Securities and Exchange Commission
Washington, D. C. 20549-1004
Post-Effective
Amendment No. 8
to
Form S-6
For Registration under the Securities Act of 1933 of
Securities of Unit Investment Trusts Registered on
Form N-8B-2
Van Kampen Merritt Utility Income Trust, Series 4
(Exact Name of Trust)
Van Kampen American Capital Distributors, Inc.
(Exact Name of Depositor)
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(Complete address of Depositor's principal executive offices)
Van Kampen American Capital
Distributors, Inc. Chapman and Cutler
Attention: Don G. Powell Attention: Mark J. Kneedy
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
(Name and complete address of agents for service)
( X ) Check if it is proposed that this filing will become effective
on April 24, 1996 pursuant to paragraph (b) of Rule 485.
SERIES 4
714,868 Units
PROSPECTUS PART ONE
NOTE: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.Please retain both parts of this Prospectus for future reference.
THE TRUST
The above-named series of Van Kampen Merritt Utility Income Trust (the "
Trust" ) consists of a fixed portfolio of equity securities of companies
diversified within the electric public utility industry (the "
Securities" ). Each Unit represents a fractional undivided interest in the
capital and net dividend income of the Trust (see "Summary of Essential
Financial Information" in this Part One and "The Trust" in Part
Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is equal to the aggregate underlying
value of the Securities in the portfolio of such Trust divided by the number
of Units outstanding, plus a sales charge of 4.5% of the Public Offering Price
(4.712% of the aggregate underlying value of the Securities). See "Summary
of Essential Financial Information" in this Part One.
ESTIMATED CURRENT RETURNS
Estimated Current Returns to Unitholders under the respective distribution
plans are indicated under "Summary of Essential Financial Information"
in this Part One. Estimated Current Returns are calculated by dividing the
Estimated Net Annual Dividend Income per Unit by the Public Offering Price.
The Estimated Net Annual Dividend Income per Unit will vary with changes in
fees and expenses of the Trustee and the Evaluator and with the exchange or
sale of underlying Securities while the Public Offering Price will vary with
changes in the bid price of the underlying Securities; therefore, there is no
assurance that the Estimated Current Returns will be realized in the future
(see "Estimated Current Return" in Part Two).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Date of this Prospectus is April 17, 1996
Van Kampen American Capital
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 4
Summary of Essential Financial Information
As of March 1, 1996
Sponsor: Van Kampen American Capital Distributors, Inc.
Supervisor: Van Kampen American Capital Investment Advisory Corp.
(An affiliate of the Sponsor)
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
VUIT
<S> <C>
General Information
Number of Units....................................................................................... 714,868
Fractional Undivided Interest in Trust per Unit....................................................... 1/714,868
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>...................................................... $ 19,946,331
Aggregate Value Securities per Unit (including accumulated dividends)................................ $ 28.20
Sales charge 2.00% (2.041% of Aggregate Value of Securities excluding principal cash per Unit)<F2>... $ .57
Principal Cash per Unit.............................................................................. $ (.02)
Public Offering Price per Unit <F1><F2><F3>.......................................................... $ 28.75
Redemption Price per Unit............................................................................. $ 28.18
Excess of Public Offering Price per Unit over Redemption Price per Unit............................... $ .57
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee...Maximum of $.005 per Unit
Evaluator's Annual Fee <F6>...........Maximum of $.005 per Unit
Evaluations for purpose of sale, purchase or redemption of Units
are made as of 4:00 P.M. Eastern time on days of trading on the
New York Stock Exchange next following receipt of an order for a
sale or purchase of Units or receipt by The Bank of New York of
Units tendered for redemption.
Mandatory Termination Date............September 1, 1997
Minimum Termination Value.............The Trust Agreement may be terminated if the net asset value of
the Trust is less than $3,000,000.
</TABLE>
<TABLE>
<CAPTION>
Special Information
<S> <C>
Calculation of Estimated Net Annual Dividends Per Unit
Estimated Annual Dividends per Unit <F4>...................... $ 1.69
Less: Estimated Annual Expense per Unit....................... $ .03
Estimated Net Annual Dividends per Unit....................... $ 1.66
Estimated Current Return Based on Public Offering Price <F5>... 5.76%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee...$0.016 per Unit
Record Date............TENTH day of the month
Distribution Date......TWENTY-FIFTH day of the month
</TABLE>
Securities listed on a national securities exchange are valued at the last
closing sale price, or if no such price exists, at the mean between the
closing bid and offer prices.
Effective on each September 1, commencing September 1, 1991 the secondary
sales charge will decrease by 1/2 of 1% to a minimum sales charge of 1.5%. See
"Public Offering-Offering Price."
Plus accumulated dividends.
The Estimated Annual Dividends are based on the most recent quarterly dividend.
The Estimated Current Return is increased for transactions entitled to a
reduced sales charge. See "Public Offering - General" .
Notwithstanding information to the contrary in Part Two of this Prospectus,
the Trust Indenture provides that as compensation for its services, the
Evaluator shall receive a fee of $.005 per Unit. This fee may be adjusted for
increases in consumer prices for services under the category "All Services
Less Rent of Shelter" in the Consumer Price Index.
PORTFOLIO
In selecting Securities for the Trust, the following factors, among others,
were considered by the Sponsor: (a) the quality of the Securities, (b) the
yield and price of the Securities relative to other similar securities and (c)
the likelihood that earnings and dividends will continue or increase.
The Trust consists of 20 different issues of Securities, all of which are
issued by electric public utility companies and are listed on the New York
Stock Exchange.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1990<F1> 1991 1992
<S> <C> <C> <C>
Net asset value per Unit at beginning of period......................................... $ 20.06 $ 21.12 $ 26.05
Net asset value per Unit at end of period............................................... $ 21.12 $ 26.05 $ 26.64
Distributions to Unitholders of investment income including accrued interest to carry
paid on Units redeemed (average Units outstanding for entire period) <F2>............. $ .12 $ 1.31 $ 1.60
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period).......................................................... $ -- $ -- $ --
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at
end of period).......................................................................... $ .80 $ 4.21 $ .40
Units outstanding at end of period...................................................... 225,000 1,047,363 1,023,221
<FN>
<F1>For the period from September 6, 1990 (date of deposit) through December 31,
1990
<F2>Unitholders receive distributions on a monthly basis.
</TABLE>
PER UNIT INFORMATION (continued)
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Net asset value per Unit at beginning of period............................................... $ 26.64 $ 27.69 $ 23.80
Net asset value per Unit at end of period..................................................... $ 27.69 $ 23.80 $ 28.56
Distributions to Unitholders of investment income including accrued interest to carry paid on
Units redeemed (average Units outstanding for entire period) <F2>........................... $ 1.63 $ 12.37 $ 1.66
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period)................................................................ $ -- $ -- $ --
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at end of
period)....................................................................................... $ .74 $ (4.77) $ 4.35
Units outstanding at end of period............................................................ 958,126 833,017 731,886
</TABLE>
For the period from September 6, 1990 (date of deposit) through December 31,
1990.
Unitholders receive distributions on a monthly basis.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen Merritt Utility Income Trust, Series 4:
We have audited the accompanying statement of condition (including the
analysis of net assets) and the related portfolio of Van Kampen Merritt
Utility Income Trust, Series 4 as of December 31, 1995, and the related
statements of operations and changes in net assets for the three years ended
December 31, 1995. These statements are the responsibility of the Trustee and
the Sponsor. Our responsibility is to express an opinion on such statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1995 by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee and
the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen Merritt Utility
Income Trust, Series 4 as of December 31, 1995, and the results of operations
and changes in net assets for the three years ended December 31, 1995, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
March 15, 1996
VAN KAMPEN MERRITT UTILITY INCOME TRUST
SERIES 4
Statements of Condition
December 31, 1995
<TABLE>
<CAPTION>
VUIT
<S> <C>
Trust property
Cash.................................................................................. $ 157,250
Securities at market value, (cost $15,768,503) (note 1)............................... 20,677,340
Accumulated dividends................................................................. 61,698
Receivable for securities sold........................................................ 47,803
$ 20,944,091
Liabilities and interest to Unitholders
Cash overdraft........................................................................ $ --
Redemptions payable................................................................... 41,268
Interest to Unitholders............................................................... 20,902,823
$ 20,944,091
Analyses of Net Assets
Interest of Unitholders (731,886 Units of fractional undivided interest outstanding)
Cost to original investors of 1,050,000 Units (note 1)................................ $ 23,525,092
Less initial underwriting commission (note 3)......................................... 1,073,220
22,451,872
Less redemption of Units (318,114 Units).............................................. 8,087,254
14,364,618
Undistributed net investment income
Net investment income................................................................. 7,303,744
Less distributions to Unitholders..................................................... 7,077,688
226,056
Realized gain (loss) on Security sale or redemption................................... 1,403,312
Unrealized appreciation (depreciation) of Securities (note 2)......................... 4,908,837
Distributions to Unitholders of Security sale or redemption proceeds.................. --
Net asset value to Unitholders........................................................ $ 20,902,823
Net asset value per Unit (731,886 Units outstanding)................................... $ 28.56
</TABLE>
The accompanying notes are an integral part of this statement.
