata portion of all the Securities
represented by the Unit. The Taxpayer Relief Act of 1997 includes provisions
that treat certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures, forward contracts or similar transactions) as constructive
sales for purposes of recognition of gain (but not loss). Unitholders should
consult their own tax advisers with regard to any such constructive sales rules.
Special Tax Consequences of In Kind Distributions upon Redemption of Units or
Termination of a 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." Treasury Obligations will not
be distributed to a Unitholder as part of an In Kind Distribution. The tax
consequences relating to the sale of Treasury Obligations are discussed above.
As previously discussed, prior to the redemption of Units or the termination of
the Trust, a Unitholder is considered as owning a pro rata portion of each of
the Trust assets for federal income tax purposes. The receipt of an In Kind
Distribution will result in a Unitholder receiving an undivided interest in
whole shares of stock plus, possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
will depend on whether 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 (and does not include the Treasury
Obligations). A Unitholder will not recognize gain or loss with respect to the
Equity Securities if a Unitholder only receives Equity Securities in exchange
for his or her pro rata portion in each share of 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
the Equity Security held by the Trust. In either case, a Unitholder who receives
cash in exchange for his interest in the Treasury Obligations will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in the Treasury Obligations.
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 for his
Units. The cost of the Units is allocated among his pro rata portion of the
Securities held in the Trust in accordance with the proportion of the fair
market values of such Securities on the valuation date nearest the date the
Units are purchased in order to determine such Unitholder's tax basis for his
pro rata portion of each Security.
A Unitholder's tax basis in his Units and his pro rata portion of an Equity
Security will be reduced to the extent dividends paid with respect to such
Security are received by the Trust which are not taxable as ordinary income as
described above. A Unitholder's tax basis in his Units and his pro rata portion
of a Treasury Obligation is increased by the amount of original issue discount
thereon property included in the Unitholder's gross income for federal income
tax purposes.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the Unitholder
has not been notified 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 (accrual of
original issue discount on the Treasury Obligations may not be subject to
taxation or withholding provided certain requirements are met). Such persons
should consult their tax advisers.
Unitholders will be notified annually of the amounts of original issue
discount, dividend income and long-term capital gain distributions includable in
the Unitholder's gross income and amounts of Trust expenses which may be claimed
as itemized deductions.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders with regard to federal and certain aspects of New York State and
City income taxes. Unitholders may be subject to state and local taxation in
other jurisdictions. Unitholders should consult their tax advisers regarding
potential foreign, state or local taxation with respect to the Units. The term
U.S. Unitholder means an owner of a Unit of the Trust that is (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
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Compensation of Sponsor, Supervisor and Evaluator. The Sponsor will not
receive any fees in connection with its activities relating to the Trusts.
However, the Supervisor and Evaluator, which are affiliates of the Sponsor, will
receive the annual fee for portfolio supervisory and evaluation services set
forth in the "Summary of Essential Financial Information" in Part One. These
fees may exceed the actual costs of providing these services to the Trusts but
at no time will the total amount received for supervisory and evaluation
services rendered to all Van Kampen unit investment trusts in any calendar year
exceed the aggregate cost of providing these services in that year.
Trustee's Fee. For its services the Trustee will receive the fee from each
Trust set forth in the "Summary of Essential Financial Information" in Part One.
(which includes the estimated amount of miscellaneous Trust expenses). The
Trustee benefits to the extent there are funds in the Capital and Income
Accounts since these Accounts are non-interest bearing to Unitholders and the
amounts earned by the Trustee are retained by the Trustee. Part of the Trustee's
compensation for its services to each Trust is expected to result from the use
of these funds.
Miscellaneous Expenses. The following additional charges are or may be
incurred by a Trust: (a) normal expenses (including the cost of mailing reports
to Unitholders) incurred in connection with the operation of such 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 a Trust and the rights and interests of
Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of a Trust without negligence, bad faith
or wilful misconduct on its part, (g) foreign custodial and transaction fees,
(h) costs associated with liquidating the securities held in a Trust portfolio,
(i) any offering costs incurred after the end of the initial offering period and
(j) expenditures incurred in contacting Unitholders upon termination of a Trust.
The Trusts will also pay a license fee to Dow Jones & Company, Inc. for use of
certain service marks. Your Trust may pay the expenses of updating its
registration statements each year. Unit investment trust sponsors have
historically paid these expenses.
General. The fees and expenses of a Trust will accrue on a daily basis. The
fees and expenses are generally paid out of the Capital Account of the related
Trust. When these amounts are paid by or owing to the Trustee, they are secured
by a lien on the related Trust's portfolio. It is expected that Securities will
be sold to pay these amounts which will result in capital gains or losses to
Unitholders. See "Taxation". The Trustee may not sell U.S. Treasury obligations
in The Dow 30SM Index & Treasury Trust to pay expenses unless the maturity value
of the U.S. Treasury obligations remaining in the portfolio after the sale
equals at least $11 per Unit. The Supervisor's, Evaluator's and Trustee's 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 or, if this category is not published, in a
comparable category.
OTHER MATTERS
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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 & Strawn has acted as counsel to the Trustee
and as special counsel for New York tax matters.
Independent Certified Public Accountants. The statements of condition and the
related portfolios 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.
ADDITIONAL INFORMATION
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This Prospectus does not contain all the information set forth in the
Registration Statement filed by the Trusts with the SEC. The Information
Supplement, which has been filed with the SEC, includes more detailed
information concerning the Securities, investment risks and general information
about the Trusts. The Information Supplement may be obtained by contacting the
Trustee at (800) 856-8487 or is available along with other related materials at
the SEC's internet site (http://www.sec.gov).
TABLE OF CONTENTS
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Title Page
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The Trusts.................................. 2
Objectives and Securities Selection......... 2
Risk Factors................................ 4
Public Offering............................. 5
Rights of Unitholders....................... 8
Trust Administration........................ 10
Taxation.................................... 12
Trust Operating Expenses.................... 18
Other Matters............................... 19
Additional Information...................... 19
PROSPECTUS
PART TWO
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August 3, 1999
Van Kampen
Focus Portfolios(SM)
A Division of Van Kampen Funds Inc.
The Dow 30SM Index Trust
The Dow 30SM Index & Treasury Trust
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this prospectus for future reference.
Van Kampen Focus Portfolios (SM)
A division of Van Kampen Funds Inc.
Great International Firms Trust Prospectus Part Two
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The Fund. The Great International Firms Trust (the "Trust") is one of several
unit investment trusts created under separate series of Van Kampen American
Capital Equity Opportunity Trust, Van Kampen Equity Opportunity Trust or Van
Kampen Focus Portfolios (the "Fund"). The Trust offers investors the opportunity
to purchase Units representing proportionate interests in a fixed, globally
diversified portfolio of equity securities primarily issued by blue chip
international companies, all of which are common stocks of foreign issuers
("Equity Securities" or "Securities"). Unless terminated earlier, the Trust will
terminate on the Mandatory Termination Date set forth under "Summary of
Essential Financial 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 may be subject to U.S. federal
withholding. See "Federal Taxation." Such investors should consult their tax
advisers regarding the imposition of U.S. withholding on distributions.
Objective of the Trust. The objective of the Trust is to provide the
potential for capital appreciation by investing in a globally diversified
portfolio of equity securities primarily issued by blue chip international
companies. See "Objectives and Securities Selection." There is, of course, no
guarantee that the objective 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 applicable sales charge, and cash, if any, in the Income and
Capital Accounts held or owned by the Trust. The Public Offering Price is based
on the aggregate value of the Securities computed on the basis of the bid side
value of the exchange rate for the relevant currency expressed in U.S. dollars.
For sales charges in the secondary market, see "Public Offering." The minimum
purchase is 100 Units except for certain transactions described under "Public
Offering--Unit Distribution". See "Public Offering."
Units of the Trust are not deposits or obligations of, or guaranteed or
endorsed by, any bank and are not federally insured or otherwise protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency and involve investment risk, including the possible loss of
principal.
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 I accompanying this
Prospectus Part II.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dividend and Capital Distributions. Distributions of dividends and capital,
if any, received by the Trust will be paid in cash on the applicable
Distribution Date to Unitholders of record on the record date as set forth in
the "Summary of Essential Financial Information" in Part One. Any distribution
of income and/or capital will be net of the expenses of the Trust. See "Federal
Taxation." Additionally, upon termination of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unitholder his pro
rata share of the Trust's assets, less expenses, in the manner set forth under
"Rights of Unitholders--Distributions of Income and Capital."
Secondary Market for Units. Although not obligated to do so, the Sponsor
intends to maintain a market for Units of the Trust and offer to repurchase such
Units at prices which are based on the aggregate underlying value of Equity
Securities in the Trust (generally determined by the closing sale or bid prices
of the 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. See "Rights of
Unitholders--Redemption of Units."
Termination. Commencing on the Mandatory Termination Date Equity Securities
will begin to be sold in connection with the termination of the Trust. The
Sponsor will determine the manner, timing and execution of the sale of the
Equity Securities. Written notice of any termination of the Trust specifying the
time or times at which Unitholders may surrender their certificates for
cancellation shall be given by the Trustee to each Unitholder at his address
appearing on the registration books of the Trust maintained by the Trustee. At
least 30 days prior to the Mandatory Termination Date the Trustee will provide
written notice thereof to all Unitholders. Unitholders will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
after the Trust is terminated. See "Trust Administration--Amendment or
Termination."
Reinvestment Option. Unitholders of any Van Kampen American Capital-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase units of any other Van Kampen American Capital trust in the initial
offering period accepting rollover investments subject to a reduced sales charge
to the extent stated in the related prospectus (which may be deferred in certain
cases).
Unitholders will have the opportunity to have their distributions reinvested
into additional Units of the Trust, subject to any remaining deferred sales
charge payments, if Units are available at the time of reinvestment, or, upon
request, reinvested into an open-end management investment company as described
herein. See "Rights of Unitholders--Reinvestment Option."
Risk Factors. An investment in the Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and currency fluctuations, the lack of adequate financial
information concerning an issuer and exchange control restrictions impacting
foreign issuers. See "Risk Factors" and "Trust Portfolio."
THE TRUST
Van Kampen American Capital Equity Opportunity Trust is comprised of separate
and distinct unit investment trusts, including series of the Great International
Firms 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, Van Kampen American
Capital Investment Advisory Corp., as Supervisor, and The Bank of New York, as
Trustee.
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 accordingly, although the actual interest in the Trust represented
by such fraction will remain unchanged. Units will remain outstanding until
redeemed upon tender to the Trustee by Unitholders, which may include the
Sponsor, or until the termination of the Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objective of the Trust is to provide the potential for capital
appreciation. The portfolio is described below under "Trust Portfolio" and in
"Portfolio" in Part One. In selecting the Securities, the Sponsor considered the
following factors, among others: the extent to which the issuers are global
leaders in their respective markets and industries; the extent to which the
issuers are leading companies within their home markets; the attractiveness of
the Securities based on an evaluation of return on equity, price to earnings
ratios and price to cash flows; and the diversification of the Trust portfolio
by countries and industries. The Sponsor attempted to select companies from
developed, industrialized countries that are well-capitalized world and market
leaders, exhibit attractive balance sheets and offer a diversified line of
products and/or services. The Trust seeks to provide investors with the
potential for greater rewards from a diversified international investment
portfolio.
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 note that the above criteria were applied to the Equity
Securities selected for inclusion in the Trust as of the Initial Date of
Deposit. Subsequent to the Initial Date of Deposit, the Securities may no longer
meet such criteria. Should an Equity Security no longer meet such criteria, such
Equity Security will not, simply as a result of such fact, be removed from the
portfolio of the Trust.
Investors should be aware that the Trust is not a "managed" fund and as a
result the adverse financial condition of a company will not result in its
elimination from the portfolio except under extraordinary circumstances (see
"Trust Administration--Portfolio Administration"). In addition, Securities will
not be sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Investors should note in particular that the
Securities were selected by the Sponsor as of the Initial Date of Deposit. The
Trust may continue to purchase or hold Securities originally selected through
this process even though the evaluation of the attractiveness of the Securities
may have changed and, if the evaluation were performed again at that time, the
Securities would not be selected for the Trust.
TRUST PORTFOLIO
The Trust consists of Equity Securities which are primarily issued by blue
chip international companies, all of which are common stocks of foreign issuers.
All of the Equity Securities are listed on a national or foreign securities
exchange or are traded in the over-the-counter market.
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. See "Trust Administration--Portfolio Administration."
Equity Securities, however, will not be sold by the Trust to take advantage of
market fluctuations or changes in anticipated rates of appreciation or
depreciation.
RISK FACTORS
General. 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, and global or
regional political, economic or banking crises. Shareholders of common stocks
have rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or preferred stocks of, such issuers. Shareholders of common stocks of the type
held by the Trust have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and have a right to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. Common stocks do not
represent an obligation of the issuer and, therefore, do not offer any assurance
of income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends which could
adversely affect the ability and inclination of the issuer to declare or pay
dividends on its common stock or the rights of holders of common stock with
respect to assets of the issuer upon liquidation or bankruptcy. The value of
common stocks is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the 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.
