MEMORANDUM OF CHANGES
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 260
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 260 on September 12, 2000. 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 4-7. Revisions have been made and the portfolios have
been completed.
Pages 8-10. The descriptions of the Securities issuers have
been completed.
Pages 11-12. The Report of Independent Certified Public
Accountants and Statements of Condition have
been completed.
FILE NO. 333-45296
CIK #1123025
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 260
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 8:00 a.m. on September 12, 2000 pursuant to Rule
487.
VAN KAMPEN
FOCUS PORTFOLIOS(SM)
A DIVISION OF VAN KAMPEN FUNDS INC.
THE ROARING 2000SSM PORTFOLIO, SERIES 8A
THE ROARING 2000SSM PORTFOLIO, SERIES 8B
--------------------------------------------------------------------------------
Van Kampen Focus Portfolios, Series 260 includes the unit investment trusts
described above (the "Portfolios"). Each Portfolio seeks to increase the value
of your investment by investing in a diversified portfolio of stocks selected
using concepts outlined in The Roaring 2000s written by Harry S. Dent, Jr. We
offer this investment in two separate Portfolios with different maturity
options. The Series A Portfolio terminates in 15 months for investors with
shorter investment horizons. The Series B Portfolio terminates in five years for
investors with longer investment horizons. Of course, we cannot guarantee that a
Portfolio will achieve its objective.
SEPTEMBER 12, 2000
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.
<TABLE>
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
SEPTEMBER 12, 2000
<CAPTION>
SERIES A SERIES B
PUBLIC OFFERING PRICE PORTFOLIO PORTFOLIO
------------ ------------
<S> <C> <C>
Aggregate value of Securities per Unit (1) $ 9.900 $ 9.900
Sales charge 0.295 0.450
Less deferred sales charge 0.195 0.350
Public offering price per Unit (2) $ 10.000 $ 10.000
PORTFOLIO INFORMATION
Initial number of Units (3) 14,732 14,732
Aggregate value of Securities (1) $ 145,843 $ 145,843
Estimated initial distribution per Unit (4)(5) $ 0.04 $ 0.04
Estimated annual dividends per Unit (5) $ 0.05353 $ 0.05353
Redemption price per Unit (6) $ 9.705 $ 9.550
GENERAL INFORMATION
Initial Date of Deposit September 12, 2000
Mandatory Termination Date - Series A Portfolio December 18, 2001
Mandatory Termination Date - Series B Portfolio September 20, 2005
Record Date - Series A Portfolio June 10, 2001
Distribution Date - Series A Portfolio June 25, 2001
Record Dates - Series B Portfolio (4) June 10 and December 10
Distribution Dates - Series B Portfolio (4) June 25 and December 25
--------------------------------------------------------------------------------
(1) Each Security is valued at the most recent closing sale price as of the
close of the New York Stock Exchange on the last business day before the
Initial Date of Deposit.
(2) You will bear all or a portion of the expenses incurred in organizing and
offering your Portfolio. The public offering price includes the estimated
amount of these costs. The Trustee will deduct these expenses from your
Portfolio at the end of the initial offering period (approximately three
months). The estimated amount for each Portfolio is described above and is
included in the "Estimated Costs Over Time" on the next page. The public
offering price will will include any accumulated dividends or cash in the
Income or Capital Accounts of a Portfolio.
(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 Portfolio will increase or decrease to the extent of any adjustment.
(4) The initial Record Date for the Series B Portfolio is June 10, 2001 and the
initial Distribution Date for such Portfolio is June 25, 2001. Thereafter,
the record and distribution dates for this Portfolio will occur in June and
December of each year.
(5) 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".
(6) 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 include these costs after the initial offering period.
</TABLE>
<TABLE>
FEE TABLE
<CAPTION>
SERIES A SERIES B
PORTFOLIO PORTFOLIO
----------- ---------
TRANSACTION FEES (AS % OF OFFERING PRICE)
<S> <C> <C>
Maximum sales charge (1)............................................. 1.00% 1.00%
Deferred sales charge (2)............................................ 1.95% 3.50%
----------- ----------
Maximum sales charge................................................. 2.95% 4.50%
=========== ==========
Maximum sales charge on reinvested dividends......................... 0.00% 0.00%
=========== ==========
ESTIMATED ORGANIZATIONAL COSTS PER UNIT.............................. $ 0.01379 $ 0.02031
=========== ==========
ESTIMATED ANNUAL EXPENSES PER UNIT
Trustee's fee and operating expenses................................. $ 0.01525 $ 0.01746
Supervisory and evaluation fees...................................... $ 0.00500 $ 0.00500
----------- ----------
Total................................................................ $ 0.02025 $ 0.02246
=========== ==========
ESTIMATED COSTS OVER TIME
One year............................................................. $ 33 $ 49
Three years.......................................................... $ 80 $ 53
Five years........................................................... N/A $ 58
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. The Series A
Portfolio example assumes that you reinvest your investment into a new trust
when the Portfolio terminates at the end of each 15-month period. 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
"Portfolio 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 for Series A Portfolio is actually equal to
$0.195 per Unit. The deferred sales charge for Series B Portfolio is
actually equal to $0.35 per Unit. These amounts will exceed the percentages
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 December 10, 2001
through May 9, 2001. Your Portfolio pays a proportionate amount of this
charge on the 10th day of each month beginning in the accrual period until
paid in full.
</TABLE>
THE ROARING 2000SSM PORTFOLIOS
Each Portfolio invests in a separate portfolio of stocks selected using
concepts outlined in The Roaring 2000s written by Harry S. Dent, Jr. Each
Portfolio seeks to increase the value of your investment over its life.
The Roaring 2000s is the third book written by Harry S. Dent, Jr. analyzing
economic, technological and demographic trends in society. We designed the
Portfolios to take advantage of the insights, philosophies and strategies
discussed in this book. Based on Mr. Dent's current analysis, each portfolio
focuses on stocks from four sectors: Technology, Financials, Health Care and
U.S.-based Multi-Nationals. Each Portfolio seeks to leverage demographic,
economic and lifestyle trends that may develop over the next 10-15 years.
According to Mr. Dent, some significant changes that may potentially impact the
future economy include:
o Aging Baby Boomers reaching their peak spending years
o Internet usage and new technologies becoming more mainstream
o A shift in the business and organizational structure brought on by the
Information Age
o Rising importance of small- to medium-sized, high growth companies
o Growth opportunities from continued global economic development
Mr. Dent believes that the coming years may bring an era of economic
prosperity and lifestyle changes. For instance, Mr. Dent believes that the
Internet may be as important a catalyst for change in business as the
assembly-line once was for production. Mr. Dent applies the principle of the
"S-curve" in analyzing technologies and social trends in the economy. This
concept shows how products move into mainstream acceptance. The S-curve shows
how products develop in three stages over time: Innovation, Growth and Maturity.
Mr Dent also focuses on the "spending wave". This analysis illustrates how our
economy has correlated closely with birth rates. Over time, the level of births
lagged for peak in family spending has almost paralleled the Dow Jones
Industrial Average adjusted for inflation.
Of course, we cannot guarantee that your Portfolio 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.
ABOUT MR. DENT. Using extensive research developed from years of hands-on
business experience, Mr. Dent seeks to offer a positive and understandable view
of trends in society. He proposes practical applications at all levels: from
personal investments, to business strategies, to jobs and changes in the
workplace, to growth areas for real estate. Mr. Dent received his MBA from
Harvard Business School where he was a Baker Scholar. He graduated number one in
his class at the University of South Carolina with a degree in accounting and
finance. Mr. Dent has worked as a consultant with several Fortune 100 companies
to develop and innovate competitive business strategies. He has been CEO of
several growth companies and has acted as consultant to several leading edge
companies.
