September 17, 1998
Van Kampen
Van Kampen Insured Income Trust, Series 72
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The Trust. The Trust initially consists of delivery statements relating to
contracts to purchase debt obligations and, thereafter, will consist of a
$9,135,000 aggregate principal amount portfolio principally comprised of
long-term corporate, taxable municipal or U.S. government debt obligations. The
Trust is comprised of 9,132 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 Objectives and Portfolio Selection". There is no
assurance that the Trust will achieve its objective. The payment of interest and
the preservation of principal is, of course, dependent upon the continuing
ability of the issuers and/or obligors of the Obligations and of the insurer
thereof to meet their respective obligations.
The Trust and "AAA" Rating. Insurance guaranteeing the payments of principal
and interest, when due, on the Obligations in the portfolio of the Trust has
been obtained from an insurance company either by the Trust or by the issuer of
the Obligations involved, by a prior owner of the Obligations or by the Sponsor
prior to the deposit of such Obligations in the Trust. See "Insurance on the
Obligations". 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 neither 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".
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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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 $2.92 per Unit and will be made on October 25, 1998
to Unitholders of record on October 10, 1998. 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 December 25, 1998 to
Unitholders of record on December 10, 1998, 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
Funds 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-sponsored unit investment
trust may utilize their redemption or termination proceeds to purchase units of
any other Van Kampen 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".
Van Kampen Insured Income Trust, Series 72
Summary of Essential Financial Information
As of 8:00 A.M. Central Time on the Date of Deposit: September 17, 1998
Sponsor: Van Kampen Funds Inc.
Supervisor: Van Kampen Investment Advisory Corp.
Evaluator: American Portfolio Evaluation Services
(A division of an affiliate of the Sponsor)
Trustee: The Bank of New York
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount (Par Value) of Obligations $ 9,135,000
Number of Units 9,132
Fractional Undivided Interest in the Trust per Unit 1/9,132
Principal Amount (Par Value) of Obligations per Unit (1)(2) $ 1,000.33
Public Offering Price:
Aggregate Offering Price of Obligations in Portfolio $ 8,684,574
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 (3) $ 1,000.00
Redemption Price per Unit $ 946.34
Secondary Market Repurchase Price per Unit $ 951.00
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ 53.66
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit $ 4.66
Minimum Value of the Trust under which the Trust Agreement may be terminated $ 1,827,000
Annual Portfolio Insurance Premium $ --
</TABLE>
Minimum Principal Distribution $1.00 per Unit
First Settlement Date September 22, 1998
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
Evaluations for purpose of sale, purchase or redemption of Units are made as
of the close of the New York Stock Exchange on days of trading on such
Exchange next following receipt of an order for a sale or purchase of Units
or receipt by The Bank of New York of Units tendered for redemption.
<TABLE>
<CAPTION>
Semi-
PER UNIT INFORMATION: Monthly Annual
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Calculation of Estimated Net Annual Unit Income:
<S> <C> <C>
Estimated Annual Interest Income per Unit $ 60.55 $ 60.55
Less: Estimated Annual Expense per Unit (4) $ 2.05 $ 1.55
Less: Annual Premium on Portfolio Insurance per Unit -- --
Estimated Net Annual Interest Income per Unit $ 58.50 $ 59.00
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit $ 58.50 $ 59.00
Divided by 12 and 2, respectively $ 4.87 $ 29.50
Estimated Daily Rate of Net Interest Accrual per Unit $ .16250 $ .16389
Estimated Current Return Based on Public Offering Price (5)(6)(7) 5.85% 5.90%
Estimated Long-Term Return (5)(6)(7) 5.91% 5.97%
Estimated Initial Monthly Distribution (October 1998) $ 2.92
Estimated Initial Semi-annual Distribution (December 1998) $ 12.78
Estimated Normal Distribution per Unit (7) $ 4.87 $ 29.50
</TABLE>
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 October 25, 1998
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(1)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.
(2)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.
(3)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 Offering--Public
Market."
(4)Excluding insurance costs. The Estimated Annual Expenses are expected to
fluctuate periodically (see "Trust Operating Expenses--Miscellaneous
Expenses"). Estimated expenses will increase during the second year to $2.27
and $1.77 under the monthly and semi-annual distribution plans, respectively.
Estimated Net Interest Income will remain as shown.
