MEMORANDUM OF CHANGES
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 261
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 261 on October 18, 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.
Pages 2-3. The "Summary of Essential Financial Information" and "Fee Table"
sections have been completed.
Pages 4-6. Certain revisions have been made and the "Portfolio" and the
notes thereto has been completed.
Pages 7-10. The descriptions of the portfolio securities have been
completed.
Pages 11-12. The Report of Independent Certified Public Accountants and
Statement of Condition have been completed.
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.
SIGNATURES
The Registrant, Van Kampen Focus Portfolios, Series 261 hereby
identifies Van Kampen Merritt Equity Opportunity Trust, Series 1, Series 2,
Series 4 and Series 7; Van Kampen American Capital Equity Opportunity Trust,
Series 13, Series 14, Series 57 and Series 89; and Van Kampen Focus Portfolios,
Series 235 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 261 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 18th day of October 2000.
Van Kampen Focus Portfolios, Series 261
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 October 18,
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*)
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*An executed copy of each of the related powers of attorney is filed
herewith or was filed with the Securities and Exchange Commission in connection
with the Registration Statement on Form S-6 of Van Kampen Focus Portfolios,
Series 136 (File No. 333-70897) and the same are hereby incorporated herein by
this reference.
BAIRD
ECONOMIC OUTLOOK TRUST, OCTOBER 2000 SERIES
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Van Kampen Focus Portfolios, Series 261 includes the unit investment trust
described above (the "Trust"). The Trust seeks to increase the value of your
investment by investing in a diversified portfolio of stocks selected by Robert
W. Baird & Co. Incorporated. Of course, we cannot guarantee that the Trust will
achieve its objective.
OCTOBER 18, 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.
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
OCTOBER 18, 2000
PUBLIC OFFERING PRICE
Aggregate value of Securities per Unit (1) $ 9.900
Sales charge 0.325
Less deferred sales charge 0.225
Public offering price per Unit (2) $ 10.000
TRUST INFORMATION
Initial number of Units (3) 14,516
Aggregate value of Securities (1) $ 143,706
Estimated initial distribution per Unit (4) $ .04
Estimated annual dividends per Unit (4) $ .05930
Redemption price per Unit (5) $ 9.675
GENERAL INFORMATION
Initial Date of Deposit October 18, 2000
Mandatory Termination Date October 16, 2002
Initial Record Date August 10, 2001
Initial Distribution Date August 25, 2001
Record Dates June 10 and December 10
Distribution Dates June 25 and December 25
--------------------------------------------------------------------------------
(1) Each Security is valued at the most recent closing sale price as of
the close of the New York Stock Exchange on the 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 Trust. The Public Offering Price includes the
estimated amount of these costs. The Trustee will deduct these
expenses from your Trust at the end of the initial offering period
(approximately three months). The estimated amount is described on the
next page. The Public Offering Price will also include any accumulated
dividends or cash in the Income or Capital Accounts.
(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 will increase or decrease to the extent of any
adjustment.
(4) This estimate is based on the most recently declared dividends. Actual
distributions will vary due to a variety of factors, including changes
in Trust expenses. See "Risk Factors".
(5) The redemption price is reduced by any remaining deferred sales
charge. The redemption price includes the estimated organizational and
offering costs. The redemption price will not include these costs
after the initial offering period. See "Rights of
Unitholders--Redemption of Units".
FEE TABLE
TRANSACTION FEES (AS % OF OFFERING PRICE)
Initial sales charge (1).............................. 1.00%
Deferred sales charge (2)............................. 2.25%
Maximum sales charge ................................. 3.25%
----------
Maximum sales charge on reinvested dividends.......... 0.00%
==========
ESTIMATED ORGANIZATIONAL COSTS PER UNIT (3)........... $ 0.02622
==========
ESTIMATED ANNUAL EXPENSES PER UNIT
Trustee's fee and operating expenses.................. $ 0.01095
Evaluation fees....................................... $ 0.00250
Supervisory fees...................................... $ 0.00250
----------
Estimated annual expenses per Unit.................... $ 0.01595
==========
ESTIMATED COSTS OVER TIME
One year.............................................. $ 37
Three years........................................... $ 67
Five years............................................ $ 99
Ten years............................................. $ 173
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 distributions at the end of each year and that you reinvest
your entire investment into a new trust when a trust terminates every two years.
Of course, you should not consider this example as a representation of actual
past or future expenses or annual rate of return which may differ from those
assumed for this example. The sales charge and expenses are described under
"Public Offering" and "Trust Operating Expenses".
--------------------------------------------------------------------------------
(1) The initial sales charge is the difference between the maximum sales
charge and the deferred sales charge.
(2) The deferred sales charge is actually equal to $0.225 per Unit. This
amount will exceed the percentage above if the Public Offering Price
per Unit falls below $10 and will be less than the percentage above if
the Public Offering Price per Unit exceeds $10. The deferred sales
charge accrues daily from February 10, 2001 through July 9, 2001. Your
Trust pays a proportionate amount of this charge on the 10th day of
each month beginning in the accrual period until paid in full.
(3) You will bear all or a portion of the expenses incurred in organizing
and offering your Trust. The Trustee will deduct the actual amount of
these expenses from your Trust at the end of the initial offering
period.
ECONOMIC OUTLOOK TRUST
The Trust seeks to increase the value of your investment by investing in a
diversified portfolio of stocks. Analysts at Robert W. Baird and Co. selected a
portfolio that seeks to identify several key sectors that Baird believes may be
attractive over the next 24 months. Baird considered four investment sectors in
selecting the portfolio: Technology, Health, Financial Services and Energy.
Baird chose these key sectors based on Baird's economic outlook and the
secular growth opportunities that Baird believes may increase the attractiveness
of these sectors. However, Baird's goal is to create a diverse Trust that
benefits from all sectors of the economy and, therefore, the Trust includes
stocks from additional sectors that Baird believes to be attractive.
TECHNOLOGY. Baird analysts have identified key sector themes that may
positively impact this sector:
o Enhanced productivity gains from continued investment in technology
o Demand for enhanced communications services
o Increasing Internet penetration rates
o Increasing need for bandwidth
HEALTHCARE. Within the Healthcare sector, Baird analysts have identified some
positive themes that may impact this sector:
o People living longer and an aging population
o Genetics (human genome project)
o New discoveries and technologies
FINANCIALS. Key sector themes that have been identified by Baird analysts
are:
o Interest rates appear unlikely to rise further
o Economy may decelerate but not fall into a recession
o Higher investor confidence rates
ENERGY. Baird analysts have identified some key sector themes within energy
to be:
o Imbalance in supply and demand that is unlikely to be corrected
near-term
o Oil prices could remain in a range to support accelerated exploration
and development
o Opportunities for better fuel efficiency, air quality, and power
reliability due to technological advancements
As with any investment, no one can guarantee that the Trust will achieve its
objective. There is no assurance that the trends discussed above will continue,
that expectations will actually occur or that they will occur during the Trust's
life. Your investment could be negatively impacted if these trends do not
continue or if current expectations are not realized. The value of your Units
may fall below the price you paid for the Units. You should read the "Risk
Factors" section before you invest.
You should remember that the Trust is designed as part of a long-term
investment strategy. Baird may offer a subsequent series of the Economic Outlook
Trust when this Trust terminates. As a result, you may achieve more consistent
overall results by following the strategy over several years if subsequent
series are available.
<TABLE>
<CAPTION>
PORTFOLIO
--------------------------------------------------------------------------------
CURRENT COST OF
NUMBER MARKET VALUE DIVIDEND SECURITIES
OF SHARES NAME OF ISSUER (1) PER SHARE (2) YIELD (3) TO TRUST (2)
------------ -------------------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
COMMUNICATION SERVICES
74 ALLTEL Corporation $ 52.063 2.46% $ 3,852.63
255 McLeodUSA, Inc. 15.250 0.00 3,888.75
124 Nextel Communications, Inc. 31.250 0.00 3,875.00
178 Worldcom, Inc. 21.750 0.00 3,871.50
CONSUMER DISCRETIONARY
254 AT&T Corporation-Liberty
Media Corporation 14.688 0.00 3,730.63
107 Comcast Corporation 38.063 0.00 4,072.69
109 Home Depot, Inc. 35.125 0.46 3,828.63
84 Viacom, Inc. 44.813 0.00 3,764.25
CONSUMER STAPLES
67 Kimberly-Clark Corporation 58.125 1.86 3,894.38
ENERGY
55 Anadarko Petroleum Corporation 70.210 0.28 3,861.55
46 Calpine Corporation 83.750 0.00 3,852.50
61 El Paso Energy Corporation 62.188 1.33 3,793.44
108 Unocal Corporation 35.813 2.23 3,867.75
FINANCIALS
122 Allstate Corporation 31.438 2.16 3,835.38
136 Charles Schwab Corporation 30.625 0.14 4,165.00
78 Citigroup, Inc. 49.375 1.13 3,851.25
93 Wells Fargo & Company 41.688 2.11 3,876.94
HEALTHCARE
76 Abbott Laboratories 51.500 1.48 3,914.00
61 Amgen, Inc. 63.938 0.00 3,900.19
44 Eli Lilly and Company 89.125 1.17 3,921.50
74 Medtronic, Inc. 53.250 0.38 3,940.50
^ 104 QIAGEN N.V. 38.688 0.00 4,023.50
52 Waters Corporation 77.250 0.00 4,017.00
INDUSTRIALS
59 Emerson Electric Company 66.188 2.16 3,905.06
71 Johnson Controls, Inc. 54.750 2.05 3,887.25
TECHNOLOGY
77 Affiliated Computer Services, Inc. 51.188 0.00 3,941.44
85 America Online, Inc. 43.600 0.00 3,706.00
65 Amphenol Corporation 58.500 0.00 3,802.50
66 Avocent Corporation 61.000 0.00 4,026.00
211 Internap Network Services
Corporation 17.500 0.00 3,692.50
17 Juniper Networks, Inc. 229.250 0.00 3,897.25
66 Linear Technology Corporation 57.000 0.21 3,762.00
+ 124 Nokia Oyj 30.688 0.53 3,805.25
^ 60 Nortel Networks Corporation 64.000 0.10 3,840.00
115 Oracle Corporation 33.750 0.00 3,881.25
77 Rational Software Corporation 51.000 0.00 3,927.00
27 VERITAS Software Corporation 149.375 0.00 4,033.13
------------ -----------
3,482 $ 143,705.59
============ ===========
See "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(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 October 17, 2000 and have a settlement date of October
20, 2000 (see "The Trust").