<TABLE>
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 4
Statements of Operations
Years ended
December 31,
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Investment income
Dividend income..................................................... $ 1,643,043 $ 1,469,422 $ 1,288,898
Expenses
Trustee fees and expenses........................................... 19,235 18,349 16,568
Evaluator fees...................................................... 1,540 4,767 5,009
Supervisory fees.................................................... 3,548 3,290 3,528
Total expenses...................................................... 24,323 26,406 25,105
Net investment income............................................... 1,618,720 1,443,016 1,263,793
Realized gain (loss) from Security sale or redemption
Proceeds............................................................ 1,807,666 3,036,456 2,568,827
Cost................................................................ 1,423,341 2,706,629 2,064,477
Realized gain (loss)................................................ 384,325 329,827 504,350
Net change in unrealized appreciation (depreciation) of Securities... 706,416 (3,975,135) 3,180,571
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......$ 2,709,461 $ (2,202,292) $ 4,948,714
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Years ended
December 31,
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income........................................................ $ 1,618,720 $ 1,443,016 $ 1,263,793
Realized gain (loss) on Security sale or redemption.......................... 384,325 329,827 504,350
Net change in unrealized appreciation (depreciation) of Securities........... 706,416 (3,975,135) 3,180,571
Net increase (decrease) in net assets resulting from operations.............. 2,709,461 (2,202,292) 4,948,714
Distributions to Unitholders from:
Net investment income........................................................ (1,637,518) (1,459,397) (1,304,088)
Securities sale or redemption proceeds....................................... -- -- --
Redemption of Units (1,807,800) (3,036,051) (2,569,798)
Total increase (decrease).................................................... (735,857) (6,697,740) 1,074,828
Net asset value to Unitholders
Beginning of period.......................................................... 27,261,592 26,525,735 19,827,995
Additional Securities purchased from proceeds of unit sales.................. -- -- --
End of period (including undistributed net investment income of $282,732
$266,351 and $226,056, respectively).......................................... $ 26,525,735 $ 19,827,995 $ 20,902,823
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT UTILITY INCOME TRUST
PORTFOLIO as of December 31, 1995
<CAPTION>
Standard
& Poor's
Earnings December 31,
and 1995
Port- Number Dividend Market
folio of Ranking Market Value Value
Item Shares Name of Issuer (Note 2) Per Share (Note 1)
<S> <C> <C> <C> <C> <C>
A 43,288 Allegheny Power System Incorporated A- $28.625 $ 1,239,119
B 42,304 Atlantic Energy Inc. N.J. A- 19.250 814,352
C 45,950 Central & Southwest Corp. A- 27.875 1,280,856
D 50,933 Central Louisiana Electric A- 26.875 1,368,824
E 34,871 Cinergy Corp. B 30.625 1,067,924
F 40,427 Consolidated Edison A 32.000 1,293,664
G 19,572 Delmarva Power & Light Co. B+ 22.750 445,263
H 40,499 Florida Progress Corp. A- 35.375 1,432,652
I 29,715 Kansas City Power & Light Company B+ 26.125 776,304
J 22,890 L, G & E Energy Corp. B+ 42.250 967,102
K 31,499 MidAmerican Energy Co. NR 16.750 527,608
L 35,354 Minnesota Power & Light B+ 28.375 1,003,170
M 29,970 Northeast Utilities B 24.375 730,519
N 24,911 Northern State Power Co. A- 49.125 1,223,753
O 47,262 Pacificorp B+ 21.250 1,004,318
P 23,582 Public Service Enterprises Group Inc. B+ 30.625 722,199
Q 43,257 SCANA Corp. A- 28.625 1,238,232
R 45,292 SCECORP B+ 17.750 803,933
S 60,768 Southern Company A- 24.625 1,496,412
T 36,504 WPS Resources Corporation A- 34.000 1,241,136
748,848 ........................................ $ 20,677,340
</TABLE>
The accompanying notes are an integral part of these statements.
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 4
Notes to Financial Statements
December 31, 1993, 1994 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Security Valuation - Securities listed on a national securities exchange are
valued at the last closing sales price, or if no such price exists, at the
mean between the closing bid and offer price.
Security Cost - The original cost to the Trust of the Securities was based,
for Securities listed on a national securities exchange, on the closing sale
prices on the exchange, or if no such price existed, at the mean between the
last bid and offer prices, or for Securities not so listed, at the mean
between bid and offering prices on the over-the-counter market, in each case,
on the day of the various Dates of Deposit plus brokerage commissions.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - The Trust is not taxable for Federal income tax
purposes. Each Unitholder is considered to be the owner of a pro rata portion
of the Trust and, accordingly, no provision has been made for Federal income
taxes.
Other - The financial statements are presented on the accrual basis of
accounting. Any realized gains or losses from securities transactions are
reported on an identified cost basis.
NOTE 2 - PORTFOLIO
Ranking - All rankings are by Standard & Poor's, A Division of McGraw Hill.
The rankings shown represent the latest published ratings of the Securities.
For a brief description of ranking symbols and their related meanings, see
"Description of Securities Ratings" in Part Two.
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1995 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized Appreciation $ 4,977,166
Unrealized Depreciation (68,329)
$ 4,908,837
</TABLE>
NOTE 3 - OTHER
Marketability - Although it is not obligated to do so, the Sponsor intends to
maintain a market for Units and to continuously offer to purchase Units at
prices, subject to change at any time, based upon the value of the Securities
in the portfolio of the Trust valued as described in Note 1, plus accumulated
dividends to the date of settlement. If the supply of Units exceeds demand, or
for other business reasons, the Sponsor may discontinue purchases of Units at
such prices. In the event that a market is not maintained for the Units, a
Unitholder desiring to dispose of his Units may be able to do so only by
tendering such Units to the Trustee for redemption at the redemption price.
Cost to Investors - The cost to original investors was based on the underlying
value of the Securities per Unit on the date of an investor's purchase, plus a
sales charge of 4.5% of the public offering price which is equivalent to
4.712% of the aggregate offering price of the Securities. The secondary market
cost to investors is based on the determination of the underlying value of the
Securities per Unit on the date of an investor's purchase plus a sales charge
of 2.00% of the public offering price which is 2.041% of the underlying value
of the Securities. Effective on each September 1, commencing September 1,
1991, the secondary sales charge will decrease by 1/2 of 1% to a minimum sales
charge of 1.5%.
Compensation of Evaluator and Supervisor - The Supervisor receives a fee for
providing portfolio supervisory services for the Trust ($.005 per Unit, not to
exceed the aggregate cost of the Supervisor for providing such services to all
applicable Trusts). The Evaluator receives an annual fee for regularly
evaluating the Trust's portfolio. Both fees may be adjusted for increases
under the category "All Services Less Rent of Shelter" in the Consumer
Price Index.
NOTE 4 - REDEMPTION OF UNITS
During the years ended December 31, 1993, 1994 and 1995, 65,095 Units, 125,109
Units and 101,131 Units, respectively, were presented for redemption.
VAN KAMPEN MERRITT
UTILITY INCOME TRUST
PROSPECTUS
Part Two
INTRODUCTION
The Trust. Van Kampen Merritt Utility Income Trust (the "Trust") is a
unit investment trust which offers investors the opportunity to purchase Units
representing proportionate interests in a fixed portfolio of equity securities
of companies diversified within the public utility industry. Unless terminated
earlier, the Trust will terminate on the Mandatory Termination Date stated
under "Summary of Essential Financial Information" in Part One of this
Prospectus and any securities then held will, within a reasonable time
thereafter, be liquidated or distributed by the Trustee. Any Securities
liquidated at termination will be sold at the then current market value for
such Securities; therefore, the amount distributable in cash to a Unitholder
upon termination may be more or less than the amount such Unitholder paid for
his Units.
