FILE NO. 33-
CIK #897125
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: VAN KAMPEN MERRITT INSURED
INCOME TRUST, Series 35
B. Name of Depositor: VAN KAMPEN MERRITT INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
VAN KAMPEN MERRITT INC. CHAPMAN AND CUTLER
Attention: John C. Merritt, Attention: Mark J. Kneedy
Chairman
One Parkview Plaza 111 West Monroe Street
Oakbrook Terrace, Illinois 60181 Chicago, Illinois 60603
E. Title and amount of securities being registered: *1,000 Units
F. Proposed maximum offering price to the public of the securities being
registered: ($1,010 per Unit): $1,010,000**
G. Amount of filing fee, computed at one twenty-nineth of l percent of
the proposed maximum aggregate offering price to the public: $348.28
H. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE
OF THE REGISTRATION STATEMENT
_________________________________________________________________________
_______________
* 500 Units registered for primary distribution.
500 Units registered for resale by Depositor of Units previously sold
in primary distribution.
** Estimated solely for the purpose of calculating the registration fee.
_________________________________________________________________________
_______________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Van Kampen Merritt Insured Income Trust,
Series 35
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust )
(b) Title of securities issued) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) Underwriting
underwriter
5. Organization of trust ) The Trusts
6. Execution and termination of ) The Trusts
Trust Indenture and Agreement) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trusts
trust's securities and rights) Insurance on the Bonds
of security holders ) Tax Status
) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trusts
) Trust Portfolios
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates)
13. (a) Loan, fees, charges and ) Prospectus Front Cover Page
expenses ) Summary of Essential Financial
) Information
) Trust Portfolios
) Annual Unit Income and
) Estimated Current Returns
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding) *
periodic payment plan )
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Annual Unit Income and
) Estimated Current Returns
) Insurance on the Bonds
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or) Trust Operating
Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received) Public Offering
by depositor, principal ) Underwriting
underwriter, trustee or any) Trust Portfolios
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments) *
from purchasers )
16. Acquisition and disposition of ) The Trusts
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions) *
(c) Reserves or special funds ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolios
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities) Public Offering
by states )
36. Suspension of sales of trust's) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
(b) Underwriting agreements ) Public Offering
(c) Selling agreements )
39. (a) Organization of principal)
underwriter )
(b) N.A.S.D. membership by )
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter)
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering price) *
(c) Variation in offering price) *
to certain persons )
45. Suspension of redemption rights) *
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption price) *
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's) Cover Page
securities ) Trust Operating Expenses
) Insurance on the Bonds
VII. Policy of Registrant
52. (a) Provisions of trust agree-) Trust Administration
ment with respect to )
replacement or elimination)
portfolio securities )
(b) Transactions involving ) *
elimination of underlying)
securities )
(c) Policy regarding substitu-) Trust Administration
tion or elimination of )
underlying securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Tax Status
VIII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55.)
56.) Certain information regarding) *
57.) periodic payment certificates)
58.)
59. Financial statements (Instructions) Report of
Independent Certified
1(c) to Form S-6) ) Public Accountants
) Statements of Condition
______________________________________________
* Inapplicable, omitted, answer negative or not required
Preliminary Prospectus Dated February 22, 1994
Van Kampen Merritt Insured Income Trust
1,000 Units Series 35
(A Unit Investment Trust)
The attached final Prospectus for a prior Series of the Fund is
hereby used as a preliminary Prospectus for the above stated Series. The
narrative information and structure of the attached final Prospectus will
be substantially the same as that of the final Prospectus for this
Series. Information with respect to pricing, the number of Units, dates
and summary information regarding the characteristics of securities to be
deposited in this Series is not now available and will be different since
each Series has a unique Portfolio. Accordingly the information
contained herein with regard to the previous Series should be considered
as being included for informational purposes only. Ratings of the
securities in this Series are expected to be comparable to those of the
securities deposited in the previous Series. However, the Estimated
Current Return for this Series will depend on the interest rates and
offering prices of the securities in this Series and may vary materially
from that of the previous Series.
A registration statement relating to the units of this Series will
be filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to completion
or amendment. Such Units may not be sold nor may offer to buy be
accepted prior to the time the registration statement becomes effective.
This Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the Units in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any State.
August 26, 1993
VAN KAMPEN MERRITT INSURED INCOME TRUST, SERIES 32
THE TRUST. The Trust initially consists of delivery statements relating
to contracts to purchase debt obligations and, thereafter, will consist of a
$10,000,000 aggregate principal amount portfolio principally comprised of
long-term corporate and taxable municipal debt obligations. The Trust is
comprised of 10,287 Units.
ATTENTION FOREIGN INVESTORS. If you are not a United States citizen or
resident, your interest income from each Trust may not be subject to Federal
withholding taxes if certain conditions are met. See "Federal Taxation".
INVESTMENT OBJECTIVE OF THE TRUST. The investment objective of the Trust
is a high level of current income consistent with preservation of capital
through a diversified investment in a
fixed portfolio principally consisting of
long-term corporate and taxable
municipal debt securities issued after July 18,
1984 (the "Obligations"). See "Investment Objectives and Portfolio Selection".
There is no assurance that the Trust
will achieve its objective. The payment of
interest and the preservation of principal is, of course, dependent upon the
continuing ability of the issuers and/or
obligors of the Obligations and of the
insurer thereof to meet their respective obligations.
THE TRUST AND "AAA" RATING. Insurance guaranteeing the payments of
principal and interest, when due, on the Obligations in the portfolio of the
Trust has been obtained from an
insurance company either by the Trust or by the
issuer of the Obligations involved, by a prior owner of the Obligations or by
the Sponsor prior to the deposit of such Obligations in the Trust. See
"Insurance on the Obligations" on page 12. Insurance obtained by the Trust
applies only while the Obligations involved are retained in such Trust while
insurance obtained on Preinsured Obligations is effective so long as such
Obligations are outstanding. The
Trustee, upon the sale of an Obligation insured
under an insurance policy obtained by
the Trust, has a right to obtain from the
insurer involved permanent insurance for such Obligation upon the payment of a
single predetermined insurance premium
and any expenses related thereto from the
proceeds of the sale of such Obligation.
IT SHOULD BE NOTED THAT THE INSURANCE,
IN EITHER CASE, RELATES ONLY TO THE OBLIGATIONS IN THE TRUST AND NOT TO THE
UNITS OFFERED HEREBY OR TO THE MARKET VALUE THEREOF. As a result of such
insurance, the Units of the Trust have
received a rating of "AAA" by Standard &
Poor's Corporation. Standard & Poor's
Corporation has indicated that this rating
is not a recommendation to buy, hold or
sell Units nor does it take into account
the extent to which expenses of the Trust or sales by the Trust of Obligations
for less than the purchase price paid by the Trust will reduce payment to
Unitholders of the interest and principal required to be paid on such
Obligations. See "Insurance on the
Obligations". No representation is made as to
any insurer's ability to meet its commitments.
PUBLIC OFFERING PRICE. The Public
Offering Price of the Units of the Trust
during the initial offering period is equal to the aggregate offering price of
the Obligations in the portfolio divided by the number of Units outstanding,
plus a sales charge equal to 4.9% of the Public Offering Price (5.152% of the
aggregate offering price of the
Obligations). For sales charges in the secondary
market, see "Public Offering--General". If the Obligations in the Trust were
available for direct purchase by investors, the purchase price of the
Obligations would not include the sales charge included in the Public Offering
Price of the Units. During the initial offering period, the sales charge is
reduced on a graduated scale for sales
involving 100 or more Units. In addition,
on transactions entered into on and
after August 27, 1993 there will be added an
amount equal to the accrued interest from September 2, 1993 to the date of
settlement (five business days after
order) less distributions from the Interest
Account subsequent to September 2, 1993.
If Units were available for purchase at
8:00 A.M. Central Time on the Date of Deposit, the Public Offering Price per
Unit would have been $1,000.00. See "Public Offering".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN. The Estimated
Current Return and Estimated Long-Term Return to Unitholders were as set forth
under "Summary of Essential Financial Information". The methods of calculating
Estimated Current Return and Estimated Long-Term Return are set forth in the
footnotes to the "Summary of Essential Financial Information" and under
"Estimated Current Return and Estimated Long-Term Return".
DISTRIBUTION. Accrued interest to the First Settlement Date will be
distributed to the Sponsor as the
Unitholder of record on that Date. Subsequent
distributions of interest received by
each Trust, pro-rated on an annual basis,
will be made monthly unless the
Unitholder elects to receive them semi-annually.
The first such subsequent distribution will be $2.00
per Unit and will be made on
December 15, 1993 to Unitholders of record on December 1, 1993. The first
distribution of funds from the Principal Account, if any, will
be made on June 15,
1993 to Unitholders of record on June 1,
1993, and thereafter such distributions will
be made on a semi-annual basis, except
under certain special circumstances (see
"Rights of Unitholders--Distributions of Interest and Principal").
MARKET FOR UNITS. Although not
obligated to do so, the Sponsor, Van Kampen
Merritt Inc., intends to, and certain of
the other Underwriters may, maintain a
secondary market for the Units at prices based upon the aggregate bid price of
the Obligations in the portfolio of the Trust; however, during the initial
offering period such prices will be
based upon the aggregate offering prices of
the Obligations. If such a market is not maintained and no other
over-the-counter market is available, a Unitholder will be able to dispose of
his Units only through redemption at prices based upon the bid prices of the
underlying Obligations (see "Rights of Unitholders--Redemption of Units").
Neither the bid nor offering prices of the underlying Obligations or of the
Units, absent situations in which Obligations are in default in payment of
principal or interest or in significant
risk of such default, include value, if
any, attributable to the insurance obtained by the Trust. See "Public
Offering--Public Market".
REINVESTMENT OPTION. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. Foreign investors should note, however, that any interest
distributions resulting from such a
reinvestment program will be subject to U.S.
Federal income taxes, including withholding taxes. See "Rights of
Unitholders--Reinvestment Option".
2
<PAGE>
<TABLE>
VAN KAMPEN MERRITT INSURED INCOME TRUST, SERIES 32
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
AS OF 8:00 A.M. CENTRAL TIME ON THE DATE OF DEPOSIT: AUGUST 26, 1993
SPONSOR: VAN KAMPEN MERRITT INC.
EVALUATOR: AMERICAN PORTFOLIO EVALUATION SERVICES
(A DIVISION OF A SUBSIDIARY OF THE SPONSOR)
TRUSTEE: THE BANK OF NEW YORK
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount (Par Value) of Obligations................................................................. $ 10,000,000
Number of Units............................................................................................. 10,287
Fractional Undivided Interest in the Trust per Unit......................................................... 1/10,287
Principal Amount (Par Value) of Obligations per Unit <F1>................................................... $ 972.10
Public Offering Price:
Aggregate Offering Price of Obligations in Portfolio........................................................ $ 9,783,035
Aggregate Offering Price of Obligations per Unit............................................................ $ 951.00
Sales Charge 4.9% (5.152% of the Aggregate Bid Price of the Obligations) per Unit........................... $ 49.00
Public Offering Price per Unit <F2>......................................................................... $ 1,000.00
Redemption Price per Unit................................................................................... $ 943.97
Secondary Market Repurchase Price per Unit.................................................................. $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit..................................... $ 56.03
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit........................ $ 7.03
Minimum Value of the Trust under which Trust Agreement may be terminated.................................... $ 2,000,000
Annual Portfolio Insurance Premium.......................................................................... $ 16,670
</TABLE>
Minimum Principal Distribution...... $1.00 per Unit
First Settlement Date............... September 2, 1993
Evaluator's Annual Supervisory Fee.. Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee... $.30 per $1,000 principal
amount of Obligations
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.
3
<PAGE>
<TABLE>
<CAPTION>
SEMI-
SPECIAL INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS MONTHLY ANNUAL
CALCULATION OF ESTIMATED NET ANNUAL UNIT INCOME:
<S> <C> <C>
Estimated Annual Interest Income per Unit............................................................. $ 67.31 $ 67.31
Less: Estimated Annual Expense per Unit <F3>.......................................................... $ 1.79 $ 1.35
Less: Annual Premium on Portfolio Insurance per Unit.................................................. $ 1.62 $ 1.62
Estimated Net Annual Interest Income per Unit Including Accrued Interest to Carry..................... $ 63.90 $ 64.34
CALCULATION OF ESTIMATED INTEREST EARNINGS PER UNIT:
Estimated Net Annual Interest Income per Unit Including Accrued Interest to Carry..................... $ 63.90 $ 64.34
Divided by 12 and 2, respectively..................................................................... $ 5.33 $ 32.17
Accrued Interest to Carry <F4>........................................................................ $ 13.79 $ 13.90
ESTIMATED DAILY RATE OF NET INTEREST ACCRUAL PER UNIT................................................. $ .17747 $ .17872
ESTIMATED CURRENT RETURN BASED ON PUBLIC OFFERING PRICE <F5><F6><F7>.................................. 6.39% 6.43%
ESTIMATED LONG-TERM RETURN <F5><F6><F7>............................................................... 6.34% 6.39%
Initial Distribution (December 1993).................................................................. $ 2.00 $ 2.00
ESTIMATED NORMAL DISTRIBUTION PER UNIT <F7>........................................................... $ 5.33 $ 32.17
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Trustee's Annual Fee................ $.91 and $.51 per $1,000 principal amount of Obligations, respectively, for those
portions of each Trust under the monthly and semi-annual distribution plans
Record and Computation Dates........ FIRST day of the month as follows: monthly--each month; semi-annual--June and December
DISTRIBUTION DATES.................. FIFTEENTH DAY OF THE MONTH AS FOLLOWS: MONTHLY--EACH MONTH; SEMI-ANNUAL-- JUNE AND
DECEMBER COMMENCING DECEMBER 15, 1993
</TABLE>
(1) Many unit investment trusts issue a number of units such that each unit
represents approximately $1,000 principal amount of underlying securities.
The Sponsor on the other hand in
determining the number of Units for Series
32 has elected not to follow this format but rather to provide that number
of Units which will establish as
close as possible as of the Date of Deposit
a Public Offering Price per Unit of $1,000.
(2) No accrued interest will be added for any person contracting to purchase
Units on the Date of Deposit. Anyone
so ordering Units after such date will
pay accrued interest from the First Settlement Date to the date of
settlement (five business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. A person will
become the owner of Units on the date of settlement provided payment has
been received.
(3) Excluding insurance costs.
(4) Accrued interest to carry is interest earned on a grouping of obligations
which is not immediately available
for distribution. This amount will remain
an asset of the Trust until it is
realized by the Unitholder when the Trust
Units or the Obligations are sold or redeemed or when the Obligations
mature. See "Public
Offering--Accrued Interest (Accrued Interest to Carry)".
(5) The Estimated Current Return and Estimated Long-Term Return are increased
for transactions entitled a reduced sales charge (see "Public
Offering--General").
(6) The Estimated Current Return is calculated by dividing the estimated net
annualized interest income per Unit by the Public Offering Price. The
estimated net annual interest income
per Unit will vary with changes in fees
and expenses of the Trustee and the Evaluator and with the principal
prepayment, redemption, maturity,
exchange or sale of Obligations while the
Public Offering Price will vary with changes in the offering price of the
underlying Obligations; therefore, there is no assurance that the present
Estimated Current Return indicated
above will be realized in the future. The
Estimated Long-Term Return is calculated using a formula which (1) takes
into consideration, and determines and factors in the relative weightings
of, the market values, yields (which
takes into account the amortization of
premiums and the accretion of
discounts) and estimated retirements of all of
the Obligations in the Trust and (2) takes into account the expenses and
sales charge associated with the Trust Unit. Since the market values and
estimated retirements of the
Obligations and the expenses of the Trust will
change, there is no assurance that
the present Estimated Long-Term Return as
indicated above will be realized in
future. The Estimated Current Return and
Estimated Long-Term Return are
expected to differ because the calculation of
the Estimated Long-Term Return reflects the estimated date and amount of
principal returned while the Estimated Current Return calculation includes
only net annual interest income and Public Offering Price. Neither rate
reflects the true return to Unitholders which is lower because neither
includes the effect of the delay in the first payment to Unitholders.
(7) These figures are based on per Unit cash flows. Cash flows will vary with
changes in fees and expenses, with changes in current interest rates and
with the principal prepayment,
redemption, maturity, call, exchange or sale
of the underlying Obligations. The estimated cash flows for the Trust are
set forth under "Estimated Cash Flows to Unitholders".
4
<PAGE>
THE TRUST
Van Kampen Merritt Insured Income Trust, Series 32 (the "Trust") was
created under the laws of the State of New York pursuant to a Trust Agreement
(the "Trust Agreement"), dated the Date of Deposit, with Van Kampen Merritt
Inc., as Sponsor, American Portfolio Evaluation Services, a division of Van
Kampen Merritt Investment Advisory Corp., as Evaluator, and The Bank of New
York, as Trustee.
The Trust may be an appropriate medium for investors who desire to
participate in a portfolio of long-term taxable fixed income securities issued
after July 18, 1984 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. For a breakdown
of the portfolio see "Trust Portfolio". In addition, securities of the type
initially deposited in the portfolio of the Trust are often not available in
small amounts and may, in the case of any privately placed securities, be
available only to institutional investors.
On the Date of Deposit, the Sponsor
deposited with the Trustee an aggregate
of $10,000,000 principal amount of interest-bearing obligations, including
delivery statements relating to contracts for the purchase of certain such
obligations and irrevocable letters of
credit issued by a financial institution
in the aggregate amount required for such purchases (the "Obligations").