(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 before 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
-------------- --------------
$ 143,701 $ 5
"+" 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 as of the
close of trading on the New York Stock Exchange on the business day
prior to the Initial Date of Deposit. Estimated annual dividends per
share are calculated by annualizing the most recently declared
dividends or by adding the most recent interim and final dividends
declared and reflect any foreign withholding taxes.
THE SECURITIES. A brief description of each of the issuers of the Securities
is listed below.
Abbott Laboratories. Abbott Laboratories discovers, develops, manufactures,
and sells a broad and diversified line of health care products and services. The
company's products include pharmaceuticals, diagnostic products, hospital
products, chemical and agricultural products, and nutritionals. Abbott markets
its products worldwide through affiliates and distributors.
Affiliated Computer Services, Inc. Affiliated Computer Services, Inc.
provides a variety of business services. Services include business process
outsourcing, electronic commerce, technology outsourcing, and professional and
systems integrations services. The company's services are provided to customers
with time-critical, transaction-intensive information processing needs.
Allstate Corporation. Allstate Corporation, through its subsidiaries,
provides property-liability insurance, as well as other types of insurance in
the United States and Canada. The company primarily sells private passenger
automobile and homeowners insurance through independent and specialized brokers.
Allstate also sells life insurance, annuity, and group pension products through
agents.
ALLTEL Corporation. ALLTEL Corporation provides wireline and wireless
communications and information services. The company, through its subsidiaries,
provides wireline, long-distance, network access and Internet services, wireless
communications, wide-area paging service, information processing management
services, and advanced applications software. ALLTEL also publishes telephone
directories.
America Online, Inc. America Online, Inc. provides interactive
communications and services through its America Online and CompuServe worldwide
Internet online services. The company's Web sites offer such features as a
personalized news service, electronic mail via the Web, an online community
center, public and private meeting rooms and interactive conversations, and
guest interviews.
Amgen, Inc. Amgen, Inc. discovers, develops, manufactures, and markets human
therapeutics based on cellular and molecular biology. The company focuses its
research on secreted protein and small molecule therapeutics, with particular
emphasis on neuroscience and cancer. Amgen concentrates on the areas of
hematology, cancer, infectious disease, endocrinology, neurobiology, and
inflammation.
Amphenol Corporation. Amphenol Corporation designs, manufactures, and
markets electrical, electronic and fiber optic connectors, interconnect systems,
and coaxial and flat-ribbon cable. The company's products are used in a variety
of industries, including telephone, wireless, and data communications systems,
cable television systems, and commercial and military aerospace electronics.
Anadarko Petroleum Corporation. Anadarko Petroleum Corporation is an
independent oil and gas exploration and production company. The company explores
for oil in Kansas, Oklahoma, and Texas, as well as offshore in the Gulf of
Mexico and in Alaska. Anadarko also owns and operates gas gathering systems in
its United States core producing areas. The company develops crude oil reserves
in Algeria.
AT&T Corporation - Liberty Media Corporation. AT&T Corporation - Liberty
Media Corporation is a media, entertainment, and communications company with
interests in a diverse group of companies. The company's subsidiaries and
business affiliates are involved in a range of programming, communications,
technology, and Internet businesses. AT&T Corporation - Liberty Media's brands
include STARZ!, Discovery, Fox, USA, TV Guide, QVC, and TBS.
Avocent Corporation. Avocent Corporation supplies connectivity solutions for
enterprise data centers, service providers and financial institutions worldwide.
Calpine Corporation. Calpine Corporation acquires, develops, owns, and
operates power generation facilities, as well as sells electricity in the United
States. The company also provides thermal energy for industrial customers.
Charles Schwab Corporation. Charles Schwab Corporation provides a variety of
financial services to individual investors, independent investment managers,
retirement plans, and institutions. The company provides its services to
customers through multiple service channels, including the Internet, a network
of branch offices, telephone, and multilingual technologies.
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.
Comcast Corporation. Comcast Corporation develops, manages, and operates
hybrid fiber-coaxial broadband cable communications networks. The company also
provides programming content. Comcast is implementing high-speed Internet access
service and digital video applications.
El Paso Energy Corporation. El Paso Energy Corporation owns an integrated
coast-to-coast natural gas pipeline system in the United States. The company has
operations in interstate natural gas transmission, gas gathering and processing,
international infrastructure development, and energy marketing. El Paso Energy's
international assets include pipeline and power generation.
Eli Lilly and Company. Eli Lilly and Company discovers, develops,
manufactures, and sells pharmaceutical products for humans and animals. The
company's products are sold in countries around the world. Eli Lilly's products
include neuroscience products, endocrine products, anti-infectives,
cardiovascular agents, oncology products, an antiulcer agent, and animal health
products.
Emerson Electric Company. Emerson Electric Company manufactures and markets
electrical, electromechanical, and electronic products and systems. The company
produces a variety of products, including process control, industrial
automation, electronics, appliance components, and electric motors. Emerson
sells its products around the world.
Home Depot, Inc. Home Depot, Inc. sells building materials and home
improvement products. The company's stores sell plumbing, heating and electrical
supplies, lumber, floor and wall coverings, hardware, tools, paint, and lawn and
garden products. Home Depot operates in North and South America.
Internap Network Services Corporation. Internap Network Services Corporation
provides centrally managed Internet connectivity services targeted at businesses
seeking to maximize the performance of mission-critical Internet-based
applications. The company offer its Interconnectivity services at dedicated line
speeds of 1.5 Megabits per second.
Johnson Controls, Inc. Johnson Controls, Inc. markets automotive systems and
building controls. The company supplies seating systems, interior systems, and
batteries. Johnson Controls also provides building control systems and services,
energy management and integrated facility management.
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.
Kimberly-Clark Corporation. Kimberly-Clark Corporation manufactures tissue,
personal care, and health care products, as well as business, correspondence,
and technical papers. The company sells its products under brand names such as
Huggies, Depend, Kotex, Kleenex, Tecnol, and Page. Kimberly-Clark sells its
products around the world.
Linear Technology Corporation. Linear Technology Corporation designs,
manufactures, and markets a line of linear integrated circuits. The company's
products are used in a variety of applications including telecommunications,
cellular telephones, networking products and satellite systems, notebook and
desktop computers, computer peripherals, video/multimedia, and military and
space systems.
McLeodUSA, Inc. McLeodUSA, Inc. provides communications services to business
and residential customers in the Midwestern and Rocky Mountain regions of the
United States. The company's communications services include local, long
distance, data, voice mail, and Internet access.
Medtronic, Inc. Medtronic, Inc. provides device-based therapies that restore
health, extend life, and alleviate pain. The company's principal products
include those for bradycardia pacing, tachyarrhythmia management, atrial
fibrillation management, heart failure management, heart valve replacement,
malignant and non-malignant pain, and movement disorders. Medtronic's products
are sold worldwide.
Nextel Communications, Inc. Nextel Communications, Inc. provides digital and
analog wireless communications services to its customers in the United States.
The company markets its products under the Nextel brand name. Nextel's network
offers an integrated wireless communications tool with digital cellular,
text/numeric paging, and a digital two-way radio feature.
Nokia Oyj. Nokia Oyj is an international telecommunications company. The
company develops and manufactures mobile phones and networks and systems for
cellular and fixed networks. Nokia also develops and supplies access networks,
multimedia equipment and other telecom related products. The company markets its
products and services worldwide.
Nortel Networks Corporation. Nortel Networks Corporation is an Internet and
communications provider with capabilities spanning optical, wireless, local
Internet, and electronic business. The company serves carrier, service provider,
and enterprise customers around the world. Nortel provides access products,
business applications and services, data and Internet products, and other
products and services.
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.
QIAGEN N.V. QIAGEN N.V. provides technologies for separating and purifying
DNA and RNA. The company's portfolio consists of consumable products for nucleic
acid separation, purification, and handling and nucleic acid amplification, as
well as automated instrumentation and related services.
Rational Software Corporation. Rational Software Corporation develops and
markets a variety of software development tools, services, and software
engineering best practices. The company's products and services help
organizations develop and deploy Web, e-business, enterprise-wide, technical,
and embedded software. Rational has offices throughout the world.
Unocal Corporation. Unocal Corporation is an oil and gas exploration and
production company with operations in Asia and the United States Gulf of Mexico
and interests in Canada. The company also supplies steam for the generation of
electricity to power plants, conducts oil and natural gas commodity trading, and
has mining operations. In addition, Unocal provides fertilizers and green
petroleum coke.
VERITAS Software Corporation. VERITAS Software Corporation designs,
develops, and markets enterprise storage management and high availability
products that manage both on-line and off-line data for business-critical
computing systems. The company's products are marketed to original equipment
manufacturers and end-user customers through resellers, value added resellers,
hardware distributors, and systems integrators.
Viacom, Inc. Viacom, Inc. is a worldwide entertainment and publishing
company. The company's operations include Blockbuster video and music, MTV
Networks, Showtime Networks, Paramount Pictures, Paramount Television, Simon &
Schuster, television stations, and movie screens in various countries. Viacom
merged with CBS Corporation and also produces television series, mini-series,
and television movies.
Waters Corporation. Waters Corporation provides high-performance liquid
chromatography products and services. The company distributes its products
worldwide to a wide range of industries such as pharmaceuticals, chemicals, and
environmental testing.
Wells Fargo & Company. Wells Fargo & Company is a diversified financial
services company providing banking, insurance, investments, mortgage, and
consumer finance. The company operates through physical stores, the Internet and
other distribution channels across North America and elsewhere internationally.