Mr. Dent is the author of the 1993 book, The Great Boom Ahead (revised in
1995). His second book, Job Shock: Four New Principles Transforming Our Work and
Business, was published in 1995 and then re-released in 1996 as The Great Jobs
Ahead. The Roaring 2000s updates key principles of these books, and focuses on
the Internet's rapid move into the mainstream and how our work, organizations,
and living circumstances may change. Mr. Dent also publishes the H.S. Dent
Forecast newsletter. Since 1988 he has been speaking to executives around the
world. He has appeared on "Good Morning America", PBS, CNBC, "The Business
Channel", and has been featured in Fortune, Success, The Wall Street Journal,
and Omni.
TWO MATURITY OPTIONS. Because different investors have different investment
horizons, we offer two portfolios with different maturities that invest in the
same companies. You should consider Series A if you intend to hold your
investment for 15 months or less. You should consider Series B if you intend to
hold your investment for approximately five years. In either case, you should
consider the impact of price volatility when selecting the appropriate Series.
While Series A and Series B invest in the same companies, they are separate
portfolios and have different sales charges and expenses. As a result, the
performance and exact composition of each Portfolio may differ, although the
Sponsor does not believe that the composition of the portfolios will differ
materially.
<TABLE>
<CAPTION>
SERIES A PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
CURRENT COST OF
NUMBER MARKET VALUE DIVIDEND SECURITIES TO
OF SHARES NAME OF ISSUER (1) PER SHARE (2) YIELD (3) PORTFOLIO (2)
---------- ----------------------------------- ------------ --------- -------------
<S> <C> <C> <C> <C>
FINANCIAL SERVICES
84 Bear Stearns Companies Inc. $ 72.500 0.83% $ 6,090.00
103 Chase Manhattan Corporation 57.500 2.23 5,922.50
106 Citigroup Inc. 56.625 0.99 6,002.25
35 J.P. Morgan & Company 169.000 2.37 5,915.00
39 Lehman Brothers Holdings Inc. 160.250 0.27 6,249.75
50 Providian Financial Corporation 118.750 0.17 5,937.50
126 T. Rowe Price Associates, Inc. 47.063 1.10 5,929.88
HEALTH CARE
78 ALZA Corporation 76.250 0.00 5,947.50
72 Baxter International Inc. 82.000 1.42 5,904.00
34 Genentech, Inc. 159.000 0.00 5,406.00
176 HCA-Healthcare Corporation 33.500 0.24 5,896.00
+ 92 Teva Pharmaceutical Industries, Ltd. 65.188 0.26 5,997.25
TECHNOLOGY
26 Broadcom Corporation 224.125 0.00 5,827.25
^ 41 Check Point Software Technologies Ltd. 138.063 0.00 5,660.56
94 Cisco Systems, Inc. 61.250 0.00 5,757.50
19 Corning Incorporated 294.125 0.24 5,588.38
62 EMC Corporation 94.375 0.00 5,851.25
91 Intel Corporation 64.688 0.12 5,886.56
30 Juniper Networks, Inc. 183.063 0.00 5,491.88
^ 84 Nortel Networks Corporation 68.000 0.09 5,712.00
69 Oracle Corporation 83.438 0.00 5,757.19
16 SDL, Inc. 344.000 0.00 5,504.00
49 Sun Microsystems, Inc. 115.250 0.00 5,647.25
U.S. MULTI-NATIONALS
73 Anheuser-Busch companies, Inc. 81.875 1.61 5,976.88
140 PepsiCo, Inc. 42.750 1.31 5,985.00
---------- ------------
1,789 $ 145,843.33
========== ============
See "Notes to Portfolios".
</TABLE>
<TABLE>
<CAPTION>
SERIES B PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
CURRENT COST OF
NUMBER MARKET VALUE DIVIDEND SECURITIES TO
OF SHARES NAME OF ISSUER (1) PER SHARE (2) YIELD (3) PORTFOLIO (2)
---------- ----------------------------------- ------------ --------- -------------
<S> <C> <C> <C> <C>
FINANCIAL SERVICES
84 Bear Stearns Companies Inc. $ 72.500 0.83% $ 6,090.00
103 Chase Manhattan Corporation 57.500 2.23 5,922.50
106 Citigroup Inc. 56.625 0.99 6,002.25
35 J.P. Morgan & Company 169.000 2.37 5,915.00
39 Lehman Brothers Holdings Inc. 160.250 0.27 6,249.75
50 Providian Financial Corporation 118.750 0.17 5,937.50
126 T. Rowe Price Associates, Inc. 47.063 1.10 5,929.88
HEALTH CARE
78 ALZA Corporation 76.250 0.00 5,947.50
72 Baxter International Inc. 82.000 1.42 5,904.00
34 Genentech, Inc. 159.000 0.00 5,406.00
176 HCA-Healthcare Corporation 33.500 0.24 5,896.00
+ 92 Teva Pharmaceutical Industries, Ltd. 65.188 0.26 5,997.25
TECHNOLOGY
26 Broadcom Corporation 224.125 0.00 5,827.25
^ 41 Check Point Software Technologies Ltd. 138.063 0.00 5,660.56
94 Cisco Systems, Inc. 61.250 0.00 5,757.50
19 Corning Incorporated 294.125 0.24 5,588.38
62 EMC Corporation 94.375 0.00 5,851.25
91 Intel Corporation 64.688 0.12 5,886.56
30 Juniper Networks, Inc. 183.063 0.00 5,491.88
^ 84 Nortel Networks Corporation 68.000 0.09 5,712.00
69 Oracle Corporation 83.438 0.00 5,757.19
16 SDL, Inc. 344.000 0.00 5,504.00
49 Sun Microsystems, Inc. 115.250 0.00 5,647.25
U.S. MULTI-NATIONALS
73 Anheuser-Busch companies, Inc. 81.875 1.61 5,976.88
140 PepsiCo, Inc. 42.750 1.31 5,985.00
---------- ------------
1,789 $ 145,843.33
========== ============
See "Notes to Portfolios".
</TABLE>
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 September 11,
2000 and have a settlement date of September 14, 2000 (see "The Portfolios").
(2) The market value of each Security is based on the most recent closing
sale price as of the close of the New York Stock Exchange on the business day
prior to the Initial Date of Deposit. Other information regarding the
Securities, as of the Initial Date of Deposit, is as follows:
PROFIT
COST TO (LOSS) TO
SPONSOR SPONSOR
-------------- -------------
Roaring 2000s Series A $145,840 $ 3
Roaring 2000s Series B $145,840 $ 3
"+" indicates that the stock is held in the form of American Depositary
Receipts or similar receipts.
"^" indicates that the stock is a foreign common stock traded on a U.S.
securities exchange.
(3) Current Dividend Yield for each Security is based on the estimated
annual dividends per share and the Security's market value. 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.
ALZA Corporation. ALZA Corporation is a research-based pharmaceutical
products company with drug delivery technologies. The company applies its
technologies to develop pharmaceutical products with enhanced therapeutic value
for its own portfolio, as well as for other pharmaceutical companies. ALZA's
sales and marketing efforts are currently focused in urology and oncology.
Anheuser-Busch Companies, Inc. Anheuser-Busch Companies, Inc. produces and
distributes beer under brand names such as Budweiser, Michelob, and Busch. The
company also manufactures beverage cans, recycles aluminum cans for conversion
into new can sheet, manufactures labels, and operates rice milling and barley
seed processing plants. In addition, Anheuser-Busch owns and operates theme
parks.
Baxter International Inc. Baxter International Inc. develops, manufactures,
and markets products and technologies related to the blood and circulatory
systems. The company also researches, develops, manufactures, and sells vaccines
for the prevention of infectious diseases. Baxter conducts operations in North
America, Asia, Europe, Japan, and Latin America.
Bear Stearns Companies Inc. Bear Stearns Companies Inc., through its Bear
Stearns & Co. Inc. subsidiary, offers investment banking and securities trading
and brokerage services. The company's business includes corporate finance and
mergers and acquisitions, institutional equities and fixed income sales and
trading, and private client services.
