File No. 33-43176 CIK #879921
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
POST-EFFECTIVE AMENDMENT NO. 6 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 5
(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, 1998 pursuant to paragraph (b) of Rule 485.
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 5
913,817 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
primarily diversified within the 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 the applicable sales charge See "Summary of Essential
Financial Information" in this Part One.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE 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 24, 1998
Van Kampen American Capital
<TABLE>
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 5
Summary of Essential Financial Information
As of March 5, 1998
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
<CAPTION>
VUIT
---------------
<S> <C>
General Information
Number of Units..................................................................................... 913,817
Fractional Undivided Interest in Trust per Unit..................................................... 1/913,817
Public Offering Price:
Aggregate Value of Securities in Portfolio <F1>.................................................... $ 25,355,873
Aggregate Value Securities per Unit (including accumulated dividends).............................. $ 28.06
Sales charge 1.5% (1.523% of Aggregate Value of Securities excluding principal cash per Unit)<F2>... $ .42
Principal Cash per Unit............................................................................ $ (.04)
Public Offering Price per Unit <F1><F2><F3>........................................................ $ 28.48
Redemption Price per Unit........................................................................... $ 28.06
Excess of Public Offering Price per Unit over Redemption Price per Unit............................. $ .42
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Supervisor's Annual Supervisory Fee...Maximum of $.005 per Unit
Evaluator's Annual Fee <F5>...........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, 1998
The Trust Agreement may be terminated if the net asset value of the Trust
is less than
Minimum Termination Value.............$3,000,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Special Information
Calculation of Estimated Net Annual Dividends Per Unit
Estimated Annual Dividends per Unit <F4>................ $1.22
Less: Estimated Annual Expense per Unit................. $.04
Estimated Net Annual Dividends per Unit................. $1.18
</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
- ----------
<F1>Securities listed on a national securities exchange are valued at the last
closing sale price, or if no such price exists, at the closing bid prices.
<F2>Effective on each November 1, commencing November 1, 1992 the secondary
sales charge will decrease by 1/2 of 1% to a minimum sales charge of 1.5%. See
"Public Offering-Offering Price" in Part Two.
<F3>Plus accumulated dividends.
<F4>The Estimated Annual Dividends are based on the most recent quarterly
dividend.
<F5>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.
</TABLE>
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 which are issued
primarily by public utility companies and are listed on the New York Stock
Exchange.
PER UNIT INFORMATION
<TABLE>
<CAPTION>
1991(1) 1992 1993
------------- -------------- -------------
<S> <C> <C> <C>
Net asset value per Unit at beginning of period......................................... $ 19.11 $ 21.03 $ 21.01
============= ============== =============
Net asset value per Unit at end of period............................................... $ 21.03 $ 21.01 $ 21.81
============= ============== =============
Distributions to Unitholders of investment income including accumulated dividends paid
on Units redeemed (average Units outstanding for entire period)(2) .................. $ -- $ 1.25 $ 1.22
============= ============== =============
Distributions to Unitholders from Equity Security redemption proceeds (average Units
outstanding for entire period).......................................................... $ -- $ -- $ --
============= ============== =============
Unrealized appreciation (depreciation) of Equity Securities (per Unit outstanding at
end of period).......................................................................... $ 1.21 $ .45 $ 1.01
============= ============== =============
Units outstanding at end of period...................................................... 675,000 2,746,156 2,400,246
- ----------
(1) For the period from October 24, 1991 (initial date of deposit) through
December 31, 1991.
(2) Unitholders receive distributions on a monthly basis.
</TABLE>
PER UNIT INFORMATION (continued)
<TABLE>
<CAPTION>
1994 1995 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Net asset value per Unit at beginning of period.........................$ 21.81 $ 18.31 $ 22.83 $ 22.33
============= ============= ============= =============
Net asset value per Unit at end of period...............................$ 18.31 $ 22.83 $ 22.33 $ 28.65
============= ============= ============= =============
Distributions to Unitholders of investment income including
accumulated dividends paid on Units redeemed
(average Units outstanding for entire period) (2).....................$ 1.22 $ 1.22 $ 1.24 $ 1.27
============= ============= ============= =============
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)................................ $ (3.61) $ 4.83 $ (1.11) $ 5.79
============= ============= ============= =============
Units outstanding at end of period...................................... 2,018,555 1,690,857 1,311,924 $ 953,433
</TABLE>
- ----------
(1)For the period from October 24, 1991 (initial date of deposit) through
December 31, 1991.