WorldCom, Inc. WorldCom, Inc. provides a broad range of communications,
outsourcing, and managed network services worldwide. The company provides long
distance, local and wireless communications, including voice, data, Internet,
and international services.
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 261:
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen Focus Portfolios, Series 261 as of October 18, 2000. The
statement of condition and portfolio are the responsibility of the Sponsor. Our
responsibility is to express an opinion on such financial statements based on
our audit.
We conducted our audit in accordance with 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 261 as of October 18, 2000, in conformity with accounting principles
generally accepted in the United States of America.
GRANT THORNTON LLP
Chicago, Illinois
October 18, 2000
STATEMENT OF CONDITION
AS OF OCTOBER 18, 2000
INVESTMENT IN SECURITIES
Contracts to purchase Securities (1) $ 143,706
-----------
Total $ 143,706
===========
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities--
Organizational costs (2) $ 381
Deferred sales charge liability (3) 3,266
Interest of Unitholders--
Cost to investors (4) 145,160
Less: Gross underwriting commission
and organizational costs (2)(4)(5) 5,101
-----------
Net interest to Unitholders (4) 140,059
-----------
Total $ 143,706
===========
--------------------------------------------------------------------------------
(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 an
irrevocable letter of credit which has 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 the
Trust. The amount of these costs are set forth in the "Fee Table". A
distribution will be made as of the close of the initial offering
period to an account maintained by the Trustee from which this
obligation of the investors will be satisfied.
(3) Represents the amount of mandatory distributions from the Trust on the
bases set forth under "Public Offering".
(4) The aggregate public offering price and the aggregate sales charge are
computed on the bases set forth under "Public Offering-- Offering
Price".
(5) Assumes the maximum sales charge.
THE TRUST
--------------------------------------------------------------------------------
The Trust was 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 Trust offers the opportunity to purchase Units representing proportionate
interests in a portfolio of stocks. The Trust 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 Trust. Unless otherwise terminated as
provided in the Trust Agreement, the Trust will terminate on the Mandatory
Termination Date and any remaining Securities will be liquidated or distributed
by the Trustee within a reasonable time. As used in this prospectus the term
"Securities" means the securities (including contracts to purchase these
securities) listed in "Portfolio" and any additional securities deposited into
the Trust.
Additional Units may be issued at any time by depositing in the Trust (i)
additional Securities, (ii) contracts to purchase Securities together with cash
or irrevocable letters of credit or (iii) cash (or a letter of credit or the
equivalent) with instructions to purchase additional Securities. As additional
Units are issued by the Trust, the aggregate value of the Securities will be
increased and the fractional undivided interest represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits into the Trust
following the Initial Date of Deposit provided that the additional deposits will
be in amounts which will maintain, as nearly as practicable, the same
proportionate relationship among the number of shares of each Security in the
Trust's portfolio that existed immediately prior to the subsequent deposit.
Investors may experience a dilution of their investments and a reduction in
their anticipated income because of fluctuations in the prices of the Securities
between the time of the deposit and the purchase of the Securities and because
the Trust will pay the associated brokerage or acquisition fees.
Each Unit initially offered represents an undivided interest in the Trust. To
the extent that any Units are redeemed by the Trustee or additional Units are
issued as a result of additional Securities being deposited by the Sponsor, the
fractional undivided interest in the Trust represented by each unredeemed Unit
will increase or decrease accordingly, although the actual interest in the Trust
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.
The Trust consists of (a) the Securities (including contracts for the
purchase thereof) listed under the "Portfolio" as may continue to be held from
time to time in the Trust, (b) any additional Securities acquired and held by
the Trust pursuant to the provisions of the Trust Agreement and (c) any cash
held in the Income and Capital Accounts. Neither the Sponsor nor the Trustee
shall be liable in any way for any failure in any of the Securities.
OBJECTIVES AND SECURITIES SELECTION
--------------------------------------------------------------------------------
The objective of the Trust is to increase the value of your investment by
investing in a diversified portfolio of stocks selected by Robert W. Baird & Co.
Incorporated (the "Underwriter"). We cannot guarantee that the Trust will
achieve its objective. In selecting the Securities, the Underwriter considered
the factors described under "Economic Outlook Trust".
The Underwriter may use the list of Securities in its independent capacity as
a broker-dealer and investment adviser to various individuals and entities. The
Underwriter may also distribute this information to various individuals and
entities. The Underwriter may recommend or effect transactions in the
Securities. This may have an adverse effect on the prices of the Securities.
This also may have an impact on the price the Trust pays for the Securities and
the price received upon Unit redemptions or Trust termination.
The Underwriter acts as agent or principal in connection with the purchase
and sale of equity securities, including the Securities, and may act as a market
maker in the Securities. The Underwriter may also issue reports and make
recommendations on the Securities. The Underwriter's research department may
receive compensation based on commissions generated by research and/or sales of
Units.
You should note that the Underwriter applied the selection criteria to the
Securities for inclusion in the Trust 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 the portfolio.
RISK FACTORS
--------------------------------------------------------------------------------
PRICE VOLATILITY. The Trust invests in common stocks. The value of Units will
fluctuate with the value of these stocks and may be more or less than the price
you originally paid for your Units. The market value of common stocks sometimes
moves up or down rapidly and unpredictably. Because the Trust is unmanaged, the
Trustee will not sell stocks in response to market fluctuations as is common in
managed investments. As with any investment, we cannot guarantee that the
performance of the Trust will be positive over any period of time.
DIVIDENDS. Common stocks represent ownership interests in the issuers and are
not obligations of the issuers. Accordingly, common stockholders have a right to
receive dividends only after the company has provided for payment of its
creditors, bondholders and preferred stockholders. Common stocks do not assure
dividend payments. Dividends are paid only when declared by an issuer's board of
directors and the amount of any dividend may vary over time.
TECHNOLOGY ISSUERS. The Trust invests significantly in technology companies.
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.
FINANCIAL SERVICES. The Trust invests 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 catastrophes 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.
ENERGY ISSUERS. The Trust invests in energy companies. Energy companies face
risks related to political conditions in oil producing regions (such as the
Middle East), the actions of the Organization of Petroleum Exporting Countries
(OPEC), the price and worldwide supply of oil and natural gas, the price and
availability of alternative fuels, the ability to find and acquire oil and gas
reserves that are economically recoverable, operating hazards, government
regulation and the level of consumer demand. Political conditions of some oil
producing regions have been unstable in the past. Political instability or war
in these regions could have a negative impact on your investment. Oil and
natural gas prices can be extremely volatile. OPEC controls a substantial
portion of world oil production. OPEC may take actions to increase or suppress
the price or availability of oil. Various domestic and foreign government
authorities and international cartels also impact these prices. Any substantial
decline in these prices could have an adverse effect on energy companies. Energy
companies depend on their ability to find and acquire additional energy
reserves. The exploration and recovery process involves significant operating
hazards and can be very costly. A company has no assurance that it will find
reserves or that any reserves will be economically recoverable. The industry
also faces substantial government regulation, including environmental
regulation. These regulations have increased costs and limited production and
usage of certain fuels. All of these factors could adversely impact your
investment.
HEALTH CARE ISSUERS. The Trust invests 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).
NO FDIC GUARANTEE. An investment in your Trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
PUBLIC OFFERING
--------------------------------------------------------------------------------
GENERAL. Units are offered at the Public Offering Price which includes the
underlying value of the Securities, the initial sales charge, and cash, if any,
in the Income and Capital Accounts. The "Fee Table" describes the sales charge
in detail. If any deferred sales charge payment date is not a business day, we
will charge the payment to the Trust on the next business day. If you purchase
Units after the initial deferred sales charge payment, you will only pay the
remaining portion of the deferred sales charge. On October 18, 2001, the
secondary market sales charge will reduce to 2.75% and will not include deferred
payments. A portion of the Public Offering Price includes an amount of
Securities to pay for all or a portion of the organizational costs incurred in
establishing your Trust. These costs include the cost of preparing documents
relating to the Trust (such as the prospectus, trust agreement and closing
documents), federal and state registration fees, the initial fees and expenses
of the Trustee and legal and audit expenses. The initial offering period sales
charge is reduced as follows:
AGGREGATE
DOLLAR AMOUNT
OF UNITS PURCHASED* SALES CHARGE
--------------------- ----------------
Less than $50,000 3.25%
$50,000 - $249,999 3.00
$250,000 - $499,999 2.75
$500,000 - $999,999 2.50
$1,000,000 or more 2.00
---------------
*The breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be applied on
whichever basis is more favorable to the investor.
Any sales charge reduction is borne by the selling broker, dealer or
agent.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).
During the initial offering period of the Trust offered in this prospectus,
unitholders of any other Van Kampen-sponsored unit investment trusts may utilize
their redemption or termination proceeds to purchase Units of the Trust offered
in this prospectus at the Public Offering Price per Unit less 1%.
During the initial offering period of the Trust offered in this prospectus,
unitholders of any other unit investment trust originally underwritten by Robert
W. Baird & Co. Inc. may utilize their termination proceeds to purchase Units of
the Trust offered in this prospectus at the Public Offering Price less 1%.
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 spouses or children under 21 and (4) officers and directors of bank
holding companies that make Units available directly or through subsidiaries or
bank affiliates. Notwithstanding anything to the contrary in this Prospectus,
such investors, bank trust departments, firm employees and bank holding company
officers and directors who purchase Units through this program will not receive
sales charge reductions for quantity purchases.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law, and trustees, custodians or fiduciaries for the
benefit of such persons) of Van Kampen Funds Inc. and its affiliates, dealers
and their affiliates and vendors providing services to the Sponsor may purchase
Units at the Public Offering Price less the applicable dealer concession.