(5)The Estimated Current Returns and Estimated Long-Term Returns are increased
for transactions entitled to a reduced sales charge (see "Public Offering--
General").
(6)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.
(7)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".
THE TRUST
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Van Kampen Insured Income Trust, Series 72 (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 Funds Inc., as Sponsor,
American Portfolio Evaluation Services, a division of Van Kampen 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 9,132 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 2014 to 2033. The dollar weighted average life of the
Obligations in the Trust is 25 years.
Each Unit initially offered represents a 1/9,132 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
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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 Assurance Corporation ("AMBAC Assurance"), 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 Assurance or one of its subsidiaries, American
Municipal Bond Assurance Corporation ("AMBAC"), (2) Financial Guaranty Insurance
Company ("Financial Guaranty"), (3) MBIA Insurance Corporation ("MBIA"), (4)
Financial Security Assurance of Maryland Inc. ("FSA Maryland"), (5) CapMAC
and/or (6) 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
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Portfolio. Series 72 consists of 11 issues, eight of which have been issued
by municipalities and three of which have been issued by public utilities.
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
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Public Utility Issues. Approximately 33% 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. 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.
Recently, the California Public Utility Commission ("CPUC") announced its
intention to deregulate the electric utility industry in California. This change
will eventually result in full competition between electric utilities and
independent power producers in the generation and sale of power to all customers
in California by the year 2002. In September of 1996, the California Legislature
passed and the Governor signed into law Assembly Bill 1890 (AB 1890) to
restructure the California electrical industry by promoting competition and
allowing customers a right to choose their electrical supplier. In February
1997, a bill was introduced which creates a joint oversight committee on
electricity and reform to oversee implementation of AB 1890 as well as other
bills passed in conjunction with AB 1890. Preliminary assessments of the CPUC
plan and the new law suggest that the deregulation of the electric utility
industry in California could have a significant adverse effect on electric
utility stocks of California issuers. Furthermore, the move toward full
competition in California could indicate that similar changes may be made in
other states in the future which could negatively impact the profitability of
electric utilities. Further deregulation could adversely affect the issuers of
certain of the Obligations in the portfolio. In view of the uncertainties
regarding the CPUC deregulation plan, it is unclear what effect, if any, that
full competition will have on electric utilities in California or whether
similar changes will be adopted in other states.
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 67% 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 portfolio of the Trust; however, because of the insurance
obtained by the Trust, the "AAA" rating of the Units of the Trust would not be
affected.
Zero Coupon Bonds. Approximately 8% of the Obligations in the Trust are
"zero coupon" 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
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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
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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 Investment Advisory
Corp., which is an affiliate 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 and Van Kampen 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 $4,659. Assuming in the alternative
that all Unitholders had elected the monthly distribution plan, such fee would
initially amount to $8,313. 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. 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
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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 Assurance or CapMAC. The other policy (or commitment therefor) obtained by
an Obligation issuer was issued by AMBAC Assurance. See "Investment Objectives
and Portfolio Selection".
Capital Markets Assurance Corporation ("CapMAC") is a New York-domiciled
monoline stock insurance company which engages only in the business of financial
guaranty and surety insurance. CapMAC is licensed in all 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.
Pursuant to a merger of a subsidiary of MBIA Inc. with and into CapMAC
Holdings Inc., CapMAC became an indirect wholly-owned subsidiary of MBIA Inc. on
February 17, 1998. MBIA Inc., through its wholly-owned subsidiary, MBIA
Insurance Corporation, is a financial guaranty insurer of municipal bonds and
structured finance transactions. MBIA Insurance Corporation has a claims paying
rating of triple-A from Moody's Investor Service, Inc., Standard & Poor's
Ratings Services and Fitch Investors Service. Pursuant to a reinsurance
agreement, it is anticipated that CapMAC will cede all of its net insured risks,
as well as its unearned premiums and contingency reserves, to MBIA Insurance
Corporation and that MBIA Insurance Corporation will reinsure CapMAC's net
outstanding exposure. Neither MBIA Inc. 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 to CapMAC.
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 of December 31, 1995 and 1996,
CapMAC had qualified statutory capital (which consists of policyholders'
surplus, statutory capital, and contingency reserves) of approximately $260
million and $240 million, respectively, and had not incurred any debt
obligations. As of September 30, 1997, CapMAC had qualified statutory capital of
$278.6 million 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, are filed with the Insurance Department of the State of New York and
are available upon request. CapMAC is located at 885 Third Avenue, New York, New
York 10022, and its telephone is (212) 755-1155.