Thereafter, the Trustee, in exchange for
the Obligations so deposited, delivered
to the Sponsor the certificates evidencing the ownership of 10,287 Units of
Series 32. Unless otherwise terminated
as provided therein, the Trust Agreement
will terminate at the end of the
calendar year prior to the fiftieth anniversary
of its execution. All of the Obligations in the Trust are long-term debt
instruments with maturities ranging from 2021 to 2025. The dollar weighted
average life of the Obligations in the Trust is 30 years.
Each Unit initially offered
represents a 1/10,287 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, 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 the
Underwriters, or until the termination of the Trust Agreement.
INVESTMENT OBJECTIVES AND PORTFOLIO SELECTION
The investment objective of the
Trust is to provide a high level of current
income consistent with safety of principal by investing in a professionally
selected portfolio principally consisting of long-term corporate and
U.S. Treasury obligations issued after July 18, 1984.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Obligations in the Trust has been obtained by such Trust from
either AMBAC Indemnity Corporation ("AMBAC Indemnity"), Capital Markets
Assurance Corporation ("CapMAC") or a combination thereof (collectively, the
"Portfolio Insurers"), or by the issuer
of such Obligations, by a prior owner of
such Obligations, or by the Sponsor
prior to the deposit of such Obligations in
such Trust from (1) AMBAC Indemnity or one of its subsidiaries, American
Municipal Bond Assurance Corporation ("AMBAC") or MGIC Indemnity Corporation
("MGIC Indemnity"), (2) Financial Guaranty Insurance Company ("Financial
Guaranty"), (3) Municipal Bond Investors Assurance Corporation ("MBIA"), (4)
Bond Investors Guaranty Insurance Company ("BIG"), (5) National Union Fire
Insurance Company of Pittsburgh, PA ("National Union"), (6) Capital Guaranty
Insurance Company ("Capital Guaranty"),
(7) CapMAC and/or (8) Financial Security
Assurance Inc. ("Financial Security" or "FSA") (collectively, the "Preinsured
Obligation Insurers") (see "Insurance on the Obligations"). The Portfolio
Insurers and the Preinsured Obligation Insurers are collectively referred to
herein as the "Insurers". Insurance
obtained by a Trust is effective only while
the Obligations thus insured are held in such Trust. The Trustee has the right
to acquire permanent insurance from a Portfolio Insurer with respect to each
Obligation insured by the respective Portfolio Insurer under a Trust portfolio
insurance policy. Insurance relating to
Obligations insured by the issuer, by a
prior owner of such Obligations or by the Sponsor is effective so long as such
Obligations are outstanding. Obligations insured under a policy of insurance
obtained by the issuer, by a prior owner of such Bonds or by the Sponsor from
one of the Preinsured Obligation
Insurers (the "Preinsured Obligations") are not
additionally insured by the Trust. No
representation is made as to any insurer's
ability to meet its commitments.
5
<PAGE>
Neither the Public Offering Price
nor any evaluation of Units for purposes
of repurchases or redemptions reflects any element of value for the insurance
obtained by the Trust unless Obligations
are in default in payment of principal
or interest or in significant risk of such default. See "Public
Offering--Offering Price".
In order for Obligations to be eligible for insurance, they must have
credit characteristics which would qualify them for at least the Standard &
Poor's Corporation rating of "BBB-" or at least the Moody's Investors Service,
Inc. rating of "Baa", which in brief
represent the lowest ratings for securities
of investment grade (see "Description of
Obligation Ratings"). Insurance is not
a substitute for the basic credit of an issuer, but supplements the existing
credit and provides additional security therefor. If an issue is accepted for
insurance, a non-cancellable policy for the prompt payment of interest and
principal on the Obligations, when due, is issued by the insurer. A monthly
premium is paid by the Trust for the insurance obtained by it. The Trustee has
the right to obtain permanent insurance from a Portfolio Insurer in connection
with the sale of an Obligation insured
under the insurance policy obtained from
the respective Portfolio Insurer by a Trust upon the payment of a single
predetermined insurance premium from the proceeds of the sale of such
Obligation. Accordingly, any Obligation
in a Trust is eligible to be sold on an
insured basis. All Obligations insured
by a Portfolio Insurer or by a Preinsured
Obligation Insurer receive a "AAA" rating by Standard & Poor's Corporation.
Standard & Poor's Corporation describes
securities it rates "AAA" as having "the
highest rating assigned by Standard & Poor's to a debt obligation. Capacity to
pay interest and repay principal is extremely strong." See "Insurance on the
Obligations".
In selecting Obligations for the
Trust, the following facts, among others,
were considered by the Sponsor: (a) the prices of the Obligations relative to
other obligations of comparable quality
and maturity, (b) the diversification of
Obligations as to purpose of issue and
location of issuer, (c) the availability
and cost of insurance for the prompt payment of principal and interest on the
Obligations and (d) whether the debt obligations were issued after July 18,
1984.
TRUST PORTFOLIO
PORTFOLIO. Series 32 consists of 9
issues, eight of which have been issued
by public utilities and one of which is a U.S. Treasury Bond.
PUBLIC UTILITY ISSUES. 93% of the aggregate principal amount of the
Obligations in the Trust are obligations of public utility issuers. In view of
this an investment in the Trust should be made with an understanding of the
characteristics of such issuers 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 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 Obligations in the
portfolio to make payments of principal and/or
interest on such Obligations.
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. Also,
changes in certain accounting standards currently under consideration by the
Financial Accounting Standards Board could cause significant write-downs of
assets and reductions in earnings for many investor-owned utilities. 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 Obligations 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
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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. 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.
TAXABLE MUNICIPAL ISSUES. A certain percentage of the aggregate
principal amount of the Obligations in the Trust may be taxable obligations of
municipal issuers. In view of this an investment in the Trust should be made
with an understanding of the
characteristics of such issuers and the risks which
such an investment may entail. Obligations of municipal issuers can be either
general obligations of a government entity that are backed by the taxing power
of such entity or revenue bonds payable
from the income of a specific project or
authority and are not supported by the issuer's power to levy taxes.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment
of principal and interest. However, the
taxing power of any governmental entity may be limited by provisions of state
constitutions or laws and an entity's credit will depend on many factors,
including an erosion of the tax base due to population declines, natural
disasters, declines in the state's industrial base or inability to attract new
industries, economic limits on the ability to tax without eroding the tax base
and the extent to which the entity relies on Federal or state aid, access to
capital markets or other factors beyond the entity's control.
As a result of the current recession's adverse impact upon both their
revenues and expenditures, as well as other factors, many state and local
governments are confronting deficits and potential deficits which are the most
severe in recent years. Many issuers are facing highly difficult choices about
significant tax increases or spending reductions in order to restore budgetary
balance. Failure to implement these actions on a timely basis could force the
issuers to depend upon market access to finance deficits or cash flow needs.
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In addition, certain of the
Obligations in the Trust may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. Recently, certain
proposals, in the form of state legislative
proposals or voter initiatives, to limit ad valorem real property taxes have
been introduced in various states.
Revenue bonds, on the other hand, are payable only from revenues derived
from a particular facility or class of facilities, or, in some cases, from the
proceeds of a special excise tax or
other special revenue source. The ability of
an issuer of revenue bonds to make
payments of principal and/or interest on such
bonds is primarily dependent upon the success or failure of the facility or
class of facilities involved or whether
the revenues received from an excise tax
or other special revenue source are sufficient to meet obligations.
Typically, interest income received from municipal issues is exempt from
Federal income taxation under Section
103 of the Internal Revenue Code of 1986,
as amended (the "Code") and therefore is not includible in the gross income of
the owners thereof. However, interest income received for taxable municipal
obligations is not exempt from Federal
income taxation under Section 103 of the
Code. Thus, owners of taxable municipal obligations generally must include
interest on such obligations in gross
income for Federal income tax purposes and
treat such interest as ordinary income.
Certain of the Obligations in the Trust may be obligations which are
payable from and secured by revenues
derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities, convention
centers and arenas. In view of this an
investment in such a Trust should be made
with an understanding of the
characteristics of such issuers and the risks which
such an investment may entail. The major
portion of an airport's gross operating
income is generally derived from fees
received from signatory airlines pursuant
to use agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees.
Airport operating income may therefore
be affected by the ability of the airlines to meet their obligations under the
use agreements. The air transport industry is experiencing significant
variations in earnings and traffic, due to increased competition, excess
capacity, increased costs, deregulation,
traffic constraints and other factors,
and several airlines are experiencing
severe financial difficulties. The Sponsor
cannot predict what effect these industry conditions may have on airport
revenues which are dependent for payment on the financial condition of the
airlines and their usage of the
particular airport facility. Similarly, payment
on Bonds related to other facilities is
dependent on revenues from the projects,
such as user fees from ports, tolls on turnpikes and bridges and rents from
buildings. Therefore, payment may be
adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased use of a
facility, lower cost of alternative modes of transportation, scarcity of fuel
and reduction or loss of rents.
Certain of the Obligations in the Trust may be health care revenue bonds.
In view of this an investment in such a Trust should be made with an
understanding of the characteristics of
such issuers and the risks which such an
investment may entail. Ratings of bonds issued for health care facilities are
often based on feasibility studies that
contain projections of occupancy levels,
revenues and expenses. A facility's
gross receipts and net income available for
debt service may be affected by future events and conditions including, among
other things, demand for services and
the ability of the facility to provide the
services required, physicians' confidence in the facility, management
capabilities, competition with other
health care facilities, efforts by insurers
and governmental agencies to limit rates, legislation establishing state
rate-setting agencies, expenses, the cost and possible unavailability of
malpractice insurance, the funding of
Medicare, Medicaid and other similar third
party payor programs, government regulation and the termination or restriction
of governmental financial assistance, including that associated with Medicare,
Medicaid and other similar third party payor programs. Pursuant to recent
Federal legislation, Medicare reimbursements are currently calculated on a
prospective basis utilizing a single
nationwide schedule of rates. Prior to such
legislation Medicare reimbursements were based on the actual costs incurred by
the health facility. The current
legislation may adversely affect reimbursements
to hospitals and other facilities for services provided under the Medicare
program. Such adverse changes also may adversely affect the ratings of
Securities held in the portfolios of the Trust; however, because of the
insurance obtained by the Trust, the "AAA" rating of the Units of each of the
Trust would not be affected.
Approximately 7% of the Obligations in the Trust are "zero coupon" U.S.
Treasury bonds. See footnote (6) in
"Notes to Portfolios". Zero coupon bonds are
purchased at a deep discount because the buyer receives only the right to
receive a final payment at the maturity of the bond and does not receive any
periodic interest payments. The effect of owning deep discount bonds which do
not make current interest payments (such as the zero coupon bonds) is that a
fixed yield is earned not only on the original investment but also, in effect,
on all discount earned during the life of such income on such obligation at a
rate as high as the implicit yield on the discount obligation, but at the same
time eliminates
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the holder's ability to reinvest at
higher rates in the future. For this reason,
zero coupon bonds are subject to
substantially greater price fluctuations during
periods of changing market interest rates than are securities of comparable
quality which pay interest.
REPLACEMENT OBLIGATIONS. Because certain of the Obligations in the Trust
may from time to time under certain circumstances be sold or redeemed or will
mature in accordance with their terms
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. Neither the Sponsor nor the
Trustee shall be liable in any way for
any default, failure or defect in any Obligation. In the event of a failure to
deliver any Obligation that has been purchased for the Trust under a contract,
including those securities purchased on a "when, as and if issued" basis
("Failed Obligations"), the Sponsor is authorized under the Trust Agreement to
direct the Trustee to acquire other securities ("Replacement Obligations") to
make up the original corpus of the affected Trust.
The Replacement Obligations must be
purchased within 20 days after delivery
of the notice of the failed contract and the purchase price (exclusive of
accrued interest) may not exceed the amount of funds reserved for the purchase
of the Failed Obligations. The Replacement Obligations shall (i) be long-term
corporate or taxable municipal bonds, debentures, notes or other straight debt
obligations (whether secured or unsecured and whether senior or subordinated)
without equity or other conversion features, with fixed maturity dates
substantially the same as those of the
Failed Obligations having no warrants or
subscription privileges attached;; (ii) be payable in United States currency;
(iii) not be when, as and if issued obligations or restricted securities; (iv)
be issued after July 18, 1984 if interest thereon is United States source
income; (v) be issued or guaranteed by an issuer subject to or exempt from the
reporting requirements under Section 13
or 15(d) of the Securities Exchange Act
of 1934 (or similar provisions of law) or in effect guaranteed, directly or
indirectly, by means of a lease
agreement, agreement to buy securities, services
or products, or other similar commitment
of the credit of such an issuer to the
payment of the substitute Obligations;
(vi) not cause the Units of the Trust to
cease to be rated AAA by Standard & Poor's Corporation; and (vii) be eligible
for (and when acquired be insured under) the insurance obtained by the Trust.
Whenever a Replacement Obligation has been acquired for the Trust, the Trustee
shall, within five days thereafter,
notify all Unitholders of such Trust of the
acquisition of the Replacement Obligation and shall, on the next monthly
distribution date which is more than 30 days thereafter, make a pro rata
distribution of the amount, if any, by which the cost to the affected Trust of
the Failed Obligation exceeded the cost of the Replacement Obligation plus
accrued interest. Once the original corpus of a Trust is acquired, the Trustee
will have no power to vary the investment of the Trust; i.e., the Trust will
have no managerial power to take advantage of market variations to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Obligations in the event of a
failed contract, the Sponsor will refund the sales charge attributable to such
Failed Obligations to all Unitholders of the affected Trust and distribute the
principal and accrued interest (at the
coupon rate of such Failed Obligations to
the date the Failed Obligations are
removed from the Trust) attributable to such
Failed Obligations not more than 30 days
after such removal or such earlier time
as the Trustee in its sole discretion deems to be in the interest of the
Unitholders. In the event a Replacement Obligation should not be acquired by a
Trust, the estimated net annual interest
income per Unit for the Trust would be
reduced and the Estimated Current Return and the Estimated Long-Term Return
thereon might be lowered. In addition,
Unitholders should be aware that they may
not be able at the time of receipt of such principal to reinvest such proceeds
in other securities at a yield equal to or in excess of the yield which such
proceeds were earning to Unitholders in the affected Trust.
REDEMPTIONS OF OBLIGATIONS. Certain of the Obligations in the Trust are
subject to redemption prior to their stated maturity date pursuant to sinking
fund provisions, call provisions or extraordinary optional or mandatory
redemption provisions or otherwise. A
sinking fund is a reserve fund accumulated
over a period of time for retirement of
debt. A callable debt obligation is one
which is subject to redemption or refunding prior to maturity at the option of
the issuer. A refunding is a method by which a debt obligation is redeemed, at
or before maturity, by the proceeds of a new debt obligation. In general, call
provisions are more likely to be exercised when the offering side valuation is
at a premium over par than when it is at a discount from par. The exercise of
redemption or call provisions will (except to the extent the proceeds of the
called Obligations are used to pay for Unit redemptions) result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions and it may also offset the current return on
Units of the Trust involved. The portfolio contains a listing of the sinking
fund and call provisions, if any, with respect to each of the
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Obligations. Extraordinary optional
redemptions and mandatory redemptions result
from the happening of certain events. Generally, events that may permit the
extraordinary optional redemption of Obligations or may require the mandatory
redemption of Obligations include, among others: the substantial damage or
destruction by fire or other casualty of the project for which the proceeds of
the Obligations were used; an exercise
by a local, state or Federal governmental
unit of its power of eminent domain to take all or substantially all of the
project for which the proceeds of the Obligations were used; changes in the
economic availability of raw materials, operating supplies or facilities or
technological or other changes which render the operation of the project for
which the proceeds of the Obligations
were used uneconomic; changes in law or an
administrative or judicial decree which
renders the performance of the agreement
under which the proceeds of the Obligations were made available to finance the
project impossible or which creates unreasonable burdens or which imposes
excessive liabilities, such as taxes, not imposed on the date the Obligations
are issued on the issuer of the Obligations or the user of the proceeds of the
Obligations; an administrative or judicial decree which requires the cessation
of a substantial part of the operations of the project financed with the
proceeds of the Obligations; an overestimate of the costs of the project to be
financed with the proceeds of the Obligations resulting in excess proceeds of
the Obligations which may be applied to
redeem Obligations; or an underestimate
of a source of funds securing the Obligations resulting in excess funds which
may be applied to redeem Obligations. The Sponsor is unable to predict all of
the circumstances which may result in such redemption of an issue of
Obligations. See "Portfolios" for the Trust and footnote (3) in "Notes to
Portfolios".
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the opening of business on
the Date of Deposit, the Estimated Current
Returns and the Estimated Long-Term Returns each under the monthly and
semi-annual distribution plans were
those indicated in the "Summary of Essential
Financial Information" for the Trust. The Estimated Current Returns are
calculated by dividing the Estimated Net
Annual Interest Income per Unit by the
Public Offering Price. The Estimated Net Annual Interest Income per Unit will
vary with changes in fees and expenses
of the Trustee and the Evaluator and with
the principal prepayment, redemption,
maturity, exchange or sale of Obligations
while the Public Offering Price will
vary with changes in the offering price of
the underlying Obligations; therefore, there is no assurance that the present
Estimated Current Return will be realized in the future. Estimated Long-Term
Returns are calculated using a formula which (1) takes into consideration, and
determines and factors in the relative
weightings of, the market values, yields
(which takes into account the amortization of premiums and the accretion of
discounts) and estimated retirements of all the Obligations in a Trust and (2)
takes into account the expenses and sales charge associated with each Trust
Unit. Since the market values and estimated retirements of the Obligations and
the expenses of a Trust will change, there is no assurance that the present
Estimated Long-Term Returns will be realized in the future. Estimated Current
Returns and Estimated Long-Term Returns are expected to differ because the
calculation of Estimated Long-Term Returns reflects the estimated date and
amount of principal returned while Estimated Current Returns calculations
include only Net Annual Interest Income
and Public Offering Price. Neither rate
reflects the true return to Unitholders
which is lower because neither includes
the effect of the delay in the first payment to Unitholders.
