FILE NO. 33-
CIK #897165
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 Trust Registered on Form N-8B-2.
A. Exact name of Trust: VAN KAMPEN AMERICAN CAPITAL INSURED
INCOME TRUST, SERIES 55
B. Name of Depositor: VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS,
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 American Capital
Distributors Inc. CHAPMAN AND CUTLER
Attention: Don G. Powell, Chairman Attention: Mark J. Kneedy
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 American Capital Insured Income Trust,
Series 55
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 Trust
6. Execution and termination of ) The Trust
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 Trust
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 units ) Prospectus Front Cover Page
) The Trust
) Trust Portfolios
) Trust Portfolios
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover Page
) 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 Trust
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 April 4, 1996
Van Kampen American Capital Insured Income Trust
1,000 Units Series 55
(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.
Preliminary Prospectus Dated February 28, 1996
Subject To Completion
February 28, 1996
Van Kampen American Capital
Van Kampen American Capital Insured Income Trust, Series 53
The Trust. The Trust initially consists of delivery statements relating to
contracts to purchase debt obligations and, thereafter, will consist of a
$8,965,000 aggregate principal amount portfolio principally comprised of
long-term corporate, taxable municipal or government debt obligations. The
Trust is comprised of 9,091 Units.
Attention Foreign Investors. If you are not a United States citizen or
resident, your interest income from the Trust may not be subject to Federal
withholding taxes if certain conditions are met. See "Tax Status".
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 Objective 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. Units of the Trust are not insured by the FDIC, are
not deposits or other obligations of, or guaranteed by, any depository
institution or any government agency and are subject to investment risk,
including possible loss of the principal amount invested.
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, A Division of the McGraw-Hill Companies
("Standard & Poor's"). Standard & Poor's 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 includes the aggregate offering price of
the Obligations in the Trust's portfolio, an applicable sales charge, cash, if
any, in the Principal Account held or owned by the Trust, and accrued
interest, if any. After the initial public offering period, the secondary
market Public Offering Price of the Trust will include the aggregate bid price
of the Obligations in the Trust, an applicable sales charge, cash, if any, in
the Principal Account held or owned by the Trust, and accrued interest, if
any. 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. 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 that amount set forth in the "Summary of Essential Financial
Information" for the Trust. The minimum purchase requirement is one Unit
except for certain transactions described under "Trust
Administration---Unit Distributions". 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.
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 Options. Purchasers of Units who desire to receive distributions
on a monthly or semi-annual basis may elect to do so at the time of settlement
during the initial public offering period. See "Rights of
Unitholders--Change of Distribution Option". 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. The first monthly distribution will be $6.83 per Unit and will be made
on April 25, 1996 to Unitholders of record on April 10, 1996. Record dates for
monthly distributions will be the tenth day of each month and record dates for
semi-annual distributions will be the tenth day of the months indicated under
"Per Unit Information". Distributions will be made on the twenty-fifth
day of the month subsequent to the respective record dates. The first
distribution of funds from the Principal Account, if any, will be made on June
25, 1996 to Unitholders of record on June 10, 1996, 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
American Capital Distributors, 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
plus interest accrued to the date of settlement; however, during the initial
offering period such prices will be based upon the aggregate offering prices
of the Obligations plus interest accrued to the date of settlement. 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 plus interest
accrued to the date of settlement (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 of any Van Kampen American Capital-sponsored
unit investment trust may utilize their redemption or termination proceeds to
purchase units of any other Van Kampen American Capital trust in the initial
offering period accepting rollover investments subject to a reduced sales
charge to the extent stated in the related prospectus (which may be deferred
in certain cases). Unitholders 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".
Risk Factors. An investment in Units of the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the inability of the issuer or an insurer to pay the principal of or
interest on a bond when due, volatile interest rates, early call provisions
and general economic conditions. See "Risk Factors".
<TABLE>
VAN KAMPEN AMERICAN CAPITAL INSURED INCOME TRUST, SERIES 53
Summary of Essential Financial Information
As of 8:00 A.M. Central Time on the Date of Deposit: February 28, 1996
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
<S> <C>
General Information
Principal Amount (Par Value) of Obligations................................................ $ 8,965,000
Number of Units ........................................................................... 9,091
Fractional Undivided Interest in the Trust per Unit........................................ 1/9,091
Principal Amount (Par Value) of Obligations per Unit <F1><F2>.............................. $ 986.14
Public Offering Price: ....................................................................