(2)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 5:
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 5 as of December 31, 1997, and the related
statements of operations and changes in net assets for the three years ended
December 31, 1997. 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, 1997 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 5 as of December 31, 1997, and the results of operations
and changes in net assets for the three years ended December 31, 1997, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
March 13, 1998
<TABLE>
VAN KAMPEN MERRITT UTILITY INCOME TRUST
SERIES 5
Statements of Condition
December 31, 1997
<CAPTION>
VUIT
--------------
<S> <C>
Trust property
Cash.................................................................................... $ 198,085
Securities at market value, (cost $17,544,383) (note 1)................................. 26,963,628
Accumulated dividends................................................................... 73,242
Receivable for securities sold.......................................................... 76,138
--------------
$ 27,311,093
==============
Liabilities and interest to Unitholders
Redemptions payable..................................................................... $ --
Interest to Unitholders................................................................. 27,311,093
--------------
$ 27,311,093
==============
Analyses of Net Assets
Interest of Unitholders (953,433 Units of fractional undivided interest outstanding)
Cost to original investors of 2,750,000 Units (note 1).................................. $ 57,540,500
Less initial underwriting commission (note 3)........................................... 2,625,123
--------------
54,915,377
Less redemption of Units (1,796,567 Units).............................................. 37,912,464
--------------
17,002,913
Undistributed net investment income
Net investment income................................................................... 14,070,601
Less distributions to Unitholders....................................................... 13,719,930
--------------
350,671
Realized gain (loss) on Security sale or redemption..................................... 538,264
Unrealized appreciation (depreciation) of Securities (note 2)........................... 9,419,245
Distributions to Unitholders of Security sale or redemption proceeds.................... --
--------------
Net asset value to Unitholders.......................................................... $ 27,311,093
==============
Net asset value per Unit (953,433 Units outstanding)................................... $ 28.65
==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 5
Statements of Operations
Years ended December 31,
<CAPTION>
1995 1996 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
Investment income
Dividend income..................................................... $ 2,275,904 $ 1,824,403 $ 1,353,836
Expenses
Trustee fees and expenses........................................... 37,284 31,905 26,741
Evaluator fees...................................................... 11,528 10,175 8,218
Supervisory fees.................................................... 8,082 8,983 7,350
-------------- --------------- ---------------
Total expenses...................................................... 56,894 51,063 42,309
-------------- --------------- ---------------
Net investment income............................................... 2,219,010 1,773,340 1,311,527
Realized gain (loss) from Security sale or redemption
Proceeds............................................................ 6,628,293 8,258,800 8,236,379
Cost................................................................ 6,461,204 7,732,783 7,419,360
-------------- --------------- ---------------
Realized gain (loss)................................................ 167,089 526,017 817,019
Net change in unrealized appreciation (depreciation) of Securities... 8,171,883 (1,455,092) 5,518,382
-------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... $ 10,557,982 $ 844,265 $ 7,646,928
============== =============== ===============
</TABLE>
<TABLE>
Statements of Changes in Net Assets
Years ended
December 31,
<CAPTION>
1995 1996 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................................................ $ 2,219,010 $ 1,773,340 $ 1,311,527
Realized gain (loss) on Security sale or redemption.................. 167,089 526,017 817,019
Net change in unrealized appreciation (depreciation) of Securities... 8,171,883 (1,455,092) 5,518,382
--------------- --------------- --------------
Net increase (decrease) in net assets resulting from operations...... 10,557,982 844,265 7,646,928
Distributions to Unitholders from:
Net investment income................................................ (2,311,946) (1,875,184) (1,402,709)
Securities sale or redemption proceeds............................... -- -- --
Redemption of Units (6,607,157) (8,270,619) (8,228,024)
--------------- --------------- --------------
Total increase (decrease)............................................ 1,638,879 (9,301,538) (1,983,805)
Net asset value to Unitholders
Beginning of period.................................................. 36,957,557 38,596,436 29,294,898
Additional Securities purchased from proceeds of unit sales.......... -- -- --
--------------- --------------- --------------
End of period (including undistributed net investment income of
$543,697, $441,853 and $350,671, respectively)...................... $ 38,596,436 $ 29,294,898 $ 27,311,093
=============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<TABLE>
VAN KAMPEN MERRITT UTILITY INCOME TRUST
PORTFOLIO as of December 31, 1997
<CAPTION>
Standard
& Poor's December 31,
Earnings 1997
and
Port- Number Dividend Market Market
folio of Ranking Value Per Value
Item Shares Name of Issuer (Note 2) Share (Note 1)
- --------- ----------- -------------------------------------------------------- ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C>
A 69,322 Bellsouth Corporation B+ $ 56.3125 $ 3,903,695