Effective July 14, 1997, AMBAC Indemnity Corporation changed its name to
AMBAC Assurance Corporation ("AMBAC Assurance"). AMBAC Assurance 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 $2,735,772,668 (unaudited) and statutory capital of
$1,547,693,950 (unaudited) as of June 30, 1997. Statutory capital consists of
AMBAC Assurance's policyholders' surplus and statutory contingency reserve.
AMBAC Assurance is a wholly owned subsidiary of AMBAC Financial Group, 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
Assurance.
Copies of its financial statements prepared in accordance with statutory
accounting standards are available from AMBAC Assurance. The address of AMBAC
Assurance's administrative offices and its telephone number are One State Street
Plaza, 17th Floor, New York, New York, 10004 and (212) 668-0340.
AMBAC Assurance has entered into quota share reinsurance agreements under
which a percentage of the insurance underwritten pursuant to certain municipal
bond insurance programs of AMBAC Assurance 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 domiciled in the State of
New York and licensed to do business in and subject to regulation under the laws
of 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. MBIA has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
Effective February 17, 1998, MBIA, Inc. acquired all of the outstanding
stock of CapMAC, through a merger with its parent, CapMAC Holdings, Inc. MBIA,
Inc. then contributed the common stock of CapMAC to MBIA. Pursuant to a
reinsurance agreement, CapMAC has ceded all of its net insured risks as well as
its unearned premiums and contingency reserves to MBIA and MBIA has reinsured
CapMAC's net outstanding exposure. MBIA, Inc. is not obligated to pay debts of
or claims against CapMAC.
As of December 31, 1997, the insurer had admitted assets of $5.3 billion
(audited), total liabilities of $3.5 billion (audited), and total capital and
surplus of $1.8 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of June 30, 1998, MBIA had admitted assets of $6.0 billion
(unaudited), total liabilities of $4.0 billion (unaudited), and total capital
and surplus of $2.0 billion (unaudited), determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's 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.
Moody's, Standard & Poor's and Fitch IBCA, Inc. (formerly Fitch Investors
Service, L.P.), all rate the claims paying ability of MBIA as "Triple A." 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 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 a
monoline financial guaranty insurer domiciled in the State of New York and
subject to regulation by the State of New York Insurance Department. As of June
30, 1998, the total capital and surplus of Financial Guaranty was
$1,282,692,798. Financial Guaranty prepares financial statements on the basis of
both statutory accounting principles and generally accepted accounting
principles. Copies of such financial statements 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 25 Beaver Street, New York, New York 10004-2319,
Attention: Financial Condition Property/Casualty Bureau, telephone number: (212)
480-5187.
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 in 1984 under the laws of the State of
New York. Financial Security is licensed to engage in the financial guaranty
insurance business in all 50 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. 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 and
its subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
Financial Security insures both newly issued securities sold in the primary
market and outstanding securities sold in the secondary market that satisfy
Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Financial Security is obligated to pay any debt of Financial
Security or its subsidiaries or any claim under any insurance policy issued by
Financial Security or its subsidiaries or to make any additional contribution to
the capital of Financial Security or its subsidiaries. As of March 31, 1998, 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 statutory accounting principles,
approximately $808,603,000 (unaudited) and $503,683,000 (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 $923,047,000 (unaudited)
and $428,158,000 (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 or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries (including FSA
Maryland) 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 and FSA Maryland reinsure a portion of their liabilities under certain
of their financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis. Such
reinsurance is utilized as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit the
obligations of Financial Security or FSA Maryland under any financial guaranty
insurance policy.
The claims-paying ability of Financial Security and FSA Maryland is rated
"Aaa" by Moody's Investors Service, Inc., and "AAA" by Standard & Poor's Ratings
Services, Nippon Investors Service Inc. and Standard & Poor's (Australia) 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 was involved in a merger in 1995. On
December 20, 1995, Capital Guaranty Corporation ("CGC") merged with a subsidiary
of Financial Security Assurance Holdings Ltd. and Capital Guaranty Insurance
Company, CGC's principal operating subsidiary, changed its name to Financial
Security Assurance of Maryland Inc. ("FSA Maryland") and became a wholly owned
subsidiary of Financial Security Assurance Inc. For further description, see
"Financial Security Assurance Inc." herein.