Objectives of the Trust. The objectives of the Trust are a high level of
dividend income and capital appreciation through investment in a fixed
portfolio of equity securities of companies diversified within the public
utility industry. Many of these companies have established a history of paying
regular dividends and of increasing their dividends over time. See "
Objectives and Securities Selection" There is no assurance that the Trust
will achieve its objectives.
Public Offering Price. The secondary market Public Offering Price of each
Trust will include the aggregate underlying value of the Securities in the
Trust, the applicable sales charge as described herein, and cash, if any, in
the Income and Capital Accounts held or owned by the Trust. The minimum
purchase is 250 Units (50 Units for a tax-sheltered retirement plan) for
Series 3 and subsequent series. For Series 2 the minimum purchase is five
Units (one Unit for a tax-sheltered retirement plan). See "Public
Offering"
Estimated Annual Distributions. The estimated annual dividend distributions
per unit will vary with changes in fees and expenses of the Trust, with
changes in dividends received and with the sale or liquidation of Securities;
therefore, there is no assurance that the estimated annual dividend
distribution will be realized in the future.
Distributions. Distributions of dividends received by the Trust will be made
monthly. Distributions of funds in the Capital Account, if any, will be made
in December of each year. See "Rights of Unitholders-Distributions of
Income and Capital"
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
Both parts of this Prospectus should be retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSIONOR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus is dated as of the date of the Prospectus Part I accompanying
this Prospectus Part II.
Van Kampen American Capital
THE TRUST
Van Kampen Merritt Utility Income Trust (the "Trust" ) is a unit
investment trust created under the laws of the State of New York pursuant to a
Trust Indenture and Agreement (the "Trust Agreement" ), among Van
Kampen American Capital Distributors, Inc., as Sponsor, The Bank of New York
as Trustee, and American Portfolio Evaluation Services, a division of Van
Kampen American Capital Investment Advisory Corp., as Evaluator (or their
predecessors).
The Trust may be an appropriate medium for investors who desire to participate
in a portfolio of public utility equity securities with greater
diversification than they might be able to acquire individually.
Diversification of the Trust's assets will not eliminate the risk of loss
always inherent in the ownership of securities. See "Trust Portfolio"
Each Unit represents a fractional undivided interest in the Trust. To the
extent that any Units are redeemed by the Trustee, the fractional undivided
interest in the Trust represented by each unredeemed Unit will increase
accordingly, although the actual interest in the Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the Sponsor, or
until the termination of the Trust Agreement.
OBJECTIVES AND SECURITIES SELECTION
The objectives of the Trust are to provide investors with a high level of
dividend income and capital appreciation. Investors should be aware that the
objectives of a high level of dividend income and capital appreciation are
likely to be contradictory; thus, the Trust's portfolio is comprised of
securities which result in a compromise between these objectives. The
portfolio of the Trust is described under "Trust Portfolio" herein and
"Portfolio" in Part One of this Prospectus. The securities deposited
in the Trust pursuant to the Trust Agreement are referred to as the "
Securities" An investor will be subjected to taxation on the dividend
income received from the Trust and on gains from the sale or liquidation of
Securities (see "Federal Taxation" ). Investors should be aware that
there is no guarantee that the Trust's objectives will be achieved because
they are subject to the continuing ability of the respective Security issuers
to continue to declare and pay dividends and because the market value of the
Securities can be affected by a variety of factors. Common stocks may be
especially susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of
the issuers change. Investors should be aware that there can be no assurance
that the value of the underlying Securities will increase or that the issuers
of the Securities will pay dividends on outstanding common shares. Any
distributions of income will generally depend upon the declaration of
dividends by the issuers of the Securities and the declaration of any
dividends depends upon several factors including the financial condition of
the issuers and general economic conditions.
In selecting Securities for the Trust, the following factors, among others,
were considered by the Sponsor: (a) the quality of the Securities, (b) the
yield and price of the Securities relative to other similar securities and (c)
the likelihood that earnings and dividends will continue or increase.
Investors should be aware that the Trust is not a "managed" trust and
as a result the adverse financial condition of a company will not result in
its elimination from the Portfolio except under extraordinary circumstances
(see "Trust Administration-Portfolio Administration" ). In addition,
Securities will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation. Investors should
note in particular that the securities were selected by the Sponsor as of the
date the Securities were purchased by the Trust. The Trust may continue to
purchase or hold Securities originally selected through this process even
though the evaluation of the attractiveness of the Securities may have changed
and, if the evaluation were performed again at that time, the Securities would
not be selected for the Trust.
TRUST PORTFOLIO
The Trust consists of a number of different issues of Securities, all of which
were issued by public utility companies listed on the New York Stock Exchange.
The Trust consists of such of the Securities listed under "Portfolio"
in Part One of this Prospectus as may continue to be held from time to time in
the Trust together with cash held in the Income and Capital Accounts. Neither
the Sponsor nor the Trustee shall be liable in any way for any failure in any
of the Securities.
Because certain of the Securities from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can be
given that the Trust will retain for any length of time its present size and
composition. Although the Portfolio is not managed, the Sponsor may instruct
the Trustee to sell Securities under certain limited circumstances.
Securities, however, will not be sold by the Trust to take advantage of market
fluctuations or changes in anticipated rates of appreciation or depreciation.
Unitholders will be unable to dispose of any of the Securities in the
Portfolio, as such, and will not be able to vote the Securities. As the holder
of the Securities, the Trustee will have the right to vote all of the voting
stocks in the Trust and will vote such stocks in accordance with the
instructions of the Sponsor. Unitholders may, however, be able upon request to
receive an "In Kind Distribution" of these Securities evidenced by the
Units (see "Rights of Unitholders-Redemption of Units" ).
RISK FACTORS
An investment in Units of the Trust should be made with an understanding of
the characteristics of the public utility industry and the risks which such an
investment may entail. General problems of such issuers would include the
difficulty in financing large construction programs in an inflationary period,
the limitations on operations and increased costs and delays attributable to
environmental considerations, the difficulty of the capital market in
absorbing utility debt, the difficulty in obtaining fuel at reasonable prices
and the effect of energy conservation. All such issuers have been experiencing
certain of these problems in varying degrees. In addition, Federal, state and
municipal governmental authorities may from time to time review existing, and
impose additional, regulations governing the licensing, construction and
operation of nuclear power plants, which may adversely affect the ability of
the issuers of certain of the Securities in the portfolio to make dividend
payments and/or interest on such Securities.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged and
the appropriate rate of return on an approved asset base, which must be
approved by the state commissions. Certain utilities have had difficulty from
time to time in persuading regulators, who are subject to political pressures,
to grant rate increases necessary to maintain an adequate return on investment
and voters in many states have the ability to impose limits on rate
adjustments (for example, by initiative or referendum). Any unexpected
limitations could negatively affect the profitability of utilities whose
budgets are planned far in advance. In addition, gas pipeline and distribution
companies have had difficulties in adjusting to short and surplus energy
supplies, enforcing or being required to comply with long-term contracts and
avoiding litigation from their customers, on the one hand, or suppliers, on
the other.
Certain of the issuers of the Securities in the Trust may own or operate
nuclear generating facilities. Governmental authorities may from time to time
review existing, and impose additional, requirements governing the licensing,
construction and operation of nuclear power plants. Nuclear generating
projects in the electric utility industry have experienced substantial costs
increases, construction delays and licensing difficulties. These have been
caused by various factors, including inflation, high financing costs, required
design changes and rework, allegedly faulty construction, objections by groups
and governmental officials, limits on the ability to finance, reduced
forecasts of energy requirements and economic conditions. This experience
indicates that the risk of significant cost increases, delays and licensing
difficulties remains present through to completion and achievement of
commercial operation of any nuclear project. Also, nuclear generating units in
service have experienced unplanned outages or extensions of scheduled outages
due to equipment problems or new regulatory requirements sometimes followed by
a significant delay in obtaining regulatory approval to return to service. A
major accident at a nuclear plant anywhere, such as the accident at a plant in
Chernobyl, could cause the imposition of limits or prohibitions on the
operation, construction or licensing of nuclear units in the United States.