Broadcom Corporation. Broadcom Corporation provides integrated silicon
solutions that enable broadband digital data transmission of voice, data, and
video content to the home and within the business enterprise. The company
designs, develops, and supplies integrated circuits for cable set-top boxes,
cable modems, high-speed networking, direct satellite and digital broadcast, and
digital subscriber line.
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.
Check Point Software Technologies Ltd. Check Point Software Technologies
Ltd. provides Internet security. The company's integrated architecture includes
network security, traffic control, and Internet Protocal address management.
Check Point Software solutions enable customers to implement centralized
policy-based management with enterprise-wide distributed deployment.
Cisco Systems, Inc. Cisco Systems, Inc. supplies data networking products
to the corporate enterprise and public wide area service provider markets. The
company offers a variety of products including routers, LAN switches, frame
relay/ATM, and remote access concentrators. Cisco's clients include utilities,
corporations, universities, governments, and small to medium-size businesses
worldwide.
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.
Corning Inc. Corning Inc. conducts operations in the telecommunications,
advanced materials, and information display industries. The company produces
optical fiber, cable, and photonic components for the telecommunications
industry, as well as produces glass panels, funnels, liquid crystal display
glass and projection video lens assemblies for the information display industry.
EMC Corporation. EMC Corporation provides enterprise storage systems,
software, networks, and services. The company's products store, retrieve,
manage, protect, and share information from all major computing environments,
including UNIX, Windows NT, and mainframe platforms. EMC operates offices around
the world.
Genentech, Inc. Genentech, Inc., a biotechnology company, discovers,
develops, manufactures, and markets human pharmaceuticals. The company markets
biotechnology products directly in the United States.
HCA-Healthcare Corporation. HCA-Healthcare Corporation operates hospitals and
related health care entities. The company currently operates general, acute care
hospitals, and psychiatric hospitals that offer a full range of services. HCA's
facilities are located in the United States, England, and Switzerland.
Intel Corporation. Intel Corporation designs, manufactures, and sells
computer components and related products. The company's major products include
microprocessors, chipsets, embedded processors and microcontrollers, flash
memory products, graphics products, network and communications products, systems
management software, conferencing products, and digital imaging products.
J.P. Morgan & Co. Inc. J.P. Morgan & Co. Inc. is a leading global financial
services firm that serves the financial needs of business enterprises,
governments, and individuals. The company advises on corporate strategy and
structure, raises capital, makes markets in financial instruments, and manages
investment assets while also committing its own capital in a variety of
investments.
Juniper Networks, Inc. Juniper Networks, Inc. provides Internet
infrastructure solutions for Internet service providers and other
telecommunications service providers. The company delivers next generation
Internet backbone routers that are designed for service provider networks.
Lehman Brothers Holdings Inc. Lehman Brothers Holdings Inc. is an
investment banking firm. The company's activities include capital raising for
clients through securities underwriting and direct placements, corporate
finance, merchant banking, securities sales and trading and research services.
Lehman Brothers operates worldwide.
Nortel Networks Corporation. Nortel Networks Corporation provides
telephony, data, wireless, and wireline products and services for the Internet.
The company serves carrier, service provider, and enterprise customers on a
worldwide basis.
Oracle Corporation. Oracle Corporation supplies software for enterprise
information management. The company offers databases and relational servers,
application development and decision support tools, and enterprise business
applications. Oracle's software runs on network computers, personal digital
assistants, set-top devices, workstations, PCs, minicomputers, mainframes, and
massively parallel computers.
PepsiCo, Inc. PepsiCo, Inc. operates worldwide soft drink, juice, and snack
food businesses. The company manufactures, sells, and distributes beverages such
as Pepsi-Cola, Slice, and Tropicana Pure Premium, as well as snack foods such as
LAY'S potato chips, DORITOS tortilla chips, and Rold Gold pretzels.
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.
SDL, Inc. SDL, Inc. designs, manufactures, and markets semiconductor lasers,
fiber optic related products, and optoelectronic systems. The company's products
are used in the telecommunications, cable television, dense wavelength division
multiplexing, and satellite communications markets.
Sun Microsystems, Inc. Sun Microsystems, Inc. provides products, services,
and support solutions for building and maintaining network computing
environments. The company sells scalable computer systems, high-speed
microprocessors, and a complete line of high-performance software for operating
network computing equipment and storage products. Sun also provides support,
education, and professional services.
T. Rowe Price Associates, Inc. T. Rowe Price Associates, Inc. and its
subsidiaries serve as investment advisor to the T. Rowe Price Mutual Funds,
other sponsored investment products, and private accounts of other institutional
and individual investors. The company also provides related administrative
services, including mutual fund transfer agent, accounting, and shareholder
services, discount brokerage, and trust services.
Teva Pharmaceutical Industries Ltd. Teva Pharmaceutical Industries Ltd. is
a pharmaceutical company with more than 70% of its sales outside Israel,
primarily in the United States. The company develops, manufactures and markets
branded and generic human pharmaceuticals, bulk pharmaceutical chemicals,
medical disposable and veterinary products.
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 260:
We have audited the accompanying statements of condition and the related
portfolios of Van Kampen Focus Portfolios, Series 260 as of September 12,
2000. 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 auditing standards generally
accepted in the United States of America. 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 260 as of September 12, 2000, in conformity with accounting principles
generally accepted in the United States of America.
GRANT THORNTON LLP
Chicago, Illinois
September 12, 2000
<TABLE>
STATEMENTS OF CONDITION
AS OF SEPTEMBER 12, 2000
<CAPTION>
ROARING ROARING
2000S 2000S
SERIES A SERIES B
-------- --------
<S> <C> <C>
INVESTMENT IN SECURITIES
Contracts to purchase Securities (1) $145,843 $145,843
-------- --------
Total $145,843 $145,843
======== ========
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities--
Organizational costs (2) $ 203 $ 299
Deferred sales charge liability (3) 2,873 5,156
Interest of Unitholders--
Cost to investors (4) 147,320 147,320
Less: Gross underwriting commission and organizational costs (2)(4)(5) 4,553 6,932
-------- --------
Net interest to Unitholders (4) 142,767 140,388
-------- --------
Total $145,843 $145,843
======== ========
(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 Portfolio.
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 Portfolio 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.
</TABLE>
THE PORTFOLIOS
--------------------------------------------------------------------------------
The Portfolios 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 Portfolios offer investors the opportunity to purchase Units representing
proportionate interests in portfolios of actively traded equity securities. A
Portfolio may be an appropriate medium for investors who desire to participate
in a portfolio of 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 Portfolios. Unless otherwise terminated
as provided in the Trust Agreement, the Portfolios 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 each "Portfolio" and any additional securities
deposited into each Portfolio.
Additional Units of a Portfolio may be issued at any time by depositing in
the Portfolio (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 Portfolio, 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 Portfolio
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 Portfolio that
existed immediately prior to the subsequent deposit. Investors may experience a
dilution of their investments and a reduction in their anticipated income
because of fluctuations in the prices of the Securities between the time of the
deposit and the purchase of the Securities and because the Portfolios will pay
the associated brokerage or acquisition fees.
Each Unit of a Portfolio initially offered represents an undivided interest
in that Portfolio. 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 Portfolio represented
by each unredeemed Unit will increase or decrease accordingly, although the
actual interest in the Portfolio 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 Portfolio 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 Portfolio, (b) any additional Securities acquired
and held by the Portfolio 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 Portfolio seeks to increase the value of your investment by investing in
a portfolio of stocks using concepts outlined in The Roaring 2000s written by
Harry S. Dent, Jr. We cannot guarantee that a Portfolio will achieve its
objective. We describe the objective and selection criteria for each Portfolio
in the section entitled "Roaring 2000sSM Portfolios" on page 4.
You should note that we applied the selection criteria to the Securities for
inclusion in the Portfolios 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 Portfolio.