The address of FSA Maryland and its telephone number are Steuart Tower, One
Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000. Because the
Obligations are insured by CapMAC, MBIA or AMBAC Assurance 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 the Trust its "AAA" investment rating. Such rating
will be in effect for a period of thirteen months from the Date of Deposit and
will, unless renewed, terminate at the end of such period. See "Investment
Objectives and Portfolio Selection". The obtaining of this rating by the Trust
should not be construed as an approval of the offering of the Units by Standard
& Poor's or as a guarantee of the market value of the Trusts or of the Units.
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
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For purposes of the following discussions and opinions, it is assumed that
the Obligations are debt for federal income tax purposes and 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:
Each 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 a 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
each 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 a 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 a Trust is
disposed of (whether by sale, exchange, liquidation, redemption, payment at
maturity or otherwise) 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 before the date the Trust acquired
ownership of the Obligations (and the amount of this reduction may exceed the
amount of accrued interest paid to the sellers) and, consequently, such
Unitholders may have an increase in taxable gain or reduction in capital loss
upon the disposition of such Units. Unitholders should consult their own tax
advisors with regard to calculation of basis.
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 a Trust at a premium must be reduced by the
annual amortization of bond premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. The tax 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 a 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 a 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 a 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 of 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 a 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 (similar limitations also apply to estates and trusts). Unitholders may
be required to treat some or all of the expenses paid by the Trusts 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 a 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 Trusts may have
been acquired with "original issue discount." In the case of any Obligations of
a Trust acquired with "original issue discount" that exceeds a "de minimis"
amount as specified in the Code or in the case of the Treasury Bonds as
specified in the Regulation, such discount is includable in taxable income of
the Unitholders on an accrual basis computed daily, without regard to when
payments of interest on such Obligations are received. The Code provides a
complex set of rules regarding the accrual of original issue discount. These
rules provide that original issue discount generally accrues on the basis of a
constant compound interest rate over the term of the Obligations. Unitholders
should consult their tax advisers as to the amount of original issue discount
which accrues.
Special original issue discount rules apply if the purchase price of the
Obligation by a Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon its issue
price (its "adjusted issue price"). 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 a 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
Trusts 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, subject to various non-recognition provisions of the Code. 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 a Trust or the
disposition of Units by a Unitholder will be determined by the period of time
the Unitholder held his Unit and the period of time the Trust held the
Obligation. The Internal Revenue Service Restructuring and Reform Act of 1998
(the "1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) realized from property (with certain
exclusions ) is subject to a maximum marginal stated tax rate of 20% (10% in the
case of certain taxpayers in the lowest tax bracket). Capital gain or loss is
long-term if the holding period for the asset is more than one year, and is
short-term if the holding period for the asset is one year or less. The date on
which a Unit is acquired (i.e., the "trade date") is excluded for purposes for
determining the holding period of the Unit. The legislation is generally
effective retroactively for amounts properly taken into account on or after
January 1, 1998. Capital gains realized from assets held for one year or less
are taxed at the same rates as ordinary income. The tax basis reduction
requirements of the Code relating to amortization of bond premium may, under
certain 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.
In addition, it should be noted that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after April
30, 1993.
The 1997 Act includes provisions that treat certain transactions designed to
reduce or eliminate risk of loss and opportunities for gain (e.g., short sales,
offsetting notional principal contracts, futures or forward contracts, or
similar transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Unit holders
should consult their own tax advisors with regard to any such constructive sales
rules.
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.
In addition, please note that capital gains may be recharacterized 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 their own tax
advisors regarding the effect of this provision on their 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.
It should be noted that the Revenue Reconciliation Act of 1993 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 special counsel to the Trust for New York tax matters, the
Trust is not an association taxable as a corporation and the income of the Trust
will be treated as the income of the Unitholders under the existing income tax
laws of the State and City of New York.