- ----------------------------------------------------------------------------------------------------------------------------
B 77,904 Central Louisiana Electric Company, Incorporated A- 32.3750 2,522,142
- ----------------------------------------------------------------------------------------------------------------------------
C 27,034 Central & South West Corporation A- 27.0625 731,608
- ----------------------------------------------------------------------------------------------------------------------------
D 27,530 Cilcorp B+ 48.8750 1,345,529
- ----------------------------------------------------------------------------------------------------------------------------
E 34,596 Consolidated Edison Company of New York Incorporated A 41.0000 1,418,436
- ----------------------------------------------------------------------------------------------------------------------------
F 17,216 Edison International B+ 27.1875 468,060
- ----------------------------------------------------------------------------------------------------------------------------
G 41,881 Enova Corporation A- 27.0625 1,133,405
- ----------------------------------------------------------------------------------------------------------------------------
H 25,914 Florida Progress Corporation A- 39.2500 1,017,124
- ----------------------------------------------------------------------------------------------------------------------------
I 20,473 GTE Corporation B+ 52.2500 1,069,714
- ----------------------------------------------------------------------------------------------------------------------------
J 86,539 Indiana Energy A- 32.9375 2,850,378
- ----------------------------------------------------------------------------------------------------------------------------
K 11,590 MidAmerican Energy, Company NR 22.0000 254,980
- ----------------------------------------------------------------------------------------------------------------------------
L 16,056 Minnesota Power & Light Company B+ 43.5625 699,440
- ----------------------------------------------------------------------------------------------------------------------------
M 38,102 Montana Power Company B+ 31.8125 1,212,120
- ----------------------------------------------------------------------------------------------------------------------------
N 76,242 National Fuel Gas Company B+ 48.6875 3,712,032
- ----------------------------------------------------------------------------------------------------------------------------
O 13,230 Northern States Power Company, Minn. A- 58.2500 770,648
- ----------------------------------------------------------------------------------------------------------------------------
P 6,756 Oklahoma Gas & Electric A- 54.6875 369,469
- ----------------------------------------------------------------------------------------------------------------------------
Q 17,121 Pacificorp B+ 27.3125 467,617
- ----------------------------------------------------------------------------------------------------------------------------
R 23,145 U. S. West, Incorporated B+ 45.1250 1,044,418
- ----------------------------------------------------------------------------------------------------------------------------
S 29,876 Utilicorp United, Incorporated B+ 38.8125 1,159,561
- ----------------------------------------------------------------------------------------------------------------------------
T 24,551 WPL Holdings, Incorporated A 33.1250 813,252
----------- -----------------
685,078 $ 26,963,628
=========== =================
</TABLE>
The accompanying notes are an integral part of these statements.
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 5
Notes to Financial Statements
December 31, 1995, 1996 and 1997
- --------------------------------------------------------------------------
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
the closing bid 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 last bid price on
the over-the-counter market, in each case, on the day of the various Dates of
Deposit.
Unit Valuation - The redemption price per Unit is the pro rata share of each
Unit based upon (1) the cash on hand in the Trust or monies in the process of
being collected, (2) the Securities in the Trust based on the value as
described in Note 1 and (3) accumulated dividends thereon, less accrued
expenses of the Trust, if any.
Federal Income Taxes - Each Unitholder 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 The
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 Earnings and Dividend Rankings" in Part
Two.
Unrealized Appreciation and Depreciation - An analysis of net unrealized
appreciation (depreciation) at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized Appreciation $ 9,419,245
Unrealized Depreciation --
-------------
$ 9,419,245
=============
</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 4.5% of the public offering price which is 4.712% of the underlying value
of the Securities. Effective on each November 1, commencing November 1, 1992,
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 three years ended December 31, 1995, 1996 and 1997, 327,698 Units,
378,933 Units and 358,491 Units, respectively, were presented for redemption.
VAN KAMPEN MERRITT
UTILITY INCOME TRUST
AND
VAN KAMPEN AMERICAN CAPITAL
UTILITY INCOME TRUST
PROSPECTUS PART TWO
- --------------------------------------------------------------------------------
THE TRUST. Van Kampen Merritt Utility Income Trust or Van Kampen American
Capital Utility Income Trust (the "Trust") are unit investment trusts which
offer 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.
ATTENTION FOREIGN INVESTORS. If you are not a United States citizen or
resident, distributions from the Trust will generally be subject to U.S. Federal
withholding taxes; however, under certain circumstances treaties between the
United States and other countries may reduce or eliminate such withholding tax.
See "Federal Taxation." Such investors should consult their tax advisers
regarding the imposition of U.S. withholding on distributions.