The minimum purchase is 100 Units (or $1,000) but may vary by selling firm
(50 Units or $500 for qualified retirement plans). 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 Trust. The
initial price of the Securities was determined by Interactive Data Corporation,
a firm regularly engaged in the business of evaluating, quoting or appraising
comparable securities. The Evaluator will generally determine the value of the
Securities as of the Evaluation Time on each business day and will adjust the
Public Offering Price of Units accordingly. This Public Offering Price will be
effective for all orders received prior to the Evaluation Time on each business
day. The Evaluation Time is the close of the New York Stock Exchange on each
Trust business day. Orders received by the Trustee or Sponsor for purchases,
sales or redemptions after that time, or on a day which is not a business day,
will be held until the next determination of price. The term "business day", as
used herein and under of Unitholders--Redemption of Units", excludes Saturdays,
Sundays and holidays observed by the New York Stock Exchange.
The aggregate underlying value of the Securities during the initial offering
period is determined on each business day by the Evaluator in the following
manner: If the Securities are listed on a national or foreign securities
exchange 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, taken as a whole, which are represented by the Units.
UNIT DISTRIBUTION. Units will be distributed to the public by the Sponsor,
broker-dealers and others at the Public Offering Price. Units repurchased in the
secondary market, if any, may be offered by this Prospectus at the secondary
market Public Offering Price in the manner described above.
The Sponsor intends to qualify Units for sale in a number of states. Brokers,
dealers and others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period as
described below.
AGGREGATE CONCESSION
DOLLAR AMOUNT OR AGENCY
OF UNITS DISTRIBUTED* COMMISSION
--------------------- ----------------
Up to $49,999 2.25%
$50,000 - $249,999 2.00
$250,000 - $499,999 1.90
$500,000 - $999,999 1.75
$1,000,000 or more 1.40
---------------
*The breakpoint concessions or agency commissions are also applied on a Unit
basis using a breakpoint equivalent of $10 per Unit and will be applied on
whichever basis is more favorable to the distributor.
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 Trust offered in this prosectus,
the total concession or agency commission will amount to 1.50% per Unit. For
transactions involving unitholders of other unit investment trusts originally
underwritten by Robert W. Baird & Co. Inc. who use their termination proceeds to
purchase Units of the Trust offered in this prospectus, the total concession or
agency commission will amount to 1.50% per Unit. For all secondary market
transactions the total concession or agency commission will amount to 70% of the
applicable sales charge. Notwithstanding anything to the contrary herein, in no
case shall the total of any concessions, agency commissions and any additional
compensation allowed or paid to any broker, dealer or other distributor of Units
with respect to any individual transaction exceed the total sales charge
applicable to such transaction. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units and to change the amount
of the concession or agency commission to dealers and others from time to time.
Broker-dealers of the Trust, banks and/or others may be eligible to
participate in a program in which such firms receive from the Sponsor a nominal
award for each of their representatives who have sold a minimum number of units
of unit investment trusts created by the Sponsor during a specified time period.
In addition, at various times the Sponsor may implement other programs under
which the sales forces of brokers, dealers, banks and/or others may be eligible
to win other nominal awards for certain sales efforts, or under which the
Sponsor will reallow to such brokers, dealers, banks and/or others that sponsor
sales contests or recognition programs conforming to criteria established by the
Sponsor, or participate in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales generated by such
persons at the public offering price during such programs. Also, the Sponsor in
its discretion may from time to time pursuant to objective criteria established
by the Sponsor pay fees to qualifying entities for certain services or
activities which are primarily intended to result in sales of Units of the
Trust. Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trust. These programs will not change the price Unitholders
pay for their Units or the amount that the Trust will receive from the Units
sold.
SPONSOR AND UNDERWRITER COMPENSATION. The Underwriter will receive a gross
sales commission equal to the total sales charge applicable to each transaction.
The Sponsor will receive from the Underwriter the difference between the gross
sales commission and an amount equal to the 2.25% of the Public Offering Price
per Unit. In addition, the Underwriter will receive additional compensation
during the initial offering period of 0.10% of the Public Offering Price per
Unit if it distributes at least $10 million, 0.15% of the Public Offering Price
per Unit if it distributes at least $15 million and 0.20% of the Public Offering
Price per Unit if it distributes at least $20 million. Any sales charge discount
provided to investors will be borne by the selling dealer or agent. In addition,
the Sponsor or Underwriter will realize a profit or loss as a result of the
difference between the price paid for the Securities by the Sponsor or
Underwriter and the cost of the Securities to the Trust on the Initial Date of
Deposit as well as on subsequent deposits. See "Notes to Portfolio". The Sponsor
has not participated as sole underwriter or as manager or as a member of the
underwriting syndicates or as an agent in a private placement for any of the
Securities. The Sponsor or Underwriter 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 or
Underwriter. In maintaining a secondary market, the Underwriter 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 or Underwriter prior to the date of settlement for the purchase of
Units may be used in the Sponsor's or Underwriter'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 affilliate 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. An affiliate may act as a
specialist or market marker 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 Trust may impact the value of the
Securities. This may especially be the case during the initial offering of
Units, upon Trust 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 Trust 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 Trust to purchase stocks at a higher price than those buyers who effect
purchases prior to purchases by your Trust.
MARKET FOR UNITS. Although it is not obligated to do so, the Underwriter
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 Underwriter 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 Underwriter of any Units tendered for
redemption. If the Underwriter'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 Underwriter 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 purchase of Units may be limited by the plans'
provisions and does not itself establish such plans. The minimun investment for
these accounts is 50 Units or $500.
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 iwrap feei charge is imposed. You should
consult your financial professional to determine whether you can benefit from
these accounts. For these purchases you generally pay the portion of the sales
charge that is retained by your Trust'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 if you purchase Units through
the Underwriter in these accounts.
Fee paid on purchase 0.00%
Deferred sponsor retention 1.00
------
Total 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 the Trust will generally be distributed to Unitholders on the
Distribution Date to Unitholders of record on the preceding Record Date. This
date appears 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.
You may also reinvest distributions in certain Van Kampen mutual funds. See
"Rights of Unitholders--Reinvestment Option".
Dividends and interest received by the Trust are credited to the Income
Account of the Trust. Other receipts (e.g., capital gains, proceeds from the
sale of Securities, etc.) are credited to the Capital Account. Proceeds received
on the sale of any Securities, to the extent not used to meet redemptions of
Units or pay deferred sales charges, fees or expenses, will be distributed to
Unitholders. Proceeds received from the disposition of any Securities after a
record date and prior to the following distribution date will be held in the
Capital Account and not distributed until the next distribution date. Any
distribution to Unitholders consists of each Unitholder's pro rata share of the
estimated annual income to be received by the Trust and any available amounts in
the Capital Account as of the related Record Date.
ROLLOVER. The Underwriter currently intends to offer a subsequent series of
the Trust when this series terminates. If you notify us at least five business
days prior to the Mandatory Termination Date, you will have the option to
participate in a rollover and have your Units reinvested into a subsequent Trust
series, if available. If you elect to participate in the rollover, the Trustee
will redeem your Units when the Trust terminates and reinvest the proceeds
(including dividends) in a new Trust series at the public offering price
applicable to rollover purchases for the new series. The Trustee will attempt to
sell Securities to satisfy the redemption as quickly as practicable on your
rollover date. The Sponsor does not anticipate that the sale period will be
longer than one day; however, certain factors could affect the ability to sell
the Securities and could affect the length of the sale period. The liquidity of
any Security depends on the daily trading volume of the Security and the amount
available for redemption and reinvestment on any day.
Of course, no one can guarantee that a subsequent trust or sufficient units
will be available or that any subsequent trusts will offer the same investment
strategies or objectives as the current Trust. No one can guarantee that the
rollover will avoid any negative market price consequences resulting from
trading large volumes of securities. Market price trends may make it
advantageous to sell or buy securities more quickly or more slowly than
permitted by the Trust procedures. The Sponsor may, in its sole discretion,
modify the rollover or stop creating units of a trust at any time regardless of
whether all proceeds of Unitholders have been reinvested in the rollover. If the
Underwriter decides not to offer a subsequent series of the Trust, we will
notify you prior to the Mandatory Termination Date. Cash which has not been
reinvested in the rollover will be distributed to you shortly after the Trust
terminates. If you participate in the rollover, you may receive realize taxable
dividends or capital gains which are reinvested in the rollover but you may not
be entitled to a deduction for capital losses due to the "wash sale" tax rules.
Due to the reinvestment in a subsequent trust, the Trust will not distribute
cash to pay any taxes. See "Taxation".
REINVESTMENT OPTION. Unitholders may have distributions automatically
reinvested in additional Units under the Automatic Reinvestment Option (to the
extent Units may be lawfully offered for sale in the state in which the
Unitholder resides) through two options. Brokers and dealers can use the
Dividend Reinvestment Service through Depository Trust Company or purchase the
Automatic Reinvestment Option CUSIP. Unitholders will be subject to any
remaining deferred sales charge payments due on Units. To participate in this
reinvestment option, a Unitholder must file with the Trustee a written notice of
election, together with any certificate representing Units and other
documentation that the Trustee may then require, at least five days prior to the
related Record Date. A Unitholder's election will apply to all Units owned by
the Unitholder and will remain in effect until changed by the Unitholder. If
Units are unavailable for reinvestment, distributions will be paid in cash.
Purchases of additional Units made pursuant to the reinvestment plan will be
made at the net asset value for Units as of the Evaluation Time on the
Distribution Date.
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 Trust. 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 the
reinvestment plan at any time.
REDEMPTION OF UNITS. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay Street,
20th Floor, New York, New York 10286. Certificates must be tendered to the
Trustee, duly endorsed or accompanied by proper instruments of transfer with
signature guaranteed (or by providing satisfactory indemnity in connection with
lost, stolen or destroyed certificates) and by payment of applicable
governmental charges, if any. On the seventh day following the tender, the
Unitholder will be entitled to receive in cash an amount for each Unit equal to
the Redemption Price per Unit next computed on the date of tender. The "date of
tender" is deemed to be the date on which Units are received by the Trustee,
except that with respect to Units received by the Trustee after the Evaluation
Time or on a day which is not a Trust business day, the date of tender is deemed
to be the next business day.
