MEMORANDUM OF CHANGES
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 166
The Prospectus filed with Amendment No. 1 of the Registration Statement
on Form S-6 has been revised to reflect information regarding the deposit of Van
Kampen Focus Portfolios, Series 166 on July 20, 1999. An effort has been made to
set forth below each of the major changes and also to reflect the same by
blacklining the marked counterparts of the Prospectus submitted with the
Amendment.
Cover Page. The date of the Prospectus has been completed.
Pages 2-3. "The Summary of Essential Financial Information" section and
"Fee Table" have been completed.
Pages 4-8. Revisions have been made and the portfolios have been completed.
Pages 9-14. The descriptions of the Securities issuers have been completed.
Pages 15-16. The Report of Independent Certified Public Accountants and
Statements of Condition have been completed.
FILE NO. 333-81671
CIK #1025318
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Amendment No. 1
to
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: VAN KAMPEN FOCUS PORTFOLIOS, SERIES 166
B. Name of Depositor: VAN KAMPEN FUNDS INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
CHAPMAN AND CUTLER VAN KAMPEN FUNDS INC.
Attention: Mark J. Kneedy Attention: A. Thomas Smith III, General Counsel
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of proportionate interest
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT
/ X / Check box if it is proposed that this filing will become effective at
2:00 p.m. on July 20, 1999 pursuant to Rule 487. ----
Van Kampen
Focus Portfolios(SM)
A Division of Van Kampen Funds Inc.
Financial Institutions Trust, Series 1
Global Energy Trust, Series 10
- --------------------------------------------------------------------------------
Van Kampen Focus Portfolios, Series 166 includes the unit investment trusts
described above (the "Trusts"). Each Trust seeks to increase the value of your
investment by investing in a diversified portfolio of common stocks of companies
within a single industry. Of course, we cannot guarantee that a Trust will
achieve its objective.
July 20, 1999
You should read this prospectus and retain it for future reference.
- --------------------------------------------------------------------------------
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.
Summary of Essential Financial Information
July 20, 1999
Financial Global
Institutions Energy
Public Offering Price Trust Trust
------------ ------------
Aggregate value of Securities per Unit (1) $ 9.900 $ 9.900
Sales charge 0.325 0.325
Less deferred sales charge 0.225 0.225
Public offering price per Unit (2) $ 10.000 $ 10.000
Trust Information
Initial number of Units (3) 14,915 15,018
Aggregate value of Securities (1) $ 147,657 $ 148,675
Estimated initial distribution per Unit (4) $ .07 $ .06
Estimated annual dividends per Unit (4) $ .17181 $ .18831
Redemption price per Unit (5) $ 9.67 $ 9.67
General Information
Initial Date of Deposit July 20, 1999
Mandatory Termination Date July 20, 2001
Record Dates June 10 and December 10
Distribution Dates June 25 and December 25
- --------------------------------------------------------------------------------
(1) Each Security is valued at the most recent closing sale price on its
principal trading exchange or at the most recent asked price if not listed
on the last business day before the Initial Date of Deposit. You will bear
all or a portion of the expenses incurred in organizing and offering your
Trust. The public offering price includes the estimated amount of these
costs. The Trustee will deduct these expenses from your Trust at the end of
the initial offering period (approximately three months). The estimated
amount for each Trust is described on the next page.
(2) The public offering price will include any accumulated dividends or cash in
the Income or Capital Accounts of a Trust.
(3) At the close of the New York Stock Exchange on the Initial Date of Deposit,
the number of Units may be adjusted so that the public offering price per
Unit equals $10. The number of Units and fractional interest of each Unit
in a Trust will increase or decrease to the extent of any adjustment.
(4) This estimate is based on the most recently declared quarterly dividends or
interim and final dividends accounting for any foreign withholding taxes.
Actual dividends may vary due to a variety of factors. See "Risk Factors".
(5 The redemption price is reduced by any remaining deferred sales charge. See
"Rights of Unitholders--Redemption of Units". The redemption price includes
the estimated organizational and offering costs. The redemption price will
not included these costs after the initial offering period.
Fee Table
Financial Global
Institutions Energy
Trust Trust
--------------------
Transaction Fees (as % of offering price)
Initial Sales Charge (1)...................... 1.00% 1.00%
Deferred sales charge (2)..................... 2.25% 2.25%
--------------------
Maximum sales charge.......................... 3.25% 3.25%
====================
Maximum sales charge on reinvested dividends.. 2.25% 2.25%
====================
Estimated Organizational Costs per Unit (3).... $ 0.03139 $ 0.03139
====================
Estimated Annual Expenses per Unit
Trustee's fee and operating expenses........... $ 0.01361 $ 0.01361
Supervisory and evaluation fees................ $ 0.00500 $ 0.00500
--------------------
Estimated annual expenses per Unit............. $ 0.01861 $ 0.01861
====================
Estimated Costs Over Time
One year....................................... $ 38 $ 38
Three years.................................... $ 42 $ 42
Five years..................................... N/A N/A
Ten years...................................... N/A N/A
This fee table is intended to assist you in understanding the costs that you
will bear and to present a comparison of fees. The "Estimated Costs Over Time"
example illustrates the expenses you would pay on a $1,000 investment assuming a
5% annual return and redemption at the end of each period. This example assumes
that you reinvest all distributions at the end of each year. Of course, you
should not consider this example a representation of actual past or future
expenses or annual rate of return which may differ from those assumed for this
example. The sales charge and expenses are described under "Public Offering" and
"Trust Operating Expenses".
- --------------------------------------------------------------------------------
(1) The initial sales charge is the difference between the maximum sales charge
and the deferred sales charge.
(2) The deferred sales charge is actually equal to $0.225 per Unit. This amount
will exceed the percentage above if the public offering price per Unit
falls below $10 and will be less than the percentage above if the public
offering price per Unit exceeds $10. The deferred sales charge accrues
daily from November 16, 1999 through July 15, 2000. Your Trust pays a
proportionate amount of this charge on the tenth day of each month
beginning in the accrual period until paid in full.
(3) You will bear all or a portion of the expenses incurred in organizing and
offering your Trust. The Trustee will deduct the actual amount of these
expenses from your Trust at the end of the initial offering period.
Financial Institutions Trust
The Trust seeks to provide capital appreciation through an investment in a
portfolio of common stocks issued by financial institutions. Financial
institutions generally include insurance companies, money center banks, regional
banks, savings and loans, consumer and industrial finance companies, securities
brokerage companies, real estate investment companies, investment managers and
leasing companies. The Trust may invest in some or all of these sectors. The
boundaries separating different financial sectors have become blurred. Banks are
not the only institutions offering checking and savings accounts, insurance
companies are not the only companies offering insurance and brokerage firms are
not the only companies offering investment products. As financial institutions
continue to consolidate, the boundaries become even more faint.
We believe that trends suggest that the financial institutions industry is
looking to consolidate financial-related products and services. The biggest
impediment to this trend has been legislation. Legislators are currently seeking
to break down barriers. As this progresses, we hope to see a financial
institutions industry that is less dependent on the interest rate spreads for
its profitability and more dependent on fees charged for products and services.
Certain factors may suggest that bank and thrift stocks offer a potential for
growth, such as:
o An increased number of consolidations and mergers
o Relatively stable interest rates
o Low inflationary expectations
o Expansion of lending products
o Consumer confidence
o Growth in consumer spending
o Growth in credit cards
o Strong credit quality
o Growth in electronic commerce
o Increase in transaction volume due to improvements in technology
Of course, no one can guarantee that these trends will continue.
If you had invested $10,000 in the stocks included in the Standard & Poor's
Financials Index on December 31, 1988, it would have grown to $72,879 by May 28,
1999. If you had invested this amount in the stocks included in the Standard &
Poor's 500 Index, it would have grown to $63,424 over the same time period. This
is not the past performance of the Trust or a previous series of the Trust and
does not indicate the future performance of the Trust. The performance of the
Trust will differ from these indices because the Trust includes a sales charge
and expenses that are not reflected in these figures. In addition, the Trust
will not own the same stocks as those included in the indices.
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.
<TABLE>
<CAPTION>
Portfolio
- --------------------------------------------------------------------------------------------------------------
Current Cost of
Number Market Value Dividend Securities
of Shares Name of Issuer (1) per Share (2) Yield (3) to Trust (2)
---------- ----------------------------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
121 AFLAC, Inc. $ 45.500 0.66% $ 5,505.50
147 Allstate Corporation 37.063 1.62 5,448.19
40 American Express Company 139.188 0.65 5,567.50
70 American General Corporation 78.750 2.03 5,512.50
45 American International Group, Inc. 120.375 0.17 5,416.88
73 Bank of America Corporation 74.125 2.43 5,411.13
91 Bank One Corporation 60.438 2.78 5,499.81
107 BankBoston Corporation 51.875 2.47 5,550.63
109 Charles Schwab Corporation 49.500 0.11 5,395.50
66 Chase Manhattan Corporation 82.125 2.00 5,420.25
110 Citigroup, Inc. 49.063 1.14 5,396.88
190 Compass Bancshares, Inc. 28.938 2.76 5,498.13
105 Donaldson, Lufkin & Jenrette, Inc. 51.438 0.49 5,400.94
80 Equitable Companies, Inc. 67.938 0.29 5,435.00
77 Fannie Mae 71.000 1.52 5,467.00
115 First Union Corporation 47.438 3.96 5,455.31
115 Household International, Inc. 47.563 1.43 5,469.69
101 Lincoln National Corporation 54.313 2.03 5,485.56
70 Marsh & McLennan Companies, Inc. 77.875 2.31 5,451.25
72 Merrill Lynch & Company, Inc. 74.438 1.45 5,359.50
293 Peoples Heritage Financial Group, Inc. 18.750 2.45 5,493.75
100 PNC Bank Corporation 54.875 2.99 5,487.50
58 Providian Financial Corporation 95.563 0.21 5,542.63
79 SunTrust Banks, Inc. 70.000 1.97 5,530.00
161 U.S. Bancorp 33.875 2.30 5,453.88
156 Washington Mutual, Inc. 35.500 2.70 5,538.00
128 Wells Fargo Company 42.688 1.87 5,464.00
- ---------- -------------
2,879 $ 147,656.91
========== =============
</TABLE>
See "Notes to Portfolios".
Global Energy Trust
The Trust seeks to increase the value of your investment and provide
dividend income by investing in stocks of energy companies throughout the world.
We selected stocks for a variety of reasons including industry position, growth
potential and valuation. The portfolio primarily includes exploration and
development companies, distributors and large multinational firms in both oil
and natural gas industries. Oil and natural gas are leading sources of energy
worldwide. Recent developments in the industry and global economic growth may
increase the future demand for these natural resources. The industry's
dedication to research, exploration and technology has improved exploration and
extraction techniques. From new drilling methods to three-dimensional
seismographic mapping, oil and natural gas companies are better able to target
potential sites and benefit from them.
The modern global economy may also provide growth potential for the energy
industry. Oil and natural gas companies from around the world are forming joint
ventures and exploration partnerships that were unheard of less than a decade
ago. From Eastern Europe to the Pacific Rim, such ventures provide important
production opportunities. While political uncertainty and other factors can
affect such development projects, the potential reserves available in this area
of the world may provide significant earnings momentum for energy companies.
The United States represents the largest market for energy products. The
U.S. economy is currently characterized, in relative historical terms, by low
inflation and moderate growth. As the world's largest energy product consumer,
the United States provides stability for energy prices. A more dramatic change
in energy usage may come from the former Soviet Union, Eastern European
countries and the Pacific Rim. As economies grow and modernize, there is an
essential demand for energy resources for both industries and consumers. With
more efficient exploration and production techniques and new reserve potential,
the supply of oil and other energy products appears promising. Global growth may
help keep demand growing, providing price support for energy products and
ultimately benefiting oil and natural gas companies.
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.