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
100 Units for Series 8 and subsequent Series, 250 Units (50 Units for a
tax-sheltered retirement plan) for Series 3 through Series 7 and five Units (one
for a tax-sheltered retirement plan) for Series 2. 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".
Units of the Trust are not deposits or obligations of, or guaranteed by, any
bank and are not federally insured or otherwise protected by the Federal Reserve
Board or any other agency and involve investment risk, including the possible
loss of principal.
NOTE: THIS PROSPECTUS MAY BE USED ONLY WHEN ACCOMPANIED BY PART ONE.
BOTH PARTS OF THIS PROSPECTUS SHOULD
BE RETAINED FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is dated as of the date of the
Prospectus Part I accompanying this Prospectus Part II.
TERMINATION. Commencing on the Mandatory Termination Date Equity Securities
will begin to be sold in connection with the termination of the Trust. The
Sponsor will determine the manner, timing and execution of the sale of the
Equity Securities. Written notice of any termination of the Trust specifying the
time or times at which Unitholders may surrender their certificates for
cancellation shall be given by the Trustee to each Unitholder at his address
appearing on the registration books of the Trust maintained by the Trustee. At
least 30 days prior to the Mandatory Termination Date the Trustee will provide
written notice thereof to all Unitholders and will include with such notice a
form to enable Unitholders to elect a distribution of share of Equity Securities
if such Unitholder owns the applicable number of Units of the Trust, rather than
to receive payment in cash for such Unitholder's pro rata share of the amounts
realized upon the disposition by the Trustee of Equity Securities. All
Unitholders will receive cash in lieu of any fractional shares. To be effective,
the election form, together with surrendered certificates, if issued, an other
documentation required by the Trustee, must be returned to the trustee at least
five business days prior to the Mandatory Termination Date. Unitholders not
electing a distribution of shares of Equity Securities will receive a cash
distribution from the sale of the remaining Securities within a reasonable time
after the Trust is terminated. See "Trust Administration--Amendment or
Termination."
REINVESTMENT OPTION. Unitholders of any Van Kampen American Capital-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase units of any other Van Kampen American Capital trust in the initial
offering period accepting rollover investments subject to a reduced sales charge
to the extent stated in the related prospectus (which may be deferred in certain
cases). Unitholders also have the opportunity to have their distributions
reinvested into an open-ended management investment company as described herein.
See "Rights of Unitholders--Reinvestment Option."
RISK FACTORS. An investment in the Trust should be made with an understanding
of the risks associated therewith, including the possible deterioration of
either the financial condition of the issuers, the general condition of the
stock market, volatile interest rates and risks related to an investment in
public utility issuers. See "Risk Factors".
THE TRUST
Van Kampen Merritt Utility Income Trust or Van Kampen American Capital
Utility Income Trust (the "Trust") are unit investment trusts 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 a national securities
exchange, the NASDAQ National Market System or are traded in the
over-the-counter market.
The Trust consists of such of the Securities listed under "Portfolio" in Part
One of this Prospectus as may continue to be held from time to time in the Trust
together with cash held in the Income and Capital Accounts. Neither the Sponsor
nor the Trustee shall be liable in any way for any failure in any of the
Securities.
Because certain of the Securities from time to time may be sold under certain
circumstances described herein, and because the proceeds from such events will
be distributed to Unitholders and will not be reinvested, no assurance can be
given that the Trust will retain for any length of time its present size and
composition. Although the Portfolio is not managed, the Sponsor may instruct the
Trustee to sell Securities under certain limited circumstances. Securities,
however, will not be sold by the Trust to take advantage of market fluctuations
or changes in anticipated rates of appreciation or depreciation.
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 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 of 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 payments of
principal 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 cost 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.
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
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 dividend payments.
A bill is currently pending in Congress which would deregulate and
restructure the electric utility industry in the U.S. The bill would establish a
federal mandate for all electric utilities to provide retail choice to all
classes of customers by late in the year 2000. After retail choice is
established, a state utility commission would be prohibited from regulating
rates for retail electricity services and would not be allowed to bar any
supplier from offering retail service to any customer. In addition to
substantially increasing competition within the industry, certain authorities
have estimated that restructuring of the industry could result in substantial
stranded investment costs relating to lost long-term investments made in
reliance on future maintenance of current customer bases (which could be
negatively impacted by deregulation). Any such stranded costs would be borne by
the stockholders of the related issuers, including the Trust. Although the
Sponsor makes no prediction as to whether this legislation will be adopted, many
authorities believe that deregulation and restructuring within the electric
utility industry is likely to occur in the coming years. Accordingly, it is
likely that the U.S. electricity market will become highly competitive in future
years. Deregulation of the electric utility industry is in the early stages and
no assurance can be made as to the timing or impact of future deregulation or
restructuring. Accordingly, the restructuring and deregulation of the
electricity industry is marked by great uncertainty and could have a material
adverse impact on certain issuers.