Unitholders tendering 1,000 or more Units (or $10,000) of the Trust for
redemption may request an in kind distribution of equity 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 the Trust's
termination. An in kind distribution will be made by the Trustee through the
distribution of each of the equity securities in book-entry form to the account
of the Unitholder's broker-dealer at Depository Trust Company. Amounts
representing fractional shares will be distributed in cash. The Trustee may
adjust the nujmber of shares of any Security included in a Unitholder's in kind
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 the Trust will be, and
the diversity of the Trust may be, reduced. Sales may be required at a time when
Securities would not otherwise be sold and may result in lower prices than might
otherwise be realized. The price received upon redemption may be more or less
than the amount paid by the Unitholder depending on the value of the Securities
at the time of redemption.
The Redemption Price per Unit and the secondary market repurchase price per
Unit are equal to the pro rata 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 Units 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, interest
and other amounts received by the Trust for each distribution. Within a
reasonable time after the end of each year, each person who was a Unitholder
during that year will receive a statement describing dividends, interest and
capital received, actual Trust distributions, Trust expenses, a list of the
Securities and other Trust information. Unitholders may obtain the Evaluator's
evaluations of the Securities upon request.
TRUST ADMINISTRATION
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PORTFOLIO ADMINISTRATION. The Trust is not a managed fund and, except as
provided in the Trust Agreement, Securities generally will not be sold or
replaced. The Sponsor may, however, direct that Securities be sold in certain
limited circumstances to protect the Trust based on advice from the Supervisor.
These situations may include events such as the issuer having defaulted on
payment of any of its outstanding obligations or the price of a Security has
declined to such an extent or other credit factors exist so that in the opinion
of the Sponsor retention of the Security would be detrimental to the Trust. 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 Trust expenses or deferred sales charges. If securities or
property are acquired by the Trust, the Sponsor may direct the Trustee to sell
the securities or property and distribute the proceeds to Unitholders or to
accept the securities or property for deposit in the Trust. Should any contract
for the purchase of any of the Securities fail, the Sponsor will (unless
substantially all of the moneys held in the Trust to cover the purchase are
reinvested in substitute Securities in accordance with the Trust Agreement)
refund the cash and sales charge attributable to the failed contract to all
Unitholders on or before the next distribution date.
When your Trust sells Securities, the composition and diversity of the
Securities in the Trust may be altered. In order to obtain the best price for
the Trust, it may be necessary for the Supervisor to specify minimum amounts
(generally 100 shares) in which blocks of Securities are to be sold. In
effecting purchases and sales of the Trust's portfolio securities, the Sponsor
may direct that orders be placed with and brokerage commissions be paid to
brokers, including brokers which may be affiliated with the Trust, 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. The Trust will terminate on the Mandatory Termination Date or
upon the sale or other disposition of the last Security held in the Trust. The
Trust may be terminated at any time with consent of Unitholders representing
two-thirds of the outstanding Units or by the Trustee when the value of the
Trust is less than $500,000 ($3,000,000 if the value of the Trust has exceeded
$15,000,000) (the "Minimum Termination Value"). Unitholders will be notified of
any termination. The Trustee may begin to sell Securities in connection with a
Trust termination during a period beginning 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. Unitholders
will receive a final cash distribution within a reasonable time after the
Mandatory Termination Date. All distributions will be net of Trust expenses and
costs. Unitholders will receive a final distribution statement following
termination. The Information Supplement contains further information regarding
termination of the Trust. See "Additional Information".
LIMITATIONS ON LIABILITIES. The Sponsor, Evaluator, Supervisor and Trustee
are under no liability for taking any action or for refraining from taking any
action in good faith pursuant to the Trust Agreement, or for errors in judgment,
but shall be liable only for their own willful misfeasance, bad faith or gross
negligence (negligence in the case of the Trustee) in the performance of their
duties or by reason of their reckless disregard of their obligations and duties
hereunder. The Trustee is not be liable for depreciation or loss incurred by
reason of the sale by the Trustee of any of the Securities. In the event of the
failure of the Sponsor to act under the Trust Agreement, the Trustee may act
thereunder and is not be liable for any action taken by it in good faith under
the Trust Agreement. The Trustee is not liable for any taxes or other
governmental charges imposed on the Securities, on it as Trustee under the Trust
Agreement or on the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Trust Agreement contains other
customary provisions limiting the liability of the Trustee. The Trustee, Sponsor
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.
ROBERT W. BAIRD & CO. Robert W. Baird & Co. Incorporated is the Underwriter
of your Trust. Baird is one of the nation's largest regionally-headquartered
investment bankers, serving individuals, corporations, municipalities and
institutional investors. Founded in Milwaukee in 1919, Baird has developed a
strong presence in the Midwest and has expanded into major markets outside
America's Heartland. The firm has 75 offices in 14 states. Baird's research
department is widely known and respected for its equity research providing broad
comprehensive coverage for its clients. Baird's special expertise includes:
o Offering individuals a full range of high-quality investment
services.
o Serving as a leading underwriter for corporations and
municipalities.
o Offering a broad range of asset management services to
individuals, pension and profit-sharing plans, foundations and
others.
o Providing highly-regarded investment research that enjoys an
international reputation.
o Working with institutional investors around the world.
Since 1982, Baird has been a member of the Northwestern Mutual Life Insurance
family of companies. Baird is a member of the New York Stock Exchange and other
principal exchanges, the National Association of Securities Dealers, Inc. and
the Securities Investor Protection Corporation. You can contact Baird at (800)
792-2473 or visit their website at www.rwbaird.com.
SPONSOR. Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the
Trust. The Sponsor is an indirect subsidiary of Morgan Stanley Dean Witter & Co.
Van Kampen Funds Inc. specializes in the underwriting and distribution of unit
investment trusts and mutual funds with roots in money management dating back to
1926. The Sponsor is a member of the National Association of Securities Dealers,
Inc. and has 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 Trust have adopted a code of ethics requiring Van
Kampen's employees who have access to information on Trust 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 Trust. The Information Supplement contains additional
information about the Sponsor.
If the Sponsor fails to perform any of its duties under the Trust Agreement
or becomes incapable of acting or declares bankruptcy or its affairs are taken
over by public authorities, then the Trustee may (i) appoint a successor Sponsor
at rates of compensation deemed by the Trustee to be reasonable and not
exceeding amounts prescribed by the Securities and Exchange Commission, (ii)
terminate the Trust Agreement and liquidate the Trust as provided therein or
(iii) continue to act as Trustee without terminating the Trust Agreement.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286 (800) 221-7668.
The Bank of New York is subject to supervision and examination by the
Superintendent of Banks of the State of New York and the Board of Governors of
the Federal Reserve System, and its deposits are insured by the Federal Deposit
Insurance Corporation to the extent permitted by law. 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 and Underwriter may from time to time in
advertising and sales materials compare the current returns on the Trust and
returns over specified time periods on other similar trusts (which may show
performance net of expenses and charges which the Trust would have charged) with
returns on other 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 Trust. Information on percentage changes in
the dollar value of Units may be included from time to time in advertisements,
sales literature, reports and other information furnished to current or
prospective Unitholders. Total return figures may not be averaged and may not
reflect deduction of the sales charge, which would decrease return. No provision
is made for any income taxes payable. Past performance may not be indicative of
future results. The Trust portfolio is not managed and Unit price and return
fluctuate with the value of the securities in the portfolio, so there may be a
gain or loss when Units are sold. As with other performance data, performance
comparisons should not be considered representative of the Trust's relative
performance for any future period.
TAXATION
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GENERAL. The following is a general discussion of certain of the federal
income tax consequences of the purchase, ownership and disposition of the Units.
The summary is limited to investors who hold the Units as capital assets
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). Unitholders should
consult their tax advisers in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of Units in
the Trust.
For purposes of the following discussion and opinions, it is assumed that
each Security is equity for federal income tax purposes. In the opinion of
Chapman and Cutler, special counsel for the Sponsor, under existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of the
Trust will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his pro rata share of income
derived from each Security when such income is considered to be received by the
Trust.
2. A Unitholder will be considered to have received all of the dividends paid
on his pro rata portion of each Security when such dividends are considered to
be received by the Trust regardless of whether such dividends are used to pay a
portion of any deferred sales charge imposed. Unitholders will be taxed in this
manner regardless of whether distributions from the Trust are actually received
by the Unitholder or are automatically reinvested (see "Rights of
Unitholders--Reinvestment Option").
3. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, exchange, liquidation, redemption, or otherwise) or
upon the sale or redemption of Units by such Unitholder (except to the extent an
in kind distribution of stock is received by such Unitholder from the Trust as
described below). The price a Unitholder pays for his Units, generally including
sales charges, is allocated among his pro rata portion of each Security held by
the Trust (in proportion to the fair market values thereof on the valuation date
closest to the date the Unitholder purchases his Units) in order to determine
his initial tax basis for his pro rata portion of each Security held by the
Trust. Unitholders should consult their own tax advisers with regard to the
calculation of basis. For federal income tax purposes, a Unitholder's pro rata
portion of the dividends, as defined by Section 316 of the Code, paid by a
corporation with respect to a Security held by the Trust is taxable as ordinary
income to the extent of such corporation's current and accumulated "earnings and
profits". A Unitholder's pro rata portion of dividends paid on such Security
which exceed such current and accumulated earnings and profits will first reduce
a Unitholder's tax basis in such Security, and to the extent that such dividends
exceed a Unitholder's tax basis in such Security shall generally be treated as
capital gain. In general, the holding period for such capital gain will be
determined by the period of time a Unitholder has held his Units.
4. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust will
generally be considered a capital loss (except in the case of a dealer or a
financial institution). In particular, a Rollover Unitholder should be aware
that a Rollover Unitholder's loss, if any, incurred in connection with the
exchange of Units for units in the next new series of the Trust (the "New Fund")
will generally be disallowed with respect to the disposition of any Securities
pursuant to such exchange to the extent that such Unitholder is considered the
owner of substantially identical securities under the wash sale provisions of
the Code taking into account such Unitholder's deemed ownership of the
securities underlying the Units in the New Fund in the manner described above,
if such substantially identical securities were acquired within a period
beginning 30 days before and ending 30 days after such disposition. However, any
gains incurred in connection with such an exchange by a Rollover Unitholder
would be recognized. Unitholders should consult their tax advisers regarding the
recognition of gains and losses for federal income tax purposes.