Aggregate Offering Price of Obligations in Portfolio...................................... $ 8,645,579
Aggregate Offering Price of Obligations per Unit.......................................... $ 951.00
Sales Charge 4.9% (5.152% of the Aggregate Offering Price of the Obligations) per Unit ... $ 49.00
Public Offering Price per Unit <F3>....................................................... $ 1,000.00
Redemption Price per Unit.................................................................. $ 946.07
Secondary Market Repurchase Price per Unit................................................. $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit.................... $ 53.93
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit....... $ 4.93
Minimum Value of the Trust under which the Trust Agreement may be terminated............... $ 1,793,000
Annual Portfolio Insurance Premium......................................................... $ 9,215
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution....... $1.00 per Unit
First Settlement Date................ March 4, 1996
Evaluator's Annual Supervisory Fee... Maximum of $0.25 per Unit
Evaluator's Annual Evaluation Fee.... $0.30 per $1,000 principal amount of Obligations
</TABLE>
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
<TABLE>
<CAPTION>
Semi-
Per Unit Information: Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit.......................... $ 71.61 $ 71.61
Less: Estimated Annual Expense per Unit <F4>....................... $ 2.26 $ 1.87
Less: Annual Premium on Portfolio Insurance per Unit............... $ 1.01 $ 1.01
Estimated Net Annual Interest Income per Unit...................... $ 68.34 $ 68.73
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit...................... $ 68.34 $ 68.73
Divided by 12 and 2, respectively.................................. $ 5.70 $ 34.37
Estimated Daily Rate of Net Interest Accrual per Unit............... $ .18981 $ .19090
Estimated Current Return Based on Public Offering
Price <F5><F6><F7>............................................... 6.83% 6.87%
Estimated Long-Term Return
<F5><F6><F7>........................................................ 6.91% 6.95%
Estimated Initial Monthly Distribution (April 1996)................. $ 6.83
Estimated Initial Semi-annual Distribution (June 1996).............. $ 18.33
Estimated Normal Distribution per Unit <F7>......................... $ 5.70 $ 34.37
Trustee's Annual Fee.............$.91 and $.51 per $1,000 principal amount of Obligations,
respectively, for those portions of the Trust under the
monthly and semi-annual distribution plans
Record and Computation Dates.....TENTH day of the month as follows: monthly--each month;
semi-annual--June and December
Distribution Dates...............TWENTY-FIFTH day of each month as follows: monthly--each
month; semi-annual--June and December commencing
April 25, 1996
<FN>
<F1> Because certain of the Securities may from time to time under certain
circumstances be sold or redeemed or will be called or mature in accordance
with their terms (including the call or sale of zero coupon bonds at prices
less than par value), there is no guarantee that the value of each Unit at the
Trust's termination will be equal to the Principal Amount (Par Value) of
Securities per Unit stated above.
<F2> Many unit investment trusts issue a number of units such that each unit
represents approximately $1,000 principal amount of underlying securities. In
determining the number of Units for this Trust, however, the Sponsor 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.
<F3> Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price. After the initial offering period, the Sponsor's Repurchase Price per
Unit will be determined as described under the caption "Public
Offering--Public Market."
<F4> Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Operating Expenses--Miscellaneous
Expenses").
<F5> The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge (see "Public
Offering--General").
<F6> The Estimated Current Returns are 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 Returns indicated above will be realized in the future. The
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 of
the Obligations in each 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 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 Returns and
Estimated Long-Term Returns 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 may be lower because of a
possible delay in the first payment to Unitholders.
<F7> These figures are based on per Unit cash flows. Estimated 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".
</TABLE>
THE TRUST
Van Kampen American Capital Insured Income Trust, Series 53 (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 American Capital Distributors, Inc., as Sponsor, American
Portfolio Evaluation Services, a division of Van Kampen American Capital
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 the Obligations
indicated under "Portfolio" herein, 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 9,091
Units of the Trust. 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 2023 to 2026. The
dollar weighted average life of the Obligations in the Trust is 29 years.