In order to acquire certain of the Obligations contracted for by the
Sponsor for deposit in the Trust, it may
be necessary for the Sponsor or Trustee
to pay on the settlement dates for
delivery of such Obligations amounts covering
accrued interest on such Obligations which exceed (1) the amounts paid by
Unitholders and (2) the amounts which will be made available through cash
furnished by the Sponsor on the Date of
Deposit, which amount of cash may exceed
the interest which would accrue to the First Settlement Date. The Trustee has
agreed to pay for any amounts necessary to cover any such excess and will be
reimbursed therefor, without interest,
when funds become available from interest
payments on the particular Obligations with respect to which such payments may
have been made.
TRUST OPERATING EXPENSES
INITIAL COSTS. All costs and expenses incurred in creating and
establishing 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
fees for evaluations and other out-of-pocket expenses have been borne by the
Sponsor at no cost to the Trust.
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COMPENSATION OF SPONSOR AND EVALUATOR. The Sponsor will not receive any
fees in connection with its activities
relating to the Trust. However, American
Portfolio Evaluation Services, a division of Van Kampen Merritt Investment
Advisory Corp., which is a wholly-owned subsidiary of the Sponsor (the
"Evaluator"), will receive an annual
supervisory fee, which is not to exceed the
amount set forth under "Summary of Essential Financial Information", 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 these Trust, but at no
time will the total amount received for
portfolio supervisory services rendered
to Series 1 and subsequent series of Van
Kampen Merritt Insured Income Trust in
any calendar year exceed the aggregate cost to the Evaluator of supplying such
services in such year. In addition, the Evaluator shall receive an annual
evaluation fee of $.30 per $1,000 principal amount of Obligations (which is
based on the outstanding principal amount of obligations on January 1 of each
year) for regularly evaluating the
Trust's portfolio. 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 the Underwriters will receive sales commissions and may realize
other profits (or losses) in connection with the sale of Units and the deposit
of the Obligations as described under
"Public Offering-- Sponsor and Underwriter
Compensation".
TRUSTEE'S FEE. For its services, the Trustee will receive an annual fee
from the Trust based on the largest aggregate amount of Obligations in such
Trust at any time during such period.
Such fee will be computed at $.51 and $.91
per $1,000 principal amount, respectively, for those portions of the Trust
representing semi-annual and monthly distribution plans. Based on the size of
the Trust on the Date of Deposit and assuming all Unitholders had chosen the
semi-annual distribution plan, the Trustee's estimated annual fee for ordinary
recurring services would initially
amount to $5,100. Assuming in the alternative
that all Unitholders were in the monthly distribution plan, such fee would
initially amount to $9,100. The
Trustee's fees are payable monthly on or before
the fifteenth day of each month from the Interest Account to the extent funds
are available and then from the Principal Account. 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. Since the Trustee has
the use of the funds being held in the Principal and Interest Accounts for
future distributions, payment of expenses and redemptions and since such
Accounts are non-interest bearing to
Unitholders, the Trustee benefits thereby.
Part of the Trustee's compensation for
its services to the Trust is expected to
result from the use of these funds. 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".
INSURANCE PREMIUMS. The cost of the portfolio insurance obtained by the
Trust is $16,670 per annum so long as the Trust retains the Obligations.
Premiums, which are Trust expenses, are
payable monthly by the Trustee on behalf
of the Trust. As Obligations in the portfolio are redeemed by their respective
issuers or are sold by the Trustee, the
amount of the premium will be reduced in
respect of those Obligations no longer owned by and held in such Trust. If the
Trustee exercises the right to obtain Permanent Insurance, the premium payable
for such Permanent Insurance will be paid solely from the proceeds of the sale
of the related Obligations. The premiums for such Permanent Insurance with
respect to each Obligation will decline over the life of the Obligation.
MISCELLANEOUS EXPENSES. The following additional charges are or may be
incurred by the Trust: (a) fees of the Trustee for extraordinary services, (b)
expenses of the Trustee (including legal and auditing expenses) and of counsel
designated by the Sponsor, (c) various governmental charges, (d) expenses and
costs of any action taken by the Trustee
to protect the Trust and the rights and
interests of Unitholders, (e) indemnification of the Trustee for any loss,
liability or expenses incurred by it in
the administration of the Trust without
negligence, bad faith or willful misconduct on its part and (f) expenditures
incurred in contacting Unitholders upon termination of the Trust.
The fees and expenses set forth herein are payable out of the Trust. When
such fees and expenses are paid by or
owing to the Trustee, they are secured by
a lien on the portfolio or portfolios of
the applicable Trust or Trusts. If the
balances in the Interest and Principal
Accounts are insufficient to provide for
amounts payable by the Trust, the Trustee has the power to sell Obligations to
pay such amounts.
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INSURANCE ON THE OBLIGATIONS
Insurance has been obtained by the Trust guaranteeing prompt payment of
interest and principal, when due (as
more fully described below), in respect of
all the Obligations in the Trust (except for three issues for which insurance
has been obtained by the issuer of the
Obligations). See "Investment Objectives
and Portfolio Selection". Each insurance policy obtained by the Trust is
non-cancellable and will continue in force so long as such Trust is in
existence, the Portfolio Insurer involved is still in business and the
Obligations described in such policy continue to be held by such Trust (see
"Portfolios"). Non-payment of premiums on a policy obtained by the Trust will
not result in the cancellation of
insurance but will force the Portfolio Insurer
involved to take action against the
Trustee to recover premium payments due it.
The Trustee in turn will be entitled to recover such payments from the Trust.
Premium rates for each issue of
Obligations protected by the policy obtained by
the Trust are fixed for the life of the Trust. The premium for any insurance
policy or policies obtained by an issuer
of Obligations has been paid in advance
by such issuer and any such policy or policies are non-cancellable and will
continue in force so long as the
Obligations so insured are outstanding and the
Portfolio Insurer involved remains in business. If the provider of an original
issuance insurance policy is unable to
meet its obligations under such policy or
if the rating assigned to the claims-paying ability of any such insurer
deteriorates, the Portfolio Insurers have no obligation to insure any issue
adversely affected by either of the above described events.
The aforementioned Trust insurance guarantees the timely payment of
principal and interest on the
Obligations as they fall due. For the purposes of
the Portfolio Insurance, "when due"
generally means the stated maturity date for
the payment of principal and interest.
However, in the event (a) an issuer of an
Obligation defaults in the payment of
principal or interest on such Obligation,
(b) such issuer enters into a bankruptcy
proceeding or (c) the maturity of such
Obligation is accelerated, the Portfolio
Insurer involved has the option, in its
sole discretion, for a limited period of time after receiving notice of the
earliest to occur of such a default, bankruptcy proceeding or acceleration to
pay the outstanding principal amount of
such Obligation plus accrued interest to
the date of such payment and thereby
retire the Obligation from a Trust prior to
such Obligation's stated maturity date. The insurance does not guarantee the
market value of the Obligations or the
value of the Units. Insurance obtained by
a Trust is only effective as to
Obligations owned by and held in such Trust. In
the event of a sale of any such Obligation by the Trustee, such insurance
terminates as to such Obligation on the date of sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the
Trustee, upon the sale of an Obligation covered under a portfolio insurance
policy obtained by the Trust, has the right to obtain permanent insurance with
respect to such Obligation (i.e., insurance to maturity of the Obligations
regardless of the identity of the holder thereof) (the "Permanent Insurance")
upon the payment of a single predetermined insurance premium and any expenses
related thereto from the proceeds of the sale of such Obligation. Accordingly,
any Obligation in the Trust is eligible to be sold on an insured basis. It is
expected that the Trustee would exercise
the right to obtain Permanent Insurance
only if upon such exercise the Trust would receive net proceeds (sale of
Obligation proceeds less the insurance
premium and related expenses attributable
to the Permanent Insurance) from such sale in excess of the sale proceeds if
such Obligations were sold on an uninsured basis.The insurance premium with
respect to each Obligation eligible for
Permanent Insurance would be determined
based upon the insurability of each Obligation as of the Date of Deposit and
would not be increased or decreased for any change in the creditworthiness of
each Obligation.
The Sponsor believes that the Permanent Insurance option provides an
advantage to the Trust in that each Obligation insured by a Trust insurance
policy may be sold out of the Trust with
the benefits of the insurance attaching
thereto. Thus, the value of the insurance, if any, at the time of sale, can be
realized in the market value of the
Obligation so sold (which is not the case in
connection with any value attributable
to such Trust's portfolio insurance). See
"Public Offering--Offering Price". Because any such insurance value may be
realized in the market value of the Obligation upon the sale thereof upon
exercise of the Permanent Insurance
option, the Sponsor anticipates that (a) in
the event the Trust were to be comprised of a substantial percentage of
Obligations in default or significant risk of default, it is much less likely
that the Trust would need at some point in time to seek a suspension of
redemptions of Units than if the Trust
were to have no such option (see "Rights
of Unitholders--Right of Redemption")
and (b) at the time of termination of the
Trust, if the Trust were holding defaulted Obligations or Obligations in
significant risk of default, the Trust would not need to hold such Obligations
until their respective maturities in order to realize the benefits of the
Trust's portfolio insurance (see "Trust Administration--Amendment or
Termination").
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Except as indicated below,
insurance obtained by the Trust has no effect on
the price or redemption value of Units. It is the present intention of the
Evaluator to attribute a value for such
insurance (including the right to obtain
Permanent Insurance) for the purpose of
computing the price or redemption value
of Units if the Obligations covered by
such insurance are in default in payment
of principal or interest or in significant risk of such default. The value of
the insurance will be equal to the
difference between (i) the market value of an
Obligation which is in default in payment of principal or interest or in
significant risk of such default assuming the exercise of the right to obtain
Permanent Insurance (less the insurance premium and related expenses
attributable to the purchase of Permanent Insurance) and (ii) the market value
of such Obligations not covered by Permanent Insurance. See "Public
Offering--Offering Price" herein for a
more complete description of the Trust's
method of valuing defaulted Obligations which have a significant risk of
default.
The portfolio insurance policies obtained by the Trust were issued by
either AMBAC Indemnity or CapMAC. The other policy (or commitment therefor)
obtained by an Obligation issuer was
issued by AMBAC Indemnity. See "Investment
Objectives and Portfolio Selection".
CapMAC is a New York-domiciled monoline stock insurance company which
engages only in the business of
financial guarantee and surety insurance. CapMAC
is licensed in 49 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the
territory of Guam. CapMAC insures structured
asset-backed, corporate and other financial obligations in the domestic and
foreign capital markets. CapMAC may also
provide financial guarantee reinsurance
for structured asset-backed, corporate and municipal obligations written by
other major insurance companies.
CapMAC's claims-paying ability is
rated "Aaa" by Moody's Investors Service,
Inc. ("Moody's"), "AAA" by Standard &
Poor's Corporation ("Standard & Poor's"),
and "AAA" by Duff & Phelps, Inc. ("Duff & Phelps"). Such ratings reflect only
the views of the respective rating agencies, are not recommendations to buy,
sell or hold securities and are subject
to revision or withdrawal at any time by
such rating agencies.
CapMAC is wholly owned by CapMAC
Holdings Inc. ("Holdings"), a company that
is owned by a group of institutional and other investors, including CapMAC's
management and employees. CapMAC
commenced operations on December 24, 1987 as an
indirect, wholly-owned subsidiary of Citibank (New York State), a wholly-owned
subsidiary of Citicorp. On June 25,
1992, Citibank (New York State) sold CapMAC
to Holdings (the "Sale").
Neither Holdings nor any of its
stockholders is obligated to pay any claims
under any surety bond issued by CapMAC or any debts of CapMAC or to make
additional capital contributions.
CapMAC is regulated by the
Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to
regulation by the insurance departments
of the other jurisdictions in which it is licensed. CapMAC is subject to
periodic regulatory examinations by the same regulatory authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends,
investment of assets, changes in control,
transactions with affiliates and
consolidations and acquisitions. The amount of
exposure per risk that CapMAC may retain, after giving effect to reinsurance,
collateral or other security, is also regulated. Statutory and regulatory
accounting practices may prescribe appropriate rates at which premiums are
earned and the levels of reserves
required. In addition, various insurance laws
restrict the incurrence of debt, regulate permissible investments of reserves,
capital and surplus, and govern the form of surety bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured. Such
reinsurance does not relieve CapMAC of any of its obligations under the Surety
Bond(s).
THE [SURETY BOND(S)] [IS] [ARE] NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In connection with the Sale,
Holdings and CapMAC entered into an Ownership
Policy Agreement (the "Ownership Policy
Agreement"), which sets forth Holdings'
intent with respect to its ownership and control of CapMAC and provides for
certain policies and agreements with respect to Holdings' exercise of its
control of CapMAC. In the Ownership
Policy Agreement, Holdings has agreed that,
during the term of the Ownership Policy Agreement, it will not, and will not
permit any stockholder of Holdings to enter into any transaction the result of
which would be a change of control (as defined in the Ownership Policy
Agreement) of CapMAC, unless the long term debt obligations or claims-paying
ability of the person which would control CapMAC after such transaction or its
direct or indirect parent are rated in a
high investment grade category, unless
Holdings or CapMAC has confirmed that CapMAC's claims-paying ability rating by
Moody's (the
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"Rating") in effect immediately prior to
any such change of control will not be
downgraded by Moody's upon such change of control or unless such change of
control occurs as a result of a public offering of Holdings' capital stock.
In addition, the Ownership Policy
Agreement includes agreements (i) not to
change the "zero-loss" underwriting standards or policies and procedures of
CapMAC in a manner that would materially and adversely affect the risk profile
of CapMAC's book of business, (ii) that CapMAC will adhere to the aggregate
leverage limitations and maintain capitalization levels considered by Moody's
from time to time as consistent with
maintaining CapMAC's Rating and (iii) that
until CapMAC's statutory capital surplus and contingency reserve ("qualified
statutory capital") equal $250 million,
CapMAC will maintain a specified amount
of qualified statutory capital in excess of the amount of qualified statutory
capital that CapMAC is required at such time to maintain under the aggregate
leverage limitations set forth in Article 69 of the New York Insurance Law.
The Ownership Policy Agreement will
terminate on the earlier of the date on
which a change of control of CapMAC occurs and the date on which CapMAC and
Holdings agree in writing to terminate
the Ownership Policy Agreement; provided
that, CapMAC or Holdings has confirmed that CapMAC's Rating in effect
immediately prior to any such termination will not be downgraded upon such
termination.
As at December 31, 1992 and 1991,
CapMAC had statutory capital and surplus
of approximately $148 million and $232 million, respectively, and had not
incurred any debt obligations. On June 26, 1992, CapMAC made a special
distribution (the "Distribution") to
Holdings in connection with the Sale in an
aggregate amount that caused the total
of CapMAC's statutory capital and surplus
to decline to approximately $150
million. Holdings applied substantially all of
the proceeds of the Distribution to repay debt owed to Citicorp that was
incurred in connection with the capitalization of CapMAC. As of June 30, 1992,
CapMAC had statutory capital and surplus of approximately $150 million and had
not incurred any debt obligations. In
addition, at December 31, 1992 CapMAC had
a statutory contingency reserve of approximately $15 million, which is also
available to cover claims under surety
bonds issued by CapMAC. Article 69 of the
New York State Insurance Law requires
that CapMAC establishes and maintains the
contingency reserve.
In addition to its capital (including contingency reserve) and other
reinsurance available to pay claims under its surety bonds, on June 25, 1992,
CapMAC entered into a Stop Loss Reinsurance Agreement (the "Stop Loss
Agreement") with Winterthur Swiss
Insurance Company (the "Reinsurer"), which is
rated "AAA" by Standard & Poor's and "Aaa" by Moody's, pursuant to which the
Reinsurer will be required to pay any
losses incurred by CapMAC during the term
of the Stop Loss Agreement on the surety bonds covered under the Stop Loss
Agreement in excess of a specified amount of losses incurred by CapMAC under
such surety bonds (such specified amount initially being $100 million and
increasing annually by an amount equal to 66 2/3% of the increase in CapMAC's
statutory capital and surplus) up to an aggregate limit payable under the Stop
Loss Agreement of $50 million. The Stop Loss Agreement has an initial term of
seven years, is extendable for one-year periods and is subject to early
termination upon the occurrence of certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity
facility (the "Liquidity Facility") provided by a syndicate of banks rated
A1+/P1 by Standard & Poor's and Moody's, respectively, having a term of 360
days. Under the Liquidity Facility CapMAC will be able, subject to satisfying
certain conditions, to borrow funds from time to time in order to enable it to
fund any claim payments or payments made in settlement or mitigation of claims
payments under its surety bonds, including the Surety Bond(s).
Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which
differ from generally accepted accounting
principles, and filed with the Insurance
Department of the State of New York are
available upon request. CapMAC is located at 885 Third Avenue, New York, New
York 10022, and its telephone number is (212) 755-1155.