The Sponsor selected each portfolio based on concepts presented in The
Roaring 2000s and research compiled by Harry S. Dent. Mr. Dent did not select
the stocks for the portfolios, does not endorse the Portfolios and will not
supervise the Portfolios. The opinions and forecasts of Mr. Dent expressed in
his books and elsewhere are not necessarily those of Van Kampen Funds Inc. and
may not actually come to pass. Mr. Dent is being compensated by the Sponsor for
his research. The Roaring 2000sSM is the exclusive property of The H.S. Dent
Foundation. The Roaring 2000sSM is a service mark of the H.S. Dent Foundation.
Each Roaring 2000s Portfolio has licensed the use of this service mark from the
H.S. Dent Foundation.
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 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 $1.7 billion; Mid-Cap --
$1.7 billion to $10.5 billion; and Large-Cap -- over $10.5 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 Portfolio as a result of any change in characteristics.
RISK FACTORS
--------------------------------------------------------------------------------
PRICE VOLATILITY. The Portfolios invest in 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 stocks sometimes moves up or down rapidly and unpredictably.
Because the Portfolios are unmanaged, the Trustee will not sell stocks in
response to market fluctuations as is common in managed investments. In
addition, because some Portfolios 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 Portfolio 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.
TECHNOLOGY ISSUERS. The Portfolios invest significantly in technology
companies. These companies include companies that are involved in computer and
business services, enterprise software/technical software, Internet and computer
software, Internet-related services, networking and telecommunications
equipment, telecommunications services, electronics products, server hardware,
computer hardware and peripherals, semiconductor capital equipment and
semiconductors. These companies face risks related to rapidly changing
technology, rapid product obsolescence, cyclical market patterns, evolving
industry standards and frequent new product introductions. An unexpected change
in technology can have a significant negative impact on a company. The failure
of a company to introduce new products or technologies or keep pace with rapidly
changing technology, can have a negative impact on the company's results.
Technology stocks tend to experience substantial price volatility and
speculative trading. Announcements about new products, technologies, operating
results or marketing alliances can cause stock prices to fluctuate dramatically.
At times, however, extreme price and volume fluctuations are unrelated to the
operating performance of a company. This can impact your ability to redeem your
Units at a price equal to or greater than what you paid.
The market for certain products may have only recently begun to develop, is
rapidly evolving or is characterized by increasing suppliers. Key components of
some technology products are available only from limited sources. This can
impact the cost of and ability to acquire these components. Some technology
companies serve highly concentrated customer bases with a limited number of
large customers. Any failure to meet the standard of these customers can result
in a significant loss or reduction in sales. Many products and technologies are
incorporated into other products. As a result, some companies are highly
dependent on the performance of other technology companies. We cannot guarantee
that these customers will continue to place additional orders or will place
orders in similar quantities as in the past.
HEALTH CARE ISSUERS. The Portfolios also invest significantly in health care
companies. These issuers include companies involved in advanced medical devices
and instruments, drugs and biotechnology, managed care, hospital
management/health services and medical supplies. These companies face
substantial government regulation and approval procedures. Congress and the
president have proposed a variety of legislative changes concerning health care
issuers from time to time. Government regulation, and any change in regulation,
can have a significantly unfavorable effect on the price and availability of
products and services.
Drug and medical products companies also face the risk of increasing
competition from new products or services, generic drug sales, termination of
patent protection for drug or medical supply products and the risk that a
product will never come to market. The research and development costs of
bringing a new drug or medical product to market are substantial. This process
involves lengthy government review with no guarantee of approval. These
companies may have losses and may not offer proposed products for several years,
if at all. The failure to gain approval for a new drug or product can have a
substantial negative impact on a company and its stock.
Health care facility operators face risks related to demand for services, the
ability of the facility to provide required services, confidence in the
facility, management capabilities, competition, efforts by insurers and
government agencies to limit rates, expenses, the cost and possible
unavailability of malpractice insurance, and termination or restriction of
government financial assistance (such as Medicare, Medicaid or similar
programs).
FINANCIAL SERVICES INDUSTRY. The Portfolios also invest significantly in
banks and thrifts, insurance companies and investment firms. Banks, thrifts and
their holding companies 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. In addition, banks,
thrifts and their holding companies are extensively regulated at both the
federal and state level and may be adversely affected by increased regulations.
Banks and thrifts will face increased competition from nontraditional lending
sources as regulatory changes, such as the recently enacted financial services
overhaul legislation, permit new entrants to offer various financial products.
Technological advances such as the Internet allow these nontraditional lending
sources to cut overhead and permit the more efficient use of customer data.
Banks are already facing tremendous pressure from mutual funds, brokerage firms
and other financial service providers in the competition to furnish services
that were traditionally offered by banks.
Brokerage firms, broker/dealers, investment banks, finance companies and
mutual fund companies compete with banks and thrifts to provide traditional
financial service products, in addition to their traditional services, such as
brokerage and investment advice. In addition, all financial service companies
face shrinking profit margins due to new competitors, the cost of new technology
and the pressure to compete globally.
Companies involved in the insurance industry underwrite, sell or distribute
property and casualty, life or health insurance. Many factors affect insurance
company profits, including interest rate movements, the imposition of premium
rate caps, competition and pressure to compete globally. Property and casualty
insurance profits may also be affected by weather ca tastrophes and other
disasters. Life and health insurance profits may be affected by mortality rates.
Already extensively regulated, insurance companies' profits may also be
adversely affected by increased government regulations or tax law changes.
NO FDIC GUARANTEE. An investment in your Portfolio is not a deposit of any
bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
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 charges
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 Portfolio, including the cost of preparing documents relating
to the Portfolio (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 May 10, 2001, the secondary
market sales charge for the Series B Portfolio will be 4.50% and will not
include deferred payments. The sales charge for this Portfolio will reduce by
0.5% on each subsequent September 12 to a minimum of 3.00%. The initial offering
period sales charge is reduced as follows:
SERIES A SERIES B
TRANSACTION PORTFOLIO PORTFOLIO
AMOUNT* SALES CHARGE SALES CHARGE
-------------- -------------- --------------
Less than $50,000 2.95% 4.50%
$50,000 - $99,999 2.70 4.25
$100,000 - $249,999 2.50 4.00
$250,000 - $499,999 2.25 3.50
$500,000 - $999,999 2.00 2.50
$1,000,000 or more 1.50 1.50
---------------
*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 Portfolios
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).
A portion of the sales charge is waived for certain accounts described in
this paragraph. Purchases by these accounts are subject only to the portion of
the deferred sales charge that is retained by the Sponsor. Please refer to the
section called "Wrap Fee and Advisory Accounts" for additional information on
these 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 brokerage
services, 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 of the Portfolios offered in this
prospectus, unitholders of any Van Kampen-sponsored unit investment trust may
utilize their redemption or termination proceeds to purchase Units of all
Portfolios offered in this prospectus 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.
Your Portfolio will charge the deferred sales charge per Unit regardless of
any discounts. However, if you are eligible to receive a discount such that the
sales charge you must pay is less than the applicable deferred sales charge, you
will be credited the difference between your sales charge and the deferred sales
charge at the time you buy your Units. If you elect to have distributions
reinvested into additional Units of your Portfolio, in addition to the
reinvestment Units you receive you will also be credited additional Units with a
dollar value sufficient to cover the amount of any remaining deferred sales
charge to be collected on such Units at the time of reinvestment. The dollar
value of these Units will fluctuate over time.
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 Portfolios. 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
Portfolio business day. Orders received by the Trustee or Sponsor for purchases,
sales or redemptions after that time, or on a day which is not a business day,
will be held until the next determination of price. The term "business day", as
used herein and under "Rights of Unitholders--Redemption of Units", excludes
Saturdays, Sundays and holidays observed by the New York Stock Exchange. The
term "business day" also excludes any day on which more than 33% of the
Securities are not traded on their principal trading exchange due to a customary
business holiday on that exchange.