Each Unit initially offered represents a 1/9,091 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 OBJECTIVE 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 consisting of long-term corporate, taxable municipal debt
or government 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) MBIA
Insurance 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.
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
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. Standard & Poor's 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 53 consists of 10 issues, 8 of which have been issued by
public utilities and 2 of which have been issued by municipalities.
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; 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.
Redemption 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 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 uneconomical;
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 "Portfolio" for the Trust
and footnote (3) in "Notes to Portfolio".
RISK FACTORS
Public Utility Issues. Approximately 79% 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 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. Approximately 21% of the aggregate principal amount
of the Obligations in the Trust are 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.
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.
Zero Coupon Bonds. Certain of the Obligations in the Trust may be "zero
coupon" U.S. Treasury bonds. See footnote (6) in "Notes to
Portfolio". 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 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.
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 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.
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 American Capital
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 the 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 or its successor trusts (Van Kampen American
Capital 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 as indicated under "
Summary of Essential Financial Information" (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 a fee based on the
aggregate outstanding principal amount of Obligations in the Trust as of the
opening of business on January 2 and July 2 of each year as set forth under
"Summary of Essential Financial Information." 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
$4,572. Assuming in the alternative that all Unitholders had elected the
monthly distribution plan, such fee would initially amount to $8,158. 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 $9,215 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, (f) any
special custodial fees payable in connection with the sale of any bonds in a
Trust, (g) expenditures incurred in contacting Unitholders upon termination of
the Trust and (h) costs incurred to reimburse the Trustee for advancing funds
to the Trust to meet scheduled distributions (which costs may be adjusted
periodically in response to fluctuations in short-term interest rates).
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.
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 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
"Portfolio"). 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").
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 50 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the territory of Guam. CapMAC insures
structured asset-backed, corporate, municipal and other financial obligations
in the U.S. and international capital markets. CapMAC also provides financial
guarantee reinsurance for structured asset-backed, corporate, municipal and
other financial 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, "
AAA" by Duff & Phelps Credit Rating Co. ("Duff & Phelps" ) and "
AAA" by Nippon Investors Service Inc. 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"). Neither
Holdings nor any of its stockholders is obligated to pay any claims under any
policy 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 laws and
regulations of the other jurisdictions in which it is licensed. Such insurance
laws regulate, among other things, the amount of net exposure per risk that
CapMAC may retain, capital transfers, dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and acquisitions.
CapMAC is subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC's obligations under the Policy(s) may be reinsured. Such reinsurance
does not relieve CapMAC of any of its obligations under the Policy(s).
THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
As at December 31, 1995 and 1994, CapMAC had qualified statutory capital
(which consists of policyholders' surplus and contingency reserve) of
approximately $240 million and $170 million, respectively, and had not
incurred any debt obligations. Article 69 of the New York State Insurance Law
requires CapMAC to establish and maintain the contingency reserve, which is
available to cover claims under policies issued by CapMAC.
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 $2,145,000,000 (unaudited) and
statutory capital of approximately $782,000,000 (unaudited) as of December 31,
1994. 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 have both assigned a triple-A
claims-paying ability rating to AMBAC Indemnity.
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.
MBIA Insurance 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, the Commonwealth of the Northern Mariana
Islands, the Commonwealth of Puerto Rico, the Virgin Islands of the United
States and the Territory of Guam. As of September 30, 1995 MBIA had admitted
assets of $3.7 billion (unaudited), total liabilities of $2.5 billion
(unaudited), and total capital and surplus of $1.2 billion (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. As of December 31, 1994, MBIA
had admitted assets of $3.4 billion (audited), total liabilities of $2.3
billion (audited), and total capital and surplus of $1.1 billion (audited)
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 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 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 December 31, 1995, the total capital and surplus
of Financial Guaranty was approximately $1,000,520,000. 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 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 March 31, 1993 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 $479,110,000
(unaudited) and $220,078,000 (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 $628,119,000 (unaudited) and $202,493,000
(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, 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" ) is a "
Aaa/AAA" rated monoline stock insurance company incorporated in the State
of Maryland, and is a wholly owned subsidiary of Capital Guaranty Corporation,
a Maryland insurance holding company. Capital Guaranty Corporation is a
publicly owned company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all 50 states, the
District of Columbia, the Commonwealth of Puerto Rico, Guam and the U.S.