AMBAC Indemnity Corporation ("AMBAC Indemnity") is a Wisconsin-domiciled
stock insurance corporation regulated by the Office of the Commissioner of
Insurance of the State of Wisconsin and licensed to do business in 50 states,
the District of Columbia and the Commonwealth of Puerto Rico, with admitted
assets of approximately $1,503,000,000 (unaudited) and statutory capital of
approximately $862,000,000 (unaudited) as of September 30, 1992. Statutory
capital consists of AMBAC Indemnity's policyholders' surplus and statutory
contingency reserve. AMBAC Indemnity is
a wholly owned subsidiary of AMBAC Inc.,
a 100% publicly-held company. Moody's Investors Service, Inc. and Standard &
Poor's Corporation have both assigned a
triple-A claims-paying ability rating to
AMBAC Indemnity.
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<PAGE>
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Indemnity. The address of AMBAC
Indemnity's administrative offices and
its telephone number are One State Street
Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Indemnity has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Indemnity has been and will be assumed by a
number of foreign and domestic unaffiliated reinsurers.
Municipal Bond Investors Assurance Corporation ("MBIA") is the principal
operating subsidiary of MBIA Inc., a New York Stock Exchange listed company.
MBIA Inc. is not obligated to pay the
debts of or claims against MBIA. MBIA is a
limited liability corporation rather
than a several liability association. MBIA
is domiciled in the State of New York and licensed to do business in all fifty
states, the District of Columbia and the Commonwealth of Puerto Rico. As of
December 31, 1991 MBIA had admitted assets of $2.0 billion (audited), total
liabilities of $1.4 billion (audited), and total capital and surplus of $647
million (audited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. As of June 30,
1993, MBIA had admitted assets of $2.9
billion (unaudited), total liabilities of
$1.9 billion (unaudited), and total capital and surplus of $945 million
(unaudited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. Copies of MBIA's
year end financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King Street,
Armonk, New York 10504.
Effective December 31, 1989, MBIA
Inc. acquired Bond Investors Group, Inc.
On January 5, 1990, MBIA acquired all of
the outstanding stock of Bond Investors
Group, Inc., the parent of Bond
Investors Guaranty Insurance Company (BIG), now
known as MBIA Insurance Corp. of
Illinois. Through a reinsurance agreement, BIG
has ceded all of its net insured risks, as well as its unearned premium and
contingency reserves, to MBIA and MBIA has reinsured BIG's net outstanding
exposure.
Moody's Investors Service, Inc.
rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG 1," both designated to be of the highest quality.
Standard & Poor's Corporation rates all new issues insured by MBIA "AAA"
Prime Grade.
The Moody's Investors Service, Inc. rating of MBIA should be evaluated
independently of the Standard & Poor's Corporation rating of MBIA. No
application has been made to any other rating agency in order to obtain
additional ratings on the Obligations.
The ratings reflect the respective rating
agency's current assessment of the creditworthiness of MBIA and its ability to
pay claims on its policies of insurance. Any further explanation as to the
significance of the above ratings may be obtained only from the applicable
rating agency.
The above ratings are not recommendations to buy, sell or hold the
Obligations and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of either or
both ratings may have an adverse effect
on the market price of the Obligations.
Financial Guaranty Insurance
Company ("Financial Guaranty" or "FGIC") is a
wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware
holding company. The Corporation is a wholly-owned subsidiary of General
Electric Capital Corporation ("GECC"). Neither the Corporation nor GECC is
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of June 30, 1993,
the total capital and surplus of Financial Guaranty was approximately
$686,140,000. Copies of Financial Guaranty's financial statements, prepared on
the basis of statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted accounting principles,
may be obtained by writing to Financial
Guaranty at 115 Broadway, New York, New
York 10006, Attention: Communications Department, telephone number: (212)
312-3000 or to the New York State Insurance Department at 160 West Broadway,
18th Floor, New York, New York 10013, Attention: Property Companies Bureau,
telephone number: (212) 621-0389.
In addition, Financial Guaranty is
currently licensed to write insurance in
all 50 states and the District of Columbia.
Financial Security Assurance Inc. ("Financial Security" or "FSA") is a
monoline insurance company incorporated
on March 16, 1984 under the laws of the
State of New York. The operations of Financial Security commenced on July 25,
1985, and Financial Security received its New York State insurance license on
September 23, 1985. Financial Security
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<PAGE>
and its two wholly owned subsidiaries are licensed to engage in the financial
guaranty insurance business in 49 states, the District of Columbia and Puerto
Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect of
asset-backed and other collateralized
securities offered in domestic and foreign
markets. Financial Security and its subsidiaries also write financial guaranty
insurance in respect of municipal and other obligations and reinsure financial
guaranty insurance policies written by other leading insurance companies. In
general, financial guaranty insurance
consists of the issuance of a guaranty of
scheduled payments of an issuer's securities, thereby enhancing the credit
rating of those securities, in consideration for payment of a premium to the
insurer.
Financial Security is approximately 91.6% owned by US WEST, Inc. and 8.4%
owned by The Tokio Marine and Fire
Insurance Co., Ltd. ("Tokio Marine"). Neither
US WEST, Inc. nor Tokio Marine is obligated to pay the debts of or the claims
against Financial Security. Financial
Security is domiciled in the State of New
York and is subject to regulation by the
State of New York Insurance Department.
As of September 30, 1992, the total policyholders' surplus and contingency
reserves and the total unearned premium reserve, respectively, of Financial
Security and its consolidated subsidiaries were, in accordance with generally
accepted accounting principles, approximately $456,840,000 (unaudited) and
$231,686,000 (unaudited), and the total shareholders' equity and the total
unearned premium reserve, respectively, of Financial Security and its
consolidated subsidiaries were, in
accordance with generally accepted accounting
principles, approximately $615,376,000
(unaudited) and $213,838,000 (unaudited).
Copies of Financial Security's financial statements may be obtained by writing
to Financial Security at 350 Park
Avenue, New York, New York, 10022, Attention:
Communications Department. Its telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written by Financial Security or either of its subsidiaries are
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations.
In addition, Financial Security reinsures
a portion of its liabilities under certain of its financial guaranty insurance
policies with unaffiliated reinsurers
under various quota share treaties and on
a transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc., and "AAA" by Standard & Poor's Corporation, Nippon
Investors Service Inc., Duff & Phelps
Inc. and Australian Ratings Pty. Ltd. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
Capital Guaranty Insurance Company
("Capital Guaranty") was incorporated in
Maryland on June 25, 1986, and is a
wholly-owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company.
Capital Guaranty Corporation is owned by the following investors:
Constellation Investments, Inc., an affiliate of Baltimore Gas and Electric;
Fleet/Norstar Financial Group, Inc.; Safeco Corporation; Sibag Finance
Corporation, an affiliate of Siemens A.G.; and United States Fidelity and
Guaranty Company and management.
Capital Guaranty, headquartered in San Francisco, is a monoline financial
guaranty insurer engaged in the underwriting and development of financial
guaranty insurance. Capital Guaranty insures general obligation, tax supported
and revenue bonds structured as tax-exempt and taxable securities as well as
selectively insures taxable
corporate/asset backed securities. Standard & Poor's
Corporation rates the claims paying ability of Capital Guaranty "AAA."
Capital Guaranty's insured
portfolio currently includes over $9 billion in
total principal and interest insured. As of December 31, 1990, the total
policyholders' surplus of Capital Guaranty was $103,802,396 (audited), and the
total admitted assets were $180,118,227 (audited) as reported to the Insurance
Department of the State of Maryland. Financial statements for Capital Guaranty
Insurance Company, that have been prepared in accordance with statutory
insurance accounting standards, are available upon request. The address of
Capital Guaranty's headquarters and its
telephone number are Steuart Tower, 22nd
Floor, One Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000.
Because the Obligations are insured by CapMAC, MBIA or AMBAC Indemnity as
to the timely payment of principal and interest, when due (as more fully
described above), and on the basis of the various reinsurance agreements in
effect,
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Standard & Poor's Corporation has assigned to the Units of the Trust its "AAA"
investment rating. See "Investment Objectives and Portfolio Selection". The
obtaining of this rating by the Trust
should not be construed as an approval of
the offering of the Units by Standard and Poor's Corporation or as a guarantee
of the market value of the Trust or of the Units.
On the date of this Prospectus, the Estimated Current Return on the
Obligations in Series 32 portfolio was 6.43% based on the semi-annual plan of
distribution, after payment of the insurance premiums payable by the Trust,
while the Estimated Long-Term Return on the Obligations in the Trust portfolio
was 6.39%. The Estimated Current Return on an identical portfolio without the
insurance obtained by the Trust would
have been 6.60% based on such semi-annual
distribution plan on such date, while the Estimated Long-Term Return on
identical portfolios without the
insurance obtained by the Trust would have been
6.55%.
An objective of portfolio insurance obtained by the Trust is to obtain a
higher yield on the Trust portfolio than would be available if all the
Obligations in such portfolio had
Standard & Poor's Corporation "AAA" rating and
yet at the same time to have the protection of insurance of prompt payment of
interest and principal, when due (as more fully described above), on the
Obligations. There is, of course, no certainty that this result will be
achieved.
In the event of nonpayment of interest or principal, when due (as more
fully described above), in respect of an Obligation, the appropriate Insurer
shall make such payment within 30 days after it has been notified that such
nonpayment has occurred. The appropriate
Insurer, as regards any payment it may
make, will succeed to the rights of the Trustee in respect thereof.
The information relating to the Insurers has been furnished by the
respective Insurers. The financial information with respect to the Insurers
appears in reports filed with state insurance regulatory authorities and is
subject to audit and review by such authorities. No representation is made
herein as to the accuracy or adequacy of such information or as to the absence
of material adverse changes in such
information subsequent to the dates thereof.
TAX STATUS
For purposes of the following
discussions and opinions, it is assumed that
interest on each of the Obligations is
included in gross income for Federal income tax purposes. In the opinion of
Chapman and Cutler, special counsel for the Sponsor, under existing law:
The Trust is not an association
taxable as a corporation for United States
Federal income tax purposes.
Each Unitholder will be considered
the owner of a pro rata portion of each
of the Trust's assets for Federal income tax purposes under Subpart E,
Subchapter J of Chapter 1 of the Internal Revenue Code of 1986 (the "Code").
Each Unitholder will be considered to have received his pro rata share of
interest derived from each such asset when such interest is received by the
Trust. Each Unitholder will also be required to include in taxable income for
Federal income tax purposes, original issue discount with respect to his
interest in any Obligations held by the Trust at the same time and in the same
manner as though the Unitholder were the direct owner of such interest.
Each Unitholder will have a taxable event when an Obligation of the Trust
is disposed of (whether by sale, exchange, redemption, or payment at maturity)
or when the Unitholder redeems or sells his Units. The cost of the Units to a
Unitholder on the date such Units are purchased is allocated among the
Obligations held in the Trust (in accordance with the proportion of the fair
market values of such Obligations) in order to determine his tax basis for his
pro rata portion in each Obligation. Unitholders must reduce the tax basis of
their Units for their share of accrued
interest received, if any, on Obligations
delivered after the date the Unitholders
pay for their Units and, consequently,
such Unitholders may have an increase in taxable gain or reduction in capital
loss upon the disposition of such Units. Gain or loss upon the sale or
redemption of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee disposes of
Obligations, gain or loss is recognized to the Unitholder. The amount of any
such gain or loss is measured by comparing the Unitholder's pro rata share of
the total proceeds from such disposition with his basis for his fractional
interest in the asset disposed of. The
basis of each Unit and of each Obligation
which was issued with original issue discount (including the Treasury Bonds)
must be increased by the amount of
accrued original issue discount and the basis
of each Unit and of each Obligation
which was purchased by a Trust at a premium
must be reduced by the annual
amortization of bond premium which the Unitholder
has properly elected to amortize under Section 171 of the Code. The tax cost
reduction requirements of the Code
relating to amortization of bond premium may,
under some circumstances, result in the
Unitholder realizing a taxable gain when
his Units are sold or redeemed for an
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amount equal to or less than his original cost. The Treasury Bonds held by the
Trust are treated as bonds that were originally issued at an original issue
discount provided, pursuant to a Treasury Regulation (the "Regulation") issued
on December 28, 1992, that the amount of original issue discount determined
under Section 1286 of the Code is not less than a "de minimis" amount as
determined thereunder (as discussed below under "Original Issue Discount").
Because the Treasury Bonds represent interests in "stripped" U.S. Treasury
bonds, a Unitholder's initial cost for his pro rata portion of each Treasury
Bond held by the Trust (determined at the time he acquires his Units, in the
manner described above) shall be treated as its "purchase price" by the
Unitholder. Original issue discount is effectively treated as interest for
Federal income tax purposes, and the amount of original issue discount in this
case is generally the difference between the bond's purchase price and its
stated redemption price at maturity. A
Unitholder will be required to include in
gross income for each taxable year the sum of his daily portions of original
issue discount attributable to the Treasury Bonds held by the Trust as such
original issue discount accrues and will, in general, be subject to Federal
income tax with respect to the total
amount of such original issue discount that
accrues for such year even though the income is not distributed to the
Unitholders during such year to the extent it is not less than a "de minimis"
amount as determined under the Regulation. In general, original issue discount
accrues daily under a constant interest
rate method which takes into account the
semi-annual compounding of accrued
interest. In the case of the Treasury Bonds,
this method will generally result in an increasing amount of income to the
Unitholders each year. Unitholders should consult their tax advisers regarding
the Federal income tax consequences and accretion of original issue discount.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him, subject to the following
limitation. It should be noted that as a result
of the Tax Reform Act of 1986, certain miscellaneous itemized deductions, such
as investment expenses, tax return preparation fees and employee business
expenses will be deductible by an individual only to the extent they exceed 2%
of such individual's adjusted gross income. Temporary regulations have been
issued which require Unitholders to treat certain expenses of the Trust as
miscellaneous itemized deductions subject to this limitation.
ACQUISITION PREMIUM. If a Unitholder's tax basis of his pro rata portion
in any Obligations held by the Trust
exceeds the amount payable by the issuer of
the Obligation with respect to such pro rata interest upon the maturity of the
Obligation, such excess would be considered "acquisition premium" which may be
amortized by the Unitholder at the
Unitholder's election as provided in Section
171 of the Code. Unitholders should
consult their tax advisors regarding whether
such election should be made and the manner of amortizing acquisition premium.
ORIGINAL ISSUE DISCOUNT. Certain
of the Obligations of the Trust may have
been acquired with "original issue
discount." In the case of any Obligation of a
Trust acquired with "original issue
discount" that exceeds a "de minimis" amount
as specified in the Code or in the case of the Treasury Bonds as specified in
the Regulation, such discount is
includable in taxable income of the Unitholders
on an accrual basis computed daily,
without regard to when payments of interest
on such Obligations are received. The Code provides a complex set of rules
regarding the accrual of original issue discount. These rules provide that
original issue discount generally accrues on the basis of a constant compound
interest rate over the term of the
Obligations. Unitholders should consult their
tax advisers as to the amount of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Obligation by a Trust exceeds its original issue price plus the amount of
original issue discount which would have
previously accrued based upon its issue
price (its "adjusted issue price"). Unitholders should also consult their tax
advisers regarding these special rules. Similarly these special rules would
apply to a Unitholder if the tax basis
of his pro rata portion of an Obligation
issued with original issue discount
exceeds his pro rata portion of its adjusted
issue price.
MARKET DISCOUNT. If a Unitholder's tax basis in his pro rata portion of
Obligations is less than the allocable portion of such Obligation's stated
redemption price at maturity (or, if issued with original issue discount, the
allocable portion of its "revised issue
price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount
accrues daily computed on a straight line
basis, unless the Unitholder elects to
calculate accrued market discount under a
constant yield method. The market
discount rules do not apply to Treasury Bonds
because they are stripped debt instruments subject to special original issue
discount rules as discussed above.
Unitholders should consult their tax advisors
as to the amount of market discount which accrues.
18
<PAGE>
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt of
serial principal payments on the Obligations, on the sale, maturity or
disposition of such Obligations by the
Trust, and on the sale by a Unitholder of
Units, unless a Unitholder elects to include the accrued market discount in
taxable income as such discount accrues. If a Unitholder does not elect to
annually include accrued market discount in taxable income as it accrues,
deductions for any interest expense
incurred by the Unitholder which is incurred
to purchase or carry his Units will be
reduced by such accrued market discount.
In general, the portion of any interest expense which was not currently
deductible would ultimately be deductible when the accrued market discount is
included in income. Unitholders should consult their tax advisers regarding
whether an election should be made to include market discount in income as it
accrues and as to the amount of interest expense which may not be currently
deductible.
COMPUTATION OF THE UNITHOLDER'S TAX BASIS. The tax basis of a Unitholder
with respect to his interest in an Obligation is increased by the amount of
original issue discount (and market discount, if the Unitholder elects to
include market discount, if any, on the
Obligations held by the Trust in income
as it accrues) thereon properly included in the Unitholder's gross income as
determined for Federal income tax purposes and reduced by the amount of any
amortized acquisition premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. A Unitholder's tax basis in his Units
will equal his tax basis in his pro rata portion of all of the assets of the
Trust.