<TABLE>
<CAPTION>
Portfolio
- --------------------------------------------------------------------------------------------------------------
Current Cost of
Number Market Value Dividend Securities
of Shares Name of Issuer (1) per Share (2) Yield (3) to Trust (2)
---------- ----------------------------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
62 Amerada Hess Corporation $ 59.688 1.01% $ 3,700.63
101 Anadarko Petroleum Corporation 36.188 0.55 3,654.94
41 Atlantic Richfield Company 92.375 3.09 3,787.38
112 Baker Hughes, Inc. 33.313 1.38 3,731.00
+ 63 BP Amoco Plc 118.000 2.03 7,434.00
88 Burlington Resources, Inc. 42.000 1.31 3,696.00
79 Chevron Corporation 95.188 2.56 7,519.81
93 Coastal Corporation 40.000 0.63 3,720.00
+ 79 Coflexip SA 46.500 0.00 3,673.50
288 Conoco, Inc. 26.125 2.91 7,524.00
120 Diamond Offshore Drilling, Inc. 31.000 1.61 3,720.00
+ 118 ENI 63.000 1.71 7,434.00
187 Enron Oil & Gas Company 19.750 0.61 3,693.25
186 ENSCO International, Inc. 20.063 0.50 3,731.63
94 Exxon Corporation 78.813 2.08 7,408.38
81 Halliburton Company 45.938 1.09 3,720.94
155 Helmerich & Payne, Inc. 24.250 1.15 3,758.75
36 Mobil Corporation 102.563 2.22 3,692.25
123 Noble Affiliates, Inc. 28.750 0.56 3,536.25
139 Phillips Petroleum Company 53.625 2.54 7,453.88
+ 357 Repsol SA 20.938 1.93 7,474.69
+ 116 Royal Dutch Petroleum Company 64.438 2.11 7,474.75
59 Schlumberger, Limited 63.438 1.18 3,742.81
113 Texaco, Inc. 66.063 2.72 7,465.06
+ 111 Total Fina SA 67.063 1.31 7,443.94
297 Ultramar Diamond Shamrock Corporation 24.875 4.42 7,387.88
177 Unocal Corporation 41.875 1.91 7,411.88
114 USX-Marathon Group 32.313 2.60 3,683.63
- ---------- ------------
3,589 $ 148,675.23
========== ============
</TABLE>
See "Notes to Portfolios".
Notes to Portfolios
(1) The Securities are initially represented by "regular way" contracts for
the performance of which an irrevocable letter of credit has been deposited with
the Trustee. Contracts to acquire Securities were entered into on July 19, 1999
and have a settlement date of July 22, 1999 (see "The Trusts").
(2) The market value of each Security is based on the most recent closing
sale price on the applicable exchange on the day prior to the Initial Date of
Deposit or the most recent asked price if not listed on an exchange. Other
information regarding the Securities, as of the Initial Date of Deposit, is as
follows:
Profit
Cost to (Loss) To
Sponsor Sponsor
-------------- --------------
Financial Institutions Trust $147,657 $ --
Global Energy Trust $148,734 $ (59)
"+" indicates that the stock is held in the form American Depositary Receipts or
similar receipts.
(3)Current Dividend Yield for each Security is based on the estimated annual
dividends per share and the Security's market value as of the most recent close
of trading on the business day prior to the Initial Date of Deposit. Estimated
annual dividends per share are calculated by annualizing the most recently
declared dividends or by adding the most recent interim and final dividends
declared and reflect any foreign withholding taxes.
The Securities. A brief description of each of the issuers of the Securities
is listed below.
Financial Institutions Trust
AFLAC, Inc. AFLAC, Inc. provides supplemental insurance to individuals in the
United States and Japan. The company's products help fill gaps in consumers'
primary insurance coverage. AFLAC's products include cancer expense insurance,
care plans, supplemental general medical expense plans, and living benefit
plans.
Allstate Corporation. Allstate Corporation, through its subsidiaries,
provides property-liability insurance, as well as other types of insurance in
the United States and Canada. The company primarily sells private passenger
automobile and homeowners insurance through independent and specialized brokers.
Allstate also sells life insurance, annuity, and group pension products through
agents.
American Express Company. American Express Company, through its subsidiaries,
provides travel-related, financial advisory, and international banking services
around the world. The company's products include the American Express Card, the
Optima Card, and American Express Travelers Cheque.
American General Corporation. American General Corporation, a diversified
financial services organization, provides retirement services, life insurance,
and consumer loans. The company offers retail financing programs through a
network of merchants in the United States.
American International Group, Inc. American International Group, Inc.,
through its subsidiaries, provides a variety of insurance and insurance-related
services in the United States and overseas. The company writes property and
casualty and life insurance, as well as provides financial services.
Bank of America Corporation. Bank of America Corporation is the holding
company for Bank of America and NationsBank. The company provides retail banking
services, asset management, financial products, corporate finance, specialized
finance, capital markets, and financial services. Bank of America operates
throughout the United States.
Bank One Corporation. Bank One Corporation, a bank holding company, provides
a full range of consumer and commercial banking-related financial services. The
company is also involved in credit card and merchant processing, consumer and
education finance, mortgage banking, and insurance. Bank One operates throughout
the United States.
BankBoston Corporation. BankBoston Corporation offers consumer, small
business, and corporate banking in New England. The company also delivers
financial solutions to corporations and governments nationally and
internationally, as well as provides full-service banking in Latin American
markets.
Charles Schwab Corporation. Charles Schwab Corporation provides a variety of
financial services to individual investors, independent investment managers,
retirement plans, and institutions. The company provides its services to
customers through multiple service channels, including the Internet, a network
of branch offices, telephone, and multilingual technologies.
Chase Manhattan Corporation. Chase Manhattan Corporation is a bank holding
company that conducts domestic and international financial services through
various bank and non-bank subsidiaries. The company provides corporate finance,
wholesale banking, and investment services, as well as emphasizes originations,
underwriting, distribution, risk management products, and private banking.
Citigroup, Inc. Citigroup, Inc. is a diversified financial services holding
company that provides a broad range of financial services to consumer and
corporate customers around the world. The company's services include investment
banking, retail brokerage, corporate banking, and cash management products and
services.
Compass Bancshares, Inc. Compass Bancshares, Inc. is a multi-bank holding
company. The banks conduct a general commercial banking and trust business
through a network of offices in Texas, Alabama, and Florida. Compass also
provides insurance products and owns real estate.
Donaldson, Lufkin & Jenrette, Inc. Donaldson, Lufkin & Jenrette, Inc., an
integrated investment and merchant bank, serves institutional, corporate,
governmental, and individual clients. The company provides securities
underwriting, sales and trading, merchant banking, financial advisory services,
investment research, correspondent brokerage services, and asset management.
Donaldson operates throughout the world.
Equitable Companies, Inc. Equitable Companies, Inc. is a diversified
financial services organization serving a broad spectrum of insurance,
investment management, and investment banking customers. The company offers life
insurance and annuity products, mutual funds, and other investment products in
all 50 states. Equitable also provides investment management, brokerage
services, and other services.
Fannie Mae. Fannie Mae buys and holds mortgages, and issues and sells
guaranteed mortgage-backed securities to facilitate housing ownership for low-
to middle-income Americans. The company was chartered by the United States
Congress, but went public in 1970.
First Union Corporation. First Union Corporation is a multi-bank holding
company operating in the eastern United States. The company provides a wide
range of commercial and retail banking and trust services. First Union also
provides other financial services, including mortgage banking, credit card,
leasing, and securities brokerage services.
Household International, Inc. Household International, Inc. provides consumer
financial services. The company offers home equity loans, auto finance loans,
and other unsecured loans, as well as private label credit cards. Household
International operates in the United States, the United Kingdom, and Canada.
Lincoln National Corporation. Lincoln National Corporation owns and operates
wealth accumulation and protection businesses. The company provides annuities,
life insurance, retirement income, life-health reinsurance, institutional
investment management, and mutual funds. Lincoln also provides institutional
investment management and advisory services.
Marsh & McLennan Companies, Inc. Marsh & McLennan Companies, Inc., through
its subsidiaries and affiliates, provides professional advice and related
services such as insurance and reinsurance brokerage, consulting, and investment
management services. The company's products include analysis, advice, and
transactional capabilities. Marsh operates worldwide.
Merrill Lynch & Company, Inc. Merrill Lynch & Company, Inc. provides a
variety of financial and investment services through offices around the world.
The company serves the needs of both individual and institutional clients with a
diverse range of financial services including personal financial planning,
trading and brokering, banking and lending, and insurance.
Peoples Heritage Financial Group, Inc. Peoples Heritage Financial Group, Inc.
is a multi-bank holding company. The banks operate offices located throughout
Maine, New Hampshire, and Massachusetts. The company offers commercial and
consumer banking services and products, as well as trust and investment advisory
services. Peoples attracts deposits and uses the funds to originate residential
and commercial loans.
PNC Bank Corporation. PNC Bank Corporation is a diversified financial
services organization. The company's major businesses include national consumer
banking, regional community banking, private banking, secured lending, asset
management and servicing, corporate banking, and mortgage banking. PNC operates
in the United States.
Providian Financial Corporation. Providian Financial Corporation is a
diversified consumer lender. The company offers a variety of loan products,
including credit cards, revolving lines of credit, home loans, secured credit
cards, and fee-based products. Providian operates in the United States.
SunTrust Banks, Inc. SunTrust Banks, Inc. is a super-regional bank holding
company. The company's subsidiary banks operate in Florida, Georgia, Alabama,
Maryland, Tennessee, Virginia, and the District of Columbia. SunTrust provides a
wide range of personal, corporate, and institutional financial services.
U.S. Bancorp. U.S. Bancorp is a holding company with subsidiary banks that
provide comprehensive banking, trust, investment, and payment systems products
and services to consumers, businesses, and institutions. The banks operate in
the United States. The company also offers full-service brokerage services.
Washington Mutual, Inc. Washington Mutual, Inc. is a financial services
company that provides a diversified line of products and services to consumers
and small to mid-sized businesses. The company offers consumer banking, mortgage
lending, commercial banking, and consumer finance throughout the United States.
Wells Fargo Company. Wells Fargo Company is a diversified financial services
company providing banking, insurance, investments, mortgage, and consumer
finance. The company operates through more than 5,800 stores, more than 6,200
automated teller machines, and other distribution channels across North America.
Global Energy Trust
Amerada Hess Corporation. Amerada Hess Corporation and its subsidiaries
explore for, produce, purchase, transport, and sell crude oil and natural gas.
The company also manufactures, purchases, transports, and markets refined
petroleum products. Amerada Hess' exploration and production activities are
located primarily in the United States, United Kingdom, Norway, and Gabon.
Anadarko Petroleum Corporation. Anadarko Petroleum Corporation is an
independent oil and gas exploration and production company. The company explores
for oil in Kansas, Oklahoma, and Texas, as well as offshore in the Gulf of
Mexico and in Alaska. Anadarko also owns and operates gas gathering systems in
its United States core producing areas. The company develops crude oil reserves
in Algeria.
Atlantic Richfield Company. Atlantic Richfield Company (ARCO) explores for,
produces, refines, and markets crude oil, natural gas, and natural gas liquids.
The company conducts its worldwide oil and gas exploration and production
operations primarily in the United States, China, Indonesia, the United Kingdom
North Sea, Algeria, and Venezuela.
Baker Hughes, Inc. Baker Hughes, Inc. supplies reservoir-centered products,
services, and systems to the worldwide oil and gas industry. The company
provides products and services for oil and gas exploration, drilling,
completion, and production. Baker also manufactures and markets a variety of
roller cutter bits and fixed cutter diamond bits.
BP Amoco Plc. BP Amoco Plc is an oil and petrochemicals company. The company
explores for and produces oil and natural gas; refines, markets, and supplies
petroleum products; and manufactures and markets chemicals. BP Amoco's chemicals
include acetic acid, acrylonitrile, ethylene and polyethylene. The company has
operations in more than 70 countries.