Virgin Islands. Capital Guaranty focuses on insuring municipal securities and
our policies guaranty the timely payment of principal and interest when due
for payment on new issue and secondary market issue municipal bond
transactions. Capital Guaranty's claims-paying ability is rated "
Triple-A" by both Moody's and Standard & Poor's.
As of September 30, 1995, Capital Guaranty had more than $19.0 billion in net
exposure outstanding (excluding defeased issues). The total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$204,642,000, and the total admitted assets were $326,802,226 as reported to
the Insurance Department of the State of Maryland as of September 30, 1995.
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, Standard & Poor's has assigned to the Units of each Trust its "
AAA" investment rating. See "Investment Objectives and Portfolio
Selection". The obtaining of this rating by each Trust should not be
construed as an approval of the offering of the Units by Standard & Poor's or
as a guarantee of the market value of the Trusts or of the Units.
On the date of this Prospectus, the Estimated Current Return on the
Obligations in the Trust portfolio was 6.83% based on the monthly 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 6.91%. The Estimated Current Return on an identical portfolio without the
insurance obtained by the Trust would have been 6.94% based on the monthly
distribution plan on such date, while the Estimated Long-Term Return on an
identical portfolio without the insurance obtained by the Trust would have
been 7.01%.
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 "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 (including the taxable municipal bonds, if
any) 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 income
derived from each such asset when such income is considered to be 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, liquidation, redemption, or payment at
maturity) or when the Unitholder redeems or sells his Units. 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. Such basis is determined (before the adjustments
described below) by apportioning the tax basis for the Units among each of the
Trust assets according to value as of the valuation date nearest the date of
acquisition of the Units. 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 to the extent that such
interest accrued on such Obligations during the period from the Unitholder's
settlement date to the date such Obligations are delivered to the Trust 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 (whether by sale, exchange, payment on maturity,
redemption or otherwise), gain or loss is recognized to the Unitholder
(subject to various non-recognition provisions of the Code). 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) (or which has market discount) must be increased by the amount
of accrued original issue discount (and market discount, if the Unitholder
elects to include market discount in income as it accrues) and the basis of
each Unit and of each Obligation which was purchased by the 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 basis 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 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" 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. To
the extent the amount of such discount is less than the respective "de
minimis" amount, such discount shall be treated as zero. 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. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income. Unitholders may be required to treat some or all of the expenses
paid by the Trust as miscellaneous itemized deductions subject to this
limitation.
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 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 premium.
Original Issue Discount. Certain of the Obligations of the Trust may have been
acquired with "original issue discount." In the case of any
Obligations of the 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 the 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"). 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. Unitholders should also consult their tax
advisers regarding these special rules.
It is possible that a Corporate Bond that has been issued at an original issue
discount may be characterized as a "high-yield discount obligation"
within the meaning of Section 163(e)(5) of the Code. To the extent that such
an obligation is issued at a yield in excess of six percentage points over the
applicable Federal rate, a portion of the original issue discount on such
obligation will be characterized as a distribution on stock (e.g., dividends)
for purposes of the dividends received deduction which is available to certain
corporations with respect to certain dividends received by such corporation.
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 regarding whether such election should be
made and as to the amount of market discount which accrues.
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 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. 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
generally 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. However, it
should be noted that legislative proposals are introduced from time to time
that affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed. The tax basis 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.
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 Revenue Reconciliation Act of 1993" (the "Tax Act" ) raised tax
rates on ordinary income while capital gains remain subject to a 28% maximum
stated rate for taxpayers other than corporations. Because some or all capital
gains are taxed at a comparatively lower rate under the 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.
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) if 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), then 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, or (iii)
with respect to any gain, 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 may contact the Sponsor to obtain a
Form W-8 which must be filed with the Trustee and refiled every three calendar
years thereafter). Foreign investors should consult their tax advisers with
respect to United States tax consequences of ownership of Units. On December
7, 1995 the U.S. Treasury Department released proposed legislation that, if
adopted, could affect the United States federal income taxation of such
non-United States Unitholders and the portion of the Trust's income allocable
to non-United States Unitholders.