RECOGNITION OF TAXABLE GAIN OR LOSS
UPON DISPOSITION OF OBLIGATIONS BY THE
TRUST OR DISPOSITION OF UNITS. A
Unitholder will recognize taxable capital gain
(or loss) when all or part of his pro
rata interest in an Obligation is disposed
of in a taxable transaction for an amount greater (or less) than his tax basis
therefor. Any gain recognized on a sale or exchange and not constituting a
realization of accrued "market
discount," and any loss will, under current law,
generally be capital gain or loss except in the case of a dealer or financial
institution. As previously discussed, gain realized on the disposition of the
interest of a Unitholder in any Obligation deemed to have been acquired with
market discount will be treated as ordinary income to the extent the gain does
not exceed the amount of accrued market discount not previously taken into
income. Any capital gain or loss arising from the disposition of an Obligation
by the Trust or the disposition of Units by a Unitholder will be short-term
capital gain or loss unless the
Unitholder has held his Units for more than one
year in which case such capital gain or loss will be long-term. For taxpayers
other than corporations, net capital gains are subject to a maximum marginal
stated tax rate of 28 percent. "The Revenue Reconciliation Act of 1993" (the
"Tax Act"), was recently enacted. The Tax Act raises tax rates on ordinary
income while capital gains remain
subject to a 28% maximum stated rate. Because
some or all capital gains are taxed at a
comparatively lower rate under the Tax
Act, the Tax Act includes a provision that characterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after April
30, 1993. Unitholders and prospective investors should consult with their tax
advisers regarding the potential effect
of this provision on their investment in
Units.
If the Unitholder disposes of a
Unit, he is deemed thereby to have disposed
of his entire pro rata interest in all Trust assets including his pro rata
portion of all of the Obligations
represented by the Unit. This may result in a
portion of the gain, if any, on such
sale being taxable as ordinary income under
the market discount rules (assuming no election was made by the Unitholder to
include market discount in income as it accrues) as previously discussed. The
tax cost reduction requirements of the Code relating to amortization of bond
premium may under some circumstances,
result in the Unitholder realizing taxable
gain when his Units are sold or redeemed
for an amount equal to or less than his
original cost.
FOREIGN INVESTORS. A Unitholder who is a foreign investor (i.e., an
investor other than a U.S. citizen or resident or a U.S. corporation,
partnership, estate or trust) will not be subject to United States Federal
income taxes, including withholding taxes, on interest income (including any
original issue discount) on, or any gain
from the sale or other disposition of,
his pro rata interest in any Obligation or the sale of his Units provided that
all of the following conditions are met:
(i) the interest income or gain is not
effectively connected with the conduct by the foreign investor of a trade or
business within the United States, (ii) the interest is United States source
income (which is the case for most
securities issued by United States issuers),
the Obligation is issued after July 18, 1984 (which is the case for each
Obligation held by the Trust), the foreign investor does not own, directly or
indirectly, 10% or more of the total combined voting power of all classes of
voting stock of the issuer of the Obligation and the foreign investor is not a
controlled foreign corporation related
(within the meaning of Section 864(d)(4)
of the Code) to the issuer of the Obligation, (iii) with respect to any gain,
19
<PAGE>
the foreign investor (if an individual)
is not present in the United States for
183 days or more during his or her taxable year and (iv) the foreign investor
provides all certification which may be required of his status. Foreign
investors should consult their tax advisers with respect to United States tax
consequences of ownership of Units. It
should be noted that the Tax Act includes
a provision which eliminates the exemption from United States taxation,
including withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion is expressed
herein regarding the potential applicability of this provision and whether
United States taxation or withholding taxes could be imposed with respect to
income derived from the Units as a result thereof. Unitholders and prospective
investors should consult with their tax
advisers regarding the potential effect
of this provision on their investment in Units.
GENERAL. Each Unitholder (other than a foreign investor who has properly
provided the certifications described in the preceding paragraph) 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 will be subject to
back-up withholding.
In the opinion of Tanner Propp & Farber, special counsel to the Trust for
New York tax matters, the Trust is not an association taxable as a corporation
and the income of such 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 United States Federal and New York
State and City income taxes; Unitholders may be subject to state and local
taxation in other jurisdictions (including a foreign investor's country of
residence). Unitholders should consult their tax advisers regarding potential
state, local, or foreign taxation with respect to the Units.
PUBLIC OFFERING
GENERAL. Units are offered at the
Public Offering Price (which during the
initial offering period is based on the offering prices of the Obligations in
the Trust and includes a sales charge of 4.9% of the Public Offering Price
(5.152% of the aggregate offering price
of the Obligations). However, the sales
charge applicable to quantity purchases
is, during the initial offering period,
reduced on a graduated basis to any person acquiring 100 or more Units as
follows:
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF SALES
AGGREGATE NUMBER OF UNITS PURCHASED CHARGE REDUCTION PER UNIT
<S> <C>
100-249 Units.......................................................... $ 4.00
250-499 Units.......................................................... $ 6.00
500-999 Units.......................................................... $ 14.00
1,000 or more Units.................................................... $ 19.00
</TABLE>
In the secondary market, Units are offered at the Public Offering Price
which is based on the bid prices of all the Obligations and includes a sales
charge determined in accordance with the
table set forth below and is based upon
the dollar weighted average maturity of the Trust, plus accrued and
undistributed interest to the settlement date. For purposes of computation,
Obligations will be deemed to mature on their expressed maturity dates unless:
(a) the Obligations have been called for
redemption or funds or securities have
been placed in escrow to redeem them on
an earlier call date, in which case such
call date will be deemed to be the date upon which they mature; or (b) such
Obligations are subject to a "mandatory tender", in which case such mandatory
tender will be deemed to be the date
upon which they mature. The effect of this
method of sales charge computation will be that different sales charges rates
will be applied to the Trust based upon
the dollar weighted average maturity of
such Trust's portfolio, in accordance with the following schedule:
20
<PAGE>
<TABLE>
<CAPTION>
YEARS TO MATURITY SALES CHARGE YEARS TO MATURITY SALES CHARGE
<S> <C> <C> <C>
1..................... 1.523% 9..................... 4.712%
2..................... 2.041 10.................... 4.932
3..................... 2.564 11.................... 4.932
4..................... 3.199 12.................... 4.932
5..................... 3.842 13.................... 5.374
6..................... 4.058 14.................... 5.374
7..................... 4.275 15.................... 5.374
8..................... 4.493 16 to 30.............. 6.045
</TABLE>
The sales charges in the above table are expressed as a percentage of the
net amount invested. Expressed as a percent of the Public Offering Price, the
sales charge on a Trust consisting entirely of a portfolio of Obligations with
15 years to maturity would be 5.10%.
Registered representatives of selling Underwriters may purchase Units of
the Trust at the current Public Offering
Price less the underwriting commission
during the initial offering period, and less the dealer's concession for
secondary market transactions. Registered representatives of selling brokers,
dealers, or agents may purchase Units of the Trust at the current Public
Offering Price less the dealer's concession during the initial offering period
and for secondary market transactions.
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker, dealer or agent. The Sponsor will, however, increase the
concession or agency commission for such quantity purchases. See "Public
Offering--Unit Distribution". This
reduced sales charge structure will apply on
all purchases by the same person from
any one Underwriter or dealer of units of
Van Kampen Merritt-sponsored unit investment trusts which are being offered in
the initial offering period (a) on any
one day (the "Initial Purchase Date") or
(b) on any day subsequent to the Initial Purchase Date if (1) the units
purchased are of a unit investment trust
purchased on the Initial Purchase Date,
and (2) the person purchasing the units purchased a sufficient amount of units
on the Initial Purchase Date to qualify
for a reduced sales charge on such date.
To determine the applicable sales charge
for units purchased in accordance with
(b) above, it is necessary to accumulate all purchases made on the Initial
Purchase Date and all purchases made in accordance with (b) above. Units
purchased in the name of the spouse of a
purchaser or in the name of a child of
such purchaser under 21 years of age will be deemed for the purposes of
calculating the applicable sales charge to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a trustee or
other fiduciary purchasing securities
for one or more trust estate or fiduciary
accounts.
ACCRUED INTEREST (ACCRUED INTEREST TO CARRY). Accrued interest to carry
consists of two elements. The first element arises as a result of accrued
interest which is the accumulation of unpaid interest on a bond from the last
day on which interest thereon was paid. Interest on Obligations in theTrust is
actually paid either monthly or semi-annually to such Trust. However, interest
on the Obligations in such Trust is accounted for daily on an accrual basis.
Because of this, the Trust always has an amount of interest earned but not yet
collected by the Trustee because of coupons that are not yet due. For this
reason, the Public Offering Price of Units will have added to it the
proportionate share of accrued and undistributed interest to the date of
settlement.
The Trustee will advance the amount of accrued interest as of the First
Settlement Date and the same will be distributed to the Sponsor. Such advance
will be repaid to the Trustee through
the first receipts of interest received on
the Obligations. Consequently, the
amount of accrued interest to be added to the
Public Offering Price of Units will
include only accrued interest arising after
the First Settlement Date of the Trust,
less any distributions from the Interest
Account subsequent to this First Settlement Date. Since the First Settlement
Date is the date of settlement for
anyone ordering Units on the Date of Deposit,
no accrued interest will be added to the
Public Offering Price of Units ordered
on the Date of Deposit.
The second element of accrued interest to carry arises because of the
structure of the Interest Account. The Trustee has no cash for distribution to
Unitholders until it receives interest
payments on the Obligations in the Trust.
The Trustee is obligated to provide its
own funds, at times, in order to advance
interest distributions. The Trustee will recover these advancements when such
interest is received. Interest Account
balances are established so that it will
not be necessary on a regular basis for
the Trustee to advance its own funds in
connection with such interest distributions. The Interest Account balances are
also structured so that there will
generally be positive cash balances and since
the funds held by
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<PAGE>
the Trustee will be used by it to earn interest thereon, it benefits thereby
(see "Trust Operating Expenses--Trustee's Fee").
Accrued interest to carry is
computed as of the Initial Record Date of the
Trust. As stated on page 2 of this Prospectus, the first distribution of
interest to Trust Unitholders after the First Settlement Date will be made on
December 15, 1993 to Unitholders of record on December 1, 1993 and will amount
to $2.00 per Unit. On this date, the interest collected by the Trustee will be
sufficient to repay its advances, to allow for accrued interest to carry under
the monthly and semi-annual plans of distribution equal to approximately
$13.79 and $13.90, respectively, and to
generate enough cash to commence distributions
to Unitholders. If a Unitholder sells or redeems all or a portion of his Units
or if the Obligations in a Trust are sold or otherwise removed or if the Trust
is liquidated, he will receive at that time his proportionate share of the
accrued interest to carry computed to
the settlement date in the case of sale or
liquidation and to the date of tender in the case of redemption.
OFFERING PRICE. The Public
Offering Price of the Units will vary from the
amounts stated under "Summary of
Essential Financial Information" in accordance
with fluctuations in the prices of the underlying Obligations in the Trust.
As indicated above, the price of
the Units as of 8:00 A.M. Central time or
the opening of business on the date the
Obligations were deposited in the Trust
was determined by adding to the
determination of the aggregate offering price of
the Obligations an amount equal to
5.152%, of such value and dividing the sum so
obtained by the number of Units outstanding. This computation produced a gross
underwriting profit equal to 4.9% of the Public Offering Price. Such price
determination as of 8:00 A.M. Central time or the opening of business on the
Date of Deposit was made on the basis of
an evaluation of the Obligations in the
Trust prepared by Interactive Data Services, Inc., a firm regularly engaged in
the business of evaluating, quoting or
appraising comparable securities. Except
on the Date of Deposit during the period
of initial offering, the Evaluator will
appraise or cause to be appraised daily
the value of the underlying Obligations
as of 4:00 P.M. Eastern time on days the New York Stock Exchange is open and
will adjust the Public Offering Price of the Units commensurate with such
appraisal. Such Public Offering Price
will be effective for all orders received
at or prior to 4:00 P.M. Eastern time 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. For secondary market sales the Public
Offering Price per Unit will be equal to the aggregate bid price of the
Obligations in the Trust plus an amount
equal to the applicable secondary market
sales charge expressed as a percentage
of the aggregate bid price of such value
and dividing the sum so attained by the number of Units then outstanding. This
computation produces a gross underwriting profit equal to such sales charge
expressed as a percentage of the Public Offering Price. For secondary market
purposes such appraisal and adjustment
will be made by the Evaluator as of 4:00
P.M. Eastern time on days on which the
New York Stock Exchange is open for each
day on which any Unit of a Trust is tendered for redemption, and it shall
determine the aggregate value of such
Trust as of 4:00 P.M. Eastern time on such
other days as may be necessary.
The aggregate price of the Obligations in the Trust has been and will be
determined on the basis of bid prices or
offering prices, as appropriate, (a) on
the basis of current market prices for
the Obligations obtained from dealers or
brokers who customarily deal in bonds
comparable to those held by the Trust; (b)
if such prices are not available for any
particular Obligations, on the basis of
current market prices for comparable bonds; (c) by causing the value of the
Obligations to be determined by others engaged in the practice of evaluation,
quoting or appraising comparable bonds;
or (d) by any combination of the above.
Unless the Obligations are in default in
payment of principal or interest or in
significant risk of such default, the
Evaluator will not attribute any value to
the insurance obtained by the Trust.
The Evaluator will consider in its evaluation of Obligations which are in
default in payment of principal or interest or, in the Sponsor's opinion, in
significant risk of such default (the
"Defaulted Obligations") the value of the
insurance guaranteeing interest and principal payments. The value of the
insurance will be equal to the difference between (i) the market value of
Defaulted Obligations assuming the exercise of the right to obtain Permanent
Insurance (less the insurance premium and related expenses attributable to the
purchase of Permanent Insurance) and (ii) the market value of such Defaulted
Obligations not covered by Permanent
Insurance. In addition, the Evaluator will
consider the ability of the Portfolio Insurer involved to meet its commitments
under theTrust's insurance policy,
including the commitments to issue Permanent
Insurance. It is the position of the Sponsor that this is a fair method of
valuing the Obligations and the insurance obtained by the Trust and reflects a
proper valuation method in accordance with the provisions of the Investment
Company Act of 1940.
22
<PAGE>
No value has been ascribed to insurance obtained by the Trust as of the
date of this Prospectus.
The initial or primary Public
Offering Price of the Units and the Sponsor's
initial repurchase price per Unit are based on the offering price per Unit of
the underlying Obligations plus the
applicable sales charge and interest accrued
but unpaid from the First Settlement Date to the date of settlement. The
secondary market Public Offering Price and the Redemption Price per Unit are
based on the bid price per Unit of the Obligations in the Trust plus the
applicable sales charge and accrued
interest. The offering price of Obligations
in the Trust may be expected to range from .35%-1% more than the bid price of
such Obligations. On the Date of Deposit, the offering side evaluation of the
Obligations in the Trust were higher than the bid side evaluation of such
Obligations by 0.72% of the aggregate principal amount of such Obligations.
Although payment is normally made five business days following the order
for purchase, payment may be made prior thereto. However, delivery of
certificates representing Units so ordered will be made five business days
following such order or shortly thereafter. A person will become the owner of
Units on the date of settlement provided payment has been received. 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.
UNIT DISTRIBUTION. During the initial offering period, Units will be
distributed to the public by Underwriters, broker-dealers and others (see
"Underwriting") at the Public Offering
Price, plus accrued interest computed as
described above under "Accrued Interest (Accrued Interest to Carry)". Upon the
completion of the initial offering, Units repurchased in the secondary market,
if any, may be offered by this
prospectus at the secondary Public Offering Price
in the manner described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of
Units during the initial offering period of
$30.00 per Unit for less than 100 Units, $36.00 per Unit for any single
transaction of 100 to 249 Units, $38.00 per Unit for any single transaction of
250 to 499 Units, $39.00 per Unit for
any single transaction of 500 to 999 Units
and $39.00 per Unit for any single
transaction of 1,000 or more Units, provided
that such Units are acquired either from the Sponsor (in the case of dealer
transactions) or through the Sponsor (in the case of transactions involving
brokers or others). The increased
concession or agency commission is a result of
the discount given to purchasers for quantity purchases. See "Public
Offering--General". 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
Units of the Trust; 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. In addition, state
securities laws on this issue may differ
from the interpretations of Federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state
law. Any quantity discount (see "General"
above) provided to investors will be borne by the selling dealer or agent. For
secondary market transactions, such
concession or agency commission will amount
to 4% of the Public Offering Price per Unit.
To facilitate the handling of transactions during the initial offering
period, sales of Units shall normally be limited to transactions involving a
minimum of five Units. Further purchases may be made in multiples of one Unit.
The minimum purchase in the secondary market will be one Unit.
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. See "Underwriting".
SPONSOR AND UNDERWRITER
COMPENSATION. The Underwriters through the initial
or primary distribution of Units will
receive a gross sales commission equal to
4.9% of the Public Offering Price of the Units (5.152% of the net amount
invested), less any reduced sales charge for quantity purchases as described
under "General" above.
The Sponsor will receive from the Underwriters the excess of such gross
sales commission over $35.00 per Unit as of the Date of Deposit. In connection
with quantity sales to purchasers of the Trust the Underwriters will receive
from the Sponsor commissions totalling $37.00 per Unit for any single
transaction of 100 to 249 Units, $39.00 per Unit for any single transaction of
250 to 499 Units, $40.00 per Unit for
any single transaction of 500 to 999 Units
and $39.00 per Unit for any single transaction of 1,000 or more Units. See
"Public Offering--General". Further, each Underwriter who
23
<PAGE>
underwrites 1,000 or more Units in any Trust will receive additional
compensation from the Sponsor of $1.00 for each Unit is underwrites. In
addition, the Sponsor and the
Underwriters will realize a profit or the Sponsor
will sustain a loss, as the case may be, as a result of the difference between
the price paid for the Obligations by the Sponsor and the cost of such
Obligations to the Trust (which is based on the determination of the aggregate
offering price of the Obligations in such Trust on the Date of Deposit as
prepared by Interactive Data Services, Inc.). See "Underwriting" and
"Portfolio". The Sponsor and the Underwriters may also realize profits or
sustain losses with respect to Obligations deposited in a Trust which were
acquired by the Sponsor from
underwriting syndicates of which they were members.