DEFERRED SALES CHARGE. Generally, the tax basis of a Unitholder includes
sales charges, and such charges are not deductible. A portion of the sales
charge for the Trust is deferred. The income (or proceeds from redemption) a
Unitholder must take into account for federal income tax purposes is not reduced
by amounts deducted to pay the deferred sales charge. Unitholders should consult
their own tax advisers as to the income tax consequences of any deferred sales
charge imposed.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such Unitholder's
pro rata portion of dividends received by the Trust (to the extent such
dividends are taxable as ordinary income, as discussed above, and are
attributable to domestic corporations) in the same manner as if such corporation
directly owned the Securities paying such dividends (other than corporate
Unitholders, such as "S" corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding corporation
tax). However, a corporation owning Units should be aware that Sections 246 and
246A of the Code impose additional limitations on the eligibility of dividends
for the 70% dividends received deduction. These limitations include a
requirement that stock (and therefore Units) must generally be held at least 46
days (as determined under Section 246(c) of the Code). Final regulations have
been issued which address special rules that must be considered in determining
whether the 46 day holding period requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. Unitholders should consult with their
tax advisers with respect to the limitations on and possible modifications to
the dividends received deduction.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. As a result of the Tax Reform Act of 1986, certain miscellaneous
itemized deductions, such as investment expenses, tax return preparation fees
and employee business expenses will be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF SECURITIES BY A TRUST
OR DISPOSITION OF UNITS. As discussed above, a Unitholder may recognize taxable
gain (or loss) when a Security is disposed of by a Trust or if the Unitholder
disposes of a Unit (although losses incurred by Rollover Unitholders may be
subject to disallowance, as discussed above). The Internal Revenue Service
Restructuring and Reform Act of 1998 (the "1998 Tax Act") provides that for
taxpayers other than corporations, net capital gain (which is defined as net
long-term capital gain over net short-term capital loss for the taxable year)
realized from property (with certain exclusions) is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in the
lowest tax bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period for the
asset is one year or less. The date on which a Unit is acquired (i.e., the
"trade date") is excluded for purposes of determining the holding period of the
Unit. Capital gains realized from assets held for one year or less are taxed at
the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult with
their tax advisers regarding the potential effect of this provision on their
investment in Units.
If a Unitholder disposes of a Unit he is deemed thereby to have disposed of
his entire pro rata interest in all assets of the Trust involved 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 loss) and for purposes of determining the
holding period. Unitholders should consult their own tax advisers with regard to
any such constructive sales rules.
SPECIAL TAX CONSEQUENCES OF IN KIND DISTRIBUTIONS UPON REDEMPTION OF UNITS OR
TERMINATION OF THE TRUST. As discussed in "Rights of Unitholders--Redemption of
Units," under certain circumstances a Unitholder tendering Units for redemption
may request an in kind distribution of certain Securities in the Trust. A
Unitholder may also under certain circumstances request an in kind distribution
of certain Securities in the Trust upon the termination of the Trust. A
Unitholder will receive cash representing his pro rata portion of the foreign
Securities in the Trust. See "Rights of Unitholders--Redemption of Units". The
Unitholder requesting an in kind distribution will be liable for expenses
related thereto (the "Distribution Expenses") and the amount of such in kind
distribution will be reduced by the amount of the Distribution Expenses. See
"Rights of Unitholders--Redemption of Units". As previously discussed, prior to
the redemption of Units or the termination of the Trust, a Unitholder is
considered as owning a pro rata portion of each of the Trust's assets for
federal income tax purposes. The receipt of an in kind distribution will result
in a Unitholder receiving shares of stock plus, possibly, cash.
The potential tax consequences that may occur under an in kind distribution
with respect to each Security owned by the Trust will depend on whether or not a
Unitholder receives cash in addition to Securities. A "Security" for this
purpose is a particular class of stock issued by a particular corporation. A
Unitholder will not recognize gain or loss if a Unitholder only receives
Securities in exchange for his or her pro rata portion in the Securities held by
a Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of a Security or for a foreign Security held by a Trust, such
Unitholder will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unitholder and his tax basis in such
fractional share of a Security or such foreign Security held by such Trust.
Because each Trust will own many Securities, a Unitholder who requests an in
kind distribution will have to analyze the tax consequences with respect to each
Security owned by such Trust. The amount of taxable gain (or loss) recognized
upon such exchange will generally equal the sum of the gain (or loss) recognized
under the rules described above by such Unitholder with respect to each Security
owned by such Trust. Unitholders who request an in kind distribution are advised
to consult their tax advisers in this regard.
ROLLOVER UNITHOLDERS. As discussed in "Rights of Unitholders--Special
Redemption and Rollover," a Unitholder may elect to become a Rollover
Unitholder. To the extent a Rollover Unitholder exchanges his Units for Units of
the New Fund in a taxable transaction, such Unitholder will recognize gains, if
any, but generally will not be entitled to a deduction for any losses recognized
upon the disposition of any Securities pursuant to such exchange to the extent
that such Unitholder is considered the owner of substantially identical
securities under the wash sale provisions of the Code taking into account such
Unitholder's deemed ownership of the securities underlying the Units in the New
Fund in the manner described above, if such substantially identical securities
were acquired within a period beginning 30 days before and ending 30 days after
such disposition under the wash sale provisions contained in Section 1091 of the
Code. In the event a loss is disallowed under the wash sale provisions, special
rules contained in Section 1091(d) of the Code apply to determine the
Unitholder's tax basis in the securities acquired. Rollover Unitholders are
advised to consult their tax advisers.
COMPUTATION OF THE UNITHOLDER'S TAX BASIS. Initially, a Unitholder's tax
basis in his Units will generally equal the price paid by such Unitholder for
his Units. The cost of the Units is allocated among the Securities held in the
Trust in accordance with the proportion of the fair market values of such
Securities on the valuation date nearest the date the Units are purchased in
order to determine such Unitholder's tax basis for his pro rata portion of each
Security.
A Unitholder's tax basis in his Units and his pro rata portion of a Security
held by the Trust will be reduced to the extent dividends paid with respect to
such Security are received by the Trust which are not taxable as ordinary income
as described above.
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 Trust to
such Unitholder (including amounts received upon the redemption of Units) will
be subject to back-up withholding. Distributions by the Trust (other than those
that are not treated as United States source income, if any) will generally be
subject to United States income taxation and withholding in the case of Units
held by non-resident alien individuals, foreign corporations or other non-United
States persons. Such persons should consult their tax advisers.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unitholders and derived from dividends of foreign corporations will not be
subject to U.S. withholding tax provided that less than 25 percent of the gross
income of the foreign corporation for a three-year period ending with the close
of its taxable year preceding payment was effectively connected to the conduct
of a trade or business within the United States. In addition, such earnings may
be exempt from U.S. withholding pursuant to a specific treaty between the United
States and a foreign country. Non-U.S. Unitholders should consult their own tax
advisers regarding the imposition of U.S. withholding on distributions from the
Trust.
It should be noted that payments to the Trust of dividends on Securities that
are attributable to foreign corporations may be subject to foreign withholding
taxes and Unitholders should consult their tax advisers regarding the potential
tax consequences relating to the payment of any such withholding taxes by the
Trust. Any dividends withheld as a result thereof will nevertheless be treated
as income to the Unitholders. Because, under the grantor trust rules, an
investor is deemed to have paid directly his share of foreign taxes that have
been paid or accrued, if any, an investor may be entitled to a foreign tax
credit or deduction for United States tax purposes with respect to such taxes.
The 1997 Tax Act imposes a required holding period for such credits. Investors
should consult their tax advisers with respect to foreign withholding taxes and
foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of the Trust a statement containing information relating to the dividends
received by the Trust on the Securities, the gross proceeds received by the
Trust from the disposition of any Security (resulting from redemption or the
sale of any Security), and the fees and expenses paid by the Trust. The Trustee
will also furnish annual information returns to Unitholders and to the Internal
Revenue Service.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of special counsel to the Fund for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal and certain aspects of
New York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers in
this regard. As used herein, the term "U.S. Unitholder" means an owner of a Unit
in one of the Trust that (a) is (i) for United States federal income tax
purposes a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, or (iii) an estate or
trust the income of which is subject to United States federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unitholder in
paragraph (a) but whose income from a Unit is effectively connected with such
Unitholder's conduct of a United States trade or business. The term also
includes certain former citizens of the United States whose income and gain on
the Units will be taxable. Unitholders should consult their tax advisers
regarding potential foreign, state or local taxation with respect to the Units.
TRUST OPERATING EXPENSES
--------------------------------------------------------------------------------
GENERAL. The fees and expenses of the Trust will accrue on a daily basis. The
deferred sales charge, fees and expenses are generally paid out of the Capital
Account of the Trust. When these amounts are paid by or owing to the Trustee,
they are secured by a lien on the Trust. 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.
ORGANIZATION COSTS. You and the other Unitholders will bear all or a portion
of the organization costs and charges incurred in connection with the
establishment of the Trust. These costs and charges will include the cost of the
preparation, printing and execution of the trust agreement, registration
statement and other documents relating to the Trust, federal and state
registration fees and costs, the initial fees and expenses of the Trustee, and
legal and auditing expenses. The public offering price of Units includes the
estimated amount of these costs. The Trustee will deduct these expenses from the
Trust's assets at the end of the initial offering period.
TRUSTEE'S FEE. For its services the Trustee will receive the fee from the
Trust set forth in the "Fee Table" (which includes the estimated amount of
miscellaneous Trust expenses). The Trustee benefits to the extent there are
funds in the Capital and Income Accounts since these Accounts are non-interest
bearing to Unitholders and the amounts earned by the Trustee are retained by the
Trustee. Part of the Trustee's compensation for its services to the Trust is
expected to result from the use of these funds.
COMPENSATION OF SPONSOR, SUPERVISOR AND EVALUATOR. 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 Trust
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.