Other general problems of the gas, water, telephone and electric utility
industry (including state and local joint action power agencies) include
difficulty in obtaining timely and adequate rate increases, difficulty in
financing large construction programs to provide new or replacement facilities
during an inflationary period, rising costs of rail transportation to
transport fossil fuels, the uncertainty of transmission service costs for both
interstate and intrastate transactions, changes in tax laws which adversely
affect a utility's ability to operate profitably, increased competition in
service costs, recent reductions in estimates of future demand for electricity
and gas in certain areas of the country, restrictions on operations and
increased cost and delays attributable to environmental considerations,
uncertain availability and increased cost of capital, unavailability of fuel
for electric generation at reasonable prices, including the steady rise in
fuel costs and the costs associated with conversion to alternate fuel sources
such as coal, availability and cost of natural gas for resale, technical and
cost factors and other problems associated with construction, licensing,
regulation and operation of nuclear facilities for electric generation,
including among other considerations the problems associated with the use of
radioactive materials and the disposal of radioactive wastes, and the effects
of energy conservation. Each of the problems referred to could adversely
affect the ability of the issuers of any utility bonds in the Trust to make
payments due on these bonds.
In view of the pending investigations and the other uncertainties discussed
above, there can be no assurance that any company's share of the full cost of
nuclear units under construction ultimately will be recovered in rates or of
the extent to which a company could earn an adequate return on its investment
in such units. The likelihood of a significantly adverse event occurring in
any of the areas of concern described above varies, as does the potential
severity of any adverse impact. It should be recognized, however, that one or
more of such adverse events could occur and individually or collectively could
have a material adverse impact on the financial condition or the results of
operations of a company's ability to make interest and principal payments on
its outstanding debt.
An investment in Units should be made with an understanding of the risks which
an investment in common stock entails, including the risk that the financial
condition of the issuers of the Securities or the general condition of the
common stock market may worsen and the value of the Securities and therefore
the value of the Units may decline. Common stocks are especially susceptible
to general stock market movements and to volatile increases and decreases of
value as market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors including expectations
regarding government economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or regional
political, economic or banking crises. Shareholders of common stocks have
rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of or holders of debt obligations
or preferred stocks of such issuers. Shareholders of common stocks of the type
held by the Trust have a right to receive dividends only when and if, and in
the amounts, declared by the issuer's board of directors and have a right to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. Common stocks do
not represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital as do
debt securities. The issuance of additional debt securities or preferred stock
will create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the issuer to
declare or pay dividends on its common stock or the rights of holders of
common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks are subject to market fluctuations for
as long as the common stocks remain outstanding, and thus the value of the
Securities in the Portfolio may be expected to fluctuate over the life of the
Trust to values higher or lower than those prevailing on the date stated in
the "Summary of Essential Financial Information" in Part One of this
Prospectus.
FEDERAL TAXATION
United States Federal Income Taxes. The following is a general discussion of
certain of the federal income tax consequences of the purchase, ownership and
disposition of the Units. The summary is limited to investors who hold the
Units as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986 (the
"Code" ). Unitholders should consult their tax advisers in determining
the federal, state, local and any other tax consequences of the purchase,
ownership and disposition of Units in the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal income
tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of
the Trust will be treated as income of the Unitholders thereof under the Code.
Each Unitholder will be considered to have received his pro rata share of
income derived from the Trust asset when such income is received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of an
Equity Security (whether by sale, exchange, liquidation, redemption, or
payment at maturity) or upon the sale or redemption of Units by such
Unitholder. The price a Unitholder pays for his Units, including sales
charges, is allocated among his pro rata portion of each Equity Security held
by the Trust (in proportion to the fair market values thereof on the date the
Unitholder purchase his Units) in order to determine his tax basis for his pro
rata portion of each Equity Security held by the Trust. For federal income tax
purposes, a Unitholder's pro rata portion of dividends as defined by Section
316 of the Code paid with respect to an Equity Security held by the Trust are
taxable as ordinary income to the extent of such corporation's current and
accumulated "earnings and profits" A Unitholder's pro rata portion of
dividends paid on such Equity Security which exceed such current and
accumulated earnings and profits will first reduce a Unitholder's tax basis in
such Equity Security, and to the extent that such dividends exceed a
Unitholder's tax basis in such Equity Security shall generally be treated as
capital gain. In general, any such capital gain will be short-term unless a
Unitholder has held his Units for more than one year.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Equity Securities held by the Trust will generally
be considered a capital gain except in the case of a dealer or a financial
institution and, in general, will be long-term if the Unitholder has held his
Units for more than one year (the date on which the Units are acquired (i.e.,
the "trade date" ) is excluded for purposes of determining whether the
Units have been held for more than one year). A Unitholder's portion of loss,
if any, upon the sale or redemption of Units or the disposition of Equity
Securities held by the Trust will generally be considered a capital loss
except in the case of a dealer or a financial institution and, in general,
will be long-term if the Unitholder has held his Units for more than one year.
Unitholders should consult their tax advisers regarding the recognition of
such capital gains and losses for federal income tax purpose.
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) in
the same manner as if such corporation directly owned the Equity Securities
paying such dividends (other than corporate Unitholders, such as "S"
corporations, which are not eligible for the deduction because of their
special characteristics' and other than for purposes of special taxes such as
the accumulated earnings tax and the personal holding corporation tax).
However, a corporation owning Units should be aware that Sections 246 and 246A
of the Code impose additional limitations on the eligibility of dividends for
the 70% dividends received deduction. These limitations include a requirement
that stock (and therefore Units) must generally be held at least 46 days (as
determined under Section 246(c) of the Code). Proposed regulations have been
issued which address special rules that must be considered in determining
whether the 46 day holding requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable
to indebtedness incurred by such corporation. It should be noted that various
legislative proposals that would affect the dividends received deduction have
been introduced. Unitholders should consult with their tax advisers with
respect to the limitations on and possible modifications to the dividends
received deduction.
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, subject to the following limitation. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to the
extent they exceed 2% of such individual's adjusted gross income. Unitholders
may be required to treat some or all of the expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
Recognition of Taxable Gain or Loss upon Disposition of Securities by the
Trust or Disposition of Units. As discussed above, a Unitholder may recognize
taxable gain (or loss) when an Equity Security is disposed of by the Trust or
if the Unitholder disposes of a Unit. For taxpayers other than corporations,
net capital gains are subject to a maximum marginal stated tax rate of 28%.
However, it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences at
which ordinary income and capital gains are taxed.
The Revenue Reconciliation Act of 1993 (the "Act" ) raised tax rates on
ordinary income while capital gains remain subject to a 28% maximum stated
rate for taxpayers other than corporations. Because some or all capital gains
are taxed at a comparatively lower rate under the Act, the Act includes a
provision that would recharacterize capital gains as ordinary income in the
case of certain financial transactions that are "conversion
transactions" effective for transactions entered into after April 30,
1993. Unitholders and 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 the Equity Securities represented by the
Unit.
Special Tax Consequences of In Kind Distributions upon Redemption of Units.
As discussed in "Rights of Unitholders--Redemption of Units" , under
certain circumstances a Unitholder tendering Units for redemption may request
an In Kind Distribution. A Unitholder may also under certain circumstances
request an In Kind Distribution upon the termination of the Trust. See "
Rights of Unitholders--Redemption of Units." As previously discussed,
prior to the redemption of Units or the termination of the Trust, a Unitholder
is considered as owning a pro rata portion of each of the Trust assets for
federal income tax purposes. The receipt of an In Kind Distribution will
result in a Unitholder receiving an undivided interest in whole shares of
stock plus, possibly, cash.
The potential tax consequences that may occur under an In Kind Distribution
will depend on whether or not a Unitholder receives cash in addition to Equity
Securities. An "Equity Security" for this purpose is a particular
class of stock issued by a particular corporation. A Unitholder will not
recognize gain or loss if a Unitholder only receives Equity Securities in
exchange for his or her pro rata portion in the Equity Securities held by the
Trust. However, if a Unitholder also receives cash in exchange for a
fractional share of an Equity Security held by the Trust, such Unitholder will
generally recognize gain or loss based upon the difference between the amount
of cash received by the Unitholder and his tax basis in such fractional share
of an Equity Securities held by the Trust.
Because the Trust will own many Equity Securities, a Unitholder who requests
an In Kind Distribution will have to analyze the tax consequences with respect
to each Equity Security owned by the Trust. The amount of taxable gain (or
loss) recognized upon such exchange will generally equal the sum of the gain
(or loss) recognized under the rules described above by such Unitholder with
respect to each Equity Security owned by the Trust. Unitholders who request an
In Kind Distribution are advised to consult their tax advisers in this regard.