The Sponsor has not participated as sole underwriter or as manager or as a
member of any underwriting syndicates from which any of the Obligations in the
portfolio of the Trust were acquired. The Underwriters may further realize
additional profit or loss during the
initial offering period as a result of the
possible fluctuations in the market
value of the Obligations in the Trust after
the Date of Deposit, since all proceeds received from purchasers of Units
(excluding dealer concessions or agency commissions allowed, if any) will be
retained by the Underwriters. Affiliates of an Underwriter are entitled to the
same dealer concessions or agency commission that are available to the
Underwriter.
As stated under "Public Market"
below, the Sponsor intends to, and certain
of the other Underwriters may, maintain
a secondary market for the Units of the
Trust. In so maintaining a market, the Sponsor or any such Underwriters 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 is based on the bid prices of the Obligations in the Trust and
includes a sales charge). In addition,
the Sponsor or any such Underwriters 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. During the initial public offering period, the Sponsor
and/or certain of the other Underwriters
intend to offer to purchase Units at a
price based on the aggregate offering price per Unit of the Obligations in the
Trust (plus accrued interest) less the related sales commission. Afterward,
although they are not obligated to do
so, the Sponsor intends to, and certain of
the other Underwriters may, maintain a market for the Units offered hereby and
to offer continuously to purchase such
Units at prices, subject to change at any
time, based upon the aggregate bid price of the Obligations in the portfolio
plus interest accrued to the date of
settlement plus any principal cash on hand,
less any amounts representing taxes or
other governmental charges payable out of
a Trust and less any accrued Trust expenses. If the supply of Units exceeds
demand or if some other business reason warrants it, the Sponsor and/or the
other Underwriters may either
discontinue all purchases of Units or discontinue
purchases of Units at such prices. In
the event that a market is not maintained
for the Units and the Unitholder cannot find another purchaser, a Unitholder
desiring to dispose of his Units may be able to dispose of such Units only by
tendering them to the Trustee for redemption at the Redemption Price, which is
based upon the aggregate bid price of the Obligations in the portfolio. The
aggregate bid prices of the underlying
Obligations in the Trust are expected to
be less than the related aggregate offering prices. 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.
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 separate registered certificates
executed by the Trustee and the Sponsor. Certificates are transferable by
presentation and surrender to the
Trustee properly endorsed or accompanied by a
written instrument or instruments of
transfer. A Unitholder must sign exactly as
his name appears on the face of the
certificate with the signature guaranteed by
a participant in the Securities Transfer Agents Medallion Program ("STAMP") or
such other signature guaranty 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
24
<PAGE>
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 INTEREST AND PRINCIPAL. Interest received by the Trust,
including that part of the proceeds of any disposition of Obligations which
represents accrued interest and including any insurance proceeds representing
interest due on defaulted Obligations, is credited by the Trustee to the
Interest Account. Other receipts are
credited to the Principal Account. Interest
received by the Trust after deduction of amounts sufficient to reimburse the
Trustee, without interest, for any amounts advanced and paid to the Sponsor as
the Unitholder of record as of the First
Settlement Date (see "Public Offering--
Offering Price") will be distributed on or shortly after the fifteenth day of
each month on a pro rata basis to Unitholders of record as of the preceding
record date (which will be the first day of the month) who are entitled to
distributions at that time under the plan of distribution chosen. All
distributions will be net of applicable
expenses. The pro rata share of cash in
the Principal Account will be computed on the date indicated under
"Distribution" on page 2, and thereafter
as of the semi-annual record date, and
distributions to the Unitholders as of such record date will be made on or
shortly after the fifteenth day of such month. Proceeds received from the
disposition of any of the Obligations after such record date and prior to the
following distribution date will be held in the Principal Account and not
distributed until the next distribution
date. The Trustee is not required to pay
interest on funds held in the Principal or Interest Accounts (but may itself
earn interest thereon and therefore
benefits from the use of such funds) nor to
make a distribution from the Principal Account unless the amount available for
distribution shall equal at least $1.00 per Unit. However, should the amount
available for distribution in the Principal Account equal or exceed $10.00 per
Unit, to the extent permissible under the Investment Company Act of 1940, the
Trustee will make a special distribution
from the Principal Account on the next
succeeding monthly distribution date to
holders of record on the related monthly
record date.
The distribution to the Unitholders
as of each record date after the First
Settlement 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 net annual unit income in the
Interest Account after deducting estimated expenses attributable as is
consistent with the distribution plan
chosen. Because interest payments are not
received by the Trust at a constant rate throughout the year, such interest
distribution may be more or less than the amount credited to the Interest
Account as of the record date. For the
purpose of minimizing fluctuation in the
distributions from the Interest Account, the Trustee is authorized to advance
such amounts as may be necessary to provide interest distributions of
approximately equal amounts. The Trustee
shall be reimbursed, without interest,
for any such advances from funds in the Interest Account on the ensuing record
date. 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.
As of the first day of each month, the Trustee will deduct from the
Interest Account and, to the extent funds are not sufficient therein, from the
Principal 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 Interest
and Principal Accounts such amounts as may be necessary to cover purchases of
Replacement Obligations and redemption of Units by the Trustee.
DISTRIBUTION OPTIONS. Purchasers of Units who desire to receive
distributions on a semi-annual basis may elect to do so at the time of
settlement during the initial public offering period. The plan of distribution
selected by such purchasers will remain in effect until changed. Those
indicating no choice will be deemed to have chosen the monthly distribution
plan. However, all Unitholders purchasing Units during the initial public
offering period and prior to the first record date will receive the first
distribution of interest. Thereafter, record dates for monthly distributions
will be the first day of each month and record dates for semi-annual
distributions will be the first day of
June and December. Distributions will be
made on the fifteenth day of the month subsequent to the respective record
dates.
The plan of distribution selected by a Unitholder will remain in effect
until changed. Unitholders purchasing Units in the secondary market will
initially receive distributions in accordance with the election of the prior
owner. Unitholders may change the plan of distribution in which they are
participating. For the convenience of Unitholders, the Trustee will furnish a
card for this purpose; cards may also be
obtained upon request from the Trustee.
Unitholders desiring to change their
25
<PAGE>
plan of distribution may so indicate on the card and return it, together with
their certificate and such other documentation that the Trustee may then
require, to the Trustee. Certificates should only be sent by registered or
certified mail to minimize the
possibility of their being lost or stolen. If the
card and certificate are properly presented to the Trustee, the change will
become effective for all subsequent distributions.
REINVESTMENT OPTION. Unitholders of the Trust may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any of the mutual funds listed under
"Trust Administration--Sponsor" which are registered in the Unitholder's state
of residence. Such mutual funds are
hereinafter collectively referred to as the
"Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trust. 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 Merritt Inc. at
One Parkview Plaza, Oakbrook Terrace, IL 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
interest 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,
plus a sales charge of $1.00 per $100 of
reinvestment except if the participant
selects the Van Kampen Merritt Money Market Fund or the Van Kampen Merritt Tax
Free Money Fund in which case no sales
charge applies. A minimum of one-half of
such sales charge would be paid to Van Kampen Merritt Inc.
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 on his
or her Units in cash. There will be no charge or other penalty for such
termination. Each Reinvestment Fund, its sponsor and its 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 interest and, if any, the amount
of other receipts (received since the
preceding distribution) 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
interests 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 Interest
Account: interest received (including amounts representing interest received
upon any disposition of the Obligations), deductions for applicable taxes and
for fees and expenses of the Trust
(including insurance costs), for purchases of
Replacement Obligations and 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 Principal Account: the dates of disposition of any Obligations and the
net proceeds received therefrom (excluding any portion representing accrued
interest and the premium and any expenses related thereto attributable to the
exercise of the right to obtain Permanent Insurance), the amount paid for
purchases of Replacement Obligations and for redemptions of Units, if any,
deductions for payment of applicable taxes, fees and expenses of the Trust 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 Obligations 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 Interest and
Principal 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
Obligations in a Trust furnished to it by the Evaluator.
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<PAGE>
Each distribution statement will reflect pertinent information in respect
of the other plan of distribution so
that Unitholders may be informed regarding
the results of such other plan of distribution.
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 by the
person seeking redemption or
satisfactory indemnity provided. No redemption fee
will be charged. On the seventh calendar day following such tender, or if the
seventh calendar day is not a business day, on the first business day prior
thereto, the Unitholder will be entitled to receive in cash 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.
Under regulations issued by the
Internal Revenue Service, the Trustee will
be required to withhold a specified
percentage of the principal amount of a Unit
redemption if the Trustee has not been
furnished the redeeming Unitholder's tax
identification number in the manner
required by such regulations. Any amount so
withheld is transmitted to the Internal
Revenue Service and may be recovered by
the Unitholder only when filing a
return. Under normal circumstances the Trustee
obtains the Unitholder's tax identification number from the selling broker.
However, at any time a Unitholder elects to tender Units for redemption, such
Unitholder should provide a tax
identification number to the Trustee in order to
avoid this possible "back-up
withholding" in the event the Trustee has not been
previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account or, if the balance therein is
insufficient, from the Principal Account.
All other amounts will be withdrawn from the Principal Account. The Trustee is
empowered to sell underlying Obligations in order to make funds available for
redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Obligations in the Trust, while the
initial and primary Public Offering Price of
Units will be determined on the basis of
the offering price of the Obligations,
as of 4:00 P.M. Eastern time on days of trading on the New York Stock Exchange
on the date any such determination is made. On the Date of Deposit, the Public
Offering Price per Unit (which is based on the offering prices of the
Obligations and includes the sales charge) exceeded the value at which Units
could have been redeemed (based upon the current bid prices of the Obligations
in such Trust) by the amount shown under "Summary of Essential Financial
Information". 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 such Trust or monies in the
process of being collected, (ii) the value of the Obligations in such Trust
based on the bid prices of the
Obligations, except for those cases in which the
value of insurance has been included, and (iii) interest accrued thereon, less
(a) amounts representing taxes or other
governmental charges payable out of such
Trust and (b) the accrued expenses of such Trust. The Evaluator may determine
the value of the Obligations in the Trust by employing any of the methods set
forth in "Public Offering--Offering
Price". In determining the Redemption Price
per Unit no value will be assigned to the portfolio insurance maintained by a
Trust on the Obligations in such Trust
unless such Obligations are in default in
payment of principal or interest or in significant risk of such default. For a
description of the situations in which the Evaluator may value the insurance
obtained by the Trust, see "Public Offering--Offering Price".
The price at which Units may be
redeemed could be less than the price paid
by the Unitholder. As stated above, the Trustee may sell Obligations to cover
redemptions. When Obligations are sold, the size and diversity of the affected
Trust will be reduced. Such sales may be required at a time when Obligations
would not otherwise be sold and might result in lower prices than might
otherwise be realized. Pursuant to an irrevocable commitment of the Portfolio
Insurers, the Trustee upon the sale of an Obligation has the right to obtain
permanent insurance for such Obligation upon the payment
27
<PAGE>
of a single predetermined insurance premium and any expenses related thereto
from the proceeds of the sale of such Obligation. Accordingly, any Obligation
may be sold on an insured basis.
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 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 Obligations
in the Trust is not reasonably practicable, or for such other periods as the
Securities and Exchange Commission may by order permit. Under certain extreme
circumstances the Sponsor may apply to the Securities and Exchange Commission
for an order permitting a full or
partial suspension of the right of Unitholders
to redeem their Units.
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 day 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 Trustee is empowered to sell, for the
purpose of redeeming Units tendered by any Unitholder, and for the payment of
expenses for which funds may not be available, such of the Obligations
designated by the Evaluator as the Trustee in its sole discretion may deem
necessary. The Evaluator, in designating such Obligations, will consider a
variety of factors, including (a) interest rates, (b) market value and (c)
marketability. To the extent that Obligations are sold which are current in
payment of principal and interest in order to meet redemption requests and
defaulted Obligations are retained in the portfolio in order to preserve the
related insurance protection applicable
to said Obligations, the overall quality
of the Obligations remaining in a Trust's portfolio will tend to diminish. The
Sponsor is empowered, but not obligated, to direct the Trustee to dispose of
Obligations in the event of an advanced refunding.
The Sponsor is required to instruct
the Trustee to reject any offer made by
an issuer of any of the Obligations to issue new obligations in exchange or
substitution for any Obligation pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject such an
offer or to take any other action with respect thereto as the Sponsor may deem
proper if (1) the issuer is in default
with respect to such Obligation or (2) in
the written opinion of the Sponsor the
issuer will probably default with respect
to such Obligation in the reasonably foreseeable future. Any obligation so
received in exchange or substitution
will be held by the Trustee subject to the
terms and conditions of the Trust Agreement to the same extent as Obligations
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution
for underlying Obligations, the Trustee
is required to give notice thereof to each Unitholder, identifying the
Obligations eliminated and the Obligations substituted therefor. Except as
stated herein and under "Trust
Portfolio--Replacement Obligations" regarding the
substitution of Replacement Obligations
for Failed Obligations, the acquisition
by the Trust of any obligations other than the Obligations initially deposited
is not permitted.
If any default in the payment of principal or interest on any Obligation
occurs and no provision for payment is made therefor either pursuant to the
portfolio insurance, or otherwise, within 30 days, the Trustee is required to
notify the Sponsor thereof. If the
Sponsor fails to instruct the Trustee to sell
or to hold such Obligation within 30 days after notification by the Trustee to
the Sponsor of such default, the Trustee may in its discretion sell the
defaulted Obligation and not be liable for any depreciation or loss thereby
incurred.
AMENDMENT OR TERMINATION. The Sponsor and the Trustee have the power to
amend the Trust Agreement without the consent of any of the Unitholders when
such an amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which
may be defective or inconsistent with any
other provision contained therein or (b)
to make such other provisions as shall
not adversely affect the interest of the Unitholders (as determined in good
faith by the Sponsor and the Trustee), provided that the Trust Agreement, may
not be amended to increase the number of
Units issuable thereunder or to permit
the deposit or acquisition of obligations either in addition to or in
substitution for any of the Obligations
initially deposited in the Trust, except
for the substitution of certain refunding
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<PAGE>
obligations for such Obligations. In the
event of any amendment, the Trustee is
obligated to notify promptly all
Unitholders of the substance of such amendment.
A Trust may be terminated at any time by consent of Unitholders
representing 51% of the Units of the Trust then outstanding or by the Trustee
when the value of the Trust, as shown by any semi-annual evaluation, is less
than that indicated under "Summary of Essential Financial Information".
A Trust will be liquidated by the Trustee in the event that a sufficient
number of Units not yet sold are tendered for redemption by the Underwriters,
including the Sponsor, so that the net worth of the Trust would be reduced to
less than 40% of the initial principal amount of the Trust. If the Trust is
liquidated because of the redemption of unsold Units by the Underwriters, the
Sponsor will refund to each purchaser of Units the entire sales charge paid by
such purchaser.
The Trust Agreement provides that the Trust shall terminate upon the
redemption, sale or other disposition of
the last Obligation held in the Trust,
but in no event shall it continue beyond beyond the end of the year preceding
the fiftieth anniversary of the Trust
Agreement. In the event of termination of
the Trust, written notice thereof will
be sent by the Trustee to each Unitholder
of the Trust at his address appearing on the registration books of the Trust
maintained by the Trustee, such notice
specifying the time or times at which the
Unitholder may surrender his certificate or certificates for cancellation.
Within a reasonable time thereafter the
Trustee shall liquidate any Obligations
then held in the Trust and shall deduct
from the funds of the Trust any accrued
costs, expenses 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. The sale of
Obligations 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. For this reason, among others, the amount realized by a
Unitholder upon termination may be less
than the principal amount of Obligations
represented by the Units held by such Unitholder. The Trustee shall then
distribute to each Unitholder his share of the balance of the Interest and
Principal Accounts. With such
distribution the Unitholders shall be furnished a
final distribution statement of the amount distributable. At such time as the
Trustee in its sole discretion shall
determine that any amounts held in reserve
are no longer necessary, it shall make distribution thereof to Unitholders in
the same manner.
LIMITATION ON LIABILITIES. The Sponsor, the Evaluator and the Trustee
shall be under no liability to Unitholders for taking any action or for
refraining from taking any action in
good faith pursuant to the Trust Agreement,
or for errors in judgment, but shall be liable only for their own willful
misfeasance, bad faith or negligence (gross negligence in the case of the
Sponsor) in the performance of their duties or by reason of their reckless
disregard of their obligations and duties hereunder. The Trustee shall not be
liable for depreciation or loss incurred
by reason of the sale by the Trustee of
any of the Obligations. 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 Obligations 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 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 Merritt Inc., a Delaware corporation, is the Sponsor
of the Trust. Van Kampen Merritt Inc. is
primarily owned by Clayton, Dubilier &
Rice, Inc., a New York-based private investment firm. Van Kampen Merritt Inc.
management owns a significant minority
equity position. Van Kampen Merritt Inc.
specializes in the underwriting and distribution of unit investment trusts and
mutual funds. The Sponsor is a member of
the National Association of Securities
Dealers, Inc. and has its principal office at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181 (708) 684-6000. It maintains a branch office in
Philadelphia and has regional representatives in Atlanta, Dallas, Los Angeles,
New York, San Francisco, Seattle and Tampa. As of December 31, 1992, the total
stockholders' equity of Van Kampen Merritt Inc. was $299,865,984 (audited).