MISCELLANEOUS EXPENSES. The following additional charges are or may be
incurred by the Trust: (a) normal expenses (including the cost of mailing
reports to Unitholders) incurred in connection with the operation of the Trust,
(b) fees of the Trustee for extraordinary services, (c) expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (d) various governmental charges, (e) expenses and costs of any action
taken by the Trustee to protect the Trust and the rights and interests of
Unitholders, (f) indemnification of the Trustee for any loss, liability or
expenses incurred in the administration of the Trust without negligence, bad
faith or wilful misconduct on its part, (g) foreign custodial and transaction
fees, (h) costs associated with liquidating the securities held in the Trust,
(i) any offering costs incurred after the end of the initial offering period and
(j) expenditures incurred in contacting Unitholders upon termination of the
Trust. The Trust may pay the expenses of updating its registration statement
each year.
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 statement of condition and the
related portfolio 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 the Trust 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 Trust. Information about your Trust (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 Trust 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
Economic Outlook Trust...................... 4
Notes to Portfolio.......................... 6
The Securities.............................. 7
Report of Independent Certified
Public Accountants....................... 11
Statement of Condition ..................... 12
The Trust................................... 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
Trust Administration........................ A-11
Taxation.................................... A-13
Trust Operating Expenses.................... A-17
Other Matters............................... A-18
Additional Information...................... A-18
---------------
When Units of the Trust are no longer available, this prospectus may be used as
a preliminary prospectus for a future series of the Trust. If this prospectus is
used for future Trust series, you should note the following:
The information in this prospectus is not complete with respect to future Trust
series and may be changed. No person may sell Units of future Trust series 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.
PROSPECTUS
--------------------------------------------------------------------------------
OCTOBER 18, 2000
ECONOMIC OUTLOOK TRUST,
OCTOBER 2000 SERIES
BAIRD / (LOGO)
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
1-800-RW-BAIRD
(1-800-792-2473)
www.rwbaird.com
Please retain this prospectus for future reference.
INFORMATION SUPPLEMENT
VAN KAMPEN FOCUS PORTFOLIOS, SERIES 261
--------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Trust which is not described in the Prospectus. This
Information Supplement should be read in conjunction with the Prospectus. This
Information Supplement is not a prospectus, does not include all of the
information that an investor should consider before investing in the Trust and
may not be used to offer or sell Units without the Prospectus. Copies of the
Prospectus can be obtained by contacting the Sponsor at 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 Trust 9
Sponsor Information 11
Trustee Information 11
Trust Termination 12
RISK FACTORS
PRICE VOLATILITY. Because the Trust invests in common stocks, you should
understand the risks of investing in common stocks before purchasing Units.
These risks include the risk that the financial condition of the company or the
general condition of the stock market may worsen and the value of the stocks
(and therefore Units) will fall. Common stocks are especially susceptible to
general stock market movements. The value of common stocks often rises or falls
rapidly and unpredictably as market confidence and perceptions of companies
change. These perceptions are based on factors including expectations regarding
government economic policies, inflation, interest rates, economic expansion or
contraction, political climates and economic or banking crises. The value of
Units will fluctuate with the value of the stocks in a Trust and may be more or
less than the price you originally paid for your Units. As with any investment,
we cannot guarantee that the performance of a Trust will be positive over any
period of time. Because the Trust is unmanaged, the Trustee will not sell stocks
in response to market fluctuations as is common in managed investments. In
addition, because some Trusts hold a relatively small number of stocks, you may
encounter greater market risk than in a more diversified investment.
DIVIDENDS. Common stocks represent ownership interests in a company and are
not obligations of the company. Accordingly, common stockholders have a right to
receive payments from the company that is subordinate to the rights of
creditors, bondholders or preferred stockholders of the company. This means that
common stockholders have a right to receive dividends only if a company's board
of directors declares a dividend and the company has provided for payment of all
of its creditors, bondholders and preferred stockholders. If a company issues
additional debt securities or preferred stock, the owners of these securities
will have a claim against the company's assets before common stockholders if the
company declares bankruptcy or liquidates its assets even though the common
stock was issued first. As a result, the company may be less willing or able to
declare or pay dividends on its common stock.
TECHNOLOGY ISSUERS. The Trust is 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. The
Trust, 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 Trust 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.
TELECOMMUNICATIONS ISSUERS. Because the Trust is concentrated in the
telecommunications industry, the value of the Units may be susceptible to
factors affecting the telecommunications industry. The telecommunications
industry is subject to governmental regulation and the products and services of
telecommunications companies may be subject to rapid obsolescence. These factors
could affect the value of Units. Telephone companies in the United States, for
example, are subject to both state and federal regulations affecting permitted
rates of returns and the kinds of services that may be offered. Certain types of
companies represented in a Trust portfolio are engaged in fierce competition for
a share of the market of their products. As a result, competitive pressures are
intense and the stocks are subject to rapid price volatility. While a Trust
portfolio concentrates on the securities of established suppliers of traditional
telecommunication products and services, a Trust may also invest in smaller
telecommunications companies which may benefit from the development of new
products and services. These smaller companies may present greater opportunities
for capital appreciation, and may also involve greater risk than large,
established issuers. Such smaller companies may have limited product lines,
market or financial resources, and their securities may trade less frequently
and in limited volume than the securities of larger, more established companies.
As a result, the prices of the securities of such smaller companies may
fluctuate to a greater degree than the prices of securities of other issuers.
FINANCIAL SERVICES ISSUERS. An investment in Units 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 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
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 a 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 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 litigation
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 a PRP is dependent on a
variety of factors. The extent of clean-up necessary and the assignment of
liability has not been fully established. The insurance industry is disputing
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.
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.
Companies engaged in investment banking/brokerage and investment management
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 Securities included in a Trust 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.
ENERGY INDUSTRY. The Trust is concentrated in issuers within the energy
industry. A portfolio concentrated in a single industry may present more risk
than a portfolio of more broadly diversified investments. The Portfolio, and
therefore Unitholders, may be particularly susceptible to a negative impact
resulting from adverse market conditions or other factors affecting issuers in
the energy industry because any negative impact on the energy industry will not
be diversified among issuers within other unrelated industries. Accordingly, an
investment in Units should be made with an understanding of the risks inherent
in the energy industry.
These factors include political conditions in oil producing regions,
including the Middle East, the actions of the Organization of Petroleum
Exporting Countries (OPEC), the domestic and foreign supply of oil and gas, the
level of consumer demand, weather conditions, the price and availability of
alternative fuels and overall economic conditions. In addition, various factors,
including the capacity and availability of oil and gas gathering systems and
pipelines, changes in supply due to drilling by other producers and changes in
demand, may have an adverse impact on the issuers of Securities. An issuer's
revenues, profitability and liquidity are substantially dependent upon
prevailing prices for oil and natural gas which can be extremely volatile and in
past years have been depressed by excess total domestic and imported supplies.
There can be no assurance that current price levels can be sustained. Prices
also are affected by actions of state and local agencies, the United States and
foreign governments, and international cartels. Any substantial or extended
decline in the price of oil and/or natural gas would have a material adverse
effect on the financial condition and results of operations of the issuers of
the Securities, including reduced cash flow and borrowing capacity. If market
factors were to change dramatically, the financial impact on an issuer could be
substantial. The nature of the oil and gas business also involves a variety of
risks, including the risks of operating hazards such as fires, explosions,
cratering, blow-outs, and encountering formations with abnormal pressures, the
occurrence of any of which could have a material adverse impact on the issuers
of the Securities. Companies generally maintain insurance against some, but not
all, of these risks. The occurrence of a significant event, however, that is not
fully insured could have a material adverse effect on a issuer's financial
position. In addition, the issuers may engage in oil and gas hedging activities
to help reduce exposure to the volatility of oil and gas prices by hedging a
portion of its production. These hedging arrangements may have an adverse impact
on the financial condition of the issuers under certain circumstances and may
limit potential gains by an issuer if the market prices for oil and gas were to
rise substantially over the price established by the hedge.
The future performance of oil and gas issuers is dependent upon the ability
to find or acquire additional oil and gas reserves that are economically
recoverable. Unless an issuer successfully replaces the reserves that it
produces, reserves will decline, resulting eventually in a decrease in oil and
gas production and lower revenues and cash flow from operations. There can be no
assurance that any issuer will be able to acquire, at acceptable costs,
producing oil and gas properties that contain economically recoverable reserves
or that it will make such acquisitions at acceptable prices. In addition,
exploitation, development and exploration involve numerous risks, including
depositional or trapping uncertainties or other conditions that may result in
dry holes, the failure to produce oil and gas in commercial quantities and the
inability to fully produce discovered reserves.
The production and sale of oil and gas are subject to a variety of federal,
state, local and foreign government regulations, including regulations
concerning the prevention of waste, the discharge of materials in the
environment, the conservation of oil and natural gas, pollution, permits for
drilling operations, drilling bonds, reports concerning operations, the spacing
of wells, the unitization and pooling of properties, and various other matters.
Such laws and regulations have increased the costs of planning designing,
drilling, installing, operating and abandoning oil and gas facilities. Many
jurisdictions have imposed limitations on the production of oil and gas by
restricting the rate of flow for oil and gas wells below their actual capacity
to produce. During recent years there has been significant discussion by
legislators concerning a variety of energy tax proposals. May states have raised
state taxes on energy sources and additional increases may occur. There can be
no assurance that significant costs for compliance will not be incurred by any
issuer in the future.
International investments may represent a significant portion of an issuer's
total assets or reserves. Foreign properties, operations or investments may be
adversely affected by local political and economic developments, exchange
controls, currency fluctuations, royalty and tax increases, retroactive tax
claims, expropriation, import and export regulations and other foreign laws or
policies as well as by laws and policies of the United States affecting foreign
trade, taxation and investment. In addition, in the event of a dispute arising
from foreign operations, an issuer may be subject to the exclusive jurisdiction
of foreign courts or may not be successful in subjecting foreign person to the
jurisdiction of the courts in the United States.
HEALTH CARE ISSUERS. An investment in Units 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.