The Trust Agreement authorizes the Sponsor to increase the size of the Trust
and the number of Units thereof by the deposit of additional Securities, or cash
(including a letter of credit) with instructions to purchase additional
Securities, in the Trust and the issuance of a corresponding number of
additional Units. If the Sponsor deposits cash, existing and new investors may
experience a dilution of their investments and a reduction in their anticipated
income because of fluctuations in the prices of the Securities between the time
of the cash deposit and the purchase of the Securities and because the Trust
will pay the associated brokerage fees. To minimize this effect, the Trust will
attempt to purchase the Securities as close to the Evaluation Time or as close
to the evaluation prices as possible.
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 same general proportion as
are shares held by owners other than the Trust.
Foreign Equity Risks. Since the Equity Securities consist of securities of
foreign issuers, an investment in the Trust involves certain investment risks
that are different in some respects from an investment in a trust which invests
entirely in the securities of domestic issuers. These investment risks include
future political or governmental restrictions which might adversely affect the
payment or receipt of payment of dividends on the relevant Equity Securities,
the possibility that the financial condition of the issuers of the Equity
Securities may become impaired or that the general condition of the relevant
stock market may worsen (both of which would contribute directly to a decrease
in the value of the Equity Securities and thus in the value of the Units), the
limited liquidity and relatively small market capitalization of the relevant
securities market, expropriation or confiscatory taxation, economic
uncertainties and foreign currency devaluations and fluctuations. In addition,
for foreign issuers that are not subject to the reporting requirements of the
Securities Exchange Act of 1934, there may be less publicly available
information than is available from a domestic issuer. Also, foreign issuers are
not necessarily subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
issuers. The securities of many foreign issuers are less liquid and their prices
more volatile than securities of comparable domestic issuers. In addition, fixed
brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States and there is generally
less government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. However, due to the nature
of the issuers of the Equity Securities, the Sponsor believes that adequate
information will be available to allow the Supervisor to provide portfolio
surveillance for the Trust.
Equity securities issued by non-U.S. issuers generally pay dividends in
foreign currencies and are principally traded in foreign currencies. Therefore,
there is a risk that the United States dollar value of these securities will
vary with fluctuations in the U.S. dollar foreign exchange rates for the various
Equity Securities. See "Exchange Rate" below.
On the basis of the best information available to the Sponsor at the present
time, none of the Equity Securities are subject to exchange control restrictions
under existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from the sale of, the Equity Securities. However,
there can be no assurance that exchange control regulations might not be adopted
in the future which might adversely affect payment to the Trust. In addition,
the adoption of exchange control regulations and other legal restrictions could
have an adverse impact on the marketability of international securities in the
Trust and on the ability of the Trust to satisfy its obligation to redeem Units
tendered to the Trustee for redemption.
Investors should be aware that it may not be possible to buy all Equity
Securities at the same time because of the unavailability of any Equity
Security, and restrictions applicable to the Trust relating to the purchase of
an Equity Security by reason of the federal securities laws or otherwise.
Foreign securities generally have not been registered under the Securities
Act of 1933 and may not be exempt from the registration requirements of such
Act. Sales of non-exempt Equity Securities by the Trust in the United States
securities markets are subject to severe restrictions and may not be
practicable. Accordingly, sales of these Equity Securities by the Trust will
generally be effected only in foreign securities markets. Although the Sponsor
does not believe that the Trust will encounter obstacles in disposing of the
Equity Securities, investors should realize that the Equity Securities may be
traded in foreign countries where the securities markets are not as developed or
efficient and may not be as liquid as those in the United States. The value of
the Equity Securities will be adversely affected if trading markets for the
Equity Securities are limited or absent.
Exchange Rate. The Trust is concentrated in Equity Securities that are
principally traded in foreign currencies and as such involves investment risks
that are substantially different from an investment in a fund which invests in
securities that are principally traded in United States dollars. The United
States dollar value of the portfolio (and hence of the Units) and of the
distributions from the portfolio will vary with fluctuations in the United
States dollar foreign exchange rates for the related foreign currencies. Most
foreign currencies have fluctuated widely in value against the United States
dollar for many reasons, including supply and demand of the respective currency,
the rate of inflation in the respective economies compared to the United States,
the impact of interest rate differentials between different currencies on the
movement of foreign currency rates, the balance of imports and exports of goods
and services, the soundness of the world economy and the strength of the
respective economy as compared to the economies of the United States and other
countries.
The post-World War II international monetary system was, until 1973,
dominated by the Bretton Woods Treaty, which established a system of fixed
exchange rates and the convertibility of the United States dollar into gold
through foreign central banks. Starting in 1971, growing volatility in the
foreign exchange markets caused the United States to abandon gold convertibility
and to effect a small devaluation of the United States dollar. In 1973, the
system of fixed exchange rates between a number of the most important industrial
countries of the world, among them the United States and most western European
countries, was completely abandoned. Subsequently, major industrialized
countries have adopted "floating" exchange rates, under which daily currency
valuations depend on supply and demand in a freely fluctuating international
market. Many smaller or developing countries have continued to "peg" their
currencies to the United States dollar although there has been some interest in
recent years in "pegging" currencies to "baskets" of other currencies or to a
Special Drawing Right administered by the International Monetary Fund.
Currencies are generally traded by leading international commercial banks and
institutional investors (including corporate treasurers, money managers, pension
funds and insurance companies). From time to time, central banks in a number of
countries also are major buyers and sellers of foreign currencies, mostly for
the purpose of preventing or reducing substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of actual and
proposed government policies on the value of currencies, interest rate
differentials between the currencies and the balance of imports and exports of
goods and services and transfers of income and capital from one country to
another. These economic factors are influenced primarily by a particular
country's monetary and fiscal policies (although the perceived political
situation in a particular country may have an influence as well--particularly
with respect to transfers of capital). Investor psychology may also be an
important determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative strength or
weakness of a particular currency may sometimes exercise considerable
speculative influence on currency exchange rates by purchasing or selling large
amounts of the same currency or currencies. However, over the long term, the
currency of a country with a low rate of inflation and a favorable balance of
trade should increase in value relative to the currency of a country with a high
rate of inflation and deficits in the balance of trade.
The Evaluator will estimate the current exchange rate for the appropriate
foreign currencies based on activity in the related currency exchange market.
However, since this market may be volatile and is constantly changing, depending
on the activity at any particular time of the large international commercial
banks, various central banks, large multi-national corporations, speculators and
other buyers and sellers of foreign currencies, and since actual foreign
currency transactions may not be instantly reported, the exchange rates
estimated by the Evaluator may not be indicative of the amount in United States
dollars the Trust would receive had the Trustee sold any particular currency in
the market. The foreign exchange transactions of the Trust will be concluded by
the Trustee with foreign exchange dealers acting as principals on a spot (i.e.,
cash) buying basis. Although foreign exchange dealers trade on a net basis, they
do realize a profit based upon the difference between the price at which they
are willing to buy a particular currency (bid price) and the price at which they
are willing to sell the currency (offer price).
FEDERAL TAXATION
Great International Firms Trust intends to elect and qualify on a continuing
basis for special federal income tax treatment as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). If
the Trust so qualifies and timely distributes to Unitholders 90% or more of its
taxable income (without regard to its net capital gain, i.e., the excess of its
net long-term capital gain over its net short-term capital loss), it will not be
subject to federal income tax on the portion of its taxable income (including
any net capital gain) that it distributes to Unitholders. In addition, to the
extent the Trust timely distributes to Unitholders at least 98% of its taxable
income (including any net capital gain), it will not be subject to the 4% excise
tax on certain undistributed income of "regulated investment companies." Because
the Trust intends to timely distribute its taxable income (including any net
capital gain), it is anticipated that the Trust will not be subject to federal
income tax or the excise tax.
Distributions to Unitholders of the Trust's taxable income, other than
distributions which are designated as capital gain dividends, will be taxable as
ordinary income to Unitholders, except that to the extent that distributions to
a Unitholder in any year exceed the Trust's current and accumulated earnings and
profits, they will be treated as a return of capital and will reduce the
Unitholder's basis in his Units and, to the extent that they exceed his basis,
will be treated as a gain from the sale of his Units as discussed below.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December payable to Unitholders
of record on a specified date in one of those months and paid during January of
the following year will be treated as having been distributed by the Trust (and
received by the Unitholder) on December 31 of the year such distributions are
declared.
Distributions of the Trust's net capital gain which are properly designated
as capital gain dividends by the Trust will be taxable to Unitholders as
long-term capital gain, regardless of the length of time the Units have been
held by a Unitholder. A Unitholder may recognize a taxable gain or loss if the
Unitholder sells or redeems his Units. Any gain or loss arising from (or treated
as arising from) the sale or redemption of Units will generally be a capital
gain or loss, except in the case of a dealer or a financial institution. The
Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998 Tax
Act") provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term capital loss
for the taxable year) is generally subject to a maximum marginal stated tax rate
of 20% (10% in the case of certain taxpayers in the lowest tax bracket). 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.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes for determining the holding period of the Unit. Capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income. Note, however, that the 1998 Tax Act and the Taxpayer Relief Act of 1997
(the "1997 Tax Act") provide that the application of the rules described above
in the case of pass-through entities such as the Trust will be prescribed in
future Treasury Regulations. Note that if a Unitholder holds Units for six
months or less and subsequently sells such Units at a loss, the loss will be
treated as a long-term capital loss to the extent that any long-term capital
gain distribution is made with respect to such Units during the six-month period
or less that the Unitholder owns the Units.
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. 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, offsetting 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.
Generally, the tax basis of a Unitholder includes sales charges, and such
charges are not deductible. A portion of the sales charge for the Trust is
deferred. The income (or proceeds from redemption) a Unitholder must take into
account for federal income tax purposes is not reduced by amounts deducted to
pay the deferred sales charge.
Distributions which are taxable as ordinary income to Unitholders will
constitute dividends for federal income tax purposes. When Units are held by
corporate Unitholders, Trust distributions may qualify for the 70% dividends
received deduction, subject to limitations otherwise applicable to the
availability of the deduction, to the extent the distribution is attributable to
dividends received by the Trust from United States corporations (other than Real
Estate Investment Trusts) and is designated by the Trust as being eligible for
such 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. The Trust will provide
each Unitholder with information annually concerning what part of the Trust
distributions are eligible for the dividends received deduction.
The Trust may elect to pass through to the Unitholders the foreign income and
similar taxes paid by the Trust in order to enable such Unitholders to take a
credit (or deduction) for foreign income taxes paid by the Trust. If such an
election is made, Unitholders of the Trust, because they are deemed to own a pro
rata portion of the foreign securities held by the Trust, must include in their
gross income, for federal income tax purposes, both their portion of dividends
received by the Trust and also their portion of the amount which the Trust deems
to be the Unitholders' portion of foreign income taxes paid with respect to, or
withheld from, dividends, interest or other income of the Trust from its foreign
investments. Unitholders may then subtract from their federal income tax the
amount of such taxes withheld, or else treat such foreign taxes as deductions
from gross income; however, as in the case of investors receiving income
directly from foreign sources, the above described tax credit or deduction is
subject to certain limitations. The 1997 Tax Act imposes a required holding
period for such credits. Unitholders should consult their tax advisers regarding
this election and its consequences to them.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Trust so long as the Units
are held by or for 500 or more persons at all times during the taxable year or
another exception is met. In the event the Units are held by fewer than 500
persons, additional taxable income may be realized by the individual (and other
noncorporate) Unitholders in excess of the distributions received from the
Trust.
Distributions reinvested into additional Units of the Trust will be taxed to
a Unitholder in the manner described above (i.e., as ordinary income, long-term
capital gain or as a return of capital).
The federal tax status of each year's distributions will be reported to
Unitholders and to the Internal Revenue Service. Each Unitholder will be
requested to provide the Unitholder's taxpayer identification number to the
Trustee and to certify that the Unitholder has not been notified that payments
to the Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up withholding.
The foregoing discussion relates only to the federal income tax status of the
Trust and to the tax treatment of distributions by the Trust to United States
Unitholders.
A Unitholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or trust) should be aware that, generally, subject to applicable tax treaties,
distributions from the Trust which constitute dividends for Federal income tax
purposes (other than dividends which the Trust designates as capital gain
dividends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from the Trust that
are designated by the Trust as capital gain dividends should not be subject to
United States Federal income taxes, including withholding taxes, if all of the
following conditions are met (i) the capital gain dividend is not effectively
connected with the conduct by the foreign investor of a trade or business within
the United States, (ii) the foreign investor (if an individual) is not present
in the United States for 183 days or more during his or her taxable year, and
(iii) the foreign investor provides all certification which may be required of
his status (foreign investors may contact the Sponsor to obtain a Form W-8 which
must be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisers with respect to
United States tax consequences of ownership of Units. Units in the Trust and
Trust distributions may also be subject to state and local taxation and
Unitholders should consult their tax advisers in this regard.
TRUST OPERATING EXPENSES
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, Van Kampen
Investment Advisory Corp., which is an affiliate of the Sponsor, will receive an
annual supervisory fee, which is not to exceed the amount set forth under
"Summary of Essential Financial Information" in Part One for providing portfolio
supervisory services for the Trust. Such fee (which is based on the number of
Units outstanding on January 1 of each year for which such compensation relates)
may exceed the actual costs of providing such supervisory services for this
Trust, but at no time will the total amount received for portfolio supervisory
services rendered to all unit investment trusts sponsored by the Sponsor for
which the Supervisor provides portfolio supervisory services in any calendar
year exceed the aggregate cost to the Supervisor of supplying such services in
such year. In addition, the Evaluator, which is a division of Van Kampen
Investment Advisory Corp., shall receive the annual per Unit evaluation fee set
forth under "Summary of Essential Financial Information" in Part One (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 foregoing fees are payable as described under "General" below. Both of the
foregoing fees may be increased without approval of the Unitholders by amounts
not exceeding proportionate increases under the category "All Services Less Rent
of Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a comparable
category. The Sponsor will receive sales commissions and may realize other
profits (or losses) in connection with the sale of Units and the deposit of the
Securities as described under "Public Offering--Sponsor Compensation."