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 above) will be requested to provide the
Unitholder's taxpayer identification number to the Trustee and to certify that
the Unitholder has not been notified that payments to the Unitholder are
subject to back-up withholding. If the proper taxpayer identification number
and appropriate certification are not provided when requested, distributions
by the Trust to such Unitholder including amounts received upon the redemption
of the Units will be subject to back-up withholding.
In the opinion of Tanner Propp LLP, 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.
ACCRUED INTEREST
Accrued Interest. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling subsequent to the First Settlement Date, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of the Trust the amount, if any, of accrued interest
paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid by Unitholders, the Trustee will advance the amount of accrued
interest 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. See "Rights of
Unitholders--Distributions of Interest and Principal".
Because of the varying interest payment dates of the Obligations, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholder
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the funds held in the Interest Account
for distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits thereby.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the aggregate offering
price of the Obligations in the Trust's portfolio, a sales charge of 4.9% of
the Public Offering Price (5.152% of the aggregate offering price of the
Obligations), cash, if any, in the Principal Account held or owned by the
Trust, and accrued interest, if any. 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>
Aggregate Number of Dollar Amount of Sales Charge
Units Purchased 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>
After the initial public offering period, the secondary market public offering
price is based on the bid prices of the Obligations in the Trust, an
applicable sales charge as determined in accordance with the table set forth
below, which is based upon the estimated long term return of the Trust, cash,
if any, in the Principal Account held or owned by the Trust, and accrued
interest, if any. 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 are subject to redemption 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
estimated long term return life of such Trust's portfolio, in accordance with
the following schedule:
<TABLE>
<CAPTION>
Years To Maturity Sales Charge Years To Maturity Sales Charge
<S> <C> <C> <C>
1 1.010% 12 4.167%
2 1.266 13 4.275
3 1.579 14 4.384
4 1.781 15 4.493
5 2.041 16 4.603
6 2.302 17 4.712
7 2.564 18 4.822
8 3.093 19 4.932
9 3.627 20 5.042
10 4.058 21 to 30 5.152
11 4.112
</TABLE>
The sales charges in the above table are expressed as a percentage of the
aggregate bid prices of the Obligations in the Trust. Expressed as a percent
of the Public Offering Price, the sales charge on the Trust consisting
entirely of a portfolio of Obligations with 15 years to maturity would be
4.30%.
Employees of Van Kampen American Capital Distributors Inc. and its
subsidiaries may purchase Units of the Trust at the current Public Offering
Price less the underwriting commission or less the dealer's concession in the
absence of an underwriting commission. Registered representatives of selling
Underwriters may purchase Units of the Trust at the current Public Offering
Price less the underwriting commission or the dealer's concession in the
absence of an underwriting commission. 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 American Capital-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. In the event units of more
than one trust are purchased on the Initial Purchase Date, the aggregate
dollar amount of such purchases will be used to determine whether purchasers
are eligible for a reduced sales charge. Such aggregate dollar amount will be
divided by the public offering price per unit (on the date preceding the date
of purchase) of each respective trust purchased to determine the total number
of units which such amount could have purchased of each individual trust.
Purchasers must then consult the applicable trust's prospectus to determine
whether the total number of units which could have been purchased of a
specific trust would have qualified for a reduced sales charge and, if so
qualified, the amount of such reduction. Assuming a purchaser qualifies for a
sales charge reduction or reductions, to determine the applicable sales charge
reduction or reductions 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.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Unit Distribution"
below) by (1) investors who purchase Units through registered investment
advisers, certified financial planners and registered broker-dealers who in
each case either charge periodic fees for financial planning, investment
advisory or asset management services, or provide such services in connection
with the establishment of an investment account for which a comprehensive "
wrap fee" charge is imposed, (2) bank trust departments investing funds
over which they exercise exclusive discretionary investment authority and that
are held in a fiduciary, agency, custodial or similar capacity, (3) any person
who for at least 90 days, has been an officer, director or bona fide employee
of any firm offering Units for sale to investors or their immediate family
members (as described above) and (4) officers and directors of bank holding
companies that make Units available directly or through subsidiaries or bank
affiliates. Notwithstanding anything to the contrary in this Prospectus, such
investors, bank trust departments, firm employees and bank holding company
officers and directors who purchase Units through this program will not
receive sales charge reductions for quantity purchases.
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 Corporation, 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 the Obligations 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
the 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 the Trust'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.