Burlington Resources, Inc. Burlington Resources, Inc., through its principal
subsidiaries, explores for, produces, and markets oil and gas. The company's
properties are primarily located in the United States. Burlington's operations
are conducted by five divisions located in New Mexico and Texas.
Chevron Corporation. Chevron Corporation explores for, develops, and produces
crude oil and natural gas. The company also refines crude oil into finished
petroleum products, as well as markets and transports crude oil, natural gas,
and petroleum products. Chevron manufactures and markets a variety of chemicals
for industrial use and mines for coal. The company operates in the United States
and throughout the world.
Coastal Corporation. Coastal Corporation, through its subsidiaries, gathers,
markets, processes, stores, and transmits gas, as well as refines, markets, and
distributes petroleum and chemicals. The company is also involved in oil and gas
exploration and production, coal mining, and power.
Coflexip SA. Coflexip SA designs, manufactures and installs offshore flexible
pipe and offers project management and engineering services to the subsea oil
industry. The company manufactures offshore and onshore flexible pipe, cables
that carry hydraulic, electrical or optical signals between surface platforms
and the seabed and installs and maintains undersea telecommunications and power
cables.
Conoco, Inc. Conoco, Inc. explores for, produces, and sells crude oil,
natural gas, and natural gas liquids. The company's downstream activities
include refining crude oil and other feedstocks into petroleum products, buying
and selling crude oil and refined products, and transporting, distributing, and
marketing petroleum products. Conoco operates in countries throughout the world.
Diamond Offshore Drilling, Inc. Diamond Offshore Drilling, Inc. contract
drills offshore oil and gas wells. The company deep water drills using a fleet
of offshore rigs, consisting of semisubmersibles, jack-ups, and a drillship.
Diamond conducts operations throughout the world.
ENI. ENI is an integrated oil and gas company. The company explores,
develops, and produces oil and natural gas; supplies, transmits and distributes
natural gas; refines and markets oil and petroleum products; and produces and
sells petrochemicals. ENI also provides oilfield services, contracting and
engineering.
Enron Oil & Gas Company. Enron Oil & Gas Company explores for, produces, and
markets natural gas and crude oil. The company's major producing basins are
located in the United States, as well as in Canada, Trinidad, and India.
ENSCO International, Inc. ENSCO International, Inc., an international
offshore contract drilling company, provides marine transportation services in
the Gulf of Mexico. The company serves the oil and gas industry.
Exxon Corporation. Exxon Corporation explores for and produces crude oil and
natural gas; manufactures petroleum products; and transports and sells crude
oil, natural gas, and petroleum products. The company also manufactures and
markets basic petrochemicals, including olefins and aromatics, as well as
supplies specialty rubbers and additives for fuels and lubricants.
Halliburton Company. Halliburton Company provides energy services and
engineering and construction services, as well as manufactures products for the
energy industry. The company offers discrete services and products and
integrated solutions to customers in the exploration, development, and
production of oil and natural gas.
Helmerich & Payne, Inc. Helmerich & Payne, Inc. explores for, produces, and
sells crude oil and natural gas, as well as provides contract drilling of oil
and gas wells for other companies. Helmerich & Payne holds commercial real
estate investments in Tulsa, Oklahoma.
Mobil Corporation. Mobil Corporation, through its subsidiaries, operates an
oil and gas exploration and producing business, a global marketing and refining
complex, and a network of pipelines and tankers. The company also manufactures
and markets petrochemicals, packaging films, and specialty chemical products.
Mobil conducts operations throughout the world.
Noble Affiliates, Inc. Noble Affiliates, Inc., an independent energy company,
explores for, produces, and markets oil and gas. The company has exploration and
production operations throughout major basins in the United States, including
the Gulf of Mexico. Noble also has international operations in Argentina, China,
Ecuador, Denmark, Equatorial Guinea, the Mediterranean Sea, and the United
Kingdom sector of the North Sea.
Phillips Petroleum Company. Phillips Petroleum Company operates in four
business segments. The company explores for and produces petroleum worldwide;
gathers and processes natural gas; refines, markets, and transports petroleum
products; and manufactures and markets petrochemicals and plastics.
Repsol SA. Repsol SA, through subsidiaries, explores for, develops and
produces crude oil products and natural gas, transports petroleum products and
liquified petroleum gas (LPG) and refines petroleum. In addition, Repsol
produces a variety of petrochemicals and markets petroleum products, petroleum
derivatives, LPG and natural gas.
Royal Dutch Petroleum Company. Royal Dutch Petroleum Company owns 60% of the
Royal Dutch/Shell Group of companies. These companies are involved in all phases
of the petroleum and petrochemicals industries from exploration to final
processing, delivery and marketing. Royal Dutch Petroleum Company has no
operations of its own and virtually the whole of its income is derived from this
60% interest.
Schlumberger, Limited. Schlumberger, Limited provides oilfield services and
other services to various industries. The company offers seismic data
acquisition, drilling rigs, wire-line logging, and other oilfield services.
Schlumberger also provides technology, products, services, and systems to the
semiconductor, banking, and other industries, as well as solutions to
electricity, gas, and water resource clients.
Texaco, Inc. Texaco, Inc. and its subsidiaries explore for, produce,
transport, refine and market crude oil, natural gas liquids, natural gas, and
petroleum products. The company owns, leases, or has interests in extensive
production, manufacturing, marketing, transportation, and other facilities
throughout the world.
Total Fina SA. Total Fina SA explores for, produces, refines, transports and
markets oil and natural gas. The company also operates a chemical division which
produces rubber, paint, ink, adhesives and resins. In addition, Total has
interests in coal mining and in nuclear power, cogeneration and electricity
generation. The company operates worldwide.
Ultramar Diamond Shamrock Corporation. Ultramar Diamond Shamrock Corporation
refines and retails refined products and convenience store merchandise. The
company's operations consist of refineries, convenience stores, pipelines, a
home heating business, and related petrochemical and natural gas liquids
operations. Ultramar Diamond Shamrock operates in the Central, Southwest, and
Northeast regions of the United States and eastern Canada.
Unocal Corporation. Unocal Corporation explores for and produces oil and gas
in Asia and the United States Gulf of Mexico. The company also produces
geothermal energy and provides electrical power, as well as manufactures and
markets nitrogen-based fertilizers, petroleum coke, graphites, and specialty
minerals.
USX-Marathon Group. USX-Marathon Group, a business unit of USX Corporation,
includes Marathon Oil Company and certain other subsidiaries of USX. The group
explores for, produces, transports, and markets crude oil and natural gas
worldwide. Marathon also refines, markets, and transports petroleum products in
the United States.
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 166:
We have audited the accompanying statements of condition and the related
portfolios of Van Kampen Focus Portfolios, Series 166 as of July 20, 1999. The
statements of condition and portfolios are the responsibility of the Sponsor.
Our responsibility is to express an opinion on such financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of an irrevocable letter of credit deposited to purchase securities
by correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion. In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Van Kampen Focus Portfolios, Series
166 as of July 20, 1999, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Chicago, Illinois
July 20, 1999
<TABLE>
<CAPTION>
STATEMENTS OF CONDITION
As of July 20, 1999
Financial Global
Institutions Energy
Trust Trust
--------------- --------------
INVESTMENT IN SECURITIES
<S> <C> <C> <C>
Contracts to purchase Securities (1) $ 147,657 $ 148,675
--------------- --------------
Total $ 147,657 $ 148,675
=============== ==============
LIABILITY AND INTEREST OF UNITHOLDERS
Liabilities--
Organizational costs (2) $ 468 $ 471
Deferred sales charge liability (3) 3,356 3,379
Interest of Unitholders--
Cost to investors (4) 149,150 150,180
Less: Gross underwriting commission and organizational costs (2)(4)(5) 5,317 5,355
--------------- --------------
Net interest to Unitholders (4) 143,833 144,825
--------------- --------------
Total $ 147,657 $ 148,675
=============== ==============
</TABLE>
(1) The value of the Securities is determined by Interactive Data Corporation
on the bases set forth under "Public Offering--Offering Price". The
contracts to purchase Securities are collateralized by separate irrevocable
letters of credit which have been deposited with the Trustee.
(2) A portion of the Public Offering Price represents an amount sufficient to
pay for all or a portion of the costs incurred in establishing a Trust. The
amount of these costs are set forth in the "Fee Table." A distribution will
be made as of the close of the initial offering period to an account
maintained by the Trustee from which this obligation of the investors will
be satisfied.
(3) Represents the amount of mandatory distributions from a Trust on the bases
set forth under "Public Offering".
(4) The aggregate public offering price and the aggregate sales charge are
computed on the bases set forth under "Public Offering-- Offering Price".
(5) Assumes the maximum sales charge.
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 date of
this Prospectus (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 equity securities. A
Trust may be an appropriate medium for investors who desire to participate in a
portfolio of common stocks 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" 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 of each Security in the Trustportfolio that existed
immediately prior to the subsequent deposit (except that for the first 90 days
these deposits will be in amounts which maintain, as nearly as practicable, the
original proportionate relationship among each Security for the Financial
Institutions Trust). 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" 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 by investing in a
portfolio of common stocks of companies diversified within a particular
industry. We cannot guarantee that a Trust will achieve its objective.
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.
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 in common stocks of U.S. and foreign
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 common 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.
In addition, because some Trusts hold a relatively small number of stocks, you
may encounter greater market risk than in a more diversified investment. As with
any investment, we cannot guarantee that the performance of a Trust will be
positive over any period of time.
Dividends. Common stocks represent ownership interests in the issuers and are
not obligations of the issuers. Accordingly, 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.
Foreign Stocks. Because the Trusts may invest in common stocks of foreign
companies, they involve additional risks that differ from an investment in
domestic stocks. These risks include the risk of losses due to future political
and economic developments, international trade conditions, foreign withholding
taxes and restrictions on foreign investments and exchange of securities. The
Trusts also involve the risk that fluctuations in exchange rates between the
U.S. dollar and foreign currencies may negatively affect the value of the
stocks. The Trusts involve the risk that information about the stocks is not
publicly available or is inaccurate due to the absence of uniform accounting and
financial reporting standards. In addition, some foreign securities markets are
less liquid than U.S. markets. This could cause the Trusts to buy stocks at a
higher price or sell stocks at a lower price than would be the case in a highly
liquid market. Foreign securities markets are often more volatile and involve
higher trading costs than U.S. markets, and foreign companies, securities
markets and brokers are also generally not subject to the same level of
supervision and regulation as in the U.S. Certain stocks may be held in the form
of American Depositary Receipts or other similar receipts ("ADRs"). ADRs
represent receipts for foreign common stock deposited with a custodian (which
may include the Trustee). The ADRs in the Trusts trade in the U.S. in U.S.
dollars and are registered with the Securities and Exchange Commission. ADRs
generally involve the same types of risks as foreign common stock held directly.
Some ADRs may experience less liquidity than the underlying common stocks traded
in their home market.
Single Industry. Each Trust invests in a single industry. Any negative impact
on the related industry will have a greater impact on the value of Units than on
a portfolio diversified over several industries. You should understand the risks
of these industries before you invest.
Financial Institutions. The Financial Institutions Trust primarily invests in
insurance companies, money center banks, regional banks, savings and loans,
consumer and industrial finance companies, securities brokerage companies, real
estate investment companies, investment managers and leasing companies. These
issuers face risks related to general economic conditions, volatile interest
rates, economic recession, competition from other financial services companies,
government regulation and portfolio concentrations in geographic markets and in
commercial and residential real estate loans. Changes in interest rates can
significantly impact the operating results of financial institutions. Increased
interest rates may increase a bank's interest income but may also increase the
interest the bank pays on depository accounts and may lead to a decreased demand
for loans. Lower interest rates may lead to increased prepayments on loans. If a
loan is paid off early, the lending bank is subject to reinvestment risk to the
extent that it is unable to reinvest the prepayments at rates which are
comparable to the rates on the prepaid loans. Economic conditions in real estate
markets can also significantly impact banks because they often invest
substantial assets in loans secured by real estate.