Trustee's Fee. For its services the Trustee will receive the annual per Unit
fee from the Trust set forth under "Summary of Essential Financial Information"
in Part One (which amount is based on the number of Units outstanding on January
1 of each year for which such compensation relates). The Trustee's fees are
payable 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) foreign custodial and transaction fees, (h) accrual
of costs associated with liquidating securities, and (i) expenditures incurred
in contacting Unitholders upon termination of the Trust. The fees and expenses
set forth herein are payable as described under "General" below.
General. The fees and expenses set forth herein are payable monthly out of
the Income Account of the Trust or, if insufficient, from the Capital Account.
When such fees and expenses are paid by or owing to the Trustee, they are
secured by a lien on the Trust's portfolio. Since the Equity Securities are all
common stocks, and the income stream produced by dividend payments is
unpredictable, the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of the Trust. If the balance in the
Income and Capital Accounts is insufficient to provide for amounts payable by
the Trust, the Trustee has the power to sell Equity Securities to pay such
amounts. These sales may result in capital gains or losses to Unitholders. See
"Federal Taxation."
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate underlying value of the Securities in the
Trust's portfolio, the applicable sales charge described below, and cash, if
any, in the Income and Capital Accounts held or owned by the Trust. The sales
charge is described under "Summary of Essential Financial Information" and will
be reduced by .5% of 1% annually to a minimum sales charge of 3.4% for Series 1
and 3.0% for Series 2 and subsequent series. The Sponsor currently does not
intend to maintain a secondary market for Units during the last six months of a
Trust's term. The Public Offering Price per Unit is based on the U.S. dollar
value of the Securities based on the bid side value of the related currency
exchange rate as of the Evaluation Time for secondary market transactions.
Any sales charge reduction will primarily be the responsibility of the
selling broker, dealer or agent.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons) of Van Kampen Funds Inc. and its affiliates,
dealers and their affiliates, and vendors providing services to the Sponsor may
purchase Units at the Public Offering Price less the applicable dealer
concession.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge reduction
for quantity purchases) less the concession the Sponsor typically allows to
brokers and dealers for purchases (see "Public Offering--Unit Distribution") by
(1) investors who purchase Units through registered investment advisers,
certified financial planners and registered broker-dealers who in each case
either charge periodic fees for financial planning, investment advisory or asset
management service, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap fee"
charge is imposed, (2) bank trust departments investing funds over which they
exercise exclusive discretionary investment authority and that are held in a
fiduciary, agency, custodial or similar capacity, (3) any person who for at
least 90 days, has been an officer, director or bona fide employee of any firm
offering Units for sale to investors or their spouses and children and (4)
officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything to
the contrary in this Prospectus, such investors, bank trust departments, firm
employees and bank holding company officers and directors who purchase Units
through this program will not receive sales charge reductions for quantity
purchases.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in accordance
with fluctuations in the prices of the underlying Securities in the Trust. The
Public Offering Price is based on the aggregate value of the Securities computed
on the basis of the bid side value of the related currency exchange rate at the
Evaluation Time expressed in U.S. dollars during the secondary market.
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 imposed on Units 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 Capital Account.
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 (except as stated below) 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 next
computation of net asset value on each such day. Orders received by the Trustee
or Sponsor for purchases, sales or redemptions after that time, or on a day when
the New York Stock Exchange is closed, will be held until the next determination
of price. No such evaluation will be made on any date on which Securities
representing greater than 33% (20% in the case of Series 1) of the aggregate
value of the Trust are not traded on the principal trading exchange for such
Securities due to a customary business holiday on such exchange. Accordingly,
purchases or redemptions of Units on such a day will be based on the next
determination of price of the Securities (and the price of such Units would be
the next computed Unit price).
The aggregate underlying 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 or foreign 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. The
evaluation of a Security traded on a foreign securities exchange will take into
consideration any event or announcement occurring after the close of the related
foreign securities exchange and prior to the Evaluation Time which could have a
material affect on the value of such Security. If the Equity Securities are not
listed on a national or foreign securities exchange 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. The value of the Equity Securities is
based on the bid side value of the currency exchange rate expressed in U.S.
dollars as of the Evaluation Time.
In offering the Units to the public, neither the Sponsor nor any
broker-dealers are recommending any of the individual Securities in the Trust
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. Units will be distributed to the public by the Sponsor,
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. Any
discount provided to investors will be borne by the selling dealer or agent as
indicated under "General" above. For secondary market transactions, the
broker-dealer concession or agency commission will amount to 70% of the sales
charge applicable to the transaction. The breakpoint concessions or agency
commissions are applied on either a Unit or a dollar basis utilizing a
breakpoint equivalent of $10 per Unit and will be applied on whichever basis is
more favorable to the broker-dealer. The breakpoints will be adjusted to take
into consideration purchase orders stated in dollars which cannot be completely
fulfilled due to the requirement that only whole Units be issued.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the agency
commission referred to above) is retained by or remitted to the banks. Under the
Glass-Steagall Act, banks are prohibited from underwriting Trust Units; however,
the Glass-Steagall Act does permit certain agency transactions and the banking
regulators have not indicated that these particular agency transactions are not
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 100 Units except as stated
herein. In connection with fully disclosed transactions with the Sponsor, the
minimum purchase requirement will be that number of Units set forth in the
contract between the Sponsor and the related broker or agent. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units and to change the amount of the concession or agency commission to dealers
and others from time to time.
Sponsor Compensation. The Sponsor will receive a gross sales commission equal
to the total sales charge imposed on Units, less any reduced sales charge (as
described under "General" above). Any discount provided to investors will be
borne by the selling broker, dealer or agent as indicated under "General" above.
In addition, the Sponsor realized a profit or will sustained a loss, as the
case may be, as a result of the difference between the price paid for the
Securities by the Sponsor and the cost of such Securities to the Trust on the
Initial Date of Deposit as well as on subsequent deposits. The Sponsor has not
participated as sole underwriter or as manager or as a member of the
underwriting syndicates or as an agent in a private placement for any of the
Securities in the Trust portfolio. The Sponsor may have further realized
additional profit or loss during the initial offering period as a result of the
possible fluctuations in the market value of the Securities in the Trust after a
date of deposit, since all proceeds received from purchasers of Units (excluding
dealer concessions and agency commissions allowed, if any) will be retained by
the Sponsor.
Broker-dealers of the Trust, banks and/or others may be eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their representatives who have sold a minimum number of units
or unit investment trusts created by the Sponsor during a specified time period.
In addition, at various times the Sponsor may implement other programs under
which the sales forces of brokers, dealers, banks and/or others may be eligible
to win other nominal awards for certain sales efforts, or under which the
Sponsor will reallow to such brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by the
Sponsor, or participate in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales generated by such
persons at the public offering price during such programs. Also, the Sponsor in
its discretion may from time to time pursuant to objective criteria established
by the Sponsor pay fees to qualifying entities for certain services or
activities which are primarily intended to result in sales of Units of the
Trust. Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trust. These programs will not change the price Unitholders
pay for their Units or the amount that the Trust will receive from the Units
sold.
A person will become the owner of Units on the date of settlement provided
payment has been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used in the Sponsor's
business and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor intends to maintain a
secondary market for Units of the Trust for the period indicated. In so
maintaining a market, the Sponsor will also realize profits or sustain losses in
the amount of any difference between the price at which Units are purchased and
the price at which Units are resold (which price includes the applicable sales
charge). In addition, the Sponsor will also realize profits or sustain losses
resulting from a redemption of such repurchased Units at a price above or below
the purchase price for such Units, respectively.
Public Market. Although it is obligated to do so, the Sponsor intends to
maintain a market for the Units offered hereby and offer continuously to
purchase Units at prices, subject to change at any time, based upon the
aggregate underlying value of the Equity Securities in the Trust. The aggregate
underlying value of the Equity Securities is computed on the basis of the bid
side value of the exchange rate for the relevant currency expressed in U.S.
dollars. If the supply of Units exceeds demand or if some other business reason
warrants it, the Sponsor may either discontinue all purchases of Units or
discontinue purchases of Units at such prices. It is the current intention of
the Sponsor not to maintain a market for Units during the last six months of a
Trust's term. 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.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust will be evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written request
to the Trustee that ownership be in book entry form. Units are transferable by
making a written request to the Trustee and, in the case of Units evidenced by a
certificate, by presentation and surrender of such certificate to the Trustee
properly endorsed or accompanied by a written instrument or instruments of
transfer. A Unitholder must sign such written request, and such certificate or
transfer instrument, exactly as his name appears on the records of the Trustee
and on the face of any certificate representing the Units to be transferred with
the signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guarantee program in
addition to, or in substitution for, STAMP as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents such as, but not
limited to, trust instruments, certificates of death, appointments as executor
or administrator or certificates of corporate authority. Certificates will be
issued in denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require
a Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
Distributions of Income and Capital. Any dividends received by the Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, etc.) are credited to the Capital Account of the Trust. Proceeds
from the sale of Securities made to meet redemptions of Units shall be
segregated within the Capital Account of the Trust from proceeds from the sale
of Securities made to satisfy the fees, expenses and charges of the Trust.
Amounts to be credited to such Accounts are first converted into U.S. dollars at
the exchange rate for the relevant currency on the bid side value during the
secondary market.
The Trustee will distribute any net 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 expenses or sales charges, 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. The Trustee is not required to pay
interest on funds held in the Capital or Income Accounts (but may itself earn
interest thereon and therefore benefits from the use of such funds).
The distribution to Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of each
Unitholder's pro rata share of the cash in the Income Account after deducting
estimated expenses. Because dividends are not received by the Trust at a
constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate from distribution to distribution. Persons who purchase
Units will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business such
notice is provided by the selling broker-dealer.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the Income Account and, to the extent funds are not sufficient therein, from the
Capital Account amounts necessary to pay the expenses of the Trust. See "Trust
Operating Expenses". The Trustee also may withdraw from said accounts such
amounts, if any, as it deems necessary to establish a reserve for any
governmental charges payable out of the Trust. Amounts so withdrawn shall not be
considered a part of the Trust's assets until such time as the Trustee shall
return all or any part of such amounts to the 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 such distribution of
dividend income, capital gains and/or principal on their Units automatically
reinvested in additional Units of the Trust (to the extent Units may be lawfully
offered for sale in the state in which the Unitholder resides). To participate
in the reinvestment plan, a Unitholder may either contact his or her broker or
agent or file with the Trustee a written notice of election at least five days
prior to the Record Date for which the first distribution is to apply. A
Unitholder's election to participate in the reinvestment plan will apply to all
Units of the Trust owned by such Unitholder and such election will remain in
effect until changed by the Unitholder.
Reinvestment plan distributions may be reinvested in Units already held in
inventory by the Sponsor (see "Public Offering--Public Market") or, until such
time as additional Units cease to be issued by the Trust (see "The Trust"),
distributions may be reinvested in such additional Units. If Units are
unavailable in the secondary market, distributions which would otherwise have
been reinvested shall be paid in cash to the Unitholder on the applicable
Distribution Date.
Purchases of additional Units made pursuant to the reinvestment plan will be
made subject to any remaining deferred sales charge based on the net asset value
for Units of the Trust as of the Evaluation Time on the related Distribution
Dates. Under the reinvestment plan, the Trust will pay the Unitholder's
distributions to the Trustee which in turn will purchase for such Unitholder
full and fractional Units of the Trust and will send such Unitholder a statement
reflecting the reinvestment.
Unitholders may also elect to have each distribution of income, capital gains
and/or capital on their Units automatically reinvested in shares of certain Van
Kampen 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 Funds 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, 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 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 and converted into U.S. dollars as of the Evaluation Time set
forth under "Summary of Essential Financial Information" in Part One. The "date
of tender" is deemed to be the date of the next computation of the net asset
value per Unit after Units are received by the Trustee for redemption. No such
computation will be made on any day on which Securities representing greater
than 33% (20% in the case of Series 1) of the aggregate value of the Trust are
not traded on the principal trading exchange for such Securities due to a
customary business holiday on such exchange. Accordingly, purchases or
redemptions of Units on such a day will be based on the next determination of
price of the Securities (and the price of such Units would be the next computed
Unit price). In addition, foreign securities exchanges are open for trading on
certain days which are U.S. holidays on which the Trust will not transact
business. The Securities will continue to trade on those days and thus the value
of Units may be significantly affected on days when a Unitholder cannot sell or
redeem Units.
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.
In the event the Trust acquires any Securities traded in a United States
securities market, Unitholders tendering 1,000 or more Units for redemption may
request from the Trustee an in kind distribution ("In Kind Distribution") of an
amount and value of such Securities per Unit and cash representing the pro rata
portion of all foreign-traded Securities equal to the Redemption Price per Unit
as determined as of the evaluation next following the tender. An In Kind
Distribution on redemption of Units will be made by the Trustee through the
distribution of each of the U.S.-traded Securities in book-entry form to the
account of the Unitholder's bank or broker-dealer at Depository Trust Company.