Computation of the Unitholder's Tax Basis. Initially, a Unitholder's tax
basis in his Units will generally equal the price paid by such Unitholder for
his Units. The cost of the Units is allocated among the Equity Securities held
in the Trust in accordance with the proportion of the fair market values of
such Equity Securities on the date the Units are purchased in order to
determine such Unitholder's tax basis for his pro rata portion of each Equity
Security.
A Unitholder's tax basis in his Units and his pro rata portion of an Equity
Security held by the Trust will be reduced to the extent dividends paid with
respect to such Equity Security are received by the Trust which are not
taxable as ordinary income as described above.
General. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the
Unitholder has not been notified 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
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. On December 7, 1995, the U.S. Treasury Department released proposed
legislation that, if adopted, could affect the United States federal income
taxation of such non-United States Unitholders and the portion of the Trust's
income allocable to non-United States Unitholders.
Unitholders will be notified annually of the amount of income dividends
includable in the Unitholder's gross income and amounts of Trust expenses
which may be claimed as itemized deductions.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
The foregoing discussion relates only to the tax treatment of United States
Unitholders with regard to United States federal income taxes; Unitholders may
be subject to state and local taxation in other jurisdictions. Unitholders
should consult their tax advisers regarding potential state or local taxation
with respect to the Units.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the
Trust will be treated as the income of the Unitholders under the existing
income tax laws of the State and City of New York.
TRUST OPERATING EXPENSES
Compensation of Sponsor and Evaluator. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However, Van Kampen
American Capital Investment Advisory Corp., which is an affiliate of the
Sponsor, will receive an annual supervisory fee, which is not to exceed the
amount set forth under "Summary of Essential Financial Information" in
Part One of this Prospectus, for providing portfolio supervisory services for
the Trust. Such fee (which is based on the number of Units outstanding on
January 1 of each year) may exceed the actual costs of providing such
supervisory services for this Trust, but at no time will the total amount
received for portfolio supervisory services rendered to this Series and other
unit investment trusts sponsored by the Sponsor for which it provides such
supervisory services in any calendar year exceed the aggregate cost to the
Supervisor of supplying such services in such year. In addition, the
Evaluator, which is a division of Van Kampen American Capital Investment
Advisory Corp., shall receive as an annual evaluation fee for regularly
evaluating the Trust's portfolio that amount set forth under "Summary of
Essential Financial Information" in Part One of this Prospectus (which is
based on the outstanding number of Units on January 1 of each year). Both of
the foregoing fees may be increased without approval of the Unitholders by
amounts not exceeding proportionate increases under the category "All
Services Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor or, if such category is no longer
published, in a comparable category. The Sponsor and dealers will receive
sales commissions and may realize other profits (or losses) in connection with
the sale of Units as described under "Public Offering-Sponsor and Dealer
Compensation".
Trustee's Fee. For its services the Trustee will receive as an annual fee
from the Trust that amount set forth under "Summary of Essential
Information" in Part One of this Prospectus (which is based on the
outstanding number of units on January 1 of each year for which such
compensation relates). The Trustee's fees are payable monthly on or before
the twenty-fifth day of each month from the Income Account to the extent funds
are available and then from the Capital Account. The Trustee benefits to the
extent there are funds for future distributions, payment of expenses and
redemptions in the Capital and Income Accounts since these accounts are
non-interest bearing and the amounts earned by the Trustee are retained by the
Trustee. Part of the Trustee's compensation for its services to the Trust is
expected to result from the use of these funds. Such fees may be increased
without approval of the Unitholders by amounts not exceeding proportionate
increases under the category "All Services Less Rent of Shelter" in
the Consumer Price Index published by the United States Department of Labor
or, if such category is no longer published, in a comparable category. For a
discussion of the services rendered by the Trustee pursuant to its obligations
under the Trust Agreement, see "Rights of Unitholders-Reports Provided"
and "Trust Administration"
Miscellaneous Expenses. 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 and (g) expenditures incurred in
contacting Unitholders upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When such
fees and expenses are paid by or owning to the Trustee, they are secured by a
lien on the portfolio of the Trust. Since the Securities are all common
stocks, and the income stream produced by dividend payments is unpredictable,
the Sponsor cannot provide any assurance that dividends will be sufficient to
meet any or all expenses of the Trust. If the balances in the Income and
Capital Accounts are insufficient to provide for amounts payable by the Trust,
the Trustee has the power to sell Securities to pay such amounts. These sales
may result in capital gains or losses to Unitholders. See "Federal
Taxation".
PUBLIC OFFERING
General. The secondary market public offering price is based on the aggregate
underlying value of the Securities in the Trust, an applicable sales charge
(which will be reduced by .5 of 1% annually to a minimum sales charge of
1.5%), and cash, if any, in the Income and Capital Accounts held or owned by
the Trust.
Employees of Van Kampen American Capital Distributors, Inc. and its
subsidiaries may purchase Units of the Trust at the current Public Offering
Price less the dealer's concession described below in "Public
Offering-Unit Distribution"
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Public Offering--Unit
Distribution" ) by (1) investors who purchase Units through registered
investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management service, or provide such
services in connection with the establishment of an investment account for
which a comprehensive "wrap fee" charge is imposed, (2) bank trust
departments investing funds over which they exercise exclusive discretionary
investment authority and that are held in a fiduciary, agency, custodial or
similar capacity, (3) any person who for at lest 90 days, has been an officer,
director, or bona fide employee of any firm offering Units for sale to
investors or their immediate family members (as described above) and (4)
officers and directors of bank holding companies that make Units available
directly or through subsidiaries or bank affiliates. Notwithstanding anything
to the contrary in this Prospectus, such investors, bank trust departments,
firm employees and bank holding company officers and directors who purchase
Units through this program will not receive sales charge reductions for
quantity purchases.
The Trustee has no cash for distribution to Unitholders until it receives
dividend payments on the Securities in the Trust. The Trustee is authorized to
provide its own funds, at times, in order to advance income distributions. The
Trustee will recover these advancements when such dividend income is received.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information" in
Part One of this Prospectus in accordance with fluctuations in the prices of
the underlying Securities in the Trust.
The price of the Units as of the opening of business on the date therein
stated in the "Summary of Essential Financial Information" in Part One
of this Prospectus was established by adding to the determination of the
aggregate underlying value of the Securities an amount initially equal to
4.712% of such value and dividing the sum so obtained by the number of Units
outstanding. Such underlying value shall include the proportionate share of
any cash held in the Capital Account. This computation produced a gross sales
commission initially equal to 4.5% of the Public Offering Price. The Evaluator
will appraise or cause to be appraised daily the value of the underlying
Securities as of 4:00 P.M. Eastern time on days the New York Stock Exchange is
open for business and will adjust the Public Offering Price of the Units
commensurate with such valuation. Such Public Offering Price will be effective
for all orders received at or prior to the close of trading on the New York
Stock Exchange on each such day. Orders received by the Trustee, Sponsor or
any Underwriter for purchases, sales or redemptions after that time, or on a
day when the New York Stock Exchange is closed, will be held until the next
determination of price. Such sales charge will be reduced over time, as set
forth in "Summary of Essential Financial Information" in Part One of
this Prospectus, to a minimum sales charge of 1.5%.
The value of the Securities is determined on each business day by the
Evaluator based on the closing sale prices on the day the valuation is made
for Securities listed on a national stock exchange or, if no such price
exists, at the mean between bid and offering prices on the day the valuation
is made. For Securities not so listed or, if so listed and the principal
market to the Securities is other than such exchange, or if in either case
such prices are unavailable, the valuation will be made based on the mean
between the current bid and offer prices on the over-the- counter market or by
taking into account the same factors referred to under "Rights of
Unitholders-Redemption of Units"
Unit Distribution. Units repurchased in the secondary market, if any, may be
offered by this Prospectus at the secondary market Public Offering Price in
the manner described.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units equal to 60% of the applicable sales
charge.
Certain commercial banks are making Units of the Trust available to their
customers on an agency basis. A portion of the sales charge (equal to the
agency commission referred to above) is retained by or remitted to the banks.
Under the Glass-Steagall Act, banks are prohibited from underwriting Trust
Units; however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular agency
transactions are not permitted under such Act.
To facilitate the handling of transactions, sales of Units shall normally be
limited to transactions involving a minimum of 250 Units (50 Units for a
tax-sheltered retirement plan). The minimum purchase for Series 2 is five
Units (one Unit for a tax-sheltered retirement plan). The Sponsor reserves the
right to reject, in whole or in part, any order for the purchase of Units and
to change the amount of the concession or agency commission to dealers and
others from time to time.