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 plus 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 the amount indicated under footnote (5) in
"Notes to Portfolio".
Although payment is normally made three business days following the order for
purchase, payment may be made prior thereto. However, delivery of certificates
representing Units so ordered will be made three 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". 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 70% of the applicable sales
charge as determined using the table found in "Public
Offering--General."
Except as state hereinafter, the minimum purchase requirement in the initial
offering period and in the secondary market is one Unit. In connection with
fully disclosed transactions with the Sponsor, the minimum purchase
requirement will be that number of Units set forth in the contract between the
Sponsor and the related broker or agent.
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 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 Corporation). 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
and the amount of accrued interest to the date of settlement 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
prices 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 the 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 plus any accrued
interest. 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 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 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
twenty-fifth day of each month on a pro rata basis to Unitholders of record as
of the preceding record date (which will be the tenth day of the month). All
distributions will be net of applicable expenses. The pro rata share of cash
in the Principal Account will be computed on the date indicated under "
Distribution Options" 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 twenty-fifth 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, 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
for any such advances from funds in the Interest Account on the ensuing record
date. Persons who purchase Units between a record date and a distribution date
will receive their first distribution on the second distribution date after
purchase, under the applicable plan of distribution. Notification to the
Trustee of the transfer of Units is the responsibility of the purchaser, but
in the normal course of business such notice is provided by the selling
broker-dealer.
On or before the twenty-fifth day of each month, the Trustee will deduct from
the 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.
Change of Distribution Option. 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 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 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 as of the opening of business on the first day after the next
succeeding semi-annual record date and will be effective, unless further
changed, 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 Van Kampen American Capital mutual
funds (other than B shares) which are registered in the Unitholder's state of
residence. Such mutual funds are hereinafter collectively referred to as the
"Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the 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 American
Capital Distributors, 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 American Capital Reserve
Fund, the Van Kampen American Capital Tax Free Money Fund, the Van Kampen
American Capital Florida Insured Tax Free Income Fund, the Van Kampen American
Capital New Jersey Tax Free Income Fund, or the Van Kampen American Capital
New York Tax Free Income Fund, in which case no sales charge applies. A
minimum of one-half of such sales charge would be paid to Van Kampen American
Capital Distributors, 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 the Trust furnished to it by the Evaluator.
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 third business day following such
tender, 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 the 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 and may be less than the par value of the Obligations
represented by the Units so redeemed. 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 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 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 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 or par 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 American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas, 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
December 31, 1995 the total stockholders' equity of Van Kampen American
Capital Distributors, Inc. was $123,165,000 (unaudited). (This paragraph
relates only to the Sponsor and not to the Trust or to any Series thereof 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.)
As of December 31, 1995, the Sponsor and its affiliates managed or supervised
approximately $56.0 billion of investment products, of which over $24.8
billion is invested in municipal securities. The Sponsor and its affiliates
managed $44.0 billion of assets, consisting of $22.2 billion for 63 open end
mutual funds (of which 47 are distributed by Van Kampen American Capital
Distributors, Inc.), $11.4 billion for 38 closed-end funds and $5.6 billion
for 84 institutional accounts. The Sponsor has also deposited approximately
$26 billion of unit investment trusts. Based on cumulative assets deposited,
the Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R)trust. The Sponsor also provides
surveillance and evaluation services at cost for approximately $13 billion of
unit investment trust assets outstanding. Since 1976, the Sponsor has serviced
over two million investor accounts, opened through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or 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.
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 American Capital Dist., Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 7,841
Bear Stearns & Co. Inc. 245 Park Avenue 4th Floor, New York 10167 250
Fidelity Capital Markets 164 Northern Avenue, Boston, Massachusetts 02210 250
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 250
Dean Witter Reynolds, Incorporated 2 World Trade Center, 59th Floor, New York, New York 10048 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 100
Gruntal & Co., Incorporated 14 Wall Street, New York, New York 10005 100
Edward D. Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
B.C. Ziegler and Company 215 North Main Street, West Bend, Wisconsin 53095 100
9,091
</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 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 LLP, 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 LLP, independent certified public accountants, as
set forth in their report in this Prospectus, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
DESCRIPTION OF OBLIGATION RATINGS
Standard & Poor's, A Division of the McGraw-Hill Companies. A brief
description of the applicable Standard & 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.