The tendering Unitholder will receive cash representing his pro rata portion of
the foreign market-traded Securities and his pro rata number of whole shares of
each of the U.S.-traded Securities comprising the Trust portfolio and cash from
the Capital Account equal to the fractional shares to which the tendering
Unitholder is entitled. The Trustee may adjust the number of shares of any issue
of Securities included in a Unitholder's In Kind Distribution to facilitate the
distribution of whole shares, such adjustment to be made on the basis of the
value of Securities on the date of tender. If funds in the Capital Account are
insufficient to cover the required cash distribution to the tendering
Unitholder, the Trustees may sell Securities according to the criteria discussed
above.
To the extent that Securities are redeemed in-kind or sold, the size of the
Trust will be, and the diversity of the Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result in
lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder depending
on the value of the Securities in the portfolio at the time of redemption.
Special federal income tax consequences will result if a Unitholder requests an
In Kind Distribution. See "Federal Taxation."
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." 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 or foreign 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 value of the Equity Securities for redemptions and
secondary market transactions is based on the U.S. dollar value of the
Securities computed on the basis of the bid side value of the exchange rate for
the relevant currency as of the Evaluation Time.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Securities
in the Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any
tender of Units for redemption. If the Sponsor's bid in the secondary market at
that time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the next
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by the
Trustee. Units held by the Sponsor may be tendered to the Trustee for redemption
as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord
with the Public Offering Price described in the then currently effective
prospectus describing such Units. Any profit resulting from the resale of such
Units will belong to the Sponsor which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to its acquisition of such
Units.
Portfolio Administration. The portfolio of the Trust is not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. Traditional methods of
investment management for a managed fund typically involve frequent changes in a
portfolio of securities on the basis of economic, financial and market analyses.
The Trust, however, will not be managed. The Trust Agreement, however, provides
that the Sponsor may (but need not) direct the Trustee to dispose of an Equity
Security in certain events such as the issuer having defaulted on the payment on
any of its outstanding obligations or the price of an Equity Security has
declined to such an extent or other such credit factors exist so that in the
opinion of the Sponsor, the retention of such Securities would be detrimental to
the Trust. In addition, the Sponsor will instruct the Trustee to dispose of
certain Securities and to take such further action as may be needed from time to
time to ensure that the Trust continues to satisfy the qualifications of a
regulated investment company, including the requirements with respect to
diversification under Section 851 of the Internal Revenue Code. Pursuant to the
Trust Agreement, the Sponsor is not authorized to direct the reinvestment of the
proceeds of the sale of Securities in replacement securities except in the event
the sale is the direct result of serious adverse credit factors affecting the
issuer of the Security which, in the opinion of the Sponsor, would make the
retention of such Security detrimental to the Trust. If such factors exist, the
Sponsor is authorized, but is not obligated, to direct the reinvestment of the
proceeds of the sale of such Securities in any other securities which meet the
criteria necessary for inclusion in the Trust on the Initial Date of Deposit
(including other Securities already deposited in 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 or to meet redemptions.
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 1,000 or more Units to request an In Kind Distribution of any Securities
which are traded in a United States securities market and cash representing the
pro rata portion of the foreign-traded Securities 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 previous business day if a holiday) the Trustee will
deliver each requesting Unitholder's pro rata portion of cash representing the
foreign-traded Securities and his pro rata number of whole shares of each of the
U.S.-traded Securities in the Trust to the account of the broker-dealer or bank
designated by the Unitholder at Depository Trust Company. The value of the
Unitholder's fractional shares of Securities will be paid in cash. Unitholders
with less than 1,000 Units and Unitholders with 1,000 or more Units not
requesting In Kind Distribution will receive a cash distribution from the sale
of the remaining Securities within a reasonable time following the Mandatory
Termination Date. Regardless of the distribution involved, the Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances or
indemnities provided by the Trust Agreement, including estimated compensation of
the Trustee, costs of liquidation and any amounts required as a reserve to
provide for payment of any applicable taxes or other governmental charges. Any
sale of Equity Securities in the Trust upon termination may result in a lower
amount than might otherwise be realized if such sale were not required at such
time. The Trustee will then distribute to each Unitholder his pro rata share of
the balance of the Income and Capital Accounts.
Within 60 days of the final distribution Unitholders will be furnished a
final distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the Trustee
in its sole discretion will determine that any amounts held in reserve are no
longer necessary, it will make distribution thereof to Unitholders in the same
manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and
the Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Securities. In the event of the failure of the Sponsor to act under
the Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Trust
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee, Sponsor
or Unitholders for errors in judgment. This provision shall not protect the
Evaluator in any case of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Sponsor. Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the
Trust. The Sponsor is an indirect subsidiary of Van Kampen Investments Inc. Van
Kampen Investments Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; global custody, securities clearance
services and securities lending; and credit card services.
Van Kampen Funds Inc. specializes in the underwriting and distribution of
unit investment trusts and mutual funds with roots in money management dating
back to 1926. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, (630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1998, the total stockholders' equity of Van Kampen
Funds Inc. was $135,236,000 (audited). (This paragraph relates only to the
Sponsor and not to the Trust or to any other Series thereof. The information is
included herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of March 31, 1999, the Sponsor and its Van Kampen affiliates managed or
supervised approximately $75 billion of investment products. The Sponsor and its
Van Kampen affiliates managed $64 billion of assets, consisting of $36.6 billion
for 50 open-end mutual funds, $19.5 billion for 39 closed-end funds and $8.2
billion for 106 institutional accounts. The Sponsor has also deposited more than
3,200 unit trusts amounting to approximately $35.4 billion of assets. All of Van
Kampen's open-end funds, closed-ended funds and unit investment trusts are
professionally distributed by leading financial firms nationwide. Based on
cumulative assets deposited, the Sponsor believes that it is the largest sponsor
of insured municipal unit investment trusts, primarily through the success of
its Insured Municipals Income Trust(R) or the IM-IT(R) trust. The Sponsor also
provides surveillance or evaluation services at cost for approximately $13.4
billion of unit investment trust assets outstanding. Since 1976, the Sponsor has
serviced over two million investor accounts, opened through retail distribution
firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trust as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286 (800) 221-7668.
The Bank of New York is subject to supervision and examination by the
Superintendent of Banks of the State of New York and the Board of Governors of
the Federal Reserve System, and its deposits are insured by the Federal Deposit
Insurance Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder of the Fund. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Winston & Strawn has acted as counsel for the Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio at the Initial Date of Deposit included in this
Prospectus have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report in this Prospectus, and are included
herein in reliance upon the authority of said firm as experts in accounting and
auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Trust,
the Sponsor or dealers. This Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, securities in any state to any persons to
whom it is not lawful to make such offer in such state.
Table of Contents Page
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The Trust 2
Objectives and Securities Selection 2
Trust Portfolio 3
Risk Factors 3
Federal Taxation 4
Trust Operating Expenses 6
Public Offering 6
Rights of Unitholders 8
Trust Administration 10
Other Matters 12
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
Van Kampen
Focus Portfolios SM
A Division of Van Kampen Funds Inc.
Great International Firms Trust
Note: This Prospectus may be used
only when accompanied by Part One.
Both parts of this Prospectus should be
retained for future reference.
Dated as of the date of the Prospectus Part One
accompanying this Prospectus Part Two.
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
BRAND NAME EQUITY TRUST
Prospectus Part Two
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The Fund. The Brand Name Equity Trust (the "Trust" or the "Brand Name Trust")
is one of several unit investment trusts created under separate series of Van
Kampen Merritt Equity Opportunity Trust, Van Kampen American Capital Equity
Opportunity Trust, Van Kampen Equity Opportunity Trust or Van Kampen Focus
Portfolios (the "Fund"). The Brand Name Trust offers investors the opportunity
to purchase Units representing proportionate interests in a fixed portfolio of
equity securities issued by companies diversified within the non-durable
consumer goods industry including common stocks of foreign issuers, all of which
are in American Depositary Receipt form ("ADRs"). Unless terminated earlier, the
Trust will terminate on the Mandatory Termination Date stated under "Summary of
Essential Financial Information" in Part One of this Prospectus 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.
Objective of the Trust. The objective of the Brand Name Trust is to provide
the potential for capital appreciation and income, consistent with the
preservation of capital, by investing in a portfolio of equity securities
diversified within the non-durable consumer goods industry ("Equity
Securities"). See "Portfolio" in Part One of this Prospectus. There is, of
course, no guarantee that the objective of the Trust will be achieved.
Public Offering Price. The secondary market Public Offering Price of the
Trust will include the aggregate underlying value of the Securities in the
Trust, the applicable sales charge as described herein, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. See "Public Offering".
Estimated Annual Distributions. The estimated annual dividend distributions
per Unit will vary with changes in fees and expenses of a Trust, with changes in
dividends received and with the sale or liquidation of Securities; therefore,
there is no assurance that the annual dividend distribution will be realized in
the future.
Distributions. Distributions of dividends received, 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 of this Prospectus. For Series 1
and 2 any distribution of income and/or capital will be net of the expenses of
the Trust. For all other Series, gross dividends received by a Trust will be
distributed to Unitholders. Expenses of such a Trust will be paid with proceeds
from the sale of Securities. See "Federal Taxation." Additionally, upon
termination of each Trust, the Trustee will distribute, upon surrender of Units
for redemption, to each Unitholder his pro rata share of each of the Trust's
assets, less expenses, in the manner set forth under "Rights of
Unitholders--Distributions of Income and Capital".
Termination. Commencing on the Mandatory Termination Date as specified in
Part One for the Trust, 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 for the Trust the Trustee will provide written notice thereof to all
Unitholders and will include with such notice a form to enable Unitholders to
elect a distribution of shares of Equity Securities if such Unitholder owns at
least 1,000 Units of the Trust rather than to receive payment in cash for such
Unitholder's pro rata share of the amounts realized upon the disposition by the
Trustee of Equity Securities. 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 of the Trust electing a distribution
of shares of Equity Securities should be aware that the transaction is subject
to taxation and Unitholders will recognize gain based on any appreciation in
value of the Equity Securities. 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 in terminated.
See "Trust Administration--Amendment or Termination."
Units of the Trust are not insured by the FDIC, are not deposits or other
obligations of, or guaranteed by, and depository institution or any government
agency and are subject to investment risk, including possible 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 I
accompanying this Prospectus Part II.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Reinvestment Option. Unitholders of any Van Kampen sponsored unit investment
trust may utilize their redemption or termination proceeds to purchase units of
any other Van Kampen trust in the initial offering period accepting rollover
investments subject to a reduced sales charge to the extent stated in the
related prospectus (which may be deferred in certain cases). Unitholders of the
Trust have the opportunity to have their distributions reinvested into an
open-end, management investment company as described herein. Unitholders also
have the option of having distributions reinvested into additional Units of the
Trust if Units are available at the time of reinvestment as described herein.
See "Rights of Unitholders--Reinvestment Option."
Risk Factors. An investment in the Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers or the general condition of the
stock market and currency fluctuations, the lack of adequate financial
information concerning an issuer and exchange control restrictions impacting
foreign issuers. See "Risk Factors".
THE TRUST
The Trust was created under the laws of the State of New York pursuant to a
Trust Indenture and Agreement (the "Trust Agreement"), among Van Kampen Funds
Inc., as Sponsor, American Portfolio Evaluation Services, a division of Van
Kampen Investment Advisory Corp., as Evaluator, Van Kampen Investment Advisory
Corp., as Supervisor, and The Bank of New York, as Trustee, or their
predecessors.
The Trust may be an appropriate medium for investors who desire to
participate in a portfolio of equity securities with greater diversification
than they might be able to acquire individually. Diversification of assets in
the Trust will not eliminate the risk of loss always inherent in the ownership
of securities. For a breakdown of the portfolio, see "Portfolio" in Part One of
this Prospectus.
Each Unit represents a fractional undivided interest in the Trust. To the
extent that any Units are redeemed by the Trustee, the fractional undivided
interest in the Trust represented by each unredeemed Unit will increase
accordingly, although the actual interest in the Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the Sponsor, or
until the termination of the Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objective of the Brand Name Trust is to provide investors with the
potential for capital appreciation and income. The portfolio of the Trust is
described under "Trust Portfolio" herein and under "Portfolio" in Part One of
this Prospectus. An investor will be subjected to taxation on the dividend
income received from the Fund 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 objective of the Trust will be achieved because it is
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.
In selecting Securities for the Trust, the following factors, among others,
were considered: (a) the issuer's position within the industry, (b) breadth and
stability of the issuer's business base and (c) growth potential.
Investors should note that the above criteria were applied to the Securities
selected for inclusion in the Trust as of the date the Trust was created.
Subsequent thereto, the Equity Securities may no longer meet such criteria.
Should an Equity Security no longer meet such criteria, such Equity Security
will not as a result thereof be removed from the portfolio of the Trust.
Investors should be aware that the Fund is not a "managed" trust and as a
result the adverse financial condition of a company will not result in its
elimination from the portfolio except under extraordinary circumstances (see
"Trust Administration--Portfolio Administration"). In addition, Securities will
not be sold by the Trust to take advantage of market fluctuations or changes in
anticipated rates of appreciation. Investors should note in particular that the
securities were selected by the Sponsor as of the date the Securities were
purchased by the Trust. 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 such
Trust.
TRUST PORTFOLIO
Each Series of the Trust consists of different issues of Equity Securities,
most of which are issued by companies diversified within the non-durable
consumer goods industry including common stocks of foreign issuers, all of which
are ADRs. The Equity Securities in the portfolio are listed on a national
securities exchange, the NASDAQ National Market System or are traded in the
over-the-counter market.