Sponsor and Dealer Compensation. The Sponsor and dealers will receive the
gross sales commission as described under "Public Offering-General"
above. Cash, if any, made available to the Sponsor prior to the date of
settlement for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the limitations
of the Securities Exchange Act of 1934.
As stated under "Public Market" below, the Sponsor intends to, and
certain dealers maintain a secondary market for Units of the Trust. In so
maintaining a market, the Sponsor and any such dealers will also realize
profits or sustain losses in the amount of any difference between the price at
which Units are purchased and the price at which Units are resold (which price
includes a sales charge). In addition, the Sponsor and any such dealers will
also realize profits or sustain losses resulting from a redemption of such
repurchased Units at a price above or below the purchase price for such Units,
respectively.
Public Market. Although they are not obligated to do so, the Sponsor intends
to, and certain of the other Underwriters may, maintain a market for the Units
offered hereby and offer continuously to purchase Units. If the supply of
Units exceeds demand or if some other business reason warrants it, the Sponsor
and/or Underwriters may either discontinue all purchases of Units or
discontinue purchases of Units at such prices. In the event that a market is
not maintained for the Units and the Unitholder cannot find another purchaser,
a Unitholder desiring to dispose of his Units may be able to dispose of such
Units only by tendering them to the Trustee for redemption at the Redemption
Price. See "Rights of Unitholders-Redemption of Units" A Unitholder
who wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in existence any price in
excess of the Redemption Price and, if so, the amount thereof.
Tax-Sheltered Retirement Plans. Units of the Trust are available for purchase
in connection with certain types of tax-sheltered retirement plans, including
Individual Retirement Accounts for individuals, Simplified Employee Pension
Plans for employees, qualified plans for self-employed individuals, and
qualified corporate pension and profit sharing plans for employees. The
purchase of Units of the Trust may be limited by the plans' provisions and
does not itself establish such plans. The minimum purchase in connection with
a tax-sheltered retirement plan is one Unit with respect to Series 2 and 50
Units with respect to Series 3 and subsequent Series.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust is evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee that ownership be in book entry. Units are transferable
by making a written request to the Trustee and, in the case of Units evidenced
by a certificate, by presentation and surrender of such certificate to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. A Unitholder must sign such written request, and such
certificate or transfer instrument, exactly as his name appears on the records
of the Trustee and on the face of any certificate representing the Units to be
transferred with the signature guaranteed by a participant in the Securities
Transfer Agents Medallion Program ("STAMP" ) or such other signature
guarantee program in addition to, or in substitution for, STAMP as may be
accepted by the Trustee. In certain instances the Trustee may require
additional documents such as, but not limited to, trust instruments,
certificates of death, appointments as executor or administrator or
certificates of corporate authority. Certificates will be issued in
denominations of one Unit or any multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Income and Capital. Income received by the Trust is credited
by the Trustee to the Income Account. Other receipts are credited to the
Capital Account. Income received by the Trust will be distributed on or
shortly after the last day of each month on a pro rata basis to Unitholders of
record as of the preceding record date (which will be the twenty-fifth day of
the month). All distributions will be net of applicable expenses. In addition,
amounts from the Capital Account, if any, will be distributed at least
annually in December to the Unitholders then of record. Proceeds received from
the disposition of any of the Securities after a record date and prior to the
following distribution date will be held in the Capital Account and not
distributed until the next distribution date applicable to such Capital
Account. The Trustee shall not be required to make a distribution from the
Capital Account unless the cash balance on deposit therein available for
distribution shall be sufficient to distribute at least $1.00 per 50 Units.
The Trustee is not required to pay interest on funds held in the Capital or
Income Accounts (but may itself earn interest thereon and therefore benefits
from the use of such funds).
The distribution to the Unitholders as of each record date will be made on the
following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the Unitholders' pro rata share
of the estimated annual dividend distributions in the Income Account after
deducting estimated expenses. Because dividends are not received by the Trust
at a constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate from distribution to distribution. Persons who purchase
Units will commence receiving distributions only after such person becomes a
record owner. Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business such
notice is provided by the selling broker-dealer.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the Income Account and, to the extent funds are not sufficient therein, from
the Capital Account amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating Expenses" ).
The Trustee also may withdraw from said accounts such amounts, if any, as it
deems necessary to establish a reserve for any governmental charges payable
out of the Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any part of
such amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Income and Capital Accounts such amounts as may be necessary
to cover redemptions of Units.
Reinvestment Option. Unitholders of the Trust may elect to have each
distribution of income, capital gains and/or capital on their Units
automatically reinvested in shares of any Van Kampen American Capital mutual
fund (except for B shares which are registered in such Unitholder's state of
residence). Such mutual funds are hereinafter collectively referred to as the
"Reinvestment Funds."
Each Reinvestment Unitholders of all unit investment trusts sponsored by Van
Kampen American Capital Distributors, Inc., may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any Van Kampen American Capital mutual
funds (except for B shares) which are registered in the Unitholder's state of
residence. Such mutual funds are hereinafter collectively referred to as the
"Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trusts. The prospectus relating to each
Reinvestment Fund describes the investment policies of such fund and sets
forth the procedures to follow to commence reinvestment. A Unitholder may
obtain a prospectus for the respective Reinvestment Funds from Van Kampen
American Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181. Texas residents who desire to reinvest may request that a
broker-dealer registered in Texas send the prospectus relating to the
respective fund.
After becoming a participant in a reinvestment plan, each distribution of
income, capital gains and/or principal on the participant's Units will, on the
applicable distribution date, automatically be applied, as directed by such
person, as of such distribution date by the Trustee to purchase shares (or
fractions thereof) of the applicable Reinvestment Fund at a net asset value as
computed as of the close of trading on the New York Stock Exchange on such
date. Unitholders with an existing Guaranteed Reinvestment Option (GRO)
Program account (whereby a sales charge is imposed on distribution
reinvestments) may transfer their existing account into a new GRO account
which allows purchases of Reinvestment Fund shares at net asset value as
described above.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund. A participant may
at any time prior to five days preceding the next succeeding distribution
date, by so notifying the Trustee in writing, elect to terminate his or her
reinvestment plan and receive future distributions of his or her Units in
cash. There will be no charge or other penalty for such termination. Each
Reinvestment Fund, its sponsor and investment adviser shall have the right to
terminate at any time the reinvestment plan relating to such fund.
Reports Provided. The Trustee shall furnish Unitholders in connection with
each distribution a statement of the amount of income and the amount of other
receipts (received since the preceding distribution), if any, being
distributed, expressed in each case as a dollar amount representing the pro
rata share of each Unit outstanding. For as long as the Trustee deems it to be
in the best interest of the Unitholders, the accounts of the Trust shall be
audited, not less frequently than annually, by independent certified public
accountants, and the report of such accountants shall be furnished by the
Trustee to Unitholders upon request. Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a registered Unitholder a statement (i)
as to the Income Account: income received, deductions for applicable taxes and
for fees and expenses of the Trust, for redemptions of Units, if any, and the
balance remaining after such distributions and deductions, expressed in each
case both as a total dollar amount and as a dollar amount representing the pro
rata share of each Unit outstanding on the last business day of such calendar
year; (ii) as to the Capital Account: the dates of disposition of any
Securities (other than pursuant to In Kind Distributions) and the net proceeds
received therefrom, the results of In Kind Distributions in connection with
redemptions of Units, if any, deductions for payment of applicable taxes and
fees and expenses of the Trust held for distribution to Unitholders of record
as of a date prior to the determination and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and as a
dollar amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (iii) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (iv) the Redemption Price per Unit based upon the last computation
thereof made during such calendar year; and (v) amounts actually distributed
during such calendar year from the Income and Capital Accounts, separately
stated, expressed both as total dollar amounts and as dollar amounts
representing the pro rata share of each Unit outstanding.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay
Street, 20th Floor, New York, New York 10286 of the certificates representing
the Units to be redeemed, duly endorsed or accompanied by proper instruments
of transfer with signature guaranteed (or by providing satisfactory indemnity,
as in connection with lost, stolen or destroyed certificates) and by payment
of applicable governmental charges, if any. Thus, redemption of Units cannot
be effected until certificates representing such Units have been delivered to
the person seeking redemption or satisfactory indemnity provided. No
redemption fee will be charged. On the third business day following such
tender, the Unitholder will be entitled to receive in cash (unless the
redeeming Unitholder elects an In Kind Distribution as indicated below) an
amount for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date of
tender" is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after 4:00 P.M. Eastern time on
days of trading on the New York Stock Exchange, the date of tender is the next
day on which such Exchange is open for trading and such Units will be deemed
to have been tendered to the Trustee on such day for redemption at the
redemption price computed on that day.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions. The Securities to be sold will be selected by
the Trustee from those designated on a current list provided by the portfolio
supervisor for this purpose. Units so redeemed shall be cancelled.