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.
As published by the rating companies.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and the Unitholders of Van Kampen American Capital Insured Income Trust,
Series 53:
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Insured Income Trust, Series 53 as of
February 28, 1996. 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 American Capital
Insured Income Trust, Series 53 as of February 28, 1996, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
February 28, 1996
<TABLE>
VAN KAMPEN AMERICAN CAPITAL INSURED INCOME TRUST
SERIES 53
Statement of Condition
As of February 28, 1996
<CAPTION>
<S> <C>
INVESTMENT IN SECURITIES
Contracts to purchase securities <F1><F2><F4>............ $ 8,645,579
Accrued interest to the First Settlement Date <F1><F4>... 154,003
Total.................................................... $ 8,799,582
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--..............................................
Accrued interest payable to Sponsor <F1><F4>............. $ 154,003
Interest of Unitholders-- ...............................
Units of fractional undivided interest outstanding:......
Cost to investors <F3> .................................. 9,091,000
Less: Gross underwriting commission <F3> ................ 445,421
Net interest to Unitholders <F3><F4>..................... 8,645,579
Total.................................................... $ 8,799,582
<FN>
<F1>The aggregate value of the Obligations listed under "Portfolio" and
their cost to the Trust are the same. The value of the Obligations is
determined by Interactive Data Corporation on the bases set forth under "
Public Offering--Offering Price". The contracts to purchase Obligations
are collateralized by an irrevocable letter of credit of $8,791,041 which has
been deposited with the Trustee. Of this amount $8,645,579 relates to the
offering price on $8,965,000 principal amount of Obligations to be purchased,
and $145,462 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 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 are computed on the bases 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>The Trustee will advance to each Trust the amount of net interest accrued to
March 4, 1996, the First Settlement Date, for distribution to the Sponsor as
the Unitholder of record as of the First Settlement Date.
</TABLE>
<TABLE>
VAN KAMPEN AMERICAN CAPITAL INSURED INCOME TRUST
SERIES 53
PORTFOLIO as of February 28, 1996
<CAPTION>
Name of Issuer, Title, Interest Rate and Maturity Offering
Aggregate Date of either Obligations Deposited or Obligations As Redemption Price to
Principal <F1> Contracted for<F1><F5> Rating<F2> Insured<F7> Features<F3> Trust<F4>
<S> <C> <C> <C> <C> <C>
1,000,000 Jersey Central Power and Light Company
$ #7.50% Due 5/1/2023.................................. BBB+ AAA 2003 @ 103.33 $ 971,260
1,000,000 Consolidated Edison Company of New York, Series 1993G
#7.50% Due 6/15/2023................................. A+ AAA 2003 @ 103.27 981,250
900,000 Houston Light and Power Company
#7.50% Due 7/1/2023.................................. A AAA 2003 @ 103.51 893,250
1,000,000 Atlantic City Electric Company
#7.00% Due 9/1/2023.................................. A- AAA 2003 @ 102.88 933,750
225,000 Potomac Edison Company
8.00% Due 6/1/2024................................... A+ AAA 2004 @ 103.6 233,719
+ 1,000,000 Public Service Electric and Gas Company
#7.00% Due 9/1/2024.................................. A- AAA 2003 @ 102.74 918,750
1,000,000 Adelanto Public Financing Authority, California,
Local Agency Taxable Subordinated Revenue Bonds,
Series 1995A (FGIC Insured) 2005 @ 102
#7.20% Due 9/1/2025.................................. AAA AAA 2010 @ 100 S.F. 977,500
840,000 City of Miami, Florida, Non-Ad Valorem Revenue
Bonds, Taxable Pension Series 1995 (AMBAC Indemnity 2006 @ 102
Insured)
#7.20% Due 12/1/2025................................. AAA AAA 2021 @ 100 S.F. 821,100
1,000,000 Mountain Park Master Conservancy District (Oklahoma)
Taxable Water Revenue Bonds, Series 1996 (AMBAC 2006 @ 102
Indemnity Insured)
#7.05% Due 1/1/2026.................................. AAA AAA 2017 @ 100 S.F. 960,000
1,000,000 Pacific Gas and Electric Company
#7.25% Due 3/1/2026.................................. A AAA 2003 @ 102.02 955,000
$ 8,965,000 $ 8,645,579
</TABLE>
All of the Obligations in the portfolio are insured either by one of the
Preinsured Obligation Insurers (as indicated in the obligation name) or 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
Portfolio".