The Trust consists of such of the Securities listed under "Portfolio" in Part
One of this Prospectus as may continue to be held from time to time in the Trust
together with cash held in the Income and Capital Accounts. Neither the Sponsor
nor the Trustee shall be liable in any way for any failure in any of the
Securities.
Because certain of the Securities from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can be
given that the Trust will retain for any length of time its present size and
composition. Although the Portfolio is not managed, the Sponsor may instruct the
Trustee to sell Securities under certain limited circumstances. Securities,
however, will not be sold by the Trust to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation.
RISK FACTORS
Consumer Products, Food and Beverage, and Pharmaceutical Companies.
Investment in securities issued by non-durable consumer products companies
should be made with an understanding of the many factors which may have an
adverse impact on the credit quality of the particular company or industry.
These include cyclicality of revenues and earnings, changing consumer demands,
regulatory restrictions, products liability litigation and other litigation
resulting from accidents, extensive competition (including that of low-cost
foreign companies), unfunded pension fund liabilities and employee and retiree
benefit costs and financial deterioration resulting from leveraged buy-outs,
takeovers or acquisitions. In general, expenditures on consumer products will be
affected by the economic health of consumers. Various factors such as recession
and any related tightening of consumer credit and spending may have a continuing
adverse effect on the industry. Other factors of particular relevance to the
profitability of the industry are the effects of increasing environmental
regulation on packaging and on waste disposal, the continuing need to conform
with foreign regulations governing packaging and the environment, the outcome of
trade negotiations and their effect on foreign subsidies and tariffs, foreign
exchange rates, the price of oil and its effect on energy costs, inventory
cutbacks by retailers, transportation and distribution costs, health concerns
relating to the consumption of certain products, the effect of demographics on
consumer demand, the availability and cost of raw materials and the ongoing need
to develop new products and to improve productivity.
Investment in stocks of the food and beverage industry, including
manufacturers of packaged foods, processors of agricultural products, beverage
companies and food distributors, should be made with an understanding of the
many factors that may have an adverse impact on the value of the stocks of these
companies and their ability to pay dividends. These factors include the
sensitivity of revenues, earnings, and financial condition to economic
conditions, changing consumer demands or preferences, fluctuations in the prices
of agricultural commodities, fluctuations in the cost of other raw materials
such as packaging, and the effects of inflation on pricing flexibility. The
revenues and earnings of these companies can also be affected by extensive
competition that can result in lost sales or in lower margins resulting from
efforts to maintain market share. Food and beverage companies are also subject
to regulation under various federal laws--such as the Food, Drug, and Cosmetic
Act--as well as state, local and foreign laws and regulations. Costs associated
with complying with changing regulatory restrictions, such as food labeling
requirements, could adversely affect earnings. Food and beverage companies are
also becoming increasingly exposed to risks associated with international
operation, including foreign currency fluctuations and future political and
economic developments in other countries. Other risk factors include potential
deterioration in financial condition resulting from litigation related to
product liability, accidents, or trademark or patent disputes; unfunded pension
liability; changing accounting standards and leveraged buyouts, takeovers, or
recapitalizations.
An investment in Units of the Trust should be made with an understanding of
the characteristics of the pharmaceutical and medical technology industries and
the risks which such investment may entail. Pharmaceutical and medical
technology companies are companies involved in drug development and production
services. Such companies have potential risks unique to their sector of the
health care field. Such companies are subject to governmental regulation of
their products and services, a factor which could have a significant and
possibly unfavorable effect on the price and availability of such products or
services. Furthermore, such companies face the risk of increasing competition
from generic drug sales, the termination of their patent protection for drug
products and the risk that technological advances will render their products or
services obsolete. The research and development costs of bringing a drug to
market are substantial and include lengthy governmental review processes, with
no guarantee that the product will ever come to market. Many of these companies
may have losses and not offer certain products for some time. Such companies may
also have persistent losses during a new product's transition from development
to production, and revenue patterns may be erratic.
Legislative proposals concerning health care have been under consideration by
federal and state governments from time to time in recent years. These proposals
span a wide range of topics, including cost and price controls (which might
include a freeze on the prices of prescription drugs), national health
insurance, incentives for competition in the provision of health care services,
tax incentives and penalties related to health care insurance premiums and
promotion of pre-paid health care plans. The Sponsor is unable to predict the
effect of any of these proposals, if enacted, on the issuers of Equity
Securities in the Trust.
Foreign Issuers. Since certain of the Equity Securities in the Trust consist
of securities to foreign issuers, an investment in the Trust involves some
investment risks that are different in some respects from an investment in a
trust that invests entirely in securities of domestic issuers. Those investment
risks include future political and governmental restrictions which might
adversely affect the payment or receipt of payment of dividends on the relevant
Equity Securities. In addition, for the foreign issuers that are not subject to
the reporting requirements of the Securities Exchange Act of 1934, there may be
less publicly available information than is available from a domestic issuer.
Also, foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, due to the nature
of the issuers of Equity Securities included in the Trust, the Sponsor believes
that adequate information will be available to allow the Supervisor to provide
portfolio surveillance.
The securities of the foreign issuers in the Trust are in American Depositary
Receipt or New York Share form. ADRs evidence American Depositary Receipts which
represent common stock deposited with a custodian in a depositary. American
Depositary Shares, and receipts therefor (ADRs), are issued by an American bank
or trust company to evidence ownership of underlying securities issued by a
foreign corporation. New York Shares are similar to and are generally subject to
similar risks as ADRs. These instruments may not necessarily be denominated in
the same currency as the securities into which they may be converted. For
purposes of the discussion herein, the term ADR generally includes American
Depositary Shares. ADRs may be sponsored or unsponsored. In an unsponsored
facility, the depositary initiates and arranges the facility at the request of
market makers and acts as agent for the ADR holder, while the company itself is
not involved in the transaction. In a sponsored facility, the issuing company
initiates the facility and agrees to pay certain administrative and
shareholder-related expenses. Sponsored facilities use a single depositary and
entail a contractual relationship between the issuer, the shareholder and the
depositary; unsponsored facilities involve several depositaries with no
contractual relationship to the company. The depositary bank that issues an ADR
generally charges a fee, based on the price of the ADR, upon issuance and
cancellation of the ADR. This fee would be in addition to the brokerage
commissions paid upon the acquisition or surrender of the security. In addition,
the depositary bank incurs expenses in connection with the conversion of
dividends or other cash distributions paid in local currency into U.S. dollars
and such expenses are deducted from the amount of the dividend or distribution
paid to holders, resulting in a lower payout per underlying shares represented
by the ADR than would be the case if the underlying share were held directly.
Investors should be aware that the Trustee of the Trust may act as the
depositary bank for certain ADRs which may include certain of the Securities.
Certain tax considerations, including tax rate differentials and withholding
requirements, arising from applications of the tax laws of one nation to
nationals of another and from certain practices in the ADR market may also exist
with respect to certain ADRs. In varying degrees, any or all of these factors
may affect the value of the ADR compared with the value of the underlying shares
in the local market. In addition, the rights of holders of ADRs may be different
than those of holders of the underlying shares, and the market for ADRs may be
less liquid than that for the underlying shares. ADRs are registered securities
pursuant to the Securities Act of 1933 and may be subject to the reporting
requirements of the Securities Exchange Act of 1934.
For those Equity Securities that are ADRs, currency fluctuations will affect
the U.S. dollar equivalent of the local currency price of the underlying
domestic share and, as a result, are likely to affect the value of the ADRs and
consequently the value of the Equity Securities. The foreign issuers of
securities that are ADRs may pay dividends in foreign currencies which must be
converted into dollars. Most foreign currencies have fluctuated widely in value
against the United States dollar for many reasons, including supply and demand
of the respective currency, the soundness of the world economy and the strength
of the respective economy as compared to the economies of the United States and
other countries. Therefore, for any securities of issuers (whether or not they
are in ADR form) whose earnings are stated in foreign currencies, or which pay
dividends in foreign currencies or which are traded in foreign currencies, there
is a risk that their United States dollar value will vary with fluctuations in
the United States dollar foreign exchange rates for the relevant currencies.
On the basis of the best information available to the Sponsor at the present
time, none of the Equity Securities are subject to exchange control restrictions
under existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from the sale of, the Equity Securities. However,
there can be no assurance that exchange control regulations might not be adopted
in the future which might adversely affect payment to the Trust. In addition,
the adoption of exchange control regulations and other legal restrictions could
have an adverse impact on the marketability of international securities in the
Trust and on the ability of the Trust to satisfy its obligation to redeem Units
tendered to the Trustee for redemption.
Equity Securities. An investment in Units should be made with an
understanding of the risks which an investment in common stocks entails,
including the risk that the financial condition of the issuers of the Equity
Securities or the general condition of the common stock market may worsen and
the value of the Equity Securities and therefore the value of the Units may
decline. Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value as market confidence
in and perceptions of the issuers change. These perceptions are based on
unpredictable factors including expectations regarding government economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction, global or regional political, economic or banking crises.
Shareholders of common stocks have rights to receive payments from the issuers
of those common stocks that are generally subordinate to those of creditors of,
or holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared by the issuer's
board of directors and have a right to participate in amounts available for
distribution by the issuer only after all other claims on the issuer have been
paid or provided for. Certain of the issuers may currently be in arrears with
respect to preferred stock dividend payments. Common stocks do not represent an
obligation of the issuer and, therefore, do not offer any assurance of income or
provide the same degree of protection of capital as do debt securities. The
issuance of additional debt securities or preferred stock will create prior
claims for payment of principal, interest and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends on
its common stock or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. The value of common stocks is
subject to market fluctuations for as long as the common stocks remain
outstanding, and thus the value of the Equity Securities in the portfolio may be
expected to fluctuate over the life of the Trust to values higher or lower than
those prevailing on the Initial Date of Deposit or at the time a Unitholder
purchases Units.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Cumulative preferred stock dividends must be paid before
common stock dividends and any cumulative preferred stock dividend omitted is
added to future dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on liquidation
which are senior to those of common stockholders.
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."
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.
Year 2000 Readiness Disclosure. These two paragraphs constitute "Year 2000
Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act of 1998. If computer systems used by the Sponsor,
Evaluator, Supervisor, Trustee or other service providers to the Trust do not
properly process date-related information after December 31, 1999, the resulting
difficulties could adversely impact the Trust. This is commonly known as the
"Year 2000 Problem". The Sponsor, Evaluator, Supervisor and Trustee are taking
steps to address this problem and to obtain reasonable assurances that other
service providers to the Trust are taking comparable steps. We cannot guarantee
that these steps will be sufficient to avoid any adverse impact on the Trust.
This problem may impact corporations to varying degrees based on factors such as
industry sector and degree of technological sophistication. We cannot predict
what impact, if any, this problem will have on the issuers of the Securities.
In addition, computer failures throughout the financial services industry
beginning January 1, 2000 could have a detrimental affect on the markets for the
Securities. Improperly functioning trading systems may result in settlement
problems and liquidity issues. Moreover, corporate and governmental data
processing errors may adversely affect issuers and overall economic
uncertainties. Remediation costs will affect the earnings of individual issuers.
These costs could be substantial. Issuers may report these costs inconsistently
in U.S. and foreign financial markets. All of these issues could adversely
affect the Securities and the Trust.
FEDERAL TAXATION
Brand Name Equity Trust, Series 1 and Series 2
The Trust has elected and intends to qualify on a continuing basis for
special federal income tax treatment as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). If the Trust so
qualifies and timely distributes to Unitholders 90% or more of its taxable
income (without regard to its net capital gain, i.e., the excess of its net
long-term capital gain over its net short-term capital loss), it will not be
subject to federal income tax on the portion of its taxable income (including
any net capital gain) that it distributes to Unitholders. In addition, to the
extent the Trust timely distributes to Unitholders at least 98% of its taxable
income (including any net capital gain), it will not be subject to the 4% excise
tax on certain undistributed income of "regulated investment companies." Because
the Trust intends to timely distribute its taxable income (including any net
capital gain), it is anticipated that the Trust will not be subject to federal
income tax or the excise tax.
Distributions to Unitholders of the Trust's taxable income, other than
distributions which are designated as capital gain dividends, will be taxable as
ordinary income to Unitholders, except that to the extent that distributions to
a Unitholder in any year exceed the Trust's current and accumulated earnings and
profits, they will be treated as a return of capital and will reduce the
Unitholder's basis in his Units and, to the extent that they exceed his basis,
will be treated as a gain from the sale of his Units as discussed below.
Although distributions generally will be treated as distributed when paid,
distributions declared in October, November or December payable to Unitholders
of record on a specified date in one of those months and paid during January of
the following year will be treated as having been distributed by the Trust (and
received by the Unitholder) on December 31 of the year such distributions are
declared.
Distributions of the Trust's net capital gain which are properly designated
as capital gain dividends by the Trust will be taxable to Unitholders as
long-term capital gain, regardless of the length of time the Units have been
held by a Unitholder. A Unitholder may recognize a taxable gain or loss if the
Unitholder sells or redeems his Units. Any gain or loss arising from (or treated
as arising from) the sale or redemption of Units will generally be a capital
gain or loss, except in the case of a dealer or a financial institution. The
Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998 Tax
Act") provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term capital loss
for the taxable year) is generally subject to a maximum marginal stated tax rate
of 20% (10% in the case of certain taxpayers in the lowest tax bracket). 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.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposes for determining the holding period of the Unit. Capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income. Note, however, that the 1998 Tax Act and the Taxpayer Relief Act of 1997
(the "1997 Tax Act") provide that the application of the rules described above
in the case of pass-through entities such as the Trust will be prescribed in
future Treasury Regulations. Note that if a Unitholder holds Units for six
months or less and subsequently sells such Units at a loss, the loss will be
treated as a long-term capital loss to the extent that any long-term capital
gain distribution is made with respect to such Units during the six-month period
or less that the Unitholder owns the Units.