LIQUIDITY. Whether or not the stocks in the Trust are listed on a stock
exchange, the stocks may delist from the exchange or principally trade in an
over-the-counter market. As a result, the existence of a liquid trading market
could depend on whether dealers will make a market in the stocks. We cannot
guarantee that dealers will maintain a market or that any market will be liquid.
The value of the stocks could fall if trading markets are limited or absent.
ADDITIONAL UNITS. The Sponsor may create additional Units of a Trust by
depositing into the Trust additional stocks or cash with instructions to
purchase additional stocks. A cash deposit could result in a dilution of your
investment and anticipated income because of fluctuations in the price of the
stocks between the time of the deposit and the purchase of the stocks and
because the Trust will pay brokerage fees.
VOTING. Only the Trustee may sell or vote the stocks in a Trust. While you
may sell or redeem your Units, you may not sell or vote the stocks in your
Trust. The Sponsor will instruct the Trustee how to vote the stocks. The Trustee
will vote the stocks in the same general proportion as shares held by other
shareholders if the Sponsor fails to provide instructions.
THE TRUST
The Trust seeks to increase the value of your investment by investing in a
diversified portfolio of stocks. Analysts at Robert W. Baird and Co. selected a
portfolio that seeks to identify several key sectors that Baird believes may be
attractive over the next 24 months. Baird considered four investment sectors in
selecting the portfolio: Technology, Health, Financial Services and Energy.
Baird chose these key sectors based on Baird's economic outlook and the
secular growth opportunities that Baird believes may increase the attractiveness
of these sectors. However, Baird's goal is to create a diverse Trust that
benefits from all sectors of the economy and, therefore, the Trust includes
stocks from additional sectors that Baird believes to be attractive.
TECHNOLOGY. Baird analysts have identified key sector themes that may
positively impact this sector:
o Enhanced productivity gains from continued investment in
technology
o Demand for enhanced communications services
o Increasing Internet penetration rates
o Increasing need for bandwidth
The Internet and the need for technologies that provide for bigger, better
and faster Internet capabilities continue to grow. As people become more reliant
upon these technologies, Baird believes that the need for enhanced software and
hardware capabilities as well as increased bandwidth also grows. Wireless
technologies also appear to be introducing a new world of technology even in
underdeveloped countries. Current technologies appear to be enabling individuals
and businesses to expand efficiencies, communicate faster and cheaper, and
become more productive. Companies that Baird has targeted for inclusion in this
sector are communications equipment and service companies, data services
companies, Internet-infrastructure companies and supply-chain management
companies, as well as some of the more traditional technology companies.
HEALTHCARE. Within the Healthcare sector, Baird analysts have identified some
positive themes that may impact this sector:
o People living longer and an aging population
o Genetics (human genome project)
o New discoveries and technologies
Baird believes that this industry may be taking off in new directions.
Baird's attention has recently focused on life sciences (biotechnology)
companies, following the announcement of the "mapping of the human genome." The
mapping has created a wealth of information that could drive research for many
years to come. At the center of this attention are pharmaceutical and
biotechnology companies that may be able to use this information to develop new
drugs. Baird believes that these companies may invest heavily in new equipment
to help speed up the discovery of new drugs. According to Baird research, life
sciences instrumentation demand could grow 16.4% to over $6 billion by 2003. One
goal these companies share is to find cures for diseases for which traditional
chemical research has been unsuccessful. These include Cancer, Alzheimer's, AIDs
and chronic pain. In selecting securities for the Trust, Baird targeted
companies providing equipment to this industry as well as specific biotechnology
drug companies.
Baird also believes that some of the more traditional healthcare companies,
such as pharmaceuticals, medical devices, hospital management and HMOs, could
also offer interesting opportunities over the next few years. The upcoming
Presidential election creates uncertainty in which healthcare, and particularly
prescription drug coverage for seniors, are major issues. The upcoming election
may create some attractive investment opportunities among traditional healthcare
names.
FINANCIALS. Key sector themes that have been identified by Baird analysts
are:
o Interest rates appear unlikely to rise further
o Economy may decelerate but not fall into a recession
o Higher investor confidence rates
As the U. S. population ages, the demand for investment advice and financial
planning could accelerate. As financial portfolios of individuals grow larger, a
greater level of professional support and advice may be required. Since the
average person has a much longer life span than in the past, which could result
in larger inheritances, the average person may require more professional
guidance than in the pas. Additionally, companies that provide bundled financial
services may offer a greater value to individuals and businesse when compared to
institutions that merely collect deposits and make loans. Baird targeted
companies in this sector that provide bundled financial services.
ENERGY. Baird analysts have identified some key sector themes within energy
to be:
o Imbalance in supply and demand that is unlikely to be corrected
near-term
o Oil prices could remain in a range to support accelerated
exploration and development
o Opportunities for better fuel efficiency, air quality, and power
reliability due to technological advancements
Oil and natural gas are leading sources of energy worldwide. As the world
becomes more industrialized, the exploration and development of these natural
resources could become a focal point. Additionally, Baird believes that some
alternative energy companies are coming to the forefront as the need for air
quality, fuel efficiency and power reliability may be the biggest energy
concerns going forward. The growing reliance on technology (i.e., the Internet,
computers, etc.) continues to grow, so may the dependence on power sources,
making the reliability of power a significant factor for utility companies.
As with any investment, no one can guarantee that the Trust will achieve its
objective. There is no assurance that the trends discussed above will continue,
that expectations will actually occur or that they will occur during the Trust's
life. Your investment could be negatively impacted if these trends do not
continue or if current expectations are not realized. The value of your Units
may fall below the price you paid for the Units. You should read the "Risk
Factors" section in the prospectus before you invest.
You should remember that the Trust is designed as part of a long-term
investment strategy. Baird may offer a subsequent series of the Economic Outlook
Trust when this Trust terminates. As a result, you may achieve more consistent
overall results by following the strategy over several years if subsequent
series are available.
SPONSOR INFORMATION
Van Kampen Funds Inc., a Delaware corporation, is the Sponsor of the Trust.
The Sponsor is an indirect subsidiary of Van Kampen Investments Inc. Van Kampen
Investments Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc., which
in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; 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 Trust or
to any other Series thereof. The information is included herein only for the
purpose of informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
As of September 30, 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 offer more than 50 open-end mutual funds, 37 closed-end
funds, and have sponsored over 2,700 series of fixed income and equity unit
investment trusts.
If the Sponsor fails to perform any of its duties under the Trust Agreement
or becomes incapable of acting or becomes bankrupt or its affairs are taken over
by public authorities, then the Trustee may (i) appoint a successor Sponsor at
rates of compensation deemed by the Trustee to be reasonable and not exceeding
amounts prescribed by the Securities and Exchange Commission, (ii) terminate the
Trust Agreement and liquidate the Trust as provided therein or (iii) continue to
act as Trustee without terminating the Trust Agreement.
TRUSTEE INFORMATION
The Trustee is The Bank of New York, a trust company organized under the
laws of New York. The Bank of New York has its unit investment trust division
offices at 101 Barclay Street, New York, New York 10286 (800) 221-7668. The Bank
of New York is subject to supervision and examination by the Superintendent of
Banks of the State of New York and the Board of Governors of the Federal Reserve
System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by, every Unitholder. 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 the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of its responsibilities created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor. The
Trustee or successor trustee must mail a copy of the notice of resignation to
all Unitholders then of record, not less than 60 days before the date specified
in such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor trustee
promptly. If, upon such resignation, no successor trustee has been appointed and
has accepted the appointment within 30 days after notification, the retiring
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Sponsor may remove the Trustee and appoint a successor trustee as
provided in the Trust Agreement at any time with or without cause. Notice of
such removal and appointment shall be mailed to each Unitholder by the Sponsor.
Upon execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original trustee
shall vest in the successor. The resignation or removal of a Trustee becomes
effective only when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
TRUST TERMINATION
The Trust may be liquidated at any time by consent of Unitholders
representing 66 2/3% of the Units of such Trust then outstanding or by the
Trustee when the value of the Securities owned by the Trust, as shown by any
evaluation, is less than $500,000 ($3,000,000 if the value of the Trust has
exceeded $15,000,000). The Trust will be liquidated by the Trustee in the event
that a sufficient number of Units of the Trust not yet sold are tendered for
redemption by the Sponsor, so that the net worth of such Trust would be reduced
to less than 40% of the value of the Securities at the time they were deposited
in the Trust. If the Trust is liquidated because of the redemption of unsold
Units by the Sponsor, the Sponsor will refund to each purchaser of Units the
entire sales charge paid by such purchaser. The Trust Agreement will terminate
upon the sale or other disposition of the last Security held thereunder, but in
no event will it continue beyond the Mandatory Termination Date.
Commencing during the period beginning nine business days prior to, and no
later than, the Mandatory Termination Date, Securities may begin to be sold in
connection with the termination of the Trust. The Sponsor will determine the
manner, timing and execution of the sales of the Securities. The Sponsor shall
direct the liquidation of the Securities in such manner as to effectuate orderly
sales and a minimal market impact. In the event the Sponsor does not so direct,
the Securities shall be sold within a reasonable period and in such manner as
the Trustee, in its sole discretion, shall determine. At least 30 days before
the Mandatory Termination Date the Trustee will provide written notice of any
termination to all Unitholders of the appropriate Trust. Unitholders will
receive a cash distribution from the sale of the remaining Securities within a
reasonable time following the Mandatory Termination Date. The Trustee will
deduct from the funds of the Trust any accrued costs, expenses, advances or
indemnities provided by the Trust Agreement, including estimated compensation of
the Trustee, costs of liquidation and any amounts required as a reserve to
provide for payment of any applicable taxes or other governmental charges. Any
sale of Securities in the Trust upon termination may result in a lower amount
than might otherwise be realized if such sale were not required at such time.
The Trustee will then distribute to each Unitholder of each Trust his pro rata
share of the balance of the Income and Capital Accounts.
Within 60 days of the final distribution Unitholders will be furnished a
final distribution statement 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.
FILE NO. 333-45720
CIK #1123026
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 261
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 undivided beneficial
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 October 18, 2000 pursuant to Rule 487.