Federal and state laws regulate financial institutions extensively. Any
increase or change in regulations could adversely affect these companies. In
recent years, however, federal legislation has reduced certain barriers to
interstate banking and branching by financial institutions. In addition, the
Federal Reserve Board has liberalized regulations that limit the ability of
nonbank subsidiaries of banks to engage in securities-related businesses. This
and any future liberalization of regulations could result in increased
competition which could negatively impact some companies. Banks also face
significant competition from other financial companies that offer a broader
array of products such as securities and brokerage companies, credit unions,
mortgage banking companies and insurance companies.
Energy Issuers. The Global Energy Trust invests in energy companies. Energy
companies face risks related to political conditions in oil producing regions
(such as the Middle East), the actions of the Organization of Petroleum
Exporting Countries (OPEC), the price and worldwide supply of oil and natural
gas, the price and availability of alternative fuels, the ability to find and
acquire oil and gas reserves that are economically recoverable, operating
hazards, government regulation and the level of consumer demand. Political
conditions of some oil producing regions have been unstable in the past.
Political instability or war in these regions could have a negative impact on
your investment. Oil and natural gas prices can be extremely volatile. OPEC
controls a substantial portion of world oil production. OPEC may take actions to
increase or suppress the price or availability of oil. Various domestic and
foreign government authorities and international cartels also impact these
prices. Any substantial decline in these prices could have an adverse effect on
energy companies. Energy companies depend on their ability to find and acquire
additional energy reserves. The exploration and recovery process involves
significant operating hazards and can be very costly. A company has no assurance
that it will find reserves or that any reserves will be economically
recoverable. The industry also faces substantial government regulation,
including environmental regulation. These regulations have increased costs and
limited production and usage of certain fuels. All of these factors could
adversely impact your investment.
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. 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, Trusteeor 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 effect 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 Trusts.
PUBLIC OFFERING
- --------------------------------------------------------------------------------
General. Units are offered at the Public Offering Price which includes the
underlying value of the Securities, the initial sales charge, and cash, if any,
in the Income and Capital Accounts. The "Fee Table" describes the sales charge
in detail. If any deferred sales charge payment date is not a business day, we
will charge the payment on the next business day. If you purchase Units after
the initial deferred sales charge payment, you will only pay that portion of the
payments not yet collected. A portion of the Public Offering Price includes an
amount of Securities to pay for all or a portion of the costs incurred in
establishing your Trust, including the cost of preparing documents relating to
the Trust (such as the prospectus, trust agreement and closing documents,
federal and state registration fees, the initial fees and expenses of the
Trustee and legal and audit expenses). Beginning on July 20, 2000, the secondary
market sales charge will be 2.75% and will not include deferred payments. The
initial offering period sales charge is reduced as follows:
Aggregate
Dollar Amount
of Units Purchased* Sales Charge
- --------------------- ----------------
$100,000 - $249,999 3.00%
$250,000 - $499,999 2.75
$500,000 - $999,999 2.50
$1,000,000 or more 2.00
- ---------------------
*The breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be applied on
whichever basis is more favorable to the investor.
Any sales charge reduction is the responsibility of the selling broker,
dealer or agent. An investor may aggregate purchases of Units of the Trusts for
purposes of qualifying for volume purchase discounts listed above. The reduced
sales charge structure will also apply on all purchases by the same person from
any one dealer of units of Van Kampen-sponsored unit investment trusts which are
being offered in the initial offering period (a) on any one day (the "Initial
Purchase Date") or (b) on any day subsequent to the Initial Purchase Date if the
units purchased are of a unit investment trust purchased on the Initial Purchase
Date. In the event units of more than one trust are purchased on the Initial
Purchase Date, the aggregate dollar amount of such purchases will be used to
determine whether purchasers are eligible for a reduced sales charge. Such
aggregate dollar amount will be divided by the public offering price per unit of
each respective trust purchased to determine the total number of units which
such amount could have purchased of each individual trust. Purchasers must then
consult the applicable trust's prospectus to determine whether the total number
of units which could have been purchased of a specific trust would have
qualified for a reduced sales charge and the amount of such reduction. To
determine the applicable sales charge reduction it is necessary to accumulate
all purchases made on the Initial Purchase Date and all purchases made in
accordance with (b) above. Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser ("immediate family
members") will be deemed to be additional purchases by the purchaser for the
purposes of calculating the applicable sales charge. The reduced sales charges
will also be applicable to a trustee or other fiduciary purchasing securities
for one or more trust estate or fiduciary accounts. If you purchase Units on
more than one day to achieve the discounts described in this paragraph, the
discount allowed on any single day will apply only to Units purchased on that
day (a retroactive discount is not given on all prior purchases).
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.
During the initial offering period, unitholders of any Van Kampen-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase Units of all Trusts at the Public Offering Price per Unit less 1%.
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 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 aggregate underlying value of the Securities during the initial offering
period is determined on each business day by the Evaluator in the following
manner: If the Securities are listed on a national 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 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
Securities on the ask side of the market or (c) 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. 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 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 during the initial offering period as
described below.
Aggregate Concession
Dollar Amount or Agency
of Units Purchased* Commission
- --------------------- ----------------
Up to $99,999 2.25%
$100,000 - $249,999 2.00
$250,000 - $499,999 1.90
$500,000 - $999,999 1.75
$1,000,000 or more 1.40
- ---------------------
*The breakpoint concessions or agency commissions are also applied on a Unit
basis using a breakpoint equivalent of $10 per Unit and are applied on whichever
basis is more favorable to the distributor.
In addition to the amounts above, during the initial offering period any firm
that distributes 500,000 - 999,999 Units of a single Trust will receive
additional compensation of $.005 per Unit of such Trust; any firm that
distributes 1,000,000 - 1,999,999 Units will receive additional compensation of
$.01 per Unit of such Trust; any firm that distributes 2,000,000 - 2,999,999
Units will receive additional compensation of $.015 per Unit of such Trust; any
firm that distributes 3,000,000 - 3,999,999 Units will receive additional
compensation of $.02 per Unit of such Trust. This additional compensation will
be paid by the Sponsor out of its own assets at the end of the initial offering
period.
Any discount provided to investors will be borne by the selling dealer or
agent as indicated under "General" above. For transactions involving unitholders
of other Van Kampen unit investment trusts who use their redemption or
termination proceeds to purchase Units of the Trusts, the total concession or
agency commission will amount to 1.50% per Unit. For all secondary market
transactions the total concession or agency commission will amount to 70% of the
sales charge. 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. See "Notes to Portfolios". 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.
Units sold prior to the time the entire deferred sales charge has been collected
will be assessed the amount of any remaining deferred sales charge at the time
of sale. 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". 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, if available. 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 the 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 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. An in kind
distribution will be made by the Trustee through the distribution of each of the
Securities in book-entry form to the account of the Unitholder's broker-dealer
at Depository Trust Company. Amounts representing fractional shares 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 the Securities in the
following manner: If the 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 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 Securities on the bid side of the
market or (c) 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 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.
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. 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, 1998, the total stockholders' equity of Van Kampen
Funds Inc. was $135,236,000 (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 similar Van Kampen 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 following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units of your
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 in the Trust 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 each Security asset when such income is considered to be received
by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, or 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 are taxable as ordinary income to the
extent of such corporation's current and accumulated "earnings and profits". A
Unitholder's pro rata portion of dividends paid on such Security which exceeds
such current and accumulated earnings and profits will first reduce a
Unitholder's tax basis in such Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Equity Security shall generally be
treated as capital gain. In general, the holding period for such capital gain
will be determined by the period of time a Unitholder has held his Units.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain, except in the case of a dealer or a financial
institution. 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). Unitholders should consult their tax advisers regarding the
recognition of such capital gains and losses for federal income tax purposes.
Deferred Sales Charge. 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. Unitholders should consult
their own tax advisers as to the income tax consequences of the deferred sales
charge.
Dividends Received Deduction. 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 received by the Trust regardless of whether such dividends
are used to pay a portion of a deferred sales charge. Unitholders will be taxed
in this manner regardless of whether distributions from the Trust are actually
received by the Unitholder or are automatically reinvested. 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.
Unitholders should consult with their own tax advisers regarding the
deductibility of Trust expenses.
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
purposes of 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 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 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 in the Securities held by
the Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of such 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 Tax Act imposes a required holding period for such credits. Investors
should consult their tax advisers with respect to foreign withholding taxes and
foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the 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
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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 "Fee Table". 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 "Fee Table" (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.
Each Trust may pay the expenses of updating its registration statement each
year. Unit investment trust sponsors have historically paid these expenses.
General. During the initial offering period, all of the fees and expenses of
a Trust will accrue on a daily basis and will be charged to the Trust at the end
of the initial offering period. After the initial offering period, all of the
fees and expenses of a Trust will accrue on a daily basis and will be charged to
the Trust on a monthly basis.
The deferred sales charge, 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 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
----- ----
Summary of Essential Financial Information.. 2
Fee Table................................... 3
Financial Institutions Trust................ 4
Global Energy Trust......................... 6
Notes to Portfolios......................... 8
The Securities.............................. 9
Report of Independent Certified
Public Accountants....................... 14
Statements of Condition .................... 15
The Trusts.................................. A-1
Objectives and Securities Selection......... A-1
Risk Factors................................ A-2
Public Offering............................. A-4
Rights of Unitholders....................... A-7
Trust Administration........................ A-9
Taxation.................................... A-11
Trust Operating Expenses.................... A-15
Other Matters............................... A-16
Additional Information...................... A-16
EMSPRO166
PROSPECTUS
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July 20, 1999
Van Kampen
Focus Portfolios(SM)
A Division of Van Kampen Funds Inc.
Financial Institutions Trust,
Series 1
Global Energy Trust,
Series 10
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
Information Supplement
Van Kampen Focus Portfolios, Series 166
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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 8
Sponsor Information 8
Trustee Information 9
Trust Termination 10
RISK FACTORS
Price Volatility. Because the Trusts invest in common 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. Common stocks are
especially susceptible to general stock market movements. The value of common
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. Common stocks represent ownership interests in a company and are
not obligations of the company. Accordingly, 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.
Foreign Stocks. Because certain Trusts invest in foreign common stocks,
they involve additional risks that differ from an investment in domestic stocks.
Investments in foreign securities may involve a greater degree of risk than
those in domestic securities. There is generally less publicly available
information about foreign companies in the form of reports and ratings similar
to those that are published about issuers in the United States. Also, foreign
issuers are generally not subject to uniform accounting, auditing and financial
reporting requirements comparable to those applicable to United States issuers.
With respect to certain foreign countries, there is the possibility of adverse
changes in investment or exchange control regulations, expropriation,
nationalization or confiscatory taxation, limitations on the removal of funds or
other assets of a Trust, political or social instability, or diplomatic
developments which could affect United States investments in those countries.
Moreover, industrial foreign economies may differ favorably or unfavorably from
the United States' economy in terms of growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position. Foreign securities markets are generally not as developed or
efficient as those in the United States. While growing in volume, they usually
have substantially less volume than the New York Stock Exchange, and securities
of some foreign issuers are less liquid and more volatile than securities of
comparable United States issuers. Fixed commissions on foreign exchanges are
generally higher than negotiated commissions on United States exchanges. There
is generally less government supervision and regulation of securities exchanges,
brokers and listed issuers than in the United States.