Unitholders tendering 25 Units or more for redemption with respect to Series 2
and 1,250 Units or more for redemption with respect to Series 3 and subsequent
series may request from the Trustee in lieu of a cash redemption a
distribution in kind ("In Kind Distribution" ) of an amount and value
of Securities per Unit equal to the Redemption Price per Unit as determined as
of the evaluation next following the tender. An In Kind Distribution on
redemption of Units will be made by the Trustee through the distribution of
each of the Securities in book- entry form to the account of the Unitholder's
bank or broker-dealer at Depository Trust Company. The tendering Unitholder
will receive his pro rata number of whole shares of each of the Securities
comprising the portfolio and cash from the Capital Account equal to the
fractional shares to which the tendering Unitholder is entitled. In
implementing these redemption procedures, the Trustee shall make any
adjustments necessary to reflect differences between the Redemption Price of
the Securities distributed in kind as of the date of tender. If funds in the
Capital Account are insufficient to cover the required cash distribution to
the tendering Unitholder, the Trustee may sell Securities according to the
criteria discussed above.
To the extent that Securities are redeemed in kind or sold, the size of the
Trust will be, and the diversity of the Trust may be, reduced. Sales may be
required at a time when Securities would not otherwise be sold and may result
in lower prices than might otherwise be realized. The price received upon
redemption may be more or less than the amount paid by the Unitholder
depending on the value of the Securities in the Portfolio at the time of
redemption. Special federal income tax consequences will result if a
Unitholder requests an In Kind Distribution. See "Federal Taxation"
The Redemption Price per Unit will be determined on the basis of the aggregate
underlying value of the Securities in the Trust. While the Trustee has the
power to determine the Redemption Price per Unit when Units are tendered for
redemption, such authority has been delegated to the Evaluator which
determines the price per Unit on a daily basis. The Redemption Price per Unit
is the pro rata share of each Unit in the Trust determined on the basis of (i)
the cash on hand in the Trust or monies in the process of being collected and
(ii) the value of the Securities in the Trust, less (a) amounts representing
taxes or other governmental charges payable out of the Trust, (b) any amount
owing to the Trustee for its advances and (c) the accrued expenses of the
Trust. The Evaluator may determine the value of the Securities in the Trust in
the following manner: if the Securities are listed on a national securities
exchange, the evaluation will generally be based on the closing sale price on
the exchange (unless the Evaluator deems the price inappropriate as a basis
for evaluation) or, if there is no closing sale price on the exchange, at the
mean between the closing bid and offer prices. If the Securities are not so
listed or, if so listed and the principal market for the Securities is other
than on the exchange, the evaluation will generally be made by the Evaluator
in good faith based on the mean between current bid and offer prices on the
over-the-counter market (unless the Evaluator deems these prices inappropriate
as a basis for evaluation) or, if bid and offer prices are not available, (1)
on the basis of the mean between current bid and offer prices for comparable
securities, (2) by the Evaluator's appraising the value of the Securities in
good faith at the mean between the bid side and the offer side of the market
or (3) by any combination thereof. See "Public Offering-Offering Price".
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size of the Trust will be, and the diversity of the
Trust may be, reduced. Such sales may be required at a time when Securities
would not otherwise be sold and might result in lower prices than might
otherwise be realized.
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or any period during which the Securities and
Exchange Commission determines that trading on that Exchange is restricted or
an emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit.
TRUST ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the date on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord with
the Public Offering Price described in the then currently effective prospectus
describing such Units. Any profit resulting from the resale of such Units will
belong to the Sponsor which likewise will bear any loss resulting from a lower
offering or redemption price subsequent to its acquisition of such Units.
Portfolio Administration. The portfolio of the Trust is not "managed"
by the Sponsor, Supervisor or the Trustee; their activities described herein
are governed solely by the provisions of the Trust Agreement. Traditional
methods of investment management for a managed fund typically involve frequent
changes in a portfolio of securities on the basis of economic, financial and
market analyses. The Trust, however, will not be managed. The Trust Agreement,
however, provides that the Sponsor may (but need not) direct the Trustee to
dispose of an Equity Security in certain events such as the issuer having
defaulted on the payment on any of its outstanding obligations or the price of
an Equity Security has declined to such an extent or other such credit factors
exist so that in the opinion of the Sponsor the retention of such Securities
would be detrimental to the Trust. Pursuant to the Trust Agreement and with
limited exceptions, the Trustee may sell any securities or other properties
acquired in exchange for Equity Securities such as those acquired in
connection with a merger or other transaction. If offered such new or
exchanged securities or property, the Trustee shall reject the offer. However,
in the event such securities or property are nonetheless acquired by the
Trust, they may be accepted for deposit in the Trust and either sold by the
Trustee or held in the Trust pursuant to the direction of the Sponsor (who may
rely on the advice of the Supervisor). Proceeds from the sale of Securities
(or any securities or other property received by the Trust in exchange for
Equity Securities) are credited to the Capital Account for distribution to
Unitholders or to meet redemptions. Except as stated under "Trust
Portfolio" for failed securities and as provided in this paragraph, the
acquisition by the Trust of any securities other than the Securities is
prohibited.
As indicated under "Rights of Unitholders-Redemption of Units" above,
the Trustee may also sell Securities designated by the Supervisor, or if no
such designation has been made, in its own discretion, for the purpose of
redeeming Units of the Trust tendered for redemption and the payment of
expenses.
The Supervisor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares of
individual issues of Equity Securities in the Trust. To the extent this is not
practicable, the composition and diversity of the Equity 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 Equity Securities are to be sold.
Amendment or Termination. The Trust Agreement may be amended by the Trustee
and the Sponsor without the consent of any of the Unitholders (1) to cure any
ambiguity or to correct or supplement any provision thereof which may be
defective or inconsistent, or (2) to make such other provisions as shall not
adversely affect the Unitholders, provided, however, that the Trust Agreement
may not be amended to increase the number of Units. The Trust Agreement may
also be amended in any respect by the Trustee and Sponsor, or any of the
provisions thereof may be waived, with the consent of the holders of 51% of
the Units then outstanding, provided that no such amendment or waiver will
reduce the interest in the Trust of any Unitholder without the consent of such
Unitholder or reduce the percentage of Units required to consent to any such
amendment or waiver without the consent of all Unitholders. The Trustee shall
advise the Unitholders of any amendment promptly after execution thereof.
The Trust may be liquidated at any time by consent of Unitholders representing
51% of the Units then outstanding or by the Trustee when the value of the
Trust, as shown by any evaluation, is less than that indicated under "
Summary of Essential Financial Information" in Part One of this
Prospectus. The Trust Agreement will terminate upon the sale or other
disposition of the last Security held thereunder, but in no event will it
continue beyond the Mandatory Termination Date stated under "Summary of
Essential Financial Information" in Part One of this Prospectus.
Written notice of any termination specifying the time or times at which
Unitholders may surrender their certificates for cancellation shall be given
by the Trustee to each Unitholder at his address appearing on the registration
books of the Trust maintained by the Trustee. If the Trust will terminate on
the Mandatory Termination Date, the Trustee will provide written notice
thereof to all Unitholders at least 30 days before such Mandatory Termination
Date and will include with such notice a form to enable eligible Unitholders
to request an In Kind Distribution rather than payment in cash upon the
termination of the Trust. To be effective, this request must be returned to
the Trustee at least five business days prior to the Mandatory Termination
Date. On the Mandatory Termination Date (or on the next business day
thereafter if a holiday) the Trustee will deliver each requesting
Unitholder's pro rata number of whole shares of each of the Securities in the
portfolio to the account of the broker- dealer or bank designated by the
Unitholder at Depository Trust Company. The value of the Unitholder's
fractional shares will be paid in cash. Unitholders not eligible to, or not
electing to, request an In Kind Distribution will receive a cash distribution
from the sale of the remaining Securities within a reasonable time following
the Mandatory Termination Date. Regardless of the distribution involved, the
Trustee will deduct from the funds of the Trust any accrued costs, expenses,
advances or indemnities provided by the Trust Agreement, including estimated
compensation of the Trustee and 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
his pro rata share of the balance of the Income and Capital Accounts.