In addition, Congress recently enacted the Telecommunications Act of 1996
which, among other things, is designed to open local telephone services to
competition. While final regulations have only recently been adopted, the
Telecommunications Act is expected to have a significant impact on the
telecommunications industry. In particular, companies within the local exchange
and long distance markets will be subject to substantially increased competition
from other long distance carriers, competitive access providers and cable
companies, among others. Telecommunications companies will need to be able to
adapt to an increasingly innovative and competitive marketplace with many
companies offering combined video, internet and telephonic services. This
increased competition and the changing regulatory environment within the
telecommunications industry could have a material adverse impact on certain
issuers of the Securities.
GENERAL. An investment in Units should be made with an understanding of the
risks which an investment in common stocks entails, including the risk that the
financial condition of the issuers of the Equity Securities or the general
condition of the common stock market may worsen and the value of the Equity
Securities and therefore the value of the Units may decline. Common stocks are
especially susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors including
expectations regarding government economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, global or
regional political, economic or banking crises. Shareholders of common stocks
have rights to receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt obligations
or preferred stocks of, such issuers. Shareholders of common stocks of the type
held by the Trust have a right to receive dividends only when and if, and in the
amounts, declared by the issuer's board of directors and have a right to
participate in amounts available for distribution by the issuer only after all
other claims on the issuer have been paid or provided for. Certain of the
issuers may currently be in arrears with respect to preferred stock dividend
payments. Common stocks do not represent an obligation of the issuer and,
therefore, do not offer any assurance of income or provide the same degree of
protection of capital as do debt securities. The issuance of additional debt
securities or preferred stock will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and inclination
of the issuer to declare or pay dividends on its common stock or the rights of
holders of common stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of common stocks is subject to market fluctuations for as
long as the common stocks remain outstanding, and thus the value of the Equity
Securities in the portfolio may be expected to fluctuate over the life of the
Trust to values higher or lower than those prevailing on the Initial Date of
Deposit or at the time a Unitholder purchases Units.
Holders of common stocks incur more risk than holders of preferred stocks and
debt obligations because common stockholders, as owners of the entity, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt obligations or preferred stocks
issued by, the issuer. Cumulative preferred stock dividends must be paid before
common stock dividends and any cumulative preferred stock dividend omitted is
added to future dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on liquidation
which are senior to those of common stockholders.
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading market
for the Equity Securities may depend on whether dealers will make a market in
the Equity Securities. There can be no assurance that a market will be made for
any of the Equity Securities, that any market for the Equity Securities will be
maintained or of the liquidity of the Equity Securities in any markets made. In
addition, the Trust may be restricted under the Investment Company Act of 1940
from selling Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions, and the value of the Trust, will be
adversely affected if trading markets for the Equity Securities are limited or
absent.
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
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986 (the "Code"). Unitholders should consult their
tax advisers in determining the federal, state, local and any other tax
consequences of the purchase, ownership and disposition of Units in the Trust.
For purposes of the following discussion and opinion, it is assumed that each
Equity Security is equity for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of the
Trust will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his pro rata share of income
derived from each Trust asset when such income is considered to be received by
the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of an
Equity Security (whether by sale, exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unitholder (except to
the extent an in kind distribution of stock is available and received by such
Unitholder from the Trust, as described below). The price a Unitholder pays for
his Units, generally including sales charges, is allocated among his pro rata
portion of each Equity Security held by the Trust (in proportion to the fair
market values thereof on the valuation date closest to the date the Unitholder
purchases his Units) in order to determine his tax basis for his pro rata
portion of each Equity Security held by the Trust. Unitholders should consult
their own tax advisors with regard to calculation of basis.
A Unitholder will be considered to have received all of the dividends paid on
his pro rata portion of each Equity Security when such dividends are received by
the Trust. Unitholders will be taxed in this manner regardless of whether
distributions from the Trust are actually received by the Unitholder or are
automatically reinvested. For federal income tax purposes, a Unitholder's pro
rata portion of the 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, the holding period for
such capital gain will be determined by the period of time a Unitholder has held
his Units.
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Equity Securities held by the Trust will generally
be considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held by the Trust
will generally be considered a capital loss (except in the case of a dealer or a
financial institution). Unitholders should consult their tax advisers regarding
the recognition of such capital gains and losses for federal income tax
purposes.