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. 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, offsetting 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.
Generally, the tax basis of a Unitholder includes sales charges, and such
charges are not deductible. A portion of the sales charge for the Trust is
deferred. The income (or proceeds from redemption) a Unitholder must take into
account for federal income tax purposes is not reduced by amounts deducted to
pay the deferred sales charge.
Distributions which are taxable as ordinary income to Unitholders will
constitute dividends for federal income tax purposes. When Units are held by
corporate Unitholders, Trust distributions may qualify for the 70% dividends
received deduction, subject to limitations otherwise applicable to the
availability of the deduction, to the extent the distribution is attributable to
dividends received by the Trust from United States corporations (other than Real
Estate Investment Trusts) and is designated by the Trust as being eligible for
such 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. The Trust will provide
each Unitholder with information annually concerning what part of the Trust
distributions are eligible for the dividends received deduction.
The Trust may elect to pass through to the Unitholders the foreign income and
similar taxes paid by the Trust in order to enable such Unitholders to take a
credit (or deduction) for foreign income taxes paid by the Trust. If such an
election is made, Unitholders of the Trust, because they are deemed to own a pro
rata portion of the foreign securities held by the Trust, must include in their
gross income, for federal income tax purposes, both their portion of dividends
received by the Trust and also their portion of the amount which the Trust deems
to be the Unitholders' portion of foreign income taxes paid with respect to, or
withheld from, dividends, interest or other income of the Trust from its foreign
investments. Unitholders may then subtract from their federal income tax the
amount of such taxes withheld, or else treat such foreign taxes as deductions
from gross income; however, as in the case of investors receiving income
directly from foreign sources, the above described tax credit or deduction is
subject to certain limitations. The 1997 Tax Act imposes a required holding
period for such credits. Unitholders should consult their tax advisers regarding
this election and its consequences to them.
Under the Code, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses, will be
deductible by individuals only to the extent they exceed 2% of adjusted gross
income. Miscellaneous itemized deductions subject to this limitation under
present law do not include expenses incurred by the Trust so long as the Units
are held by or for 500 or more persons at all times during the taxable year or
another exception is met. In the event the Units are held by fewer than 500
persons, additional taxable income may be realized by the individual (and other
noncorporate) Unitholders in excess of the distributions received from the
Trust.
Distributions reinvested into additional Units of the Trust will be taxed to
a Unitholder in the manner described above (i.e., as ordinary income, long-term
capital gain or as a return of capital).
Under certain circumstances a Unitholder may be able to request an in kind
distribution upon redemption of Units or termination of the Trust. Unitholders
electing an in kind distribution of shares of Securities should be aware that
the exchange is subject to taxation and Unitholders will recognize gain or loss
(subject to various nonrecognition provisions of the Code) based on the value of
the Securities received. Investors electing an in kind distribution should
consult their own tax advisors with regard to such transaction.
The federal tax status of each year's distributions will be reported to
Unitholders and to the Internal Revenue Service. Each Unitholder will be
requested to provide the Unitholder's taxpayer identification number to the
Trustee and to certify that the Unitholder has not been notified that payments
to the Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up withholding.
The foregoing discussion relates only to the federal income tax status of the
Trust and to the tax treatment of distributions by the Trust to United States
Unitholders.
A Unitholder who is a foreign investor (i.e., an investor other than a United
States citizen or resident or a United States corporation, partnership, estate
or trust) should be aware that, generally, subject to applicable tax treaties,
distributions from the Trust which constitute dividends for Federal income tax
purposes (other than dividends which the Trust designates as capital gain
dividends) will be subject to United States income taxes, including withholding
taxes. However, distributions received by a foreign investor from the Trust that
are designated by the Trust as capital gain dividends should not be subject to
United States Federal income taxes, including withholding taxes, if all of the
following conditions are met (i) the capital gain dividend is not effectively
connected with the conduct by the foreign investor of a trade or business within
the United States, (ii) the foreign investor (if an individual) is not present
in the United States for 183 days or more during his or her taxable year, and
(iii) the foreign investor provides all certification which may be required of
his status (foreign investors may contact the Sponsor to obtain a Form W-8 which
must be filed with the Trustee and refiled every three calendar years
thereafter). Foreign investors should consult their tax advisers with respect to
United States tax consequences of ownership of Units. Units in the Trust and
Trust distributions may also be subject to state and local taxation and
Unitholders should consult their tax advisers in this regard.
Brand Name Equity Trust, Series 3 and subsequent Series
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units of the
Trust. The summary is limited to investors who hold the Units as "capital
assets" (generally, property held for investment within the meaning of Section
1221 of the Internal Revenue Code of 1986 (the "Code")). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust. For purposes of the following discussion and opinion, it is assumed
that each Security is 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 Security when such dividends are considered to
be received by the Trust. Unitholders will be taxed in this manner regardless of
whether distributions from the Trust are actually received by the Unitholder or
are automati cally reinvested.
3. Each Unitholder will have a taxable event when the Trust disposes of a
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 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 Security held by the Trust.
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 by a corporation with
respect to a Security held by the Trust is taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings and profits". A
Unitholder's pro rata portion of dividends paid on such Security which exceeds
such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Security shall generally be treated as
capital gain. In general, 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 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 Securities held by the Trust will generally be
considered a capital loss (except in the case of a dealer or a financial
institution).
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 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.
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. Unitholders should
consult with their tax advisers with respect to the limitations on and possible
modifications to the dividends received deduction.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the 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 Securities by the
Trust or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by the Trust or if the
Unitholder disposes of a Unit. The Internal Revenue Service Restructing and
Reform Act of 1998 (the "1998 Tax Act") provides that for taxpayers other than
corporations, net capital gain (which is defined as net long-term capital gain
over net short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax rate of
20% (10% in the case of certain taxpayers in the lowest tax bracket). 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.
The date on which a Unit is acquired (i.e., the "trade date") is excluded for
purposed for determining the holding period of the Unit. Capital gains realized
from assets held for one year or less are taxed at the same rates as ordinary
income.
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 Securities represented by a Unit.
The Taxpayer Relief Act of 1997 (the "1997 Act") includes provisions that
treat certain transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g., short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as constructive
sales for purposes of recognition of gain (but not of 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's 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
with respect to each Security held by the Trust will depend on whether or not a
Unitholder receives cash in addition to Securities. A "Security" for this
purpose is a particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only receives
Securities in exchange for his or her pro rata portion of the Securities held by
the Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of Security held by the Trust, such Unitholder will generally
recognize gain or loss based upon the difference between the amount of cash
received by the Unitholder and his tax basis in such fractional share of a
Security held by the Trust.
Because the Trust will own many Securities, a Unitholder who requests an in
kind distribution will have to analyze the tax consequences with respect to each
Security owned by the Trust. The amount of taxable gain (or loss) recognized
upon such exchange will generally equal the sum of the gain (or loss) recognized
under the rules described above by such Unitholder with respect to each Security
owned by the Trust. Unitholders who request an in kind distribution are advised
to consult their tax advisers in this regard.
Computation of the 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 Securities held in the Trust
in accordance with the proportion of the fair market values of such Securities
on the valuation date nearest the date the Units are purchased in order to
determine such Unitholder's tax basis for his pro rata portion of each Security.
A Unitholder's tax basis in his Units and his pro rata portion of a Security
held by the Trust will be reduced to the extent dividends paid with respect to
such Security are received by the Trust which are not taxable as ordinary income
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 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 corporations for a three-year period ending with the close
of its taxable year preceding payment was 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 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 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 Securities, the gross proceeds received by the
Trust from the disposition of any Security (resulting from redemption or the
sale of any 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.
Unitholders should consult their tax advisers regarding potential foreign, state
or local taxation with respect to the Units.
TRUST OPERATING EXPENSES
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, Van Kampen
Investment Advisory Corp., which is an affiliate of the Sponsor, will receive an
annual supervisory fee, payable as described under "General", which is not to
exceed the amount set forth under "Summary of Essential Financial Information"
in Part One of this Prospectus, for providing portfolio supervisory services for
the Trust. Such fee (which is based on the number of Units outstanding on
January 1 of each year) may exceed the actual costs of providing such
supervisory services for this Fund, but at no time will the total amount
received for portfolio supervisory services rendered to Series 1 and subsequent
series of the Fund in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. In addition, the Evaluator,
which is a division of Van Kampen Investment Advisory Corp., shall receive as an
annual per Unit evaluation fee, payable in as described under "General", for
regularly evaluating each Trust's portfolio that amount set forth under "Summary
of Essential Financial Information" in Part One of this Prospectus (which is
based on the outstanding number of Units on January 1 of each year). Both of the
foregoing fees may be increased without approval of the Unitholders by amounts
not exceeding proportionate increases under the category "All Services Less Rent
of Shelter" in the Consumer Price Index published by the United States
Department of Labor or, if such category is no longer published, in a comparable
category. The Sponsor and dealers will receive sales commissions and may realize
other profits (or losses) in connection with the sale of Units as described
under "Public Offering--Sponsor and Dealer Compensation".
Trustee's Fee. For its services the Trustee will receive as an annual per
Unit fee from the Trust that amount set forth under "Summary of Essential
Information" in Part One of this Prospectus (which is based on the outstanding
number of units on January 1 of each year). The Trustee's fees are payable
monthly on or before the twenty-fifth day of each month from the Income Account
to the extent funds are available and then from the Capital Account. The Trustee
benefits to the extent there are funds for future distributions, payment of
expenses and redemptions in the Capital and Income Accounts since these Accounts
are non-interest bearing and the amounts earned by the Trustee are retained by
the Trustee. Part of the Trustee's compensation for its services to the Trust is
expected to result from the use of these funds. Such fees may be increased
without approval of the Unitholders by amounts not exceeding proportionate
increases under the category "All Services Less Rent of Shelter" in the Consumer
Price Index published by the United States Department of Labor or, if such
category is no longer published, in a comparable category. For a discussion of
the services rendered by the Trustee pursuant to its obligations under the Trust
Agreement, see "Rights of Unitholders--Reports Provided" and "Trust
Administration".
Miscellaneous Expenses. Expenses incurred in establishing Series 2 and
subsequent Series, 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 respective Trust and
amortized over the life of such 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 a 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 a Trust without negligence, bad faith
or wilful misconduct on its part and (g) expenditures incurred in contacting
Unitholders upon termination of the Trust. The Trust may pay the cost of
updating its registration statement each year. Unit investment trust sponsors
have historically paid these costs.
General. All of the fees and expenses of each Trust will accrue on a daily
basis and will be charged to such Trust, in arrears, on a monthly basis on or
before the tenth day of each month. The fees and expenses of Series 1 and 2 are
payable out of the Income Account or, if insufficient, out of the Capital
Account of such Trust. The fees and expenses of Series 3 and subsequent Series
are payable out of the Capital Account of such Trust. When such fees and
expenses are paid by or owning to the Trustee, they are secured by a lien on the
portfolio of the Trust. Since the Securities are all common stocks, and the
income stream produced by dividend payments is unpredictable, the Sponsor cannot
provide any assurance that dividends will be sufficient to meet any or all
expenses of the Trust. If the balances in the Income and Capital Accounts are
insufficient to provide for amounts payable by the Trust, the Trustee has the
power to sell Securities to pay such amounts. These sales may result in capital
gains or losses to Unitholders. See "Federal Taxation".
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. The secondary market
Public Offering Price is based on the aggregate underlying value of the
Securities in the Trust, an applicable sales charge, and cash, if any, in the
Income and Capital Accounts held or owned by the Trust. The current sales charge
applicable to Units is described in Part One of this Prospectus under "Summary
of Essential Financial Information".
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law and trustees, custodians or fiduciaries for the
benefit of such persons) of Van Kampen Funds Inc. and its affiliates, dealers
and their affiliates, and vendors providing services to the Sponsor may purchase
Units at the Public Offering Price less the applicable dealer concession.
Units may be purchased in the secondary market at the Public Offering Price
(for purchases which do not qualify for a sales charge reduction for quantity
purchases) less the concession the Sponsor typically allows to brokers and
dealers for purchases (see "Trust Administration--General--Unit Distribution")
by (1) investors who purchase Units through registered investment advisers,
certified financial planners and registered broker-dealers who in each case
either charge periodic fees for financial planning, investment advisory or asset
management services, or provide such services in connection with the
establishment of an investment account for which a comprehensive "wrap fee"
charge is imposed, (2) bank trust departments investing funds over which they
exercise exclusive discretionary investment authority and that are held in a
fiduciary, agency, custodial or similar capacity, (3) any person who for at
least 90 days, has been an officer, director or bona fide employee of any firm
offering Units for sale to investors or their spouses or children and (4)
officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything to
the contrary in this Prospectus, such investors, bank trust departments, firm
employees and bank holding company officers and directors who purchase Units
through this program will not receive sales charge reductions for quantity
purchases.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in Part One of
this Prospectus in accordance with fluctuations in the prices of the underlying
Securities in the Trust.