Foreign Currencies. Certain Trusts also involve the risk that fluctuations
in exchange rates between the U.S. dollar and foreign currencies may negatively
affect the value of the stocks. For example, if a foreign stock rose 10% in
price but the U.S. dollar gained 5% against the related foreign currency, a U.S.
investor's return would be reduced to about 5%. This is because the foreign
currency would "buy" fewer dollars or, conversely, a dollar would buy more of
the foreign currency. Many foreign currencies have fluctuated widely against the
U.S. dollar for a variety of reasons such as supply and demand of the currency,
investor perceptions of world or country economies, political instability,
currency speculation by institutional investors, changes in government policies,
buying and selling of currencies by central banks of countries, trade balances
and changes in interest rates. A Trust's foreign currency transactions will be
conducted with foreign exchange dealers acting as principals on a spot (i.e.,
cash) buying basis. These dealers realize a profit based on the difference
between the price at which they buy the currency (bid price) and the price at
which they sell the currency (offer price). The Evaluator will estimate the
currency exchange rates based on current activity in the related currency
exchange markets, however, due to the volatility of the markets and other
factors, the estimated rates may not be indicative of the rate a Trust might
obtain had the Trustee sold the currency in the market at that time.
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.
Energy Industry. The Global Energy Trust is concentrated in issuers within
the energy industry. A portfolio concentrated in a single industry may present
more risk than a portfolio of more broadly diversified investments. The Trust,
and therefore Unitholders, may be particularly susceptible to a negative impact
resulting from adverse market conditions or other factors affecting issuers in
the energy industry because any negative impact on the energy industry will not
be diversified among issuers within other unrelated industries. Accordingly, an
investment in Units should be made with an understanding of the risks inherent
in the energy industry.
These factors include political conditions in oil producing regions,
including the Middle East, the actions of the Organization of Petroleum
Exporting Countries (OPEC), the domestic and foreign supply of oil and gas, the
level of consumer demand, weather conditions, the price and availability of
alternative fuels and overall economic conditions. In addition, various factors,
including the capacity and availability of oil and gas gathering systems and
pipelines, changes in supply due to drilling by other producers and changes in
demand, may have an adverse impact on the issuers of Securities. An issuer's
revenues, profitability and liquidity are substantially dependent upon
prevailing prices for oil and natural gas which can be extremely volatile and in
past years have been depressed by excess total domestic and imported supplies.
There can be no assurance that current price levels can be sustained. Prices
also are affected by actions of state and local agencies, the United States and
foreign governments, and international cartels. Any substantial or extended
decline in the price of oil and/or natural gas would have a material adverse
effect on the financial condition and results of operations of the issuers of
the Securities, including reduced cash flow and borrowing capacity. If market
factors were to change dramatically, the financial impact on an issuer could be
substantial. The nature of the oil and gas business also involves a variety of
risks, including the risks of operating hazards such as fires, explosions,
cratering, blow-outs, and encountering formations with abnormal pressures, the
occurrence of any of which could have a material adverse impact on the issuers
of the Securities. Companies generally maintain insurance against some, but not
all, of these risks. The occurrence of a significant event, however, that is not
fully insured could have a material adverse effect on a issuer's financial
position. In addition, the issuers may engage in oil and gas hedging activities
to help reduce exposure to the volatility of oil and gas prices by hedging a
portion of its production. These hedging arrangements may have an adverse impact
on the financial condition of the issuers under certain circumstances and may
limit potential gains by an issuer if the market prices for oil and gas were to
rise substantially over the price established by the hedge.
The future performance of oil and gas issuers is dependent upon the ability
to find or acquire additional oil and gas reserves that are economically
recoverable. Unless an issuer successfully replaces the reserves that it
produces, reserves will decline, resulting eventually in a decrease in oil and
gas production and lower revenues and cash flow from operations. There can be no
assurance that any issuer will be able to acquire, at acceptable costs,
producing oil and gas properties that contain economically recoverable reserves
or that it will make such acquisitions at acceptable prices. In addition,
exploitation, development and exploration involve numerous risks, including
depositional or trapping uncertainties or other conditions that may result in
dry holes, the failure to produce oil and gas in commercial quantities and the
inability to fully produce discovered reserves.
The production and sale of oil and gas are subject to a variety of federal,
state, local and foreign government regulations, including regulations
concerning the prevention of waste, the discharge of materials in the
environment, the conservation of oil and natural gas, pollution, permits for
drilling operations, drilling bonds, reports concerning operations, the spacing
of wells, the unitization and pooling of properties, and various other matters.
Such laws and regulations have increased the costs of planning designing,
drilling, installing, operating and abandoning oil and gas facilities. Many
jurisdictions have imposed limitations on the production of oil and gas by
restricting the rate of flow for oil and gas wells below their actual capacity
to produce. During recent years there has been significant discussion by
legislators concerning a variety of energy tax proposals. May states have raised
state taxes on energy sources and additional increases may occur. There can be
no assurance that significant costs for compliance will not be incurred by any
issuer in the future.
International investments may represent a significant portion of an issuer's
total assets or reserves. Foreign properties, operations or investments may be
adversely affected by local political and economic developments, exchange
controls, currency fluctuations, royalty and tax increases, retroactive tax
claims, expropriation, import and export regulations and other foreign laws or
policies as well as by laws and policies of the United States affecting foreign
trade, taxation and investment. In addition, in the event of a dispute arising
from foreign operations, an issuer may be subject to the exclusive jurisdiction
of foreign courts or may not be successful in subjecting foreign person to the
jurisdiction of the courts in the United States.
Banking Issuers. The Financial Institutions Trust is concentrated in
securities issued by companies in the banking industry. In view of this, an
investment in Units should be made with an understanding of the problems and
risks inherent in the banking industry in general. Banking institutions are
especially subject to the adverse effects of economic recession, volatile
interest rates, portfolio concentrations in geographic markets and in commercial
and residential real estate loans, and competition from new entrants in their
fields of business. Economic conditions in the real estate markets can have a
significant effect upon banking institutions because they generally have a
substantial percentage of their assets invested in loans secured by real estate.
Banking institutions are subject to extensive federal regulation and, when such
institutions are state-chartered, to state regulation as well. Regulatory
actions, such as increases in minimum capital requirements applicable to
commercial banks to the FDIC, can negatively impact earning and the ability of
an institution to pay dividends. Furthermore, neither federal insurance or
deposits nor governmental regulation, however, ensures the solvency or
profitability of banking institutions, or insures against any risk of investment
in the securities issued by such institutions.
Financial institutions and their holding companies are extensively regulated
under federal and state laws. As a result, the business, financial condition and
prospects of banks can be materially affected not only by management decisions
and general economic conditions, but also by applicable statutes and regulations
and other regulatory pronouncements and policies promulgated by regulatory
agencies with jurisdiction over the banks, such as the Board of Governors of the
Federal Reserve System ("FRB"), the Office of the Comptroller of the Currency
("OCC"), the Office of Thrift Supervision ("OTS"), the Federal Deposit Insurance
Corporation ("FDIC") and the state banking regulators. The effect of such
statutes, regulations, and other pronouncements and policies can be significant,
cannot be predicted with a high degree of certainty and can change over time.
Furthermore, such statutes, regulations, and other pronouncements and policies
are intended to protect depositors and the FDIC's deposit insurance funds, not
to protect stockholders. Bank holding companies as well as their subsidiary
banks are subject to enforcement actions by their regulators for regulatory
violations. In addition to compliance with statutory and regulatory limitations
and requirements concerning financial and operating matters, regulated financial
institutions must file periodic and other reports and information with their
regulators and are subject to examination by each of their regulators.
The statutory requirements applicable to and regulatory supervision of
banking holding companies and their subsidiary banks have increased
significantly and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act ("FIRREA"), enacted in August 1989, the Federal
Deposit Insurance Corporations Improvement Act of 1991 ("FDICA"), enacted in
December 1991, and the regulations promulgated under FIRREA and FDICIA. The
impact of regulations promulgated pursuant to FDICIA on the business and
financial condition and prospects of banks cannot be predicted with certainty.
Banks currently face significant competition from other financial institutions
such as mutual funds, securities and brokerage companies, credit unions,
mortgage banking corporations and insurance companies, and increased competition
may result from broadening national interstate banking powers and liberalization
of certain restrictions on the activities of nonbank subsidiaries of banks. Many
of these competitors are much larger in total assets and capitalization, have
greater access to capital markets and offer a broader array of financial
services than the issuers of the Securities. There can be no assurance that such
issuers will be able to compete effectively in their markets, and the results of
operations could be adversely affected if circumstances affecting the nature or
level of competition change.
Federal legislation has become effective in recent years which serves to
lessen or remove certain legal barriers to interstate banking and branching by
financial institutions. The legislation may result in an increase in the
nationwide consolidation activity occurring among financial institutions by
facilitating interstate bank operations and acquisitions. The legislation does,
however, allow states to "opt out" of interstate branching and certain states
have opted out of the legislation. The effects of changes in interstate banking
cannot be predicted, however, it is likely that there will be increased
competition within the regional banking industry which could have an adverse
impact on certain issuers. In addition, the Federal Reserve Board has approved
applications by bank holding companies to engage, through nonbank subsidiaries,
in certain securities-related activities, provided that the subsidiaries would
not be "principally engaged" in such activities for purposes of Section 20 of
the Glass-Steagall Act. In certain situations, holding companies may be able to
use such subsidiaries to underwrite and deal in corporate debt and equity
securities. The Federal Reserve Board has recently liberalized the standards
used in determining whether a subsidiary is principally engaged in such
activities. From time to time bills have been introduced in Congress that would
remove many of the Glass-Steagall Act restraints. This and any future
liberalization of Glass-Steagall could result in increased competition which
could be have an adverse impact on certain issuers. The Sponsor makes no
prediction as to what, if any, additional bank regulatory reform might be
adopted or what ultimately effect such reform might have on the Trust's
portfolio.
Financial Services Issuers. The Financial Services Trust is concentrated in
issuers within the financial services industry. A portfolio concentrated in a
single industry may present more risk than a portfolio broadly diversified over
several industries. The Trust, and therefore Unitholders, may be particularly
susceptible to a negative impact resulting from adverse market conditions or
other factors affecting financial services issuers because any negative impact
on the financial services industry will not be diversified among issuers within
other unrelated industries. Accordingly, an investment in Units should be made
with an understanding of the characteristics of the financial services industry
and the risks which such an investment may entail.
An investment in Units should be made with an understanding of the problems
and risks inherent in the insurance sector. Companies involved in the insurance
industry are engaged in underwriting, reinsuring, selling, distribution or
placing of property and casualty, life or health insurance. Other growth areas
within the insurance industry include brokerage, reciprocals, claims processors
and multiline insurance companies. Multiline insurance companies provide
property and casualty coverage, as well as life and health insurance. The Trust
may also invest in diversified financial companies with subsidiaries (including
insurance brokerage, reciprocals and claims processors) engaged in underwriting,
reinsuring, selling, distributing or placing insurance with independent third
parties.
Insurance company profits are affected by interest rate levels, general
economic conditions, and price and marketing competition. Property and casualty
insurance profits may also be affected by weather catastrophes and other
disasters. Life and health insurance profits may be affected by morality and
morbidity rates. Individual companies may be exposed to material risks including
reserve inadequacy and the inability to collect from reinsurance carriers.
Insurance companies are subject to extensive governmental regulation, including
the imposition of maximum rate levels, which may not be adequate for some lines
of business. Proposed or potential tax law changes may also adversely affect
insurance companies' policy sales, tax obligations, and profitability. In
addition to the foregoing, profit margins of these companies continue to shrink
due to the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressures to compete globally.