(This paragraph relates only to the Sponsor and not to the Trust or to any
Series thereof or to any other Underwriter. 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.)
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<PAGE>
As of April 30, 1993, the Sponsor
and its affiliates managed or supervised
approximately $36 billion of investment products, of which over $25 billion is
invested in municipal securities. The Sponsor and its affiliates managed $20.4
billion of assets, consisting of $7.4
billion for 13 mutual funds, $7.1 billion
for 30 closed-end funds and $5.9 billion for 37 institutional accounts. The
Sponsor has also deposited approximately
$23 billion of unit investment trusts.
Based on cumulative assets deposited, the Sponsor believes that it is the
largest sponsor of insured municipal unit investment trusts, primarily through
the success of its Insured Municipal
Income Trust(R) or the IM-IT(R) trust. The
Sponsor also provides surveillance and evaluation services at cost for
approximately $16 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has opened over one million retail investor accounts through
retail distribution firms. Van Kampen
Merritt Inc. is the sponsor of the various
series of the trusts listed below and the distributor of the mutual funds and
closed-end funds listed below.
Unitholders may only invest in the trusts, mutual
funds, and closed-end funds which are registered for sale in the state of
residence of such Unitholder. In order
for a Unitholder to invest in the trusts,
mutual funds, and closed-end funds listed below, such Unitholder must obtain a
prospectus relating to the trust or fund involved. A prospectus is the only
means by which an offer can be delivered to investors.
<TABLE>
<CAPTION>
NAME OF TRUST TRUST INVESTMENT OBJECTIVE
<S> <C>
Insured Municipals Income Trust................ Tax-exempt income by investing in insured municipal securities
California Insured Municipals Income Trust..... Double tax-exemption for California residents by investing in insured
California municipal securities
New York Insured Municipals Income Trust....... Double and in certain cases triple tax-exemption for New York residents
by investing in insured New York municipal securities
Pennsylvania Insured Municipals Income Trust... Double and in certain cases triple tax-exemption for Pennsylvania
residents by investing in insured Pennsylvania municipal securities.
Tax-exempt income by investing in insured municipal securities; all
issuers of bonds in a state trust are located in such state or in
territories or possessions of the United States-- providing
exemptions from all state income tax for residents of such state
(except for the Oklahoma IM-IT Trust where a portion of the income of
the Trust is subject to the Oklahoma state income tax)
Insured Municipals Income Trust, Insured
Multi-Series.................................
(Premium Bond Series, National, Limited
Maturity, Intermediate, Short Intermediate,
Discount, Alabama, Arizona, California,
California Intermediate, California
Intermediate Laddered Maturity, California
Premium, Colorado, Connecticut, Florida,
Florida Intermediate, Florida Intermediate
Laddered Maturity, Georgia, Louisiana,
Massachusetts, Massachusetts Premium,
Michigan, Michigan Intermediate, Michigan
Premium, Minnesota, Missouri, Missouri
Intermediate Laddered Maturity, Missouri
Premium, New Jersey, New Mexico, New York, New
York Intermediate, New York Limited Maturity,
Ohio, Ohio Intermediate, Ohio Premium,
Oklahoma, Pennsylvania, Pennsylvania
Intermediate, Pennsylvania Premium, Tennessee,
Texas, Washington, West Virginia)
Insured Tax Free Bond Trust.................... Tax-exempt income by investing in municipal securities
Insured Tax Free Bond Trust, Insured
Multi-Series (National, Limited Maturity, New
York)........................................ Tax-exempt income by investing in insured municipal securities; all
issuers of bonds in a state trust are located in such state--providing
exemptions from state income tax for residents of such state
Investors' Quality Tax-Exempt Trust............ Tax-exempt income by investing in municipal securities
Tax-exempt income by investing in municipal securities; all issuers of
bonds in a state trust are located in such state or in territories or
possessions of the United States-- providing exemptions from state
income tax for residents of such state
Investors' Quality Tax-Exempt Trust............
Multi-Series (National, National AMT,
Intermediate, Alabama, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware,
Florida, Georgia, Kansas, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Minnesota,
Missouri, Nebraska, New Jersey, New York,
North Carolina, Ohio, Oregon, Pennsylvania,
South Carolina, Virginia)
Investors' Quality Municipals Trust, AMT
Series....................................... Tax-exempt income for investors not subject to the alternative minimum
tax by investing in municipal securities, some or all of which are
subject to the Federal alternative minimum tax
Investors' Corporate Income Trust.............. Taxable income by investing in corporate bonds
Investors' Governmental Securities-Income
Trust........................................ Taxable income by investing in government-backed GNMA securities
Van Kampen Merritt International Bond Income
Trust........................................ High current income through an investment in a diversified portfolio of
foreign currency denominated corporate debt obligations
Van Kampen Merritt Utility Income Trust........ High dividend income and capital appreciation by investing in common
stock of electric utilities
Van Kampen Merritt Insured Income Trust........ High current income consistent with preservation of capital through a
diversified investment in a fixed portfolio of insured, long-term or
intermediate-term corporate and taxable municipal debt securities
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Van Kampen Merritt Blue Chip Opportunity
<S> <C>
Trust........................................ Provide the potential for capital appreciation and income by investing
in a portfolio of actively traded, New York Stock Exchange listed
equity securities which are components of the Dow Jones Industrial
Average*
Van Kampen Merritt Blue Chip Opportunity and
Treasury Trust............................... Protect Unitholders' capital and provide the potential for capital
appreciation and income by investing a portion of its portfolio in
"zero coupon" U.S. Treasury obligations and the remainder of the
trust's portfolio in actively traded, New York Stock Exchange listed
equity securities which at the time of the creation of the trust were
components of the Dow Jones Industrial Average*
Van Kampen Merritt Emerging Markets Income
Trust........................................ High current income consistent with preservation of capital through a
diversified investment in a fixed portfolio primarily consisting of
Brady Bonds of emerging market countries that have restructured
sovereign debt pursuant to the framework of the Brady Plan
</TABLE>
<TABLE>
<CAPTION>
NAME OF MUTUAL FUND FUND INVESTMENT OBJECTIVE
<S> <C>
Van Kampen Merritt U.S. Government Fund........ High current income by investing in U.S. Government securities
Van Kampen Merritt Insured Tax-Free Income
Fund.......................................... High current income exempt from Federal income taxes by investing in
insured municipal securities
Van Kampen Merritt Municipal Income Fund....... High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt Tax-Free High Income Fund... High current income exempt from Federal income taxes by investing in
medium and lower grade municipal securities
Van Kampen Merritt California Insured Tax Free
Fund.......................................... High current income exempt from Federal and California income taxes by
investing in insured California municipal securities
Van Kampen Merritt High Yield Fund............. Provide a high current income by investing in medium and lower grade
domestic and foreign corporate debt securities
Van Kampen Merritt Growth and Income Fund...... Long-Term growth of both capital and dividend income by investing in
dividend paying common stocks
Van Kampen Merritt Pennsylvania Tax Free Income
Fund.......................................... High current income exempt from Federal and Pennsylvania state and
local income taxes by investing in medium and lower grade Pennsylvania
municipal securities
Van Kampen Merritt Money Market Fund........... High current income by investing in a broad range of money market
instruments that will mature within twelve months
Van Kampen Merritt Tax Free Money Fund......... High current income exempt from federal income taxes by investing in a
broad range of municipal securities that will mature within twelve
months
Van Kampen Merritt Short-Term Global Income
Fund.......................................... High current income by investing in a global portfolio of high quality
debt securities denominated in various currencies having remaining
maturities of not more than three years
Van Kampen Merritt Adjustable Rate U.S.
Government Fund............................... High level of current income with a relatively stable net asset value
investing in U.S. Government securities
Van Kampen Merritt Limited Term Municipal
Income Fund................................... High level of current income exempt from federal income tax, consistent
with preservation of capital
</TABLE>
* The Dow Jones Industrial Average is
the property of Dow Jones & Company, Inc.
Dow Jones & Company, Inc. has not
granted to the Trust or the Sponsor a license
to use the Dow Jones Industrial Average.
31
<PAGE>
<TABLE>
<CAPTION>
NAME OF CLOSED-END FUND FUND INVESTMENT OBJECTIVE
<S> <C>
Van Kampen Merritt Municipal Income Trust...... High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment grade
municipal securities
Van Kampen Merritt California Municipal
Trust......................................... High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment grade
California municipal securities
Van Kampen Merritt Intermediate Term High
Income Trust.................................. High current income while seeking to preserve shareholders' capital by
investing in a diversified portfolio of high yield fixed income
securities
Van Kampen Merritt Limited Term High Income
Trust......................................... High current income while seeking to preserve shareholders' capital by
investing in a diversified portfolio of high yield fixed income
securities
Van Kampen Merritt Prime Rate Income Trust..... High current income, consistent with preservation of capital by
investing in interests in floating or variable rate senior loans
Van Kampen Merritt Investment Grade Municipal
Trust......................................... High current income exempt from federal income tax, consistent with
preservation of capital
Van Kampen Merritt Municipal Trust............. High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt California Quality Municipal
Trust......................................... High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
investment grade California municipal securities
Van Kampen Merritt Florida Quality Municipal
Trust......................................... High current income exempt from Federal income taxes and Florida
intangible personal property taxes with safety of principal by
investing in a diversified portfolio of investment grade Florida
municipal securities
Van Kampen Merritt New York Quality Municipal
Trust......................................... High current income exempt from Federal as well as New York State and
New York City income taxes with safety of principal by investing in a
diversified portfolio of investment grade New York municipal
securities
Van Kampen Merritt Ohio Quality Municipal
Trust......................................... High current income exempt from Federal and Ohio income taxes with
safety of principal by investing in a diversified portfolio of
investment grade Ohio municipal securities
Van Kampen Merritt Pennsylvania Quality
Municipal Trust............................... High current income exempt from Federal and Pennsylvania income taxes
with safety of principal by investing in a diversified portfolio of
investment grade Pennsylvania municipal securities
Van Kampen Merritt Trust for Investment Grade
Municipals.................................... High level of current income exempt from Federal income tax, consistent
with preservation of capital
Van Kampen Merritt Trust for Insured
Municipals.................................... High level of current income from Federal income tax, consistent with
preservation of capital by investing in a diversified portfolio of
municipal securities which are covered by insurance with respect to
timely payment of principal and interest
Van Kampen Merritt Trust for Investment Grade
CA Municipals................................. High level of current income exempt from Federal and California income
taxes, consistent with preservation of capital by investing in a
diversified portfolio of California municipal securities
Van Kampen Merritt Trust for Investment Grade
FL Municipals................................. High level of current income exempt from Federal income taxes,
consistent with preservation of capital. The Fund also seeks to offer
its Shareholders the opportunity to own securities exempt from Florida
intangible personal property taxes
Van Kampen Merritt Trust for Investment Grade
NJ Municipals................................. High level of current income exempt from Federal income taxes and New
Jersey gross income taxes, consistent with preservation of capital
Van Kampen Merritt Trust for Investment Grade
NY Municipals................................. High level of current income exempt from Federal as well as from New
York State and New York City income taxes, consistent with preservation
of capital
Van Kampen Merritt Trust for Investment Grade
PA Municipals................................. High level of current income exempt from Federal and Pennsylvania
income taxes and, where possible under local law, local income and
property taxes, consistent with preservation of capital
Van Kampen Merritt Municipal Opportunity
Trust......................................... High level of current income exempt from Federal income tax, consistent
with preservation of capital by investing in a diversified portfolio of
municipal securities
Van Kampen Merritt Advantage Municipal Income
Trust......................................... High level of current income exempt from Federal income tax, consistent
with preservation of capital by investing in a diversified portfolio of
municipal securities
Van Kampen Merritt Advantage Pennsylvania
Municipal Income Trust........................ High level of current income exempt from Federal and Pennsylvania
income taxes and, where possible under local law, local income and
property taxes, consistent with preservation of capital
Van Kampen Merritt Strategic Sector Municipal
Trust......................................... Provide common shareholders with a high level of current income exempt
from Federal income taxes, consistent with preservation of capital
Van Kampen Merritt Value Municipal Income
Trust......................................... High level of current income exempt from Federal income taxes,
consistent with preservation of capital
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Van Kampen Merritt California Value Municipal
<S> <C>
Income Trust.................................. High level of current income exempt from Federal and California income
taxes, consistent with preservation of capital
Van Kampen Merritt Massachusetts Value
Municipal Income Trust........................ High level of current income exempt from Federal income taxes and
Massachusetts personal income taxes, consistent with preservation of
capital
Van Kampen Merritt New Jersey Value Municipal
Income Trust.................................. High level of current income exempt from Federal income taxes and New
Jersey gross income tax, consistent with preservation of capital
Van Kampen Merritt New York Value Municipal
Income Trust.................................. High level of current income exempt from Federal as well as New York
State and New York City income taxes, consistent with preservation of
capital
Van Kampen Merritt Ohio Value Municipal Income
Trust......................................... High level of current income exempt from Federal and Ohio income taxes,
consistent with preservation of capital
Van Kampen Merritt Pennsylvania Value Municipal
Income Trust.................................. High level of current income exempt from Federal and Pennsylvania
income taxes, consistent with preservation of capital
</TABLE>
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or 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 Trust as provided therein or
(iii) continue to act as Trustee without terminating the Trust Agreement.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of
New York has its offices at 101 Barclay
Street, New York, New York 10286, (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of
Governors of the Federal Reserve System, and
its deposits are insured by the Federal Deposit Insurance Corporation to the
extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Obligations for the portfolio of the Trust.
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 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
Obligations 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.
33
<PAGE>
UNDERWRITING
The Underwriters named below have severally purchased Units in the
following respective amounts from the Sponsor.
<TABLE>
<CAPTION>
NAME ADDRESS UNITS
<S> <C> <C>
Van Kampen Merritt Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 8,187
A. G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 500
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 250
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 250
Prudential Securities Inc.
Unit Investment Trust
Department 32 Old Slip, 16th Floor, Financial Square, New York, New York 10292 250
B. C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 250
Dean Witter Reynolds,
Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
Fidelity Capital Markets
A Division of National
Financial Services
Corporation 161 Devonshire Street D4, Boston, Massachusetts 02110 100
First of Michigan Corporation 100 Renaissance Center, 26th Floor, Detroit, Michigan 48243 100
Invest 120 South LaSalle Street, Suite 850, Chicago, Illinois 60603 100
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, Chicago, Illinois 60601 100
Mabon Securities Corp. One Liberty Plaza, 165 Broadway, New York, New York 10006 100
10,287
</TABLE>
Units may also be sold to
broker-dealers and others at prices representing
the per Unit concession or agency
commission stated under "Public Offering--Unit
Distribution". However, resales of Units by such broker-dealers and others to
the public will be made at the Public Offering Price described in the
Prospectus. The Sponsor reserves the right to reject, in whole or in part, any
order for the purchase of Units and the right to change the amount of the
concession or agency commission from time to time.
In addition to any other benefits the Underwriters may realize from the
sale of the Units of the Trust, the Agreement Among Underwriters provides that
the Sponsor will share on a pro rata basis among those Underwriters who
underwrite at least 250 Units 50% of the
aggregate gain, if any, represented by
the difference between the Sponsor's cost of the Securities in connection with
their acquisition and the evaluation thereof on the Date of Deposit less
deductions for certain accrued interest and certain other costs. See "Public
Offering--Sponsor and Underwriter Compensation" and "Portfolio".
Underwriters and broker-dealers of the Trust, banks and/or others are
eligible to participate in a program in which such firms receive from the
Sponsor a nominal award for each of their registered representatives who have
sold a minimum number of units of unit
investment trusts created by the Sponsor
during a specified time period. In addition, at various times the Sponsor may
implement other programs under which the
sales forces of Underwriters, brokers,
dealers, banks and/or others may be eligible to win other nominal awards for
certain sales efforts, or under which the Sponsor will reallow to any such
Underwriters, brokers, dealers, banks
and/or others that sponsor sales contests
or recognition programs conforming to criteria established by the Sponsor, or
participate in sales programs sponsored
by the Sponsor, an amount not exceeding
the total applicable sales charges on
the sales generated by such person at the
public offering price during such
programs. Also, the Sponsor in its discretion
may from time to time pursuant to
objective criteria established by the Sponsor
pay fees to qualifying Underwriters, brokers, dealers, banks or others for
certain services or activities which are primarily intended to result in sales
of Units of the Trust. Such payments are made by the Sponsor out of its own
assets, and not out of the assets of the Trust. These programs will not change
the price Unitholders pay for their Units or the amount that the Trust will
receive from the Units sold. Approximately every eighteen months the
34
<PAGE>
Sponsor holds a business seminar which is open to Underwriters that sell units
of trusts it sponsors. The Sponsor pays
substantially all costs associated with
the seminar, excluding Underwriter
travel costs. Each Underwriter is invited to
send a certain number of representatives
based on the gross number of units such
firm underwrites during a designated time period.
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. Tanner Propp & Farber, 99 Park Avenue, New York, New
York 10016 has acted as counsel for the Trustee and as special counsel for the
Trust for New York tax matters.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. The statement of condition and
the related portfolio at the Date of Deposit included in this Prospectus have
been audited by Grant Thornton,
independent certified public accountants, as set
forth in their report in this Prospectus, and are included herein in reliance
upon the authority of said firm as experts in accounting and auditing.