The price of the Units as of the opening of business on the date stated in
the "Summary of Essential Financial Information" in Part One of this Prospectus
was established by adding to the determination of the aggregate underlying value
of the Securities that amount specified under "Summary of Essential Financial
Information" in Part One and dividing the sum so obtained by the number of Units
outstanding. The Public Offering Price shall include the proportionate share of
any cash held in the Capital Account. This computation produced a gross sales
commission initially equal to that amount specified under "Summary of Essential
Financial Information" in Part One. The Evaluator will appraise or cause to be
appraised daily the value of the underlying Securities as of the close of
trading on the New York Stock Exchange (which is presently 4:00 P.M. New York
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 at or prior to the
close of trading on the New York Stock Exchange on each such day. Orders
received by the Trustee, Sponsor or any dealer 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. Such sales charge
will be reduced annually as set forth in "Summary of Essential Financial
Information" in Part One of this Prospectus.
The value of the Equity Securities is determined on each business day by the
Evaluator based on the closing sale prices on the day the valuation is made for
Securities listed on a national stock exchange or, if no such price exists, at
the bid price on the day the valuation is made.
In offering the Units to the public, neither the Sponsor, nor any
broker-dealers are recommending any of the individual Securities in the Trust
but rather the entire pool of Securities, taken as a whole, which are
represented by the Units.
Unit Distribution. 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.
Broker-dealers or others will be allowed a concession or agency commission of
70% of the sale charge in connection with the distribution of Units.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the agency
commission referred to above) is retained by or remitted to the banks. Under the
Glass-Steagall Act, banks are prohibited from underwriting Units; however, the
Glass-Steagall Act does permit certain agency transactions and the banking
regulators have not indicated that these particular agency transactions are not
permitted under such Act. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 100 Units and 25 Units for a
tax-sheltered retirement plan. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units and to change the amount
of the concession or agency commission to dealers and others from time to time.
Sponsor and Dealer Compensation. The Sponsor and dealers will receive the
gross sales commission as described under "Public Offering--General" above.
Cash, if any, made available to the Sponsor prior to the date of settlement for
the purchase of Units may be used in the Sponsor's business and may be deemed to
be a benefit to the Sponsor, subject to the limitations of the Securities
Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor intends to, and certain
dealers maintain a secondary market for Units of each Trust. In so maintaining a
market, the Sponsor and any such dealers 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. In addition, the Sponsor and
any such dealers 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 they are not obligated to do so, the Sponsor intends
to maintain a market for the Units offered hereby and offer continuously to
purchase Units at prices subject to change at any time, based upon the aggregate
underlying value of the Equity Securities in the Trust. The Sponsor does not
intend to maintain a market for Units during the last six months of a Trust's
term. If the supply of Units exceeds demand or if some other business reason
warrants it, the Sponsor may either discontinue all purchases of Units or
discontinue purchases of Units at such prices. In the event that a market is not
maintained for the Units and the Unitholder cannot find another purchaser, a
Unitholder desiring to dispose of his Units may be able to dispose of such Units
only by tendering them to the Trustee for redemption at the Redemption Price.
See "Rights of Unitholders--Redemption of Units". A Unitholder who wishes to
dispose of his Units should inquire of his broker as to current market prices in
order to determine whether there is in existence any price in excess of the
Redemption Price and, if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for individuals, Simplified Employee Pension
Plans for employees, qualified plans for self-employed individuals, and
qualified corporate pension and profit sharing plans for employees. The purchase
of Units of the Trust may be limited by the plans' provisions and does not
itself establish such plans. The minimum purchase in connection with a
tax-sheltered retirement plan is 25 Units of the Trust.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust is evidenced by separate registered certificates
executed by the Trustee and the Sponsor. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or accompanied by a
written instrument or instruments of transfer. A Unitholder must sign exactly as
his name appears on the face of the certificate 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 multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require
a Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in connection
with each such transfer or interchange. Destroyed, stolen, mutilated or lost
certificates will be replaced upon delivery to the Trustee of satisfactory
indemnity, evidence of ownership and payment of expenses incurred. Mutilated
certificates must be surrendered to the Trustee for replacement.
Distributions of Income and Capital. Any dividends received by the Trust with
respect to the Equity Securities therein are credited by the Trustee to the
Income Account. Other receipts (e.g., capital gains, proceeds from the sale of
Securities, return of principal, etc.) are credited to the Capital Account. The
Trustee will distribute any net 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 of the Prospectus. Proceeds received on the
sale of any Securities in the Trust, to the extent not used to meet redemptions
of Units or pay expenses, will 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. 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 the Unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the Unitholders' pro rata share of
the cash in the Income Account after deducting estimated expenses, if
applicable. 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. A person
will become the owner of Units, and thereby a Unitholder of record, on the date
of settlement provided payment has been received. 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.
On or before of the tenth day of each month, the Trustee will deduct from the
Income Account and, to the extent funds are not sufficient therein, from the
Capital Account amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating Expenses"). The Trustee
will deduct amounts necessary to pay the expenses of Series 3 and subsequent
Series from the Capital Account only. The Trustee also may withdraw from said
accounts such amounts, if any, as it deems necessary to establish a reserve for
any governmental charges payable out of the Trust. Amounts so withdrawn shall
not be considered a part of a 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
interest income, capital gains and/or principal on their Units automatically
reinvested in shares of certain Van Kampen 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 Trusts. 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 Funds Inc. at
One Parkview Plaza, Oakbrook Terrace, Illinois 60181. Texas residents who desire
to reinvest may request that a broker-dealer registered in Texas send the
prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units will,
on the applicable distribution date, automatically be applied, as directed by
such person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such date.
Unitholders with an existing Guaranteed Reinvestment Option (GRO) Program
account (whereby a sales charge is imposed on distribution reinvestments) may
transfer their existing account into a new GRO account which allows purchases of
Reinvestment Fund shares at net asset value as described above.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund. A participant may at
any time prior to five days preceding the next succeeding distribution date, by
so notifying the Trustee in writing, elect to terminate his or her reinvestment
plan and receive future distributions of his or her Units in cash. There will be
no charge or other penalty for such termination. Each Reinvestment Fund, its
sponsor and investment adviser shall have the right to terminate at any time the
reinvestment plan relating to such fund.
Unitholders may elect to have each distribution of income, capital gains
and/or capital on their Units automatically reinvested in additional Units of
such Trust without a sales charge (to the extent Units may be lawfully offered
for sale in the state in which the Unitholder resides). To participate in the
reinvestment plan, a Unitholder may either contact his or her broker or agent or
file with the Trustee a written notice of election at least ten days prior to
the Record Date for which the first distribution is to apply. A Unitholder's
election to participate in the reinvestment plan will apply to all Units of the
applicable Trust owned by such Unitholder and such election will remain in
effect until changed by the Unitholder.
Reinvestment plan distributions may be reinvested in Units of the Trust
already held in inventory by the Sponsor (see "Public Offering--Public Market")
or, until such time as additional Units cease to be issued by the Trust (see
"The Trust"), distributions may be reinvested in such additional Units. If Units
are unavailable in the secondary market, distributions which would otherwise
have been reinvested shall be paid in cash to the Unitholder on the applicable
Distribution Date.
Purchases made pursuant to the reinvestment plan will be made without a sales
charge at the net asset value for Units of the Trust as of the Evaluation Time
on the related Income or Capital Distribution Dates. Under the reinvestment
plan, the Trust will pay the Unitholder's distributions to the Trustee which in
turn will purchase for such Unitholder full and fractional Units of the Trust
and will send such Unitholder a statement reflecting the reinvestment.
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. Each Reinvestment Fund, its sponsor and its investment adviser
shall have the right to terminate at any time the reinvestment plan relating to
such Reinvestment Fund and the Sponsor shall have the right to suspend or
terminate the reinvestment plan for reinvestment in additional Units of the
Trust 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 a 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 (other than pursuant
to In Kind Distributions) and the net proceeds received therefrom, the results
of In Kind Distributions in connection with redemptions of Units, if any,
deductions for payment of applicable taxes and 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 a 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, 101 Barclay Street,
20th Floor, New York, New York 10286 of the certificates representing the Units
to be redeemed, 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 (unless the redeeming Unitholder elects an In Kind Distribution
as indicated below) an amount for each Unit equal to the Redemption Price per
Unit next computed after receipt by the Trustee of such tender of Units. 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 close of trading on the
New York Stock Exchange (which is currently 4:00 P.M. New York time) the date of
tender is the next day on which such Exchange is open for trading and such Units
will be deemed to have been tendered to the Trustee on such day for redemption
at the redemption price computed on that day.
The Trustee is empowered to sell Securities 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 portfolio
supervisor for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering 1,000 Units or more for redemption may request from the
Trustee in lieu of a cash redemption a distribution in kind ("In Kind
Distribution") of an amount and value of Securities per Unit equal to the
Redemption Price per Unit as determined as of the evaluation next following the
tender. An In Kind Distribution on redemption of Units will be made by the
Trustee through the distribution of each of the Securities in book-entry form to
the account of the Unitholder's bank or broker-dealer at Depository Trust
Company. The tendering Unitholder will receive his pro rata number of whole
shares of each of the Securities comprising the portfolio and cash from the
Capital Account equal to the fractional shares to which the tendering Unitholder
is entitled. In implementing these redemption procedures, the Trustee shall make
any adjustments necessary to reflect differences between the Redemption Price of
the Securities distributed in kind as of the date of tender. If funds in the
Capital Account are insufficient to cover the required cash distribution to the
tendering Unitholder, the Trustee may sell Securities according to the criteria
discussed above.
To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be, and the diversity of such 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.
Special federal income tax consequences will result if a Unitholder requests an
In Kind Distribution. See "Federal Taxation".
The Redemption Price per Unit 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. 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 the Unit in a Trust determined on the basis of (i) the cash on
hand in such Trust or monies in the process of being collected and (ii) the
value of the Securities in such Trust, less (a) amounts representing taxes or
other governmental charges payable out of such Trust, (b) any amount owing to
the Trustee for its advances and (c) the accrued expenses of such Trust. The
Evaluator may determine the value of a Securities in the Trust in the following
manner: if the Securities are listed on a national securities exchange, the
evaluation will generally be based on the last available sale price on the
exchange (unless the Evaluator deems the price inappropriate as a basis for
evaluation) or, if there is no last available sale price on the exchange, at the
mean between the last available bid and offer prices.
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size and the diversity of the Trust will be reduced.
Such sales may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the Securities
in the Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any
tender of Units for redemption. If the Sponsor's bid in the secondary market at
that time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the next
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by the
Trustee. Units held by the Sponsor may be tendered to the Trustee for redemption
as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord
with the Public Offering Price described in the then currently effective
prospectus describing such Units. Any profit resulting from the resale of such
Units will belong to the Sponsor which likewise will bear any loss resulting
from a lower offering or redemption price subsequent to its acquisition of such
Units.
Portfolio Administration. The portfolio of the Fund is not "managed" by the
Sponsor, Supervisor or the Trustee; their activities described herein are
governed solely by the provisions of the Trust Agreement. The Trust Agreement
provides that the Sponsor may (but need not) direct the Trustee to dispose of an
Equity Security in the event that an issuer defaults in the payment of a
dividend that has been declared, that any action or proceeding has been
instituted restraining the payment of dividends or there exists any legal
question or impediment affecting such Equity Security, that the issuer of the
Equity Security has breached a covenant which would affect the payments of
dividends, the credit standing of the issuer or otherwise impair the sound
investment character of the Equity Security, that the issuer has defaulted on
the payment on any other of its outstanding obligations, that the price of the
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 Equity
Securities would be detrimental to a Trust. In addition, the Sponsor will
instruct the Trustee to dispose of certain Securities and to take such further
action as may be needed from time to time to ensure that Series 1 and Series 2
continue to satisfy the qualifications of a regulated investment company,
including the requirements with respect to diversification under Section 851 of
the Internal Revenue Code, if applicable. Except as stated under "Trust
Portfolio--General" for failed securities, the acquisition by the Fund of any
securities other than the Securities is prohibited. 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 a
Trust, they may be accepted for deposit in such Trust and either sold by the
Trustee or held in such Trust pursuant to the direction of the Sponsor (who may
rely on the advice of the Supervisor). Proceeds from the sale of Securities (or
any securities or other property received by the Fund in exchange for Equity
Securities) are credited to the applicable Capital Account for distribution to
Unitholders or to meet redemptions.
As indicated under "Rights of Unitholders" 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 a Trust tendered for
redemption and the payment of expenses.
When the Trust sells Securities, 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. 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.
A Trust may be liquidated (1) at any time by consent of Unitholders
representing 66 2/3% of the Units then outstanding, or (2) by the Trustee when
the value of the Trust, as shown by any evaluation, is less than that indicated
under "Summary of Essential Financial Information" in Part One of the
Prospectus. 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 of this Prospectus.
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. 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
Fund 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 of the Trust 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 related 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 1,000 Units and those not requesting an In Kind
Distribution will receive a cash distribution from the sale of the remaining
Securities within a reasonable time following the Mandatory Termination Date.
Regardless of the distribution involved, the Trustee will deduct from the funds
of the Trust any accrued costs, expenses, advances or indemnities provided by
the Trust Agreement, including estimated compensation of the Trustee, costs of
liquidation and any amounts required as a reserve to provide for payment of any
applicable taxes or other governmental charges. Any sale of Equity Securities in
the Trust upon termination may result in a lower amount than might otherwise be
realized if such sale were not required at such time. The Trustee will then
distribute to each Unitholder his pro rata share of the balance of the Income
and Capital Accounts.