In addition to the normal risks of business, companies involved in the
insurance industry are subject to significant risk factors, including those
applicable to regulated insurance companies, such as: (i) the inherent
uncertainty in the process of establishing property-liability loss reserves,
particularly reserves for the cost of environmental, asbestos and mass tort
claims, and the fact that ultimate losses could materially exceed established
loss reserves which could have a material adverse effect on results of
operations and financial condition; (ii) the fact that insurance companies have
experienced, and can be expected in the future to experience, catastrophe losses
which could have a material adverse impact on their financial condition, results
of operations and cash flow; (iii) the inherent uncertainty in the process of
establishing property-liability loss reserves due to changes in loss payment
patterns caused by new claims settlement practices; (iv) the need for insurance
companies and their subsidiaries to maintain appropriate levels of statutory
capital and surplus, particularly in light of continuing scrutiny by rating
organizations and state insurance regulatory authorities, and in order to
maintain acceptable financial strength or claims-paying ability rating; (v) the
extensive regulation and supervision to which insurance companies' subsidiaries
are subject, various regulatory initiatives that may affect insurance companies,
and regulatory and other legal actions; (vi) the adverse impact that increases
in interest rates could have on the value of an insurance company's investment
portfolio and on the attractiveness of certain of its products; (vii) the need
to adjust the effective duration of the assets and liabilities of life insurance
operations in order to meet the anticipated cash flow requirements of its
policyholder obligations; and (viii) the uncertainty involved in estimating the
availability of reinsurance and the collectibility of reinsurance recoverables.
The state insurance regulatory framework has, during recent years, come under
increased federal scrutiny, and certain state legislatures have considered or
enacted laws that alter and, in many cases, increase state authority to regulate
insurance companies and insurance holding company systems. Further, the National
Association of Insurance Commissioners ("NAIC") and state insurance regulators
are re-examining existing laws and regulations, specifically focusing on
insurance companies, interpretations of existing laws and the development of new
laws. In addition, Congress and certain federal agencies have investigated the
condition of the insurance industry in the United States to determine whether to
promulgate additional federal regulation. The Sponsor is unable to predict
whether any state or federal legislation will be enacted to change the nature or
scope of regulation of the insurance industry, or what effect, if any, such
legislation would have on the industry.
All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the amount of
investments in certain investment categories. Failure to comply with these laws
and regulations would cause non-conforming investments to be treated as
non-admitted assets for purposes of measuring statutory surplus and, in some
instances, would require divestiture. Environmental pollution clean-up is the
subject of both federal and state regulation. By some estimates, there are
thousands of potential waste sites subject to clean up. The insurance industry
is involved in extensive ligation regarding coverage issues. The Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("Superfund") and
comparable state statutes ("mini-Superfund") govern the clean-up and restoration
by "Potentially Responsible Parties" ("PRP's"). Superfund and the
mini-Superfunds ("Environmental Clean-up Laws or "ECLs") establish a mechanism
to pay for clean-up of waste sites if PRP's fail to do so, and to assign
liability to PRP's. The extent of liability to be allocated to PRP is dependent
on a variety of factors. Further, the number of waste sites subject to clean-up
is unknown. Very few sites have been subject to clean-up to date. The extent of
clean-up necessary and the assignment of liability has not been established. The
insurance industry is disrupting many such claims. Key coverage issues include
whether Superfund response costs are considered damages under the policies, when
and how coverage is triggered, applicability of pollution exclusions, the
potential for joint and several liability and definition of an occurrence.
Similar coverage issues exist for clean up and waste sites not covered under
Superfund. To date, courts have been inconsistent in their rulings on these
issues. An insurer's exposure to liability with regard to its insureds which
have been, or may be, named as PRPs is uncertain. Superfund reform proposals
have been introduced in Congress, but none have been enacted. There can be no
assurance that any Superfund reform legislation will be enacted or that any such
legislation will provide for a fair, effective and cost-efficient system for
settlement of Superfund related claims.
Proposed federal legislation which would permit banks greater participation
in the insurance business could, if enacted, present an increased level of
competition for the sale of insurance products. In addition, while current
federal income tax law permits the tax-deferred accumulation of earnings on the
premiums paid by an annuity owner and holders of certain savings-oriented life
insurance products, no assurance can be given that future tax law will continue
to allow such tax deferrals. If such deferrals were not allowed, consumer demand
for the affected products would be substantially reduced. In addition, proposals
to lower the federal income tax rates through a form of flat tax or otherwise
could have, if enacted, a negative impact on the demand for such products.
An investment in Units should also be made with an understanding of the
problems and risks of companies engaged in investment banking/brokerage and
investment management. Such companies include brokerage firms, broker/dealers,
investment banks, finance companies and mutual fund companies. Earnings and
share prices of companies in this industry are quite volatile, and often exceed
the volatility levels of the market as a whole. Recently, ongoing consolidation
in the industry and the strong stock market has benefited stocks which investors
believe will benefit from greater investor and issuer activity. Major
determinants of future earnings of these companies are the direction of the
stock market, investor confidence, equity transaction volume, the level and
direction of long-term and short-term interest rates, and the outlook for
emerging markets. Negative trends in any of these earnings determinants could
have a serious adverse effect on the financial stability, as well as the stock
prices, of these companies. Furthermore, there can be no assurance that the
issuers of the Equity Securities will be able to respond in a timely manner to
compete in the rapidly developing marketplace. In addition to the foregoing,
profit margins of these companies continue to shrink due to the commoditization
of traditional businesses, new competitors, capital expenditures on new
technology and the pressures to compete globally.
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 above 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.
Stocks have been acknowledged as one of the best ways to stay ahead of
inflation over time. For example, $1 growing at the rate of inflation (as
measured by the Consumer Price Index) would have grown to approximately $9.16
from the beginning of 1926 to the end of 1998. Over the same period $1 invested
in the common stocks comprising the S&P 500 Index, long-term U.S. government
bonds or short-tem U.S. Treasury Bills would have grown to approximately
$2,351.04, $44.18 or $14.96. Source: Ibbotson Associates. These figures do not
take into consideration taxes or any sales charges, commissions or fees that an
investor would incur in connection with these investments. The S&P 500 Index
measures the performance of 500 stocks from 83 industrial groups. U.S. Treasury
bonds are considered long-term investments and are subject to price
fluctuations. The value of long-term bonds decline as interest rates rise. Stock
indices are unmanaged, statistical composites and do not include payment of any
sales charges or fees an investor would pay to purchase the securities they
represent. Furthermore, an investment cannot be made in an index. U.S. Treasury
bills are short-term obligations of the U.S. government that are purchased at a
discount and mature at face value. U.S. government securities are backed by the
full faith and credit of the government. The Consumer Price Index is a
statistical measure of the annual rate of inflation; it is not an investment.
The historical performance of these indices is shown for illustrative purposes
only; it is not meant to forecast, imply or guarantee the future performance of
any particular investment vehicle or the Trust. Securities in which the Trust
invests will be different from those in these indices. Common stocks involve
greater risks than government bonds and CDs, as they are more volatile and have
greater potential for loss of principal.
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, 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 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 prior 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 REGISTRATION STATEMENTS
This Amendment to the Registration Statement comprises the following
papers and documents:
The facing sheet
The Prospectus
The signatures
The consents of independent public accountants and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to the Federal Income tax status of
securities being registered.
3.3 Opinion and consent of counsel as to New York tax status of
securities being registered.
4.1 Consent of Interactive Data Corporation.
4.2 Consent of Independent Certified Public Accountants.
SIGNATURES
The Registrant, Van Kampen Focus Portfolios, Series 166, hereby
identifies Van Kampen Merritt Equity Opportunity Trust, Series 1, Series 2,
Series 4 and Series 7 and Van Kampen American Capital Equity Opportunity Trust,
Series 13, Series 14, Series 57 and Series 89 for purposes of the
representations required by Rule 487 and represents the following: (1) that the
portfolio securities deposited in the series as to the securities of which this
Registration Statement is being filed do not differ materially in type or
quality from those deposited in such previous series; (2) that, except to the
extent necessary to identify the specific portfolio securities deposited in, and
to provide essential financial information for, the series with respect to the
securities of which this Registration Statement is being filed, this
Registration Statement does not contain disclosures that differ in any material
respect from those contained in the registration statements for such previous
series as to which the effective date was determined by the Commission or the
staff; and (3) that it has complied with Rule 460 under the Securities Act of
1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen Focus Portfolios, Series 166 has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and State of
Illinois on the 20th day of July, 1999.
Van Kampen Focus Portfolios, Series 166
By Van Kampen Funds Inc.
By Christine K. Putong
Assistant Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on July 20, 1999
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 )
Christine K. Putong
(Attorney-in-fact*)
- --------------------------------------------------------------------------------
*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.
EXHIBIT 1.1
VAN KAMPEN FOCUS PORTFOLIOS
SERIES 166
TRUST AGREEMENT
Dated: July 20, 1999
This Trust Agreement among Van Kampen Funds Inc., as Depositor,
American Portfolio Evaluation Services, a division of Van Kampen Investment
Advisory Corp., as Evaluator, Van Kampen Investment Advisory Corp., as
Supervisory Servicer, and The Bank of New York, as Trustee, sets forth certain
provisions in full and incorporates other provisions by reference to the
document entitled "Van Kampen American Capital Equity Opportunity Trust, Series
87 and Subsequent Series, Standard Terms and Conditions of Trust, Effective
January 27, 1998" (herein called the "Standard Terms and Conditions of Trust")
and such provisions as are set forth in full and such provisions as are
incorporated by reference constitute a single instrument. All references herein
to Articles and Sections are to Articles and Sections of the Standard Terms and
Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual agreements herein
contained, the Depositor, Evaluator, Supervisory Servicer and Trustee agree as
follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II hereof, all the provisions
contained in the Standard Terms and Conditions of Trust are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as though said provisions had been
set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed to:
1. The Securities defined in Section 1.01(24), listed in the
Schedule hereto, have been deposited in trust under this Trust
Agreement.
2. The fractional undivided interest in and ownership of each Trust
represented by each Unit is an amount the numerator of which is
one and the denominator of which is the amount set forth under
"Summary of Essential Financial Information - Initial Number of
Units" in the Prospectus. Such fractional undivided interest may
be (a) increased by the number of any additional Units issued
pursuant to Section 2.03, (b) increased or decreased in
connection with an adjustment to the number of Units pursuant to
Section 2.03, or (c) decreased by the number of Units redeemed
pursuant to Section 5.02.
3. The terms "Capital Account Record Date" and "Income Account
Record Date" shall mean the "Record Dates" set forth under
"Summary of Essential Financial Information" in the Prospectus.
4. The terms "Capital Account Distribution Date" and "Income Account
Distribution Date" shall mean the "Distribution Dates" set forth
under "Summary of Essential Financial Information" in the
Prospectus.
5. The term "Mandatory Termination Date" shall mean the "Mandatory
Termination Date" set forth under "Summary of Essential Financial
Information" in the Prospectus.
6. Notwithstanding anything to the contrary in the Standard Terms
and Conditions of Trust and subject to the requirements set forth
in this paragraph, unless the Prospectus otherwise requires, the
Sponsor may, on any Business Day (the "Trade Date"), subscribe
for additional Units as follows:
(a) Prior to the Evaluation Time on such Business Day, the
Sponsor shall provide notice (the "Subscription Notice") to
the Trustee, by telephone or by written communication, of
the Sponsor's intention to subscribe for additional Units.
The Subscription Notice shall identify the additional
Securities to be acquired (unless such additional Securities
are a precise replication of the then existing portfolio)
and shall either (i) specify the quantity of additional
Securities to be deposited by the Sponsor on the settlement
date for such subscription or (ii) instruct the Trustee to
purchase additional Securities with an aggregate value as
specified in the Subscription Notice.
(b) Promptly following the Evaluation Time on such Business Day,
the Sponsor shall verify with the Trustee the number of
additional Units to be created.
(c) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver or assign the
additional Units created hereby, the Sponsor shall deposit
with the Trustee (i) any additional Securities specified in
the Subscription Notice (or contracts to purchase such
additional Securities together with cash or a letter of
credit in the amount necessary to settle such contracts) or
(ii) cash or a letter of credit in an amount equal to the
aggregate value of the additional Securities specified in
the Subscription Notice, and adding and subtracting the
amounts specified in the first and second sentences of
Section 5.01, computed as of the Evaluation Time on the
Business Day preceding the Trade Date divided by the number
of Units outstanding as of the Evaluation Time on the
Business Day preceding the Trade Date, times the number of
additional Units to be created.