DIVIDENDS RECEIVED DEDUCTION. A corporation that owns Units will generally be
entitled to a 70% dividends received deduction with respect to such Unitholder's
pro rata portion of dividends received by the Trust (to the extent such
dividends are taxable as ordinary income, as discussed above and are
attributable to domestic corporations) in the same manner as if such corporation
directly owned the Equity Securities paying such dividends (other than corporate
Unitholders, such as "S" corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding corporation
tax). However, a corporation owning Units should be aware that Sections 246 and
246A of the Code impose additional limitations on the eligibility of dividends
for the 70% dividends received deduction. These limitations include a
requirement that stock (and therefore Units) must generally be held at least 46
days (as determined under Section 246(c) of the Code). Final regulations have
been issued which address special rules that must be considered in determining
whether the 46 day holding period requirement is met. Moreover, the allowable
percentage of the deduction will be reduced from 70% if a corporate Unitholder
owns certain stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. 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.
To the extent dividends received by the Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of such
dividends, since the dividends received deduction is generally available only
with respect to dividends paid by domestic corporations.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. 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 A 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. The Taxpayer Relief Act of 1997 (the "1997 Act")
provides that for taxpayers other than corporations, net capital gain (which is
defined as net long-term capital gain over net short-term capital loss for the
taxable year) is subject to a maximum marginal stated tax rate of either 28% or
20%, depending upon the holding periods of the capital assets. Capital gain or
loss is long-term if the holding period for the asset is more than one year, and
is short-term if the holding period for the asset is one year or less. The date
on which a Unit is acquired (i.e., the "trade date") is excluded for purposes of
determining the holding period of the Unit. Generally, capital gains realized
from assets held for more than one year but not more than 18 months are taxed at
a maximum marginal stated tax rate of 28% and capital gains realized from assets
(with certain exclusions) held for more than 18 months are taxed at a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in the
lowest tax bracket). Further, capital gains realized from assets held for one
year or less are taxed at the same rates as ordinary income. Legislation is
currently pending that provides the appropriate methodology that should be
applied in netting the realized capital gains and losses. Such legislation is
proposed to be effective retroactively for tax years ending after May 6, 1997.
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.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult with
their tax advisors regarding the potential effect of this provision on their
investment in Units.
If the Unitholder disposes of a Unit, he or she is deemed thereby to have
disposed of his or her entire pro rata interest in all assets of the Trust
including his or her pro rata portion of all the Equity Securities represented
by the Unit. The 1997 Act includes provisions that treat certain transactions
designed to reduce or eliminate risk of loss and opportunities for gain (e.g.,
short sales, offsetting notional principal contracts, futures or forward
contracts, or similar transactions) as constructive sales for purposes of
recognition of gain (but not loss) and for purposes of determining the holding
period. Unitholders should consult their own tax advisers with regard to any
such constructive sales rules.
SPECIAL TAX CONSEQUENCES OF IN-KIND DISTRIBUTIONS UPON REDEMPTION OR
TERMINATION OF THE TRUST. Under certain circumstances, a Unitholder tendering
Units for redemption may be able to request an In-Kind Distribution. In-Kind
Distributions are not available, however, of foreign securities held by the
Trust. A Unitholder may also under certain circumstances be able to 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 Security 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 valuation date closest to 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 (other than those
that are not treated as United States source income, if any) will generally be
subject to United States income taxation and withholding in the case of Units
held by non-resident alien individuals, foreign corporations or other non-United
States person. Such persons should consult their tax advisers.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unitholders and derived from dividends of foreign corporations will not be
subject to U.S. withholding tax provided that less than 25 percent of the gross
income of the foreign corporation for a three-year period ending with the close
of its taxable year preceding payment was not effectively connected to the
conduct of a trade or business within the United States. In addition, such
earnings may be exempt from U.S. withholding pursuant to a specific treaty
between the United States and a foreign country. Non-U.S. Unitholders should
consult their own tax advisers regarding the imposition of U.S. withholding on
distributions from the Trust.
It should be noted that payments to the Trust of dividends on Equity
Securities that are attributable to foreign corporations may be subject to
foreign withholding taxes and Unitholders should consult their tax advisers
regarding the potential tax consequences relating to the payment of any such
withholding taxes by the Trust. Any dividends withheld as a result thereof will
nevertheless be treated as income to the Unitholders. Because, under the grantor
trust rules, an investor is deemed to have paid directly his share of foreign
taxes that have been paid or accrued, if any, an investor may be entitled to a
foreign tax credit or deduction for United States tax purposes with respect to
such taxes. The 1997 Act imposes a required holding period for such credits.