The aggregate underlying value of the 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 or the Nasdaq Stock Market, Inc., this evaluation is generally based on
the closing sale prices on that exchange or market 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 or market, at the closing asked prices. If
the Securities are not listed on a national or foreign securities exchange or
the Nasdaq Stock Market, Inc. or, if so listed and the principal market therefor
is other than on the exchange or market, the evaluation shall generally be based
on the current asked price on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for evaluation). If
current asked prices are unavailable, the evaluation is generally determined (a)
on the basis of current asked prices for comparable securities, (b) by
appraising the value of the Securities on the asked 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 Portfolio, 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.
SERIES A SERIES B
TRANSACTION PORTFOLIO PORTFOLIO
AMOUNT* CONCESSION CONCESSION
-------------- -------------- --------------
Less than $50,000 2.25% 3.50%
$50,000 - $99,999 2.00 3.25
$100,000 - $249,999 1.75 3.00
$250,000 - $499,999 1.50 2.50
$500,000 - $999,999 1.25 1.50
$1,000,000 or more 0.75 0.75
---------------
*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 regular concession or agency commission earned by selling
firms, during the initial offering period any firm that distributes 500,000 -
999,999 Units will receive additional compensation of $.005 per Unit; any firm
that distributes 1,000,000 - 1,999,999 Units will receive $.01 per Unit; any
firm that distributes 2,000,000 - 2,999,999 Units will receive $.015 per Unit;
and any firm that distributes 3,000,000 Units or more will receive $.02 per
Unit. A firm may aggregate Units of the Series A Portfolio and the Series B
Portfolio to qualify for these compensation levels.
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 Portfolios, the total concession
or agency commission will amount to 1.30% per Unit for the Series A Portfolio
and 2.50% per Unit for the Series B Portfolio. 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, 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
Portfolios. Such payments are made by the Sponsor out of its own assets, and not
out of the assets of any Portfolio. These programs will not change the price
Unitholders pay for their Units or the amount that a Portfolio 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. Prudential Securities,
Inc. will receive an additional concession equal to 0.15% of the Public Offering
Price of all Units it distributes during the initial offering period rather than
the additional compensation described under "Unit Distribution". 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 Portfolio 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.
The Sponsor or an affiliate 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.
Purchases and sales of Securities by your Portfolio may impact the value of
the Securities. This may especially be the case during the initial offering of
Units, upon Portfolio termination and in the course of satisfying large Unit
redemptions. Any publication of a list of Securities, or a list of anticipated
Securities, to be included in a Portfolio may also cause increased buying
activity in certain Securities. Once this information becomes public, investors
may purchase individual Securities appearing in such a publication and may do so
during or prior to the initial offering of Units. It is possible that these
investors could include investment advisory and brokerage firms of the Sponsor
or its affiliates or firms that are distributing Units. This activity may cause
your Portfolio to purchase stocks at a higher price than those buyers who effect
purchases prior to purchases by your Portfolio.
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.
RETIREMENT ACCOUNTS
--------------------------------------------------------------------------------
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.
WRAP FEE AND ADVISORY ACCOUNTS
--------------------------------------------------------------------------------
Units may be available for purchase by investors who purchase Units through
registered investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for brokerage
services, 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. You should
consult your financial professional to determine whether you can benefit from
these accounts. For these purchases you generally only pay the portion of the
sales charge that is retained by your Portfolio's Sponsor, Van Kampen Funds Inc.
For example, this table illustrates the transaction fees you will pay as a
percentage of the public offering price per Unit.
SERIES A SERIES B
PORTFOLIO PORTFOLIO
---------- ----------
Fee paid on purchase 0.00% 0.00%
Deferred sponsor retention 0.70 1.00
--------- ---------
Total 0.70% 1.00%
========= =========
You should consult the "Public Offering--General" section for specific
information on this and other sales charge discounts. That section governs the
calculation of all sales charge discounts.
RIGHTS OF UNITHOLDERS
--------------------------------------------------------------------------------
DISTRIBUTIONS. Dividends and any net proceeds from the sale of Securities
received by a Portfolio 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 Portfolio are credited to the Income Account of the
Portfolio. 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 without a
sales charge (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. 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 Portfolios. 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 Portfolio business day, the date of tender is
deemed to be the next business day.
Unitholders tendering 1,000 or more Units of a Portfolio for redemption may
request an in kind distribution of Securities equal to the Redemption Price per
Unit on the date of tender. Unitholders may not request an in kind distribution
during the five business days prior to a Portfolio's termination. Portfolios
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 Portfolio will be,
and the diversity of a Portfolio 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 Portfolio determined
on the basis of (i) the cash on hand in the Portfolio, (ii) the value of the
Securities in the Portfolio and (iii) dividends receivable on the Securities in
the Portfolio trading ex-dividend as of the date of computation, less (a)
amounts representing taxes or other governmental charges payable out of the
Portfolio, (b) the accrued expenses of the Portfolio 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 or the Nasdaq Stock Market, Inc., this
evaluation is generally based on the closing sale prices on that exchange or
market (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 or market,
at the closing bid prices. If the Securities are not so listed or, if so listed
and the principal market therefor is other than on the exchange or market, 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 Portfolio 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
Portfolio distributions, Portfolio expenses, a list of the Securities and other
Portfolio information. Unitholders may obtain the Evaluator's evaluations of the
Securities upon request.
PORTFOLIO ADMINISTRATION
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PORTFOLIO ADMINISTRATION. The Portfolios 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 Portfolio 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
Portfolio. If a public tender offer has been made for a Security or a merger or
acquisition has been announced affecting a Security, the Trustee may either sell
the Security or accept a tender offer for cash if the Supervisor determines that
the sale or tender is in the best interest of Unitholders. The Trustee will
distribute any cash proceeds to Unitholders. In addition, the Trustee may sell
Securities to redeem Units or pay Portfolio expenses or deferred sales charges.
If securities or property are acquired by a Portfolio, 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
Portfolio. Should any contract for the purchase of any of the Securities fail,
the Sponsor will (unless substantially all of the moneys held in the Portfolio
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 Portfolio sells Securities, the composition and diversity of the
Securities in the Portfolio may be altered. In order to obtain the best price
for a Portfolio, 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 Portfolio's 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 Portfolios, 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 Portfolio will terminate on the Mandatory Termination Date
or upon the sale or other disposition of the last Security held in the
Portfolio. A Portfolio 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 Portfolio is less than $500,000 ($3,000,000 if the value of the
Portfolio 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 Portfolio 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 Portfolio
expenses and costs. Unitholders will receive a final distribution statement
following termination. The Information Supplement contains further information
regarding termination of the Portfolios. 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 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 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
Portfolio 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 Portfolio. 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 its principal offices at 1
Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555, (630)
684-6000. As of November 30, 1999, the total stockholders' equity of Van Kampen
Funds Inc. was $141,554,861 (audited). Van Kampen Funds Inc. and your Portfolio
have adopted a code of ethics requiring Van Kampen's employees who have access
to information on Portfolio transactions to report personal securities
transactions. The purpose of the code is to avoid potential conflicts of
interest and to prevent fraud, deception or misconduct with respect to your
Portfolio. 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 Portfolios 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 Portfolios
and returns over specified time periods on other similar Van Kampen trusts
(which may show performance net of expenses and charges which the Portfolios
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 Portfolios.
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 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 a Portfolio'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 each
Portfolios. 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
your Portfolio. For purposes of the following discussion and opinion, it is
assumed that each Security in your Portfolio is equity for federal income tax
purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. Your Portfolio 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 Portfolio under the Code; and the income of
the Portfolio 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 when such income is considered to be received
by the Portfolio.
2. Each Unitholder will have a taxable event when the Portfolio 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
Portfolio (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
Portfolio. 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 Portfolio 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 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio
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 Portfolio (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 Portfolio 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 PORTFOLIO EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Portfolio is deductible
by the Unitholder to the same extent as though the expense had been paid
directly by him. As a result of the Tax Reform Act of 1986, certain
miscellaneous itemized deductions, such as investment expenses, tax return
preparation fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income. Unitholders may be required to treat some or all of the expenses of the
Portfolio as miscellaneous itemized deductions subject to this limitation.