(d) On the settlement date for such subscription, the Trustee
shall, in exchange for the Securities and cash or letter of
credit described above, deliver to, or assign in the name of
or on the order of, the Sponsor the number of Units verified
by the Sponsor with the Trustee.
7. Section 6.01(e) is hereby replaced with the following:
(e)
(1) Subject to the provisions of subparagraph (2) of this
paragraph, the Trustee may employ agents,
sub-custodians, attorneys, accountants and auditors and
shall not be answerable for the default or misconduct
of any such agents, sub-custodians, attorneys,
accountants or auditors if such agents, sub-custodians,
attorneys, accountants or auditors shall have been
selected with reasonable care. The Trustee shall be
fully protected in respect of any action under this
Indenture taken or suffered in good faith by the
Trustee in accordance with the opinion of counsel,
which may be counsel to the Depositor acceptable to the
Trustee, provided, however that this disclaimer of
liability shall not excuse the Trustee from the
responsibilities specified in subparagraph (2) below.
The fees and expenses charged by such agents,
sub-custodians, attorneys, accountants or auditors
shall constitute an expense of the Trust reimbursable
from the Income and Capital Accounts of the affected
Trust as set forth in section 6.04 hereof.
(2) The Trustee may place and maintain in the care of an
Eligible Foreign Custodian (which is employed by the
Trustee as a sub-custodian as contemplated by
subparagraph (1) of this paragraph (e) and which may be
an affiliate or subsidiary of the Trustee or any other
entity in which the Trustee may have an ownership
interest) any investments (including foreign
currencies) for which the primary market is outside the
United States, and such cash and cash equivalents in
amounts reasonably necessary to effect the Trust's
transactions in such investments, provided that:
(a) The Trustee shall perform all duties assigned to the
Foreign Custody Manager by Rule 17f-5 under the
Investment Company Act of 1940 (17 CFR ss. 270.17f-5)
("Rule 17f-5"), as now in effect or as such rule may be
amended in the future. The Trustee shall not delegate
such duties.
(b) The Trustee shall exercise reasonable care, prudence
and diligence such as a person having responsibility
for the safekeeping of Trust assets would exercise, and
shall be liable to the Trust for any loss occurring as
a result of its failure to do so.
(c) The Trustee shall indemnify the Trust and hold the
Trust harmless from and against any risk of loss of
Trust assets held in accordance with the foreign
custody contract.
(d) The Trustee shall maintain and keep current written
records regarding the basis for the choice or continued
use of a particular Eligible Foreign Custodian pursuant
to this subparagraph for a period of not less than six
years from the end of the fiscal year in which the
Trust was terminated, the first two years in an easily
accessible place. Such records shall be available for
inspection by Unitholders and the Securities and
Exchange Commission at the Trustee's offices at all
reasonable times during its usual business hours.
(3) "Eligible Foreign Custodian" shall have the meaning
assigned to it in Rule 17f-5.
(4) "Foreign Custody Manager" shall have the meaning
assigned to it in Rule 17f-5.
8. Section 1.01 (1), (3) and (4) shall be replaced in their entirety
by the following:
(1) "Depositor" shall mean Van Kampen Funds Inc. and its
succesors in interest, or any successor depositor appointed
as hereinafter provided.
(3) "Evaluator" shall mean American Portfolio Evaluation
Services (a division of a Van Kampen Investment Advisory
Corp.) and its successors in interest, or any successor
evaluator appointed as hereinafter provided.
(4) "Supervisory Servicer" shall mean Van Kampen Investment
Advisory Corp. and its successors in interest, or any
successor portfolio supervisor appointed as hereinafter
provided.
9. Section 3.15 of the Standard Terms and Conditions of Trust is
hereby replaced in its entirety by the following:
Section 3.15. Deferred Sales Charge. If the Prospectus related to
the Trust specifies a deferred sale charge, the Trustee shall, on each
Deferred Sales Charge Payment Date and as permitted by such Prospectus,
withdraw from the Capital Account an amount per Unit equal to the Deferred
Sales Charge Payment and credit such amount to a special non-Trust account
maintained at the Trustee out of which the deferred sales charge will be
distributed to the Depositor. If the balance in the Capital Account is
insufficient to make any such withdrawal, the Trustee shall, as directed
by the Depositor, either advance funds in an amount equal to the proposed
withdrawal and be entitled to reimbursement of such advance upon the
deposit of additional moneys in the Capital Account, sell Securities and
credit the proceeds thereof to such special Depositor's account or credit
(if permitted by law) Securities in kind to such special Depositor's
Account. If a Unitholder redeems Units prior to full payment of the
deferred sales charge, the Trustee shall, if so provided in the related
Prospectus, on the Redemption Date, withhold from the Redemption Price
payable to such Unitholder an amount equal to the unpaid portion of the
deferred sales charge and distribute such amount to such special
Depositor's Account. The Depositor may at any time instruct the Trustee in
writing to distribute to the Depositor cash or Securities previously
credited to the special Depositor's account. Amounts to be credited to the
special Depositor's account with respect to each Deferred Sales Charge
Payment are due and payable to the Depositor on the related Deferred Sales
Charge Payment Date.
The term "Deferred Sales Charge Payment Dates" shall mean the
10th day of each month beginning December 10, 1999 and continuing through
August 10, 2000. If any Deferred Sales Charge Payment Date is not a
Business Day, that Deferred Sales Charge Payment Date shall be deemed to
be the next business day. The term "Deferred Sales Charge Payment" shall
mean a fraction of the total maximum deferred sales charge specified in
the Prospectus, the numerator of which is one and the denominator of which
is equal to the total number of Deferred Sales Charge Payment Dates.
IN WITNESS WHEREOF, the undersigned have caused this Trust Agreement to
be executed and their corporate seals to be hereto affixed and attested; all as
of the day, month and year first above written.
Van Kampen Funds Inc.
By James J. Boyne
Senior Vice President
Attest:
By Weston B. Wetherell
Vice President
American Portfolio Evaluation Services, a division of
Van Kampen Investment Advisory Corp.
By James J. Boyne
Senior Vice President
Attest
By Weston B. Wetherell
Vice President
Van Kampen Investment Advisory Corp.
By James J. Boyne
Senior Vice President
Attest
By Weston B. Wetherell
Vice President
The Bank of New York
By Jeffrey Cohen
Vice President
Attest
By Robert Weir
Assistant Treasurer
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN VAN KAMPEN FOCUS PORTFOLIOS, SERIES 166
(Note: Incorporated herein and made a part hereof is each "Portfolio"
as set forth in the Prospectus.)
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
July 20, 1999
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Re: Van Kampen Focus Portfolios, Series 166
---------------------------------------
Gentlemen:
We have served as counsel for Van Kampen Funds Inc. as Sponsor and
Depositor of Van Kampen Focus Portfolios, Series 166 (hereinafter referred to as
the "Trust"), in connection with the preparation, execution and delivery of a
Trust Agreement dated July 20, 1999, among Van Kampen Funds Inc., as Depositor,
American Portfolio Evaluation Services, a division of Van Kampen Investment
Advisory Corp., as Evaluator, Van Kampen Investment Advisory Corp., as
Supervisory Servicer, and The Bank of New York, as Trustee, pursuant to which
the Depositor has delivered to and deposited the Securities listed in the
Schedule to the Trust Agreement with the Trustee and pursuant to which the
Trustee has provided to or on the order of the Depositor documentation
evidencing ownership of Units of fractional undivided interest in and ownership
of the Trust (hereinafter referred to as the "Units"), created under said Trust
Agreement.
In connection therewith we have examined such pertinent records and
documents and matters of law as we have deemed necessary in order to enable us
to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and the
execution and issuance of certificates evidencing the Units in
the Trust have been duly authorized; and
2. The certificates evidencing the Units in the Trust, when duly
executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of such Trust and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (File No. 333-81671) relating to the Units referred to
above and to the use of our name and to the reference to our firm in said
Registration Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
MJK/md
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
July 20, 1999
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: Van Kampen Focus Portfolios, Series 166
---------------------------------------
Gentlemen:
We have acted as counsel for Van Kampen Funds Inc., Depositor of Van
Kampen Focus Portfolios, Series 166 (the "Fund"), in connection with the
issuance of Units of fractional undivided interest in the Fund, under a Trust
Agreement dated July 20, 1999 (the "Indenture") among Van Kampen Funds Inc., as
Depositor, American Portfolio Evaluation Services, a division of Van Kampen
Investment Advisory Corp., as Evaluator, Van Kampen Investment Advisory Corp.,
as Supervisory Servicer, and The Bank of New York, as Trustee. The Fund is
comprised of the following separate unit investment trusts, Financial
Institutions Trust, Series 1 and Global Energy Trust, Series 10 (each a
"Trust").
In this connection, we have examined the Registration Statement, the
Prospectus, the Indenture, and such other instruments and documents as we have
deemed pertinent.
The assets of the Trust will consist of a portfolio of equity
securities (the "Equity Securities") as set forth in the Prospectus. For
purposes of this opinion, it is assumed that each Equity Security is equity for
federal income tax purposes.
Based upon the foregoing and upon an investigation of such matters of
law as we consider to be applicable, we are of the opinion that, under existing
United States Federal income tax law:
(i) The Trust is not an association taxable as a corporation for
Federal income tax purposes but will be governed by the
provisions of subchapter J (relating to Trusts) of chapter 1,
Internal Revenue Code of 1986 (the "Code").
(ii) A Unitholder will be considered as owning a pro rata share of
each asset of the Trust in the proportion that the number of
Units held by him bears to the total number of Units outstanding.
Under subpart E, subchapter J of chapter 1 of the Code, income of
the Trust will be treated as income of each Unitholder in the
proportion described, and an item of Trust income will have the
same character in the hands of a Unitholder as it would have in
the hands of the Trustee. Each Unitholder will be considered to
have received his pro rata share of income derived from each
Trust asset when such income is considered to be received by the
Trust. A Unitholder's pro rata portion of distributions of cash
or property by a corporation with respect to an Equity Security
("dividends" as defined by Section 316 of the Code ) are taxable
as ordinary income to the extent of such corporation's current
and accumulated "earnings and profits." A Unitholder's pro rata
portion of dividends which exceed such current and accumulated
earnings and profits will first reduce the Unitholder's tax basis
in such Equity Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Equity Security, shall be
treated as gain from the sale or exchange of property.
(iii) The price a Unitholder pays for his Units, generally including
sales charges, is allocated among his pro rata portion of each
Equity Security held by Trust (in proportion to the fair market
values thereof on the valuation date closest to the date the
Unitholder purchases his Units), in order to determine his tax
basis for his pro rata portion of each Equity Security held by
the Trust.
(iv) Gain or loss will be recognized to a Unitholder (subject to
various nonrecognition provisions under the Code) upon redemption
or sale of his Units, except to the extent an in kind
distribution of stock is received by such Unitholder from the
Trust as discussed below. Such gain or loss is measured by
comparing the proceeds of such redemption or sale with the
adjusted basis of his Units. Before adjustment, such basis would
normally be cost if the Unitholder had acquired his Units by
purchase. Such basis will be reduced, but not below zero, by the
Unitholder's pro rata portion of dividends with respect to each
Equity Security which are not taxable as ordinary income.
(v) If the Trustee disposes of a Trust asset (whether by sale,
exchange, liquidation, redemption, payment on maturity or
otherwise) gain or loss will be recognized to the Unitholder
(subject to various nonrecognition provisions under the Code) and
the amount thereof will be measured by comparing the Unitholder's
aliquot share of the total proceeds from the transaction with his
basis for his fractional interest in the asset disposed of. Such
basis is ascertained by apportioning the tax basis for his Units
(as of the date on which his Units were acquired) among each of
the Trust assets (as of the date on which his Units were
acquired) ratably according to their values as of the valuation
date nearest the date on which he purchased such Units. A
Unitholder's basis in his Units and of his fractional interest in
each Trust asset must be reduced, but not below zero, by the
Unitholder's pro rata portion of dividends with respect to the
Equity Security which is not taxable as ordinary income.