NOTES TO PORTFOLIO:
As of the Date of Deposit: February 28, 1996
(1) 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
February 15,1996 to February 27,1996. These Obligations have expected
settlement dates from February 28,1996 to March 1,1996 (see "Trust
Portfolio").
(2) All ratings are by Standard & Poor's 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".
(3) 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".
(4) 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").
(5) Other information regarding the Obligations in the Trust, as of the Date of
Deposit, is as follows:
<TABLE>
<CAPTION>
Annual Bid Side
Annual Interest Evaluation
Insurance Cost to Profit (Loss) Income to of
Cost Sponsor to Sponsor Trust Obligations
<S> <C> <C> <C> <C>
$9,215 $8,585,257 $60,322 $650,980 $8,600,744
</TABLE>
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.
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 0.50% 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".
(6)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.
(7)Standard & Poor's has assigned its "AAA" investment rating to all
of the Obligations while in the Trust, as insured by the Insurers.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The table below sets forth the per Unit estimated distributions of interest
and principal to Unitholders. The table assumes 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 53
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
April 1996 $6.83 $ 6.83
May 1996 - May 2014 5.70 5.70
June 2014 5.65 $ 24.74 30.39
July 2014 - April 2023 5.54 5.54
May 2023 5.34 110.00 115.34
June 2023 4.88 4.88
July 2023 4.15 209.00 213.15
August 2023 3.63 3.63
September 2023 3.44 110.00 113.44
October 2023 - August 2024 3.01 3.01
September 2024 2.83 110.00 112.83
October 2024 - August 2025 2.40 2.40
September 2025 2.21 110.00 112.21
October 2025 - November 2025 1.76 1.76
December 2025 1.60 92.40 94.00
January 2026 1.03 110.00 111.03
February 2026 .59 .59
March 2026 .40 110.00 110.40
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C> <C> <C> <C>
June 1996 $18.33 $ 18.33
December 1996 - December 2013 34.37 34.37
June 2014 34.32 $ 24.74 59.06
December 2014 - December 2022 33.41 33.41
May 2023 110.00 110.00
June 2023 32.55 32.55
July 2023 209.00 209.00
September 2023 110.00 110.00
December 2023 20.38 20.38
June 2024 18.19 18.19
September 2024 110.00 110.00
December 2024 16.16 16.16
June 2025 14.50 14.50
September 2025 110.00 110.00
December 2025 12.20 92.40 104.60
January 2026 110.00 110.00
March 2026 2.02 110.00 112.02
</TABLE>
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
Fund, 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>
<CAPTION>
Title Page
<S> <C>
Summary Of Essential Financial Information 3
The Trust 5
Investment Objective and Portfolio Selection 5
Trust Portfolio 6
Risk Factors 8
Estimated Current Return and Estimated
Long-Term Return 10
Trust Operating Expenses 11
Insurance on the Obligations 12
Tax Status 17
Accrued Interest 21
Public Offering 21
Rights of Unitholders 26
Trust Administration 29
Underwriting 33
Other Matters 34
Description of Obligation Ratings 34
Report of Independent Certified Public Accountants 36
Statement of Condition 37
Portfolio 38
Notes to Portfolio 39
Estimated Cash Flows to Unitholders 41
</TABLE>
This Prospectus contains information concerning the Fund and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
February 28, 1996
Van Kampen
American Capital
Insured Income Trust
Series 53
A Wealth of Knowledge A Knowledge of Wealth(sm)
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
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 American Capital
Distributors, Inc., Depositor, American Portfolio Advisory Service, a
division of Van Kamepn American Capital Investment Advisory Corp., 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 Ratings Group (to be supplied by
amendment).
4.3 Consent of Grant Thornton LLP (to be supplied by amendment).
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Insured Income Trust, Series 55
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 4th day of April, 1996.
Van Kampen American Capital Insured
Income Trust, Series 55
By Van Kampen American Capital
Distributors, 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 April 4, 1996.
Signature Title
Don G. Powell Chairman and Chief )
Executive Officer )
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 with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