Unitholders should consult with their own tax advisers regarding the
deductibility of Portfolio expenses.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF SECURITIES BY THE
PORTFOLIO OR DISPOSITION OF UNITS. As discussed above, a Unitholder may
recognize taxable gain (or loss) when a Security is disposed of by the Portfolio
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 Portfolio 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 PORTFOLIO. 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 Portfolio. See "Rights of Unitholders--Redemption of Units".
As previously discussed, prior to the redemption of Units or the termination of
the Portfolio, a Unitholder is considered as owning a pro rata portion of each
of the Portfolio's assets for federal income tax purposes. The receipt of an in
kind distribution will result in a Unitholder receiving 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 Portfolio 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 Portfolio. However, if a Unitholder also receives cash in exchange for a
fractional share of such Security held by the Portfolio, 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 Portfolio.
Because the Portfolio 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 Portfolio. 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 Portfolio. 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 Portfolio 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 Portfolio will be reduced to the extent dividends paid with respect
to such Security are received by the Portfolio which are not taxable as ordinary
income as described above.
OTHER MATTERS. 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 Portfolio to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the Portfolio (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
Portfolio.
It should be noted that payments to the Portfolio 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 Portfolio. 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 Portfolio, the Trustee will furnish to each
Unitholder of the Portfolio a statement containing information relating to the
dividends received by the Portfolio on the Securities, the gross proceeds
received by the Portfolio from the disposition of any Security (resulting from
redemption or the sale of any Security), and the fees and expenses paid by the
Portfolio. The Trustee will also furnish annual information returns to
Unitholders and to the Internal Revenue Service.
In the opinion of special counsel to the Portfolio for New York tax matters,
the Portfolio is not an association taxable as a corporation and the income of
the Portfolio 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 Portfolio 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.
PORTFOLIO 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 Portfolios.
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 Portfolios 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
Portfolio set forth in the "Fee Table" (which includes the estimated amount of
miscellaneous Portfolio 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 Portfolio
is expected to result from the use of these funds.
MISCELLANEOUS EXPENSES. The following additional charges are or may be
incurred by a Portfolio: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of such
Portfolio, (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 Portfolio and the rights and interests
of Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of a Portfolio 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 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
Portfolio. Each Portfolio may pay the expenses of updating its registration
statement each year. Unit investment trust sponsors have historically paid these
expenses. The Trusts will also pay a license fee to the Harry S. Dent Foundation
for use of certain service marks.
GENERAL. The fees and expenses of a Portfolio will accrue on a daily basis.
The deferred sales charge, fees and expenses are generally paid out of the
Capital Account of the related Portfolio. When these amounts are paid by or
owing to the Trustee, they are secured by a lien on the related 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
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
This Prospectus does not contain all the information set forth in the
Registration Statement filed by your Portfolio 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 Portfolio. Information about your Portfolio (including the Information
Supplement) can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. You may obtain information about the Public Reference Room by
calling 1-202-942-8090. Reports and other information about your Portfolio are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, after paying a
duplication fee, by electronic request at the following e-mail address:
[email protected] or by writing the SEC's Public Reference Section, Washington,
D.C. 20549-0102.
TABLE OF CONTENTS
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TITLE PAGE
----- ----
Summary of Essential Financial Information.. 2
Fee Table................................... 3
The Roaring 2000sSM Portfolios.............. 4
Notes to Portfolios......................... 7
The Securities.............................. 8
Report of Independent Certified
Public Accountants....................... 11
Statements of Condition .................... 12
The Portfolios.............................. A-1
Objectives and Securities Selection......... A-1
Risk Factors................................ A-2
Public Offering............................. A-4
Retirement Accounts......................... A-8
Wrap Fee and Advisory Accounts.............. A-8
Rights of Unitholders....................... A-8
Portfolio Administration.................... A-11
Taxation.................................... A-13
Portfolio Operating Expenses................ A-16
Other Matters............................... A-17
Additional Information...................... A-17
--------------
When Units of the Portfolios are no longer available this prospectus may be used
as a preliminary prospectus for a future Portfolio. If this prospectus is used
for future Portfolios you should note the following:
The information in this prospectus is not complete with respect to future
Portfolio series and may be changed. No person may sell Units of future
Portfolios until a registration statement is filed with the Securities and
Exchange Commission and is effective. This prospectus is not an offer to sell
Units and is not soliciting an offer to buy Units in any state where the offer
or sale is not permitted.
EMSPRO260
#37693
PROSPECTUS
--------------------------------------------------------------------------------
SEPTEMBER 12, 2000
VAN KAMPEN
FOCUS PORTFOLIOS(SM)
THE ROARING 2000SSM PORTFOLIO, SERIES 8A
THE ROARING 2000SSM PORTFOLIO, SERIES 8B
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Please retain this prospectus for future reference.
VAN KAMPEN
INFORMATION SUPPLEMENT
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 260
--------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Portfolio 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 Portfolio 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 1 Parkview Plaza, P.O.
Box 5555, Oakbrook Terrace, Illinois 60181-5555 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 Portfolios 9
Sponsor Information 10
Trustee Information 11
Portfolio Termination 12
RISK FACTORS
PRICE VOLATILITY. Because the Portfolios 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 Portfolio 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 Portfolio will be positive over any period of time. Because the
Portfolios are unmanaged, the Trustee will not sell stocks in response to market
fluctuations as is common in managed investments. In addition, because some
Portfolios 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 Portfolios 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 Portfolio, 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 Portfolios 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 Portfolio'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 Portfolio might obtain had the Trustee sold the currency in the market at that
time.
LIQUIDITY. Whether or not the stocks in a Portfolio 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 Portfolio by
depositing into the Portfolio 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 Portfolio will pay brokerage fees.
VOTING. Only the Trustee may sell or vote the stocks in a Portfolio. While
you may sell or redeem your Units, you may not sell or vote the stocks in your
Portfolio. 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.
TECHNOLOGY ISSUERS. Certain Portfolios are concentrated in issuers within the
technology industry. A portfolio concentrated in a single industry may present
more risk than a portfolio broadly diversified over several industries. These
Portfolios, and therefore Unitholders, may be particularly susceptible to a
negative impact resulting from adverse market conditions or other factors
affecting technology issuers because any negative impact on the technology
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 technology industry and the risks
which such an investment may entail.
Technology companies generally include companies involved in the development,
design, manufacture and sale of computers, computer related equipment, computer
networks, communications systems, telecommunications products, electronic
products, and other related products, systems and services. The market for
technology products and services, especially those specifically related to the
Internet, is characterized by rapidly changing technology, rapid product
obsolescence, cyclical market patterns, evolving industry standards and frequent
new product introductions. The success of the issuers of the Securities depends
in substantial part on the timely and successful introduction of new products.
An unexpected change in one or more of the technologies affecting an issuer's
products or in the market for products based on a particular technology could
have a material adverse affect on an issuer's operating results. Furthermore,
there can be no assurance that the issuers of the Securities will be able to
respond timely to compete in the rapidly developing marketplace.
The market for certain technology products and services may have only
recently begun to develop, is rapidly evolving and is characterized by an
increasing number of market entrants. Additionally, certain technology companies
may have only recently commenced operations or offered equity securities to the
public. Such companies are in the early stage of development and have a limited
operating history on which to analyze future operating results. It is important
to note that following its initial public offering a security is likely to
experience substantial stock price volatility and speculative trading.
Accordingly, there can be no assurance that upon redemption of Units or
termination of a Portfolio a Unitholder will receive an amount greater than or
equal to the Unitholder's initial investment.
Based on trading history, factors such as announcements of new products or
development of new technologies and general conditions of the industry have
caused and are likely to cause the market price of technology common stocks to
fluctuate substantially. In addition, technology company stocks have experienced
extreme price and volume fluctuations that often have been unrelated to the
operating performance of such companies. This market volatility may adversely
affect the market price of the Securities and therefore the ability of a
Unitholder to redeem units, or roll over Units into a new trust, at a price
equal to or greater than the original price paid for such Units.