(vi) Under the Indenture, under certain circumstances, a Unitholder
tendering Units for redemption may request an in kind
distribution of Equity Securities upon the redemption of Units or
upon the termination of the Trust. As previously discussed, prior
to the redemption of Units or the termination of the Trust, a
Unitholder is considered as owning a pro rata portion of each of
the Trust's assets. The receipt of an in kind distribution will
result in a Unitholder receiving an undivided interest in whole
shares of stock and possibly cash. The potential federal income
tax consequences which may occur under an in kind distribution
with respect to each Equity Security owned by the Trust will
depend upon whether or not a Unitholder receives cash in addition
to Equity Securities. An "Equity Security" for this purpose is a
particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only
receives Equity Securities in exchange for his or her pro rata
portion in the Equity Securities held by the Trust. However, if a
Unitholder also receives cash in exchange for a fractional share
of an Equity Security held by the Trust, such Unitholder will
generally recognize gain or loss based upon the difference
between the amount of cash received by the Unitholder and his tax
basis in such fractional share of an Equity Security held by the
Trust. The total amount of taxable gains (or losses) recognized
upon such redemption will generally equal the sum of the gain (or
loss) recognized under the rules described above by the redeeming
Unitholder with respect to each Equity Security owned by the
Trust.
A domestic corporation owning Units in the Trust may be eligible for
the 70% dividends received deduction pursuant to Section 243(a) of the Code 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 and are
attributable to domestic corporations), subject to the limitations imposed by
Sections 246 and 246A of the Code.
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.
Section 67 of the Code provides that certain itemized deductions, such
as investment expenses, tax return preparation fees and employee business
expenses will be deductible by individuals only to the extent they exceed 2% of
such individual's adjusted gross income. Unitholders may be required to treat
some or all of the expenses of the Trust as miscellaneous itemized deductions
subject to this limitation.
A Unitholder will recognize taxable gain (or loss) when all or part of
his pro rata interest in an Equity Security is either sold by the Trust or
redeemed or when a Unitholder disposes of his Units in a taxable transaction, in
each case for an amount greater (or less) than his tax basis therefor, subject
to various non-recognition provisions of the Code.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof will
nevertheless be treated as income to the Unitholders. Because under the grantor
trust rules, an investor is deemed to have paid directly his share of foreign
taxes that have been paid or accrued, if any, an investor may be entitled to a
foreign tax credit or deduction for United States tax purposes with respect to
such taxes. A required holding period is imposed for such credits.
Any gain or loss recognized on a sale or exchange will, under current
law, generally be capital gain or loss.
The scope of this opinion is expressly limited to the matters set forth
herein, and, except as expressly set forth above, we express no opinion with
respect to any other taxes, including foreign, state or local taxes or
collateral tax consequences with respect to the purchase, ownership and
disposition of Units.
Very truly yours
CHAPMAN AND CUTLER
MJK/md
EXHIBIT 3.3
WINSTON & STRAWN
200 Park Avenue
New York, New York 10166-4193
July 20, 1999
Van Kampen Focus Portfolios, Series 166
c/o The Bank of New York, As Trustee
101 Barclay Street, 17 West
New York, New York 10286
Dear Sirs:
We have acted as special counsel for the Van Kampen Focus Portfolios,
Series 166 (the "Fund") consisting of Financial Institutions Trust, Series 1 and
Global Energy Trust, Series 10 (individually a "Trust" and, in the aggregate,
the "Trusts") for purposes of determining the applicability of certain New York
taxes under the circumstances hereinafter described.
The Fund is created pursuant to a Trust Agreement (the "Indenture"),
dated as of today (the "Date of Deposit") among Van Kampen Funds Inc. (the
"Depositor"), American Portfolio Evaluation Services, a division of an affiliate
of the Depositor, as Evaluator, Van Kampen Investment Advisory Corp., an
affiliate of the Depositor, as Supervisory Servicer (the "Supervisory
Servicer"), and The Bank of New York, as trustee (the "Trustee"). As described
in the prospectus relating to the Fund dated today to be filed as an amendment
to a registration statement heretofore filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Prospectus") (File
Number 333-81671), the objectives of the Fund are to provide the potential for
dividend income and capital appreciation through investment in a fixed portfolio
of actively traded equity securities of companies engaged in, providing services
to companies in, the industry identified in Trust's name, or are the type of
securities identified in the name of the Trusts. It is noted that no opinion is
expressed herein with regard to the Federal tax aspects of the securities, the
Trusts, units of the Trusts (the "Units"), or any income, gains or losses in
respect thereof.
As more fully set forth in the Indenture and in the Prospectus, the
activities of the Trustee will include the following:
On the Date of Deposit, the Depositor will deposit with the Trustee
with respect to the Trust the securities and/or contracts and cash for the
purchase thereof together with an irrevocable letter of credit in the amount
required for the purchase price of the securities comprising the corpus of the
Trust as more fully set forth in the Prospectus.
The Trustee did not participate in the selection of the securities to
be deposited in the Trust, and, upon the receipt thereof, will deliver to the
Depositor a registered certificate for the number of Units representing the
entire capital of the Trusts as more fully set forth in the Prospectus. The
Units, which are represented by certificates ("Certificates"), will be offered
to the public upon the effectiveness of the registration statement.
The duties of the Trustee, which are ministerial in nature, will
consist primarily of crediting the appropriate accounts with cash dividends
received by the Fund and with the proceeds from the disposition of securities
held in the Fund and the proceeds of the treasury obligation on maturity and the
distribution of such cash dividends and proceeds to the Unit holders. The
Trustee will also maintain records of the registered holders of Certificates
representing an interest in the Fund and administer the redemption of Units by
such Certificate holders and may perform certain administrative functions with
respect to an automatic reinvestment option.
Generally, equity securities held in the Trust may be removed therefrom
by the Trustee at the direction of the Depositor upon the occurrence of certain
specified events which adversely affect the sound investment character of the
Fund, such as default by the issuer in payment of declared dividends or of
interest or principal on one or more of its debt obligations.
Prior to the termination of the Fund, the Trustee is empowered to sell
equity securities designated by the Supervisory Servicer only for the purpose of
redeeming Units tendered to it and of paying expenses for which funds are not
available. The Trustee does not have the power to vary the investment of any
Unit holder in the Fund, and under no circumstances may the proceeds of sale of
any equity securities held by the Fund be used to purchase new equity securities
to be held therein.
Article 9-A of the New York Tax Law imposes a franchise tax on business
corporations, and, for purposes of that Article, Section 208(l) defines the term
"corporation" to include, among other things, "any business conducted by a
trustee or trustees wherein interest or ownership is evidenced by certificate or
other written instrument."
The Regulations promulgated under Section 208 provide as follows:
A business conducted by a trustee or trustees in which
interest or ownership is evidenced by certificate or other
written instrument includes, but is not limited to, an
association commonly referred to as a "business trust" or
"Massachusetts trust". In determining whether a trustee or
trustees are conducting a business, the form of the agreement
is of significance but is not controlling. The actual
activities of the trustee or trustees, not their purposes and
powers, will be regarded as decisive factors in determining
whether a trust is subject to tax under Article 9-A. The mere
investment of funds and the collection of income therefrom,
with incidental replacement of securities and reinvestment of
funds, does not constitute the conduct of a business in the
case of a business conducted by a trustee or trustees. 20
NYCRR 1-2.5(b)(2) (July 11, 1990).
New York cases dealing with the question of whether a trust will be
subject to the franchise tax have also delineated the general rule that where a
trustee merely invests funds and collects and distributes the income therefrom,
the trust is not engaged in business and is not subject to the franchise tax.
Burrell v. Lynch, 274 A.D. 347, 84 N.Y.S.2d 171 (3rd Dept. 1948), order
resettled, 274 A.D. 1083, 85 N.Y.S.2d 705 (3rd Dept. 1949).
In an Opinion of the Attorney General of the State of New York, 47 N.Y.
Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held that where the trustee of an
unincorporated investment trust was without authority to reinvest amounts
received upon the sales of securities and could dispose of securities making up
the trust only upon the happening of certain specified events or the existence
of certain specified conditions, the trust was not subject to the franchise tax.
In the instant situation, the Trustee is not empowered to, and we
assume will not, sell equity securities contained in the corpus of the Fund and
reinvest the proceeds therefrom. Further, the power to sell such equity
securities is limited to circumstances in which the credit-worthiness or
soundness of the issuer of such equity security is in question or in which cash
is needed to pay redeeming Unit holders or to pay expenses, or where the Fund is
liquidated subsequent to the termination of the Indenture. In substance, the
Trustee will merely collect and distribute income and will not reinvest any
income or proceeds, and the Trustee has no power to vary the investment of any
Unit holder in the Fund.
Under Subpart E of Part I, Subchapter J of Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), the grantor of a trust will be
deemed to be the owner of the trust under certain circumstances, and therefore
taxable on his proportionate interest in the income thereof. Where this Federal
tax rule applies, the income attributed to the grantor will also be income to
him for New York income tax purposes. See TSB-M-78(9)(c), New York Department of
Taxation and Finance, June 23, 1978.
By letter dated today, Messrs. Chapman and Cutler, counsel for the
Depositor, rendered their opinion that each Unit holder will be considered as
owning a share of each asset of the Trust in the proportion that the number of
Units held by such holder bears to the total number of Units outstanding and the
income of a Trust will be treated as the income of each Unit holder in said
proportion pursuant to Subpart E of Part I, Subchapter J of Chapter 1 of the
Code.
Based on the foregoing and on the opinion of Messrs. Chapman and
Cutler, counsel for the Depositor, dated today, upon which we specifically rely,
we are of the opinion that under existing laws, rulings, and court decisions
interpreting the laws of the State and City of New York:
1. Each of the Trusts will not constitute an association taxable as
a corporation under New York law, and, accordingly, will not be
subject to tax on its income under the New York State franchise
tax or the New York City general corporation tax.
2. The income of the Trusts will be treated as the income of the
Unit holders under the income tax laws of the State and City of
New York.
3. Unit holders who are not residents of the State of New York are
not subject to the income tax laws thereof with respect to any
interest or gain derived from the Fund or any gain from the sale
or other disposition of the Units, except to the extent that such
interest or gain is from property employed in a business, trade,
profession or occupation carried on in the State of New York.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Units and to the use of our name and the
reference to our firm in the Registration Statement and in the Prospectus.
Very truly yours,
WINSTON & STRAWN
MNS:
EXHIBIT 4.1
Interactive Data
FINANCIAL TIMES Information
100 William Street, 15th Floor, New York, NY 10038
USA Tel: (212) 269-6300 Fax: (212) 771-6445
July 20, 1999
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: Van Kampen Focus Portfolios Financial Institutions Trust, Series 1 Global
Energy Trust, Series 10 (A Unit Investment Trust) Registered Under the
Securities Act of 1933, File No. 333-81671
Gentlemen:
We have examined the Registration Statement for the above captioned
Fund, a copy of which is attached hereto.
We hereby consent to the reference in the Prospectus and Registration
Statement for the above captioned Fund to Interactive Data Corporation, as the
Evaluator, and to the use of the Obligations prepared by us which are referred
to in such Prospectus and Statement.
You are authorized to file copies of this letter with the Securities
and Exchange Commission.
Very truly yours,
James Perry
Vice President
EXHIBIT 4.3
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We have issued our report dated July 20, 1999 on the statements of
condition and related securities portfolios of Van Kampen Focus Portfolios,
Series 166 as of July 20, 1999 contained in the Registration Statement on Form
S-6 and Prospectus. We consent to the use of our report in the Registration
Statement and Prospectus and to the use of our name as it appears under the
caption "Other Matters-Independent Certified Public Accountants."
Grant Thornton LLP
Chicago, Illinois
July 20, 1999