The Sponsor currently intends to, but is not obligated to, offer for sale
units of a subsequent series of Van Kampen Merritt Utility Income Trust on the
Mandatory Termination Date for the Trust stated under "Summary of
Essential Information" in Part One of this Prospectus. If the Sponsor is
in fact offering such units for sale, Unitholders of the Trust will be given
an opportunity to purchase such units at a public offering price which
includes a special reduced sales charge. There is, however, no assurance that
units of any new series of Van Kampen Merritt Utility Income Trust will be
offered for sale at the time, or if offered, that there will be sufficient
units available for sale to meet the requests of any or all Unitholders.
With such distribution to the Unitholders will be furnished a final
distribution statement, in substantially the same form as the annual
distribution statement, of the amount distributable. At such time as the
Trustee in its sole discretion will determine that any amounts held in reserve
are no longer necessary, it will make distributions thereof to Unitholders in
the same manner.
Limitations on Liabilities. The Sponsor, the Evaluator, the Supervisor and the
Trustee shall be under no liability to Unitholders for taking any action or
for refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their own
willful misfeasance, bad faith or negligence (gross negligence in the case of
the Sponsor) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee
of any of the Securities. In the event of the failure of the Sponsor to act
under the Trust Agreement, the Trustee may act thereunder and shall not be
liable for any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the
Trust which the Trustee may be required to pay under any present or future law
of the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be
made in good faith upon the basis of the best information available to it,
provided, however, that the Evaluator shall be under no liability to the
Trustee, Sponsor or Unitholders for errors in judgment. This provision shall
not protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
December 31, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,165,000 (unaudited). (This paragraph
relates only to the Sponsor and not to the Trust or to any 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 December 31, 1995, the Sponsor and its affiliates managed or supervised
approximately $56.0 billion of investment products, of which over $24.8
billion is invested in municipal securities. The Sponsor and its affiliates
managed $44.0 billion of assets, consisting of $22.2 billion for 63 open end
mutual funds (of which 47 are distributed by Van Kampen American Capital
Distributors, Inc.), $11.4 billion for 38 closed-end funds and $5.6 billion
for 84 institutional accounts. The Sponsor has also deposited approximately
$26 billion of unit investment trusts. Based on cumulative assets deposited,
the Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R)trust. The Sponsor also provides
surveillance and evaluation services at cost for approximately $13 billion of
unit investment trust assets outstanding. Since 1976, the Sponsor has serviced
over two million investor accounts, opened through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i) appoint
a successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
All costs and expenses incurred in creating and establishing the Fund,
including the cost of the initial preparation, printing and execution of the
Trust Agreement and the certificates, legal and accounting expenses,
advertising and selling expenses, expenses of the Trustee, initial evaluation
fees and other out-of-pocket expenses have been borne by the Sponsor at no
cost to the Fund.
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 offices at 101 Barclay
Street, New York, New York 10286 (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of the Banks of
the State of New York and the Board of Governors of the Federal Reserve
System, and its deposits are insured by the Federal Deposit Insurance
Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the certificates issued by
the Trust to, every Unitholder of the Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during the usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or federal statute,
rule or regulation (see "Rights of Unitholders-Reports Provided" ). The
Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any state and having at all times an aggregate capital, surplus, and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Various counsel have acted as counsel for the Trustee.
Independent Certified Public Accountants. The statement of condition and the
related securities portfolio included in Part One of this Prospectus have been
audited by Grant Thornton LLP, independent certified public accountants, as
set forth
in their report in Part One of this Prospectus, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing.
DESCRIPTION OF EARNINGS AND DIVIDEND RANKINGS*
The investment process involves assessment of various factors-such as product
and industry position, corporate resources and financial policy-with results
that make some common stocks more highly esteemed than others. In this
assessment, Standard & Poor's believes that earnings and dividend performance
is the end result of the interplay of these factors and that, over the long
run, the record of this performance has a considerable bearing on relative
quality. The rankings, however, do not pretend to reflect all of the factors,
tangible or intangible, that bear on stock quality.
Relative quality of bonds or other debt, that is, degrees of protection for
principal and interest, called creditworthiness, cannot be applied to common
stocks, and therefore rankings are not to be confused with bond quality
ratings which are arrived at by a necessarily different approach.
Growth and stability of earnings and dividends are deemed key elements in
establishing Standard & Poor's earnings and dividend rankings for common
stocks, which are designed to capsulize the nature of this record in a single
symbol. It should be noted, however, that the process also takes into
consideration certain adjustments and modifications deemed desirable in
establishing such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent ten years-a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic change in trends
as they develop, and to encompass the full peak-to-peak range of the business
cycle. Basis scores are computed for earnings and dividends, then adjusted as
indicated by a set of predetermined modifiers for growth, stability within
long-term trends, and cyclicality. Adjusted scores for earnings and dividends
are then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in general,
corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sales
volume) are set for the various rankings, but the system provides for making
exceptions where the score reflects an outstanding earnings-dividend record.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample of
stocks. The range of scores in the array of this sample has been aligned with
the following ladder of rankings:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
</TABLE>
The positions as determined above may be modified in some instances by special
considerations, such as natural disasters, massive strikes, and non-recurring
accounting adjustments.
A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends, and
relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to
justify its sale, while a low-score stock may be attractively priced for
purchase. Rankings based upon earnings and dividend records are no substitute
for complete analysis. They cannot take into account potential effects of
management changes, internal company policies not yet fully reflected in the
earnings and dividend record, public relations standing, recent competitive
shifts, and a host of other factors that may be relevant to investment status
and decision.
*As published by Standard & Poor's.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or dealers. This Prospectus does not constitute an offer to
sell, or a solicitation of any offer to buy, securities in any state to any
persons to whom it is not lawful to make such offer in such state.
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
Introduction.......................... 1
The Trust............................. 2
Objectives and Securities Selection... 2
Trust Portfolio....................... 2
Risk Factors.......................... 2
Federal Taxation...................... 4
Trust Operating Expenses.............. 5
Public Offering....................... 6
Rights of Unitholders................. 7
Trust Administration..................10
Other Matters.........................12
Description of Earnings and
Dividend Rankings....................12
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
VAN KAMPEN MERRITT
UTILITY INCOME TRUST
PROSPECTUS
PART TWO
Note: This Prospectus May Be Used Only
When Accompanied by Part One. Both
Parts of this Prospectus should be
retained for future reference.
Dated as of the date
of the Prospectus
Part I accompanying
this Prospectus
Part II.
Sponsor:
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
A Wealth of Knowledge A Knowledge of Wealth(sm)
VAN KAMPEN AMERICAN CAPITAL
Contents of Post-Effective Amendment
to Registration Statement
This Post-Effective Amendment to the Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Accountants
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen Merritt Utility Income Trust, Series 4, certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Chicago and State of Illinois on the 24th
day of April, 1996.
Van Kampen Merritt Utility Income Trust,
Series 4
(Registrant)
By Van Kampen American Capital Distributors,
Inc.
(Depositor)
By: Sandra A. Waterworth
Vice President
(Seal)
Pursuant to the requirements of the Securities Act of 1933, this
Post Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities on April 24, 1996:
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
)
William R. Molinari President and Chief )
Operating Officer )
)
Ronald A. Nyberg Executive Vice President )
and General Counsel )
)
William R. Rybak Executive Vice President and )
Chief Financial Officer ) Sandra A. Waterworth
) (Attorney in Fact)*
____________________
* An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income
Trust and Investors' Quality Tax-Exempt Trust, Multi-Series 203
(File No. 33-65744) and with the Registration Statement on Form S-6
of Insured Municipals Income Trust, 170th Insured Multi-Series (File
No. 33-55891) and the same are hereby incorporated herein by this
reference.
Consent of Independent Certified Public Accountants
We have issued our report dated March 17, 1996 accompanying the
financial statements of Van Kampen Merritt Utility Income Trust, Series 4
as of December 31, 1995, and for the period then ended, contained in this
Post-Effective Amendment No. 8 to Form S-6.
We consent to the use of the aforementioned report in the Post-
Effective Amendment and to the use of our name as it appears under the
caption "Auditors".
Grant Thornton LLP
Chicago, Illinois
April 24, 1996
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<NAME> VUIT
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<DISTRIBUTIONS-OF-INCOME> (1304088)
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</TABLE>