Some key components of certain products of technology issuers are currently
available only from single sources. There can be no assurance that in the future
suppliers will be able to meet the demand for components in a timely and cost
effective manner. Accordingly, an issuer's operating results and customer
relationships could be adversely affected by either an increase in price for, or
and interruption or reduction in supply of, any key components. Additionally,
many technology issuers are characterized by a highly concentrated customer base
consisting of a limited number of large customers who may require product
vendors to comply with rigorous and constantly developing industry standards.
Any failure to comply with such standards may result in a significant loss or
reduction of sales. Because many products and technologies are incorporated into
other related products, certain companies are often highly dependent on the
performance of other computer, electronics and communications companies. There
can be no assurance that these customers will place additional orders, or that
an issuer of Securities will obtain orders of similar magnitude as past orders
form other customers. Similarly, the success of certain companies is tied to a
relatively small concentration of products or technologies with intense
competition between companies. Accordingly, a decline in demand of such
products, technologies or from such customers could have a material adverse
impact on issuers of the Securities.
HEALTH CARE ISSUERS. An investment in Units of certain Portfolios should be
made with an understanding of the problems and risks inherent in the healthcare
industry in general. Healthcare companies involved in advanced medical devices
and instruments, drugs and biotech, managed care, hospital management/health
services and medical supplies have potential risks unique to their sector of the
healthcare field. These companies are subject to governmental regulation of
their products and services, a factor which could have a significant and
possibly unfavorable effect on the price and availability of such products or
services. Furthermore, such companies face the risk of increasing competition
from new products or services, generic drug sales, termination of patent
protection for drug or medical supply products and the risk that technological
advances will render their products obsolete. The research and development costs
of bringing a drug to market are substantial, and include lengthy governmental
review processes with no guarantee that the product will ever come to market.
Many of these companies may have losses and not offer certain products for
several years. Such companies may also have persistent losses during a new
product's transition from development to production, and revenue patterns may be
erratic. In addition, healthcare facility operators may be affected by events
and conditions including, among other things, demand for services, the ability
of the facility to provide the services required, physicians' confidence in the
facility, management capabilities, competition with other hospitals, efforts by
insurers and governmental agencies to limit rates, legislation establishing
state rate-setting agencies, expenses, government regulation, the cost and
possible unavailability of malpractice insurance and the termination or
restriction of governmental financial assistance, including that associated with
Medicare, Medicaid and other similar third-party payor programs.
Legislative proposals concerning healthcare are proposed in Congress from
time to time. These proposals span a wide range of topics, including cost and
price controls (which might include a freeze on the prices of prescription
drugs), national health insurance, incentives for competition in the provision
of healthcare services, tax incentives and penalties related to healthcare
insurance premiums and promotion of pre-paid healthcare plans. The Sponsor is
unable to predict the effect of any of these proposals, if enacted, on the
issuers of Securities in your Portfolio.
FINANCIAL SERVICES ISSUERS. An investment in Units of certain Portfolios
should be made with an understanding of the problems and risks inherent in the
bank and financial services sector in general.
Banks, thrifts and their holding companies 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.
Banks and thrifts are highly dependent on net interest margin. Recently, bank
profits have come under pressure as net interest margins have contracted, but
volume gains have been strong in both commercial and consumer products. There is
no certainty that such conditions will continue. Bank and thrift institutions
had received significant consumer mortgage fee income as a result of activity in
mortgage and refinance markets. As initial home purchasing and refinancing
activity subsided, this income diminished. Economic conditions in the real
estate markets, which have been weak in the past, can have a substantial effect
upon banks and thrifts because they generally have a portion of their assets
invested in loans secured by real estate. Banks, thrifts and their holding
companies are subject to extensive federal regulation and, when such
institutions are state- chartered, to state regulation as well. Such regulations
impose strict capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their supervisory
and enforcement authority and may substantially restrict the permissible
activities of a particular institution if deemed to pose significant risks to
the soundness of such institution or the safety of the federal deposit insurance
fund. Regulatory actions, such as increases in the minimum capital requirements
applicable to banks and thrifts and increases in deposit insurance premiums
required to be paid by banks and thrifts to the Federal Deposit Insurance
Corporation ("FDIC"), can negatively impact earnings and the ability of a
company to pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or their
holding companies, or insures against any risk of investment in the securities
issued by such institutions.
The statutory requirements applicable to and regulatory supervision of banks,
thrifts and their holding companies 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;
enacted in August 1989, the Federal Deposit Insurance Corporation Improvement
Act of 1991, the Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991 and the regulations promulgated under these laws. Many
of the regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and prospects of
the Securities in the Trust's portfolio cannot be predicted with certainty. The
recently enacted financial-services overhaul legislation will allow banks,
securities firms and insurance companies to form one-stop financial
conglomerates marketing a wide range of financial service products to investors.
This legislation will likely result in increased merger activity and heightened
competition among existing and new participants in the field. Efforts to expand
the ability of federal thrifts to branch on an interstate basis have been
initially successful through promulgation of regulations, and legislation to
liberalize interstate banking has recently been signed into law. Under the
legislation, banks will be able to purchase or establish subsidiary banks in any
state, one year after the legislation's enactment. Since mid-1997, banks have
been allowed to turn existing banks into branches. Consolidation is likely to
continue. The Securities and Exchange Commission and the Financial Accounting
Standards Board require the expanded use of market value accounting by banks and
have imposed rules requiring market accounting for investment securities held in
trading accounts or available for sale. Adoption of additional such rules may
result in increased volatility in the reported health of the industry, and
mandated regulatory intervention to correct such problems. Additional
legislative and regulatory changes may be forthcoming. For example, the bank
regulatory authorities have proposed substantial changes to the Community
Reinvestment Act and fair lending laws, rules and regulations, and there can be
no certainty as to the effect, if any, that such changes would have on the
Securities in the portfolio. In addition, from time to time the deposit
insurance system is reviewed by Congress and federal regulators, and proposed
reforms of that system could, among other things, further restrict the ways in
which deposited moneys can be used by banks or reduce the dollar amount or
number of deposits insured for any depositor. Such reforms could reduce
profitability as investment opportunities available to bank institutions become
more limited and as consumers look for savings vehicles other than bank
deposits. Banks and thrifts face significant competition from other financial
institutions such as mutual funds, credit unions, mortgage banking companies and
insurance companies, and increased competition may result from legislative
broadening of regional and national interstate banking powers as has been
recently enacted. Among other benefits, the legislation allows banks and bank
holding companies to acquire across previously prohibited state lines and to
consolidate their various bank subsidiaries into one unit. The Sponsor makes no
prediction as to what, if any, manner of bank and thrift regulatory actions
might ultimately be adopted or what ultimate effect such actions might have on
the portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5% of the
outstanding shares of any class of voting securities of a bank or bank holding
company, (2) acquiring control of a bank or another bank holding company, (3)
acquiring all or substantially all the assets of a bank, or (4) merging or
consolidating with another bank holding company, without first obtaining Federal
Reserve Board ("FRB") approval. In considering an application with respect to
any such transaction, the FRB is required to consider a variety of factors,
including the potential anti-competitive effects of the transaction, the
financial condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would serve,
the record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the prospective
availability to the FRB of information appropriate to determine ongoing
regulatory compliance with applicable banking laws. In addition, the federal
Change In Bank Control Act and various state laws impose limitations on the
ability of one or more individuals or other entities to acquire control of banks
or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the FRB expressed its view that
a bank holding company experiencing earnings weaknesses should not pay cash
dividends which exceed its net income or which could only be funded in ways that
would weaken its financial health, such as by borrowing. The FRB also may impose
limitations on the payment of dividends as a condition to its approval of
certain applications, including applications for approval of mergers and
acquisitions. The Sponsor makes no prediction as to the effect, if any, such
laws will have on the Securities or whether such approvals, if necessary, will
be obtained.