DESCRIPTION OF OBLIGATION RATINGS*
STANDARD & POOR'S CORPORATION. A brief description of the applicable
Standard & Poor's Corporation ("Standard and Poor's") rating symbols and their
meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an
obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not
comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer and
obtained by Standard & Poor's from other
sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying
degrees, on the following considerations:
I. Likelihood of default--capacity
and willingness of the obligor as to the
timely payment of interest and
repayment of principal in accordance with
the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA--Bonds rated AAA have the
highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay
interest and repay principal is extremely
strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong
capacity to pay interest and repay principal
although they are somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas
they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to
show relative standing within the major
rating categories.
*As published by the ratings companies.
35
<PAGE>
Provisional Ratings: The symbol "(p)" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the bonds being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion
of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are
protected by a large, or by an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. With the occasional
exception of oversupply in a few specific instances, the safety of obligations
of this class is so absolute that their
market value is affected solely by money
market fluctuations.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group
they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. These Aa bonds are high grade, their market value virtually immune
to all but money market influences, with
the occasional exception of oversupply
in a few specific instances.
A--Bonds which are rated A possess
many favorable investment attributes and
are to be considered as higher medium
grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to
impairment sometime in the future. The market
value of A-rated bonds may be influenced
to some degree by credit circumstances
during a sustained period of depressed business conditions. During periods of
normalcy, bonds of this quality frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few specific
instances.
Baa--Bonds which are rated Baa are considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have
speculative characteristics as well. The market
value of Baa-rated bonds is more
sensitive to changes in economic circumstances,
and aside from occasional speculative factors applying to some bonds of this
class, Baa market valuations move in parallel with Aaa, Aa and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1
indicates that the bond ranks at the high
end of its category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue
ranks in the lower end of its generic rating
category.
Con--Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects
under construction, (b) earnings of projects
unseasoned in operating experience, (c)
rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Merritt Inc. and Unitholders of
Van Kampen Merritt Insured Income Trust, Series 32 :
We have audited the accompanying statement of condition and the
related portfolio of Van Kampen Merritt Insured Income Trust, Series 32 as
of August 26, 1993. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion
on such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of an irrevocable letter
of credit deposited to purchase securities by correspondence with the
Trustee. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Van Kampen
Merritt Insured Income Trust, Series 32 as of August 26, 1993, in
conformity with generally accepted accounting principles.
Chicago, Illinois
August 26, 1993 GRANT THORNTON
37
<PAGE>
<TABLE>
VAN KAMPEN MERRITT INSURED INCOME TRUST
SERIES 32
STATEMENT OF CONDITION
AS OF THE DATE OF DEPOSIT: AUGUST 26, 1993
<CAPTION>
INVESTMENT IN SECURITIES
<S> <C>
Contracts to purchase securities <F1><F2>................................................................... $ 9,783,035
Accrued interest to date of deposit on underlying securities <F1><F4>....................................... $ 111,996
Total....................................................................................................... $ 9,895,031
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest to date of deposit on underlying securities <F1><F4>....................................... $ 111,996
Interest of Unitholders--
Units of fractional undivided interest outstanding:
Cost to investors <F3>...................................................................................... $ 10,287,000
Less: Gross underwriting commission <F3>.................................................................... $ 503,965
Net interest to Unitholders <F3>............................................................................ $ 9,783,035
Total....................................................................................................... $ 9,895,031
<FN>
<F1> The aggregrate value of the Obligations listed under "Portfolio" herein and
their cost to the Trust are the same. The value of the Obligations is
determined by Interactive Data Services, Inc. on the bases set forth under
"Public Offering--Offering Price". The contracts to purchase Obligations
are collateralized by an irrevocable letter of credit of $9,903,606 which
has been deposited with the Trustee. Of this amount $9,783,035 relates to
the offering price on $10,000,000 principal amount of Obligations to be
purchased, and $120,571 relates to accrued interest on such Obligations to
the expected dates of delivery.
<F2> Insurance coverage providing for the timely payment, when due (as more
fully set forth under "Insurance on the Obligations"), of all principal and
interest on the Obligations in the portfolio of the Trust has been obtained
by the Trust except for three Obligations in the Trust for which insurance
has been obtained by the issuer of the Obligation. Such insurance does not
guarantee the market value of the Obligations or the value of the Units.
The insurance obtained by the Trust is effective only while the Obligations
are held in such Trust, however, insurance obtained by an Obligation issuer
is effective so long as such Obligation is outstanding. Neither the bid nor
offering prices of the underlying Obligations or of the Units, absent
situations in which the Obligations are in default in payment of principal
or interest or in significant risk of such default, include value, if any,
attributable to the insurance obtained by the Trust.
<F3> The aggregate public offering price (exclusive of interest) and the
aggregate sales charge of 4.9% are computed on the basis set forth under
"Public Offering--Offering Price" and "Public Offering--Sponsor and
Underwriter Compensation" and assume all single transactions involve less
than 100 Units. For single transactions involving 100 or more Units, the
sales charge is reduced (see "Public Offering-- General") resulting in an
equal reduction in both the Cost to investors and the Gross underwriting
commission while the Net interest to Unitholders remains unchanged.
<F4> On the bases set forth under "Public Offering--Accrued Interest (Accrued
Interest to Carry)", the Trustee will advance the amount of accrued
interest as of September 2, 1993 (the "First Settlement Date"), and all
accrued interest to the First Settlement Date will be distributed to the
Sponsor as the Unitholder of record as of the First Settlement Date.
Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date.
</TABLE>
38
<PAGE>
<TABLE>
VAN KAMPEN MERRITT INSURED INCOME TRUST
SERIES 32
PORTFOLIO AS OF AUGUST 26, 1993
<CAPTION>
NAME OF ISSUER, TITLE, INTEREST RATE AND
MATURITY DATE OF EITHER OBLIGATIONS
AGGREGATE DEPOSITED OR OBLIGATIONS CONTRACTED AS REDEMPTION OFFERING PRICE
PRINCIPAL<F1> FOR<F1><F5> RATING<F2> INSURED<F7> FEATURES<F3> TO TRUST<F4>
<S> <C> <C> <C> <C> <C>
$ / 700,000 U.S. Treasury Strip
#0.00% Due 11/15/2021.................... N/R AAA $ 111,125<F6>
1,000,000 Public Service Electric and Gas Company
7.50% Due 3/1/2023....................... A AAA 1998 @ 105.38 1,047,500
1,500,000 Appalachian Power Company
7.80% Due 5/1/2023....................... A- AAA 1998 @ 105.85 1,607,160
1,000,000 Philadelphia Electric Company
7.75% Due 5/1/2023....................... BBB+ AAA 1998 @ 105.29 1,061,250
1,000,000 Columbus Southern Power Company, First
Mortgage Bonds, Medium Term Notes
7.75% Due 8/1/2023....................... BBB+ AAA 1998 @ 105.82 1,060,000
1,000,000 Carolina Power & Light Company
6.875% Due 8/15/2023..................... A AAA 2003 @ 102.84 998,750
1,300,000 Florida Power & Light Company
7.625% Due 6/1/2024...................... A AAA 1998 @ 104.41 1,382,875
/ 1,000,000 Texas Utilities Electric Company
7.625% Due 7/1/2025...................... BBB AAA 2003 @ 102.69 1,046,250
1,500,000 Duke Power Company
#6.75% Due 8/1/2025...................... AA- AAA 1998 @ 102.68 1,468,125
$ 10,000,000 $ 9,783,035
All of the Obligations in the portfolio are insured under a
portfolio insurance policy obtained by the Trust from AMBAC Indemnity or CapMAC.
Obligations that are insured under a portfolio insurance policy obtained by the
Trust from CapMAC are marked by a "/". See "Insurance on the Obligations".
For an explanation of the footnotes used on this page, see "Notes to
Portfolios".
39
<PAGE>
NOTES TO PORTFOLIO:
AS OF THE DATE OF DEPOSIT: AUGUST 26, 1993
<FN>
<F1> All Obligations are represented by "regular way" or "when issued" contracts
for the performance of which an irrevocable letter of credit, obtained from
an affiliate of the Trustee, has been deposited with the Trustee. At the
Date of Deposit, Obligations may have been delivered to the Sponsor
pursuant to certain of these contracts; the Sponsor has assigned to the
Trustee all of its right, title and interest in and to such Obligations.
Contracts to acquire Obligations were entered into during the period from
August 24, 1993 to August 25, 1993. These Obligations have expected
settlement dates from August 31, 1993 to September 1, 1993 (see "Trust
Portfolio").
<F2> All ratings are by Standard & Poor's Corporation unless otherwise
indicated. "*" indicates that the rating of the Obligation is by Moody's
Investors Service, Inc. The ratings represent the latest published ratings
by the respective ratings agency. "Y" indicates that such rating is
contingent upon physical receipt by the respective ratings agency of a
policy of insurance obtained by the issuer of the bonds involved and issued
by the Preinsured Bond Insurer named in the bond's title. A commitment for
insurance in connection with these bonds has been issued by the Preinsured
Bond Insurer named in the bond's title. "N/R" indicates that the applicable
rating service did not provide a rating for that particular Obligation. For
a brief description of the rating symbols and their related meaning, see
"Description of Obligation Ratings".
<F3> There is shown under this heading the year in which each issue of the
Obligations is initially or currently callable and the call price for that
year. Each issue of the Obligations continues to be callable at declining
prices thereafter (but not below par value) except for original issue
discount bonds which are redeemable at prices based on the issue price plus
the amount of original issue discount accreted to redemption date plus, if
applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to an
issue of the Obligations. Redemption pursuant to call provisions generally
will, and redemption pursuant to sinking fund provisions may, occur at
times when the redeemed bonds have an offering side valuation which
represents a premium over par. Certain Obligations may be subject to
redemption without premium prior to the date shown pursuant to
extraordinary optional or mandatory redemptions if certain events occur.
Notwithstanding any provisions to the contrary, certain bond issuers have
in the past and others may in the future, attempt to redeem bonds prior to
their initially scheduled call dates and at prices which do not include any
premiums. For a general discussion of certain of these events, see "Trust
Portfolio--Redemptions of Obligations". To the extent that the Obligations
were deposited in the Trust at a price higher than the price at which they
are redeemed, this will represent a loss of capital when compared with the
original Public Offering Price of the Units. Conversely, to the extent that
the Obligations were acquired at a price lower than the redemption price,
this will represent an increase in capital when compared with the original
Public Offering Price of the Units. Distributions will generally be reduced
by the amount of the income which would otherwise have been paid with
respect to redeemed Obligations and there will be distributed to
Unitholders the principal amount and any premium received on such
redemption. The Estimated Current Return and Estimated Long-Term Return in
this event may be affected by such redemptions. For the Federal tax effect
on Unitholders of such redemptions and resultant distributions, see "Tax
Status" and "Estimated Current Return and Estimated Long-Term Return".
<F4> Evaluation of Obligations is made on the basis of current offering prices
for the Obligations. The offering prices are greater than the current bid
prices of the Obligations which is the basis on which Unit value is
determined for purposes of redemption of Units (see "Public
Offering--Offering Price").
<F5> Other information regarding the Obligations in the Trust, as of the Date of
Deposit, is as follows:
ANNUAL
ANNUAL INTEREST BID SIDE
INSURANCE COST TO PROFIT (LOSS) INCOME TO EVALUATION OF
COST SPONSOR TO SPONSOR TRUST OBLIGATIONS
$16,670 $9,719,375 $63,660 $692,375 $9,710,660
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain Obligations in the portfolio. The cost of any such
contracts and the corresponding gain or loss is included in the Cost to
Sponsor.
40
<PAGE>
On the Date of Deposit, the offering side evaluation of the Obligations in
the Trust was higher than the bid side evaluation of such Obligations by
0.72%, of the aggregate principal amount of such Obligations. All
contracts are expected to be settled by the First Settlement Date for the
purchase of Units.
"#" indicates that such Obligation was issued at an original issue
discount. The tax effect of Obligations issued at an original issue
discount is described in "Tax Status".
<F6> This Obligation has been purchased at a deep discount from the par value
because there is little or no stated interest income thereon. Obligations
which pay no interest are normally described as "zero coupon" bonds. Over
the life of bonds purchased at a deep discount the value of such bonds will
increase such that upon maturity the holders of such bonds will receive
100% of the principal amount thereof. Approximately 7% of the aggregate
principal amount of the Obligations in the Trust are "zero coupon" bonds.
<F7> Standard & Poor's Corporation has assigned its "AAA" investment rating to
all of the Obligations while in the Trust, as insured by the Insurers.
</TABLE>
41
<PAGE>
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated distributions of
interest, principal and rebates of
accrued interest to carry to Unitholders. The
tables assume no changes in Trust expenses, no changes in the current interest
rates, no exchanges, redemptions, sales, prepayments or partial prepayments of
the underlying Obligations prior to
maturity or expected retirement date and the
receipt of principal upon maturity or expected retirement date. To the extent
the foregoing assumptions change actual distributions will vary.
SERIES 32
<TABLE>
MONTHLY
<CAPTION>
ESTIMATED
ESTIMATED ESTIMATED ACCRUED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL INTEREST TO CARRY TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
December 1993 $2.00 $ 2.00
January 1994 - April 1998 5.33 5.33
May 1998 5.33 $256.69 $3.87 265.89
June 1998 3.81 131.95 1.98 137.74
July 1998 - June 2003 3.03 3.03
July 2003 3.03 99.82 1.52 104.37
August 2003 - November 2021 2.45 2.45
December 2021 2.45 68.05 70.50
January 2022 - February 2022 2.46 2.46
March 2022 2.46 97.21 1.49 101.16
April 2022 - July 2023 1.87 1.87
August 2023 1.87 97.21 1.54 100.62
September 2023 .99 97.21 1.37 99.57
October 2023 - July 2025 .74 .74
August 2025 .74 145.82 2.02 148.58
</TABLE>
<TABLE>
SEMI ANNUAL
<CAPTION>
ESTIMATED
DISTRIBUTION DATES ESTIMATED ESTIMATED ACCRUED ESTIMATED
(EACH JUNE AND DECEMBER INTEREST PRINCIPAL INTEREST TO CARRY TOTAL
UNLESS OTHERWISE INDICATED) DISTRIBUTION DISTRIBUTION REBATE DISTRIBUTION
<S> <C> <C> <C> <C> <C> <C>
December 1993 $2.00 $ 2.00
June 1994 - December 1997 32.17 32.17
May 1998 $256.69 $3.91 260.60
June 1998 30.65 131.95 1.99 164.59
December 1998 - June 2003 18.36 18.36
July 2003 99.82 1.53 101.35
December 2003 15.40 15.40
June 2004 - June 2021 14.81 14.81
December 2021 14.81 68.05 82.86
March 2022 97.21 1.50 98.71
June 2022 13.10 13.10
December 2022 - June 2023 11.34 11.34
August 2023 97.21 1.56 98.77
September 2023 97.21 1.38 98.59
December 2023 7.03 7.03
June 2024 - June 2025 4.50 4.50
August 2025 1.50 145.82 2.03 149.35
</TABLE>
42
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
43
<PAGE>
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 the Underwriters. This
Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, securities in any state to any
person to whom it is not lawful to make such offer in such state.
TABLE OF CONTENTS
TITLE PAGE
Summary of Essential Financial Information..... 3
The Trust...................................... 5
Investment Objectives and Portfolio
Selection.................................... 5
Trust Portfolio................................ 6
Estimated Current Return and Estimated
Long-Term Return............................. 10
Trust Operating Expenses....................... 10
Insurance on the Obligations................... 12
Tax Status..................................... 17
Public Offering................................ 20
Rights of Unitholders.......................... 24
Trust Administration........................... 28
Underwriting................................... 34
Other Matters.................................. 35
Description of Obligation Ratings.............. 35
Report of Independent Certified Public
Accountants.................................. 37
Statement of Condition......................... 38
Portfolio...................................... 39
Notes to Portfolio............................. 40
Estimated Cash Flows to Unitholders............ 42
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information
set forth in the registration statements
and exhibits relating thereto, which the
Trust 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.
(R) denotes a registered trademark of Van Kampen Merritt Inc.
P R O S P E C T U S
August 26, 1993
Series 32
One Parkview Plaza (R)
Oakbrook Terrace, Illinois 60181
Mellon Bank Center
1735 Market Street, Suite 1300
Philadelphia, Pennsylvania 19103
Please retain this Prospectus for future reference.
VAN KAMPEN MERRITT
INSURED INCOME TRUST
<PAGE>
Contents Of Registration Statement
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services
and legal counsel
The following exhibits:
1.1 Proposed form of Trust Agreement between Van Kampen Merritt Inc.,
Depositor, American Portfolio Advisory Service Inc., as Evaluator,
and The Bank of New York, as Trustee (to be supplied by amendment).
1.4 Copy of Bond Fund Portfolio Insurance Policy (to be supplied by
amendment).
1.5 Form of Agreement Among Underwriters (to be supplied by amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be supplied by amendment).
3.2 Opinion of counsel as to Federal income tax status of securities
being registered (to be supplied by amendment).
3.3 Opinion and consent of counsel as to New York tax status of
securities being registered (to be supplied by amendment).
4.1 Consent of Interactive Data Services, Inc. (to be supplied by
amendment).
4.2 Consent of Standard & Poor's Corporation (to be supplied by
amendment).
4.3 Consent of Grant Thornton (to be supplied by amendment).
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen Merritt Insured Income Trust, Series 35 has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Chicago and State
of Illinois on the 22nd day of February, 1994.
Van Kampen Merritt Insured Income
Trust, Series 35
By Van Kampen Merritt Inc.
(Depositor)
By Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on February 22, 1994.
Signature Title
John C. Merritt Chairman, Chief Executive )
Officer and Director )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact*)
_________________________________________________________________________
_______________
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and the same are hereby incorporated herein by this reference.