Investors should consult their tax advisers with respect to foreign withholding
taxes and foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unitholder
of such Trust a statement containing information relating to the dividends
received by the Trust on the Equity Securities, the gross proceeds received by
the Trust from the disposition of any Equity Security (resulting from redemption
or the sale of any Equity Security), and the fees and expenses paid by the
Trust. The Trustee will also furnish annual information returns to Unitholders
and to the Internal Revenue Service.
Unitholders desiring to purchase Units for tax-deferred plans and IRAs should
consult their broker-dealers for details on establishing such accounts. Units
may also be purchased by persons who already have self-directed plans
established.
In the opinion of special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to the tax treatment of U.S.
Unitholders ("U.S. Unitholders") with regard to federal and certain aspects of
New York State and City income taxes. Unitholders may be subject to taxation in
New York or in other jurisdictions and should consult their own tax advisers in
this regard. As used herein, the term "U.S. Unitholder" means an owner of a Unit
in the Trust that (a) is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source or (b) does not qualify as a U.S. Unitholder in paragraph (a) but whose
income from a Unit is effectively connected with such Unitholder's conduct of a
United States trade or business. The term also includes certain former citizens
of the United States whose income and gain on the Units will be taxable.
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. All costs and expenses incurred in creating and
establishing Series 7 and prior Series of the Trust, including the cost of the
initial preparation, printing and execution of the Trust Agreement and the
certificates, legal and accounting expenses, advertising and selling expenses,
expenses of the Trustee, initial evaluation fees and other out-of-pocket
expenses have been borne by the Sponsor at no cost to such Trust. Expenses
incurred in establishing Series 8 and subsequent Series of the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and state
registration fees, the initial fees and expenses of the Trustee, legal and
accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by such Trust and amortized over the life of such Trust.
The following additional charges are or may be incurred by the Trust: (a) normal
expenses (including the cost of mailing reports to Unitholders) incurred in
connection with the operation of 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. All of
the fees and expenses of the Trust will accrue on a daily basis and will be
charged to the Trust, in arrears, on a monthly basis as of the tenth day of each
month. The fees and expenses of Series 8 and subsequent Series are payable out
of the Capital Account while the fees and expenses of all other Series are paid
out of the Income Account. 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 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%
(3.0% for Series 8)), and cash, if any, in the Income and Capital Accounts held
or owned by the Trust.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law, daughters-in-law and trustees, custodians or fiduciaries for the
benefit of such persons) of Van Kampen American Capital Distributors, Inc. and
its affiliates, dealers and their affiliates, and vendors providing services to
the Sponsor may purchase Units at the Public Offering Price less the applicable
dealer concession.
Units may be purchased in the secondary market at the Public Offering Price
(for purchases which do not qualify for a sales charge reduction for quantity
purchases) less the concession the Sponsor typically allows to brokers and
dealers for purchases (see "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 spouses or children and (4) officers and directors of bank
holding companies that make Units available directly or through subsidiaries or
bank affiliates. Notwithstanding anything to the contrary in this Prospectus,
such investors, bank trust departments, firm employees and bank holding company
officers and directors who purchase Units through this program will not receive
sales charge reductions for quantity purchases.
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 either
3.0% or 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 bid price 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 current bid price 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 100 Units for Series 8 and
subsequent Series and 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 for Series 3 through Series 7). 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 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 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 through Series 7.
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 twenty-fifth day of each month on a pro rata basis to Unitholders of record
as of the preceding record date (which will be the tenth 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. In the case of certain
Series, 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 or 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 certain Van Kampen American Capital or
Morgan Stanley mutual funds which are registered in such 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, 1,250 Units or more for redemption with respect to Series 3 through 7 and
1,000 Units or more with respect to Series 8 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
closing bid price. 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
current bid price on the over-the-counter market (unless the Evaluator deems
this price inappropriate as a basis for evaluation) or, if bid price is not
available, (1) on the basis of the current bid price for comparable securities,
(2) by the Evaluator's appraising the value of the Securities in good faith at
the bid side of the market or (3) by any combination thereof. See "Public
Offering-Offering Price".
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 the 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 the 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 gross negligence (negligence in the case of
the Trustee) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the Trustee of
any of the Securities. In the event of the failure of the Sponsor to act under
the Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the Trust
which the Trustee may be required to pay under any present or future law of the
United States of America or of any other taxing authority having jurisdiction.
In addition, the Trust Agreement contains other customary provisions limiting
the liability of the Trustee.
The Trustee, Sponsor, Supervisor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the accuracy
thereof. Determinations by the Evaluator under the Trust Agreement shall be made
in good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee, Sponsor
or Unitholders for errors in judgment. This provision shall not protect the
Evaluator in any case of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
SPONSOR. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. The Sponsor is an indirect subsidiary
of VK/AC Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM
Holdings II, Inc., which in turn is a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD").