Companies involved in the insurance industry are engaged in underwriting,
reinsuring, selling, distributing 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.
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 mortality 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 (vii) 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 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 PORTFOLIOS
In seeking the Portfolios' 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 Portfolios as of the Initial Date of Deposit.
Should a Security no longer meet the criteria used for selection for a
Portfolio, such Security will not as a result thereof be removed from a
Portfolio.
Harry S. Dent, Jr. believes that the economy may be on the edge of economic
change that may change how people communicate and fundamentally alter how and
where people live and work. At the same time, Mr. Dent believes the Baby Boom
generation will reach its peak earning, spending and productivity years. Mr.
Dent believes that the convergence of these two events could spark the trends of
the years ahead.
The Roaring 2000sSM Portfolios were designed to benefit from the insights,
philosophies and strategies found in the book, "The Roaring 2000s," by Harry S.
Dent, Jr.
Family spending cycles of each new generation of consumers and workers drive
the economy. Birth rates, because they show how many people are in a generation,
may be a leading indicator of the economy. As a generation develops and moves
into its peak family spending cycle, the economy may rise.
To account for the number of people at their peak spending age at a given
time, Mr. Dent lags the birth index forward 46.5 years (the average person
historically hits their peak spending at approximately 46.5 years of age). After
consideration of this lag, the birth index and the Dow Jones Industrial Average,
adjusted for inflation, have exhibited a close correlation in the past. Mr. Dent
believes that this "Spending Wave" may enable a connection to be made, helping
to forecast the economy in the future. Of course, past performance is no
guarantee of future results.
Based on the cycles discussed previously, Mr. Dent has identified various
sectors of our economy that may be primed for growth potential. The Roaring
2000s Portfolios seek to capitalize on trends impacting four main sectors,
including:
o TECHNOLOGY - New Technologies may be shaping new standards in the way
people work and live. Businesses may be beginning to prepare for
downshifts in the labor force by investing in labor saving technology that
could improve productivity and lower costs.
o FINANCIAL SERVICES - The Baby Boomers may be forced to become investors
and, therefore, may need to seek financial advice. Additionally, choices
for investing are numerous and complicated. As our economy grows, so may
additional opportunities for investment vehicles.
o HEALTH CARE - As the Baby Boomers age, health care may become increasingly
important as needs statistically begin to rise. As people age they tend to
spend more of their income on health care costs. As technologies increase,
Americans may find more options and choices in this sector than ever
before.
o U.S. MULTINATIONAL COMPANIES - A global marketplace is emerging and many
U.S.-based companies appear to be experiencing new sales growth through
the elimination of geographical barriers that once inhibited sales. Now,
through technology increases, multinational companies may be emerging as
market leaders internationally as well as domestically.
The Sponsor selected the stocks each Portfolio based on concepts presented
in The Roaring 2000s and research compiled by Mr. Dent. Mr. Dent did not select
the stocks for the Portfolios, does not endorse the Portfolios and will not
supervise the Portfolios. The opinions and forecasts of Mr. Dent expressed in
his books and elsewhere are not necessarily those of Van Kampen Funds Inc. and
may not actually come to pass. Mr. Dent is being compensated by the Sponsor for
his research. The Roaring 2000sSM is the exclusive property of The H.S. Dent
Foundation. The Roaring 2000sSM is a service mark of the H.S. Dent Foundation.
Each Portfolio has licensed the use of this service mark from the H.S. Dent
Foundation.
The Roaring 2000sSM is the exclusive property of The H.S. Dent Foundation.
The Roaring 2000sSM is a service mark of the H.S. Dent Foundation and has been
licensed for use by Van Kampen Funds Inc.
This fund is not sponsored, endorsed, sold or promoted by the H.S. Dent
Foundation. The H.S. Dent Foundation makes no representation or warranty,
express or implied, to the owners of this fund or any member of the public
regarding the advisability of investing in funds generally or in this fund
particularly. The H.S. Dent Foundation is the licensor of certain trademarks,
service marks and trade names of the H.S. Dent Foundation. The H.S. Dent
Foundation is not responsible for and has not participated in the determination
of the timing of, prices at, or quantities of this fund to be issued. The H.S.
Dent Foundation has no obligation or liability to owners of this fund in
connection with the administration, marketing or trading of this fund.
NEITHER The H.S. DENT Foundation NOR ANY OTHER RELATED PARTY GUARANTEES THE
ACCURACY AND/OR THE COMPLETENESS OF ANY DATA INCLUDED THEREIN. NEITHER The H.S.
DENT Foundation NOR ANY OTHER RELATED PARTY MAKES ANY WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND
COUNTERPARTIES, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF ANY DATA INCLUDED HEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR
FOR ANY OTHER USE. NEITHER The H.S. DENT Foundation NOR ANY OTHER RELATED PARTY
MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND The H.S. DENT Foundation HEREBY
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ITS SERVICE MARKS. WITHOUT LIMITING ANY OF
THE FORE-GOING, IN NO EVENT SHALL The H.S. DENT Foundation OR ANY OTHER RELATED
PARTY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
SPONSOR INFORMATION
Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the
Portfolios. 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; credit
services; asset management; trading of futures, options, foreign exchange
commodities and swaps (involving foreign exchange, commodities, indices and
interest rates); and real estate advice, financing and investing.
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 its principal offices at 1 Parkview Plaza, P.O. Box 5555,
Oakbrook Terrace, Illinois 60181-5555, (630) 684-6000. As of November 30, 1999,
the total stockholders' equity of Van Kampen Funds Inc. was $141,554,861
(audited). (This paragraph relates only to the Sponsor and not to the Portfolio
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, 2000, the Sponsor and its Van Kampen affiliates managed or
supervised more than $100 billion of investment products. The Sponsor and its
Van Kampen affiliates managed $84.2 billion of assets for more than 63 open-end
mutual funds, 39 closed-end funds and more than 2,700 unit trusts as of March
31, 2000. All of Van Kampen's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. 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 Portfolios 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 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 Portfolio. Such
records shall include the name and address of, and the number of Units of each
Portfolio 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 Portfolio.
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.
PORTFOLIO TERMINATION
A Portfolio may be liquidated at any time by consent of Unitholders
representing 66 2/3% of the Units of such Portfolio then outstanding or by the
Trustee when the value of the Securities owned by a Portfolio, as shown by any
evaluation, is less than $500,000 ($3,000,000 if the value of the Portfolio has
exceeded $15,000,000). A Portfolio will be liquidated by the Trustee in the
event that a sufficient number of Units of such Portfolio not yet sold are
tendered for redemption by the Sponsor, so that the net worth of such Portfolio
would be reduced to less than 40% of the value of the Securities at the time
they were deposited in such Portfolio. If a Portfolio 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 Portfolios. 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 Portfolio and in the case
of a Portfolio 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 Portfolio to the account of the
broker-dealer or bank designated by the Unitholder at Depository Trust Company.
The value of the Unitholder's fractional shares of the Securities will be paid
in cash. Unitholders with less than 1,000 Units, Unitholders in a Portfolio 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 Portfolio
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 Portfolio 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 Portfolio his pro rata share of the balance of the
Income and Capital Accounts of such Portfolio.
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.
2.1 Form of Code of Ethics. Reference is made to Exhibit 2.1 to
the Registration Statement on Form S-6 of Van Kampen Focus
Portfolios, Series 223 (File No. 333-34242) dated July 25,
2000.
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.
<PAGE>
SIGNATURES
The Registrant, Van Kampen Focus Portfolios, Series 260, 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 260 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 12th day of September 2000.
Van Kampen Focus Portfolios, Series 260
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 September 12,
2000 by the following persons who constitute a majority of the Board of
Directors of Van Kampen Funds Inc.
SIGNATURE TITLE
Richard F. Powers III Chairman and Chief Executive )
Officer )
John H. Zimmermann III President
A. Thomas Smith III Executive Vice President, )
General Counsel and Secretary )
Michael H. Santo Executive Vice President and Chief )
Operations and Technology Officer
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.