Within 60 days of the final distribution, Unitholders will be furnished a
final distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the Trustee
in its sole discretion will determine that any amounts held in reserve are no
longer necessary, it will make distribution thereof to Unitholders in the same
manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and
the Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or gross negligence (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Securities. In the event of the failure of the Sponsor to act under
the Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Trust
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee, Sponsor
or Unitholders for errors in judgment. This provision shall not protect the
Evaluator in any case of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
Sponsor. Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the
Trust. The Sponsor is an indirect subsidiary of Van Kampen Investments Inc. Van
Kampen Investments Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc.,
which in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; global custody, securities clearance
services and securities lending; and credit card services.
Van Kampen Funds Inc. specializes in the underwriting and distribution of
unit investment trusts and mutual funds with roots in money management dating
back to 1926. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, (630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1998, the total stockholders' equity of Van Kampen
Funds Inc. was $135,236,000 (audited). (This paragraph relates only to the
Sponsor and not to the Trust or to any other Series thereof. The information is
included herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of September 30, 1997, the Sponsor and its Van Kampen affiliates managed
or supervised approximately $65.3 billion of investment products, of which over
$10.85 billion is invested in municipal securities. The Sponsor and its Van
Kampen affiliates managed $54 billion of assets, consisting of $34.3 billion for
55 open-end mutual funds (of which 45 are distributed by Van Kampen Funds Inc.)
$14.2 billion for 37 closed-end funds and $5.5 billion for 106 institutional
accounts. The Sponsor has also deposited approximately $26 billion of unit
investment trusts. All of Van Kampen's open-end funds, closed-ended funds and
unit investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
All costs and expenses incurred in creating and establishing the Series 1,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses, advertising
and selling expenses, expenses of the Trustee, initial evaluation fees and other
out-of-pocket expenses have been borne by the Sponsor at no cost to such Trust.
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 the 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 such Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may from
time to time be required under any applicable state or federal statute, rule or
regulation (see "Rights of Unitholders--Reports Provided"). The Trustee is
required to keep a certified copy or duplicate original of the Trust Agreement
on file in its office available for inspection at all reasonable times during
the usual business hours by any Unitholder, together with a current list of the
Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus, and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio included in Part One of this Prospectus have been
audited by Grant Thornton LLP, independent certified public accountants, as set
forth in their report in Part One of this Prospectus, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Trust,
the Sponsor or dealers. This Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, securities in any state to any persons to
whom it is not lawful to make such offer in such state.
Table of Contents Page
----------------- ------
The Trust 2
Objectives and Securities Selection 2
Trust Portfolio 2
Risk Factors 2
Federal Taxation 4
Trust Operating Expenses 7
Public Offering 8
Rights of Unitholders 9
Trust Administration 11
Other Matters 13
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.
BRAND NAME EQUITY TRUST
PROSPECTUS
PART TWO
Note: This Prospectus May Be Used Only
When Accompanied by Part One. Both
Parts of this Prospectus should be
retained for future reference.
Dated as of the date
of the Prospectus
Part One accompanying
this prospectus
Part Two.
Sponsor:
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Van Kampen
Information Supplement
The Dow 30SM Index Trust
The Dow 30SM Index & Treasury Trust
- --------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Trust which is not described in the Prospectus. This
Information Supplement should be read in conjunction with the Prospectus. This
Information Supplement is not a prospectus, does not include all of the
information that an investor should consider before investing in a Trust and may
not be used to offer or sell Units without the Prospectus. Copies of the
Prospectus can be obtained by contacting the Sponsor at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181 or by contacting your broker. This Information
Supplement is dated as of the date of the Prospectus and all capitalized terms
have been defined in the Prospectus.
Table of Contents
Page
Risk Factors 2
The Trusts 3
Sponsor Information 3
Trustee Information 4
Trust Termination 5
RISK FACTORS
Price Volatility. Because the Trusts invest in stocks of U.S. and foreign
companies, you should understand the risks of investing in common stocks before
purchasing Units. These risks include the risk that the financial condition of
the company or the general condition of the stock market may worsen and the
value of the stocks (and therefore Units) will fall. Stocks are especially
susceptible to general stock market movements. The value of stocks often rises
or falls rapidly and unpredictably as market confidence and perceptions of
companies change. These perceptions are based on factors including expectations
regarding government economic policies, inflation, interest rates, economic
expansion or contraction, political climates and economic or banking crises. The
value of Units will fluctuate with the value of the stocks in a Trust and may be
more or less than the price you originally paid for your Units. As with any
investment, we cannot guarantee that the performance of a Trust will be positive
over any period of time. Because the Trusts are unmanaged, the Trustee will not
sell stocks in response to market fluctuations as is common in managed
investments. In addition, because some Trusts hold a relatively small number of
stocks, you may encounter greater market risk than in a more diversified
investment.
Dividends. Stocks represent ownership interests in a company and are not
obligations of the company. Common stockholders have a right to receive payments
from the company that is subordinate to the rights of creditors, bondholders or
preferred stockholders of the company. This means that common stockholders have
a right to receive dividends only if a company's board of directors declares a
dividend and the company has provided for payment of all of its creditors,
bondholders and preferred stockholders. If a company issues additional debt
securities or preferred stock, the owners of these securities will have a claim
against the company's assets before common stockholders if the company declares
bankruptcy or liquidates its assets even though the common stock was issued
first. As a result, the company may be less willing or able to declare or pay
dividends on its common stock.
Liquidity. Whether or not the stocks in a Trust are listed on a stock
exchange, the stocks may delist from the exchange or principally trade in an
over-the-counter market. As a result, the existence of a liquid trading market
could depend on whether dealers will make a market in the stocks. We cannot
guarantee that dealers will maintain a market or that any market will be liquid.
The value of the stocks could fall if trading markets are limited or absent.
Additional Units. The Sponsor may create additional Units of a Trust by
depositing into the Trust additional stocks or cash with instructions to
purchase additional stocks. A cash deposit could result in a dilution of your
investment and anticipated income because of fluctuations in the price of the
stocks between the time of the deposit and the purchase of the stocks and
because the Trust will pay brokerage fees.
Voting. Only the Trustee may sell or vote the stocks in a Trust. While you
may sell or redeem your Units, you may not sell or vote the stocks in your
Trust. The Sponsor will instruct the Trustee how to vote the stocks. The Trustee
will vote the stocks in the same general proportion as shares held by other
shareholders if the Sponsor fails to provide instructions.
Year 2000. The Trusts could be negatively impacted if computer systems used
by the Sponsor, Evaluator, Supervisor or Trustee or other service providers to
the Trusts do not properly process date-related information after January 1,
2000. This is commonly known as the "Year 2000 Problem". The Sponsor, Evaluator,
Supervisor and Trustee are taking steps to address this problem and to obtain
reasonable assurances that other service providers to the Trusts are taking
comparable steps. We cannot guarantee that these steps will be sufficient to
avoid any adverse impact on the Trusts. This problem is expected to impact
corporations to varying degrees based on factors such as industry sector and
degree of technological sophistication. We cannot predict what impact, if any,
this problem will have on the issuers of stocks in the Trusts.
THE TRUSTS
In seeking the Trusts' objectives, the Sponsor considered the ability of the
Securities to outpace inflation. While inflation is currently relatively low,
the United States has historically experienced periods of double-digit
inflation. While the prices of securities will fluctuate, over time securities
have outperformed the rate of inflation, and other less risky investments, such
as government bonds and U.S. Treasury bills. Past performance is, however, no
guarantee of future results.
Investors should note that the selection criteria were applied to the
Securities for inclusion in the Trusts as of the Initial Date of Deposit. Should
a Security no longer meet the criteria used for selection for a Trust, such
Security will not as a result thereof be removed from a Trust portfolio.
SPONSOR INFORMATION
Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the Trust.
The Sponsor is an indirect subsidiary of Van Kampen Investments Inc. Van Kampen
Investments Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc., which
in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; global custody, securities clearance
services and securities lending; and credit card services.
Van Kampen Funds Inc. specializes in the underwriting and distribution of
unit investment trusts and mutual funds with roots in money management dating
back to 1926. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, (630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1999, the total stockholders' equity of Van Kampen
Funds Inc. was $141,554,861 (audited). (This paragraph relates only to the
Sponsor and not to the Trust or to any other Series thereof. The information is
included herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of March 31, 1999, the Sponsor and its Van Kampen affiliates managed or
supervised approximately $75 billion of investment products. The Sponsor and its
Van Kampen affiliates managed $64 billion of assets, consisting of $36.6 billion
for 50 open-end mutual funds, $19.5 billion for 39 closed-end funds and $8.2
billion for 106 institutional accounts. The Sponsor has also deposited more than
3,200 unit trusts amounting to approximately $35.4 billion of assets. All of Van
Kampen's open-end funds, closed-ended funds and unit investment trusts are
professionally distributed by leading financial firms nationwide. Based on
cumulative assets deposited, the Sponsor believes that it is the largest sponsor
of insured municipal unit investment trusts, primarily through the success of
its Insured Municipals Income Trust(R) or the IM-IT(R) trust. The Sponsor also
provides surveillance or evaluation services at cost for approximately $13.4
billion of unit investment trust assets outstanding. Since 1976, the Sponsor has
serviced over two million investor accounts, opened through retail distribution
firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
TRUSTEE INFORMATION
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 portfolios.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for each Trust. Such
records shall include the name and address of, and the number of Units of each
Trust held by, every Unitholder. 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. 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 each 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.
TRUST TERMINATION
A Trust may be liquidated at any time by consent of Unitholders representing
66 2/3% of the Units of such Trust then outstanding or by the Trustee when the
value of the Securities owned by a Trust, as shown by any evaluation, is less
than $500,000 ($3,000,000 if the value of the Trust has exceeded $15,000,000). A
Trust will be liquidated by the Trustee in the event that a sufficient number of
Units of such Trust not yet sold are tendered for redemption by the Sponsor, so
that the net worth of such Trust would be reduced to less than 40% of the value
of the Securities at the time they were deposited in such Trust. If a Trust is
liquidated because of the redemption of unsold Units by the Sponsor, the Sponsor
will refund to each purchaser of Units the entire sales charge paid by such
purchaser. The Trust Agreement will terminate upon the sale or other disposition
of the last Security held thereunder, but in no event will it continue beyond
the Mandatory Termination Date.
Commencing during the period beginning nine business days prior to, and no
later than, the Mandatory Termination Date, Securities will begin to be sold in
connection with the termination of the Trusts. The Sponsor will determine the
manner, timing and execution of the sales of the Securities. The Sponsor shall
direct the liquidation of the Securities in such manner as to effectuate orderly
sales and a minimal market impact. In the event the Sponsor does not so direct,
the Securities shall be sold within a reasonable period and in such manner as
the Trustee, in its sole discretion, shall determine. At least 30 days before
the Mandatory Termination Date the Trustee will provide written notice of any
termination to all Unitholders of the appropriate Trust and in the case of a
Trust will include with such notice a form to enable Unitholders owning 1,000 or
more Units to request an in kind distribution of the U.S.-traded Securities. 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 previous business day if a holiday) the Trustee will
deliver each requesting Unitholder's pro rata number of whole shares of the
U.S.-traded Securities in a Trust to the account of the broker-dealer or bank
designated by the Unitholder at Depository Trust Company. The value of the
Unitholder's fractional shares of the Securities will be paid in cash.
Unitholders with less than 1,000 Units, Unitholders in a Trust with 1,000 or
more Units not requesting an in kind distribution will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
following the Mandatory Termination Date. Regardless of the distribution
involved, the Trustee will deduct from the funds of the appropriate Trust any
accrued costs, expenses, advances or indemnities provided by the Trust
Agreement, including estimated compensation of the Trustee, costs of liquidation
and any amounts required as a reserve to provide for payment of any applicable
taxes or other governmental charges. Any sale of Securities in a Trust upon
termination may result in a lower amount than might otherwise be realized if
such sale were not required at such time. The Trustee will then distribute to
each Unitholder of each Trust his pro rata share of the balance of the Income
and Capital Accounts of such Trust.
Within 60 days of the final distribution Unitholders will be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distribution thereof to Unitholders in the
same manner.
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 Focus Portfolios, Series 115, 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
25th day of January, 2000.
Van Kampen Focus Portfolios,
Series 115
(Registrant)
By Van Kampen Funds 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 January 25,
2000 by the following persons who constitute a majority of the Board of
Directors of Van Kampen Funds Inc.:
SIGNATURE TITLE
Richard F. Powers III Chairman and Chief Executive )
Officer )
John H. Zimmerman III President and Chief Operating )
Officer )
William R. Rybak Executive Vice President and )
Chief Financial Officer )
A. Thomas Smith III Executive Vice President, )
General Counsel and Secretary )
Michael H. Santo Executive Vice President )
Gina M. Costello______________
(Attorney in Fact)*
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* An executed copy of each of the related powers of attorney is filed herewith
or was filed with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Van Kampen Focus Portfolios, Series 136
(File No. 333-70897) and the same are hereby incorporated herein by this
reference.
Consent of Independent Certified Public Accountants
We have issued our report dated November 12, 1999 accompanying the
financial statements of Van Kampen Focus Portfolios, Series 115 as of September
30, 1999, 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
January 25, 2000