MSDWD is a global financial services firm with a market capitalization of
more than $21 billion which was created by the merger of Morgan Stanley Group
Inc. with and into Dean Witter, Discover & Co. on May 31, 1997. MSDWD, together
with various of its directly and indirectly owned subsidiaries, is engaged in a
wide range of financial services through three primary businesses: securities,
asset management and credit services. These principal businesses include
securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; asset management; trading of futures,
options, foreign exchange commodities and swaps (involving foreign exchange,
commodities, indices and interest rating and investing; global custody,
securities clearance services and securities lending; and credit card services.
As of June 2, 1997, MSDWD, together with its affiliated investment advisory
companies, had approximately $270 billion of assets under management,
supervision or fiduciary advice.
Van Kampen American Capital Distributors, Inc. specializes in the
underwriting and distribution of unit investment trusts and mutual funds with
roots in money management dating back to 1926. The Sponsor is a member of the
National Association of Securities Dealers, Inc. and has offices at One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, (630) 684-6000 and 2800 Post Oak
Boulevard, Houston, Texas 77056, (713) 993-0500. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco and Seattle. As of November 30, 1996, the total
stockholders' equity of Van Kampen American Capital Distributors, Inc. was
$129,451,000 (unaudited). (This paragraph relates only to the Sponsor and not to
the Trusts or to any other Series thereof. The information is included herein
only for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations. More
detailed financial information will be made available by the Sponsor upon
request.)
As of September 30, 1997, the Sponsor and its Van Kampen American Capital
affiliates managed or supervised approximately $65.3 billion of investment
products, of which over $10.85 billion is invested in municipal securities. The
Sponsor and its Van Kampen American Capital affiliates managed $54 billion of
assets, consisting of $34.3 billion for 55 open-end mutual funds (of which 45
are distributed by Van Kampen American Capital Distributors, Inc.) $14.2 billion
for 37 closed-end funds and $5.5 billion for 106 institutional accounts. The
Sponsor has also deposited approximately $26 billion of unit investment trusts.
All of Van Kampen American Capital's open-end funds, closed-ended funds and unit
investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its Unit Investment Trust
Division offices at 101 Barclay Street, New York, New York 10286 (800) 221-7668.
The Bank of New York is subject to supervision and examination by the
Superintendent of the Banks of the State of New York and the Board of Governors
of the Federal Reserve System, and its deposits are insured by the Federal
Deposit Insurance Corporation to the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books
of record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the 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.
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.
*As published by Standard & Poor's
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:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
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.
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the Trust,
the Sponsor or dealers. This Prospectus does not constitute an offer to sell, or
a solicitation of any offer to buy, securities in any state to any persons to
whom it is not lawful to make such offer in such state.
Table of Contents Page
----------------- ------
The Trust 2
Objectives and Securities Selection 2
Trust Portfolio 2
Risk Factors 3
Federal Taxation 5
Trust Operating Expenses 7
Public Offering 7
Rights of Unitholders 8
Trust Administration 10
Other Matters 12
Description of Earnings and Dividend Rankings 12
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration statements
and exhibits relating thereto, which the Fund has filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 and the
Investment Company Act of 1940, and to which reference is hereby made.
VAN KAMPEN MERRITT
UTILITY INCOME TRUST
AND
VAN KAMPEN
AMERICAN CAPITAL
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 ONE ACCOMPANYING
THIS PROSPECTUS
PART TWO.
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 o 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 5, 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, 1998.
VAN KAMPEN MERRITT UTILITY INCOME TRUST, SERIES 5
(Registrant)
By VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(Depositor)
By: Gina Costello
Assistant Secretary
(SEAL)
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below on April 24, 1998 by the
following persons who constitute a majority of the Board of Directors of Van
Kampen American Capital Distributors, Inc.:
SIGNATURE TITLE
Don G. Powell Chairman and Chief )
Executive Officer )
John H. Zimmerman President and Chief Operating )
Officer )
Ronald A. Nyberg Executive Vice President and )
General Counsel )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Gina Costello_______
(Atttorney 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 Van Kampen American Capital Equity Opportunity Trust,
Series 64 (File No. 333-33087) and Van Kampen American Capital Equity
Opportunity Trust, Series 87 (File No. 333-44581) and the same are hereby
incorporated herein by this reference.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 13, 1998 accompanying the financial
statements of Van Kampen Merritt Utility Income Trust, Series 5 as of December
31, 1997, and for the period then ended, contained in this Post-Effective
Amendment No. 6 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, 1998
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