The foregoing discussion relates only to 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
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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
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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:
Dollar Amount of Sales
Aggregate Number of Units Purchased* Charge Reduction Per Unit
-------------------------------------- -------------------------
100-249 Units $ 4.00
250-499 Units $ 6.00
500-999 Units $ 14.00
1,000 or more Units $ 19.00
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*The breakpoint sales charges are also applied on a dollar basis utilizing
a breakpoint equivalent in the above table of $1,000 per Unit and will be
applied on whichever basis is more favorable to the investor. The breakpoints
above will be adjusted to take into consideration purchase orders stated in
dollars which cannot be completely fulfilled due to the Trust's requirement that
only whole Units be issued.
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:
Years To Maturity Sales Charge Years To Maturity Sales Charge
------------------ ------------- ------------------ -------------
1 1.010% 12 4.712%
2 1.523 13 4.822
3 2.041 14 4.932
4 2.302 15 5.042
5 2.564 16 5.152
6 2.828 17 5.263
7 3.093 18 5.374
8 3.627 19 5.485
9 4.167 20 5.597
10 4.384 21 to 30 5.708
11 4.603
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 4.80%.
Employees, officers and directors (including their spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-in-law,
sons-in-law and daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons (collectively referred to herein as "related
purchasers")) of Van Kampen Funds Inc. and its affiliates and Underwriters and
their affiliates may purchase Units at the Public Offering Price less the
applicable underwriting commission or less the applicable dealer concession in
the absence of an underwriting commission and employees, officers and directors
(including related purchasers) of dealers and their affiliates and vendors
providing services to the Sponsor may purchase Units at the Public Offering
Price less the applicable dealer concession.
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-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 ("immediate family members") 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.
A purchaser desiring to purchase during a 13 month period $500,000 or more
of any combination of series of Van Kampen Trusts may qualify for a reduced
sales charge by signing a nonbinding Letter of Intent with any single
broker-dealer. After signing a Letter of Intent, at the date total purchases,
less redemptions, of units of any combination of series of Van Kampen Trusts by
a purchaser (including 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) exceed
$500,000, the selling broker-dealer, bank or other will credit the unitholder
with cash as a retroactive reduction of the sales charge on such units equal to
the amount which would have been paid for the total aggregated sale amount. If a
purchase does not complete the required purchases under the Letter of Intent
within the 13 month period, no such retroactive sales charge reduction shall be
made.
Purchasers of units of any two consecutive series of a Trust may aggregate
purchases of units of such series for purposes of the sales charge reduction for
quantity purchases, provided that at the time of the initial purchase of units
such purchaser submitted a purchase order for at least 100 units that was
partially unfulfilled due to a lack of units of such Trust series available for
sale at such time. The sales charge reduction shall be applied to the subsequent
purchase of units such that the aggregate sales charge reduction applicable to
both purchases will equal the amount described in the table above.
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. 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 the
close of the New York Stock Exchange 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 the close of the New York Stock Exchange on each such day. Orders
received by the Trustee, Sponsor or any Underwriter for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price. 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 the close of the New York Stock Exchange 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 the close of the New York Stock Exchange 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, $32.00 per Unit for any single
transaction of 100 to 249 Units, $34.00 per Unit for any single transaction of
250 to 499 Units, $35.00 per Unit for any single transaction of 500 to 999 Units
and $34.00 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". Volume concessions or agency commissions of an additional
$5.00 per Unit will be given to any broker/dealer or agent (other than
Underwriters) who purchases from the Sponsor at least 250 Units of the Trust
during the initial offering period. The breakpoint concessions or agency
commissions listed above are also applied on a dollar basis utilizing a
breakpoint equivalent of $1,000 per Unit and will be applied on whichever basis
is more favorable to the distributor. The breakpoints will be adjusted to take
into consideration purchase orders stated in dollars which cannot be completely
fulfilled due to the Trust's requirement that only whole Units be issued.
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 set forth above.
Except as stated 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 it underwrites. All breakpoints listed above are also
applied on a dollar basis utilizing a breakpoint equivalent of $1,000 per Unit
and will be applied on whichever basis is more favorable to the Underwriter. The
breakpoints will be adjusted to take into consideration purchase orders stated
in dollars which cannot be completely fulfilled due to the Trust's requirement
that only whole Units be issued. 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
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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 may elect to have each distribution of
interest income, capital gains and/or principal on their Units automatically
reinvested in shares of certain Van Kampen or Morgan Stanley mutual funds which
are registered in the Unitholder's state of residence. Such mutual funds are
hereinafter collectively referred to as the "Reinvestment Funds." By reinvesting
distributions, investors have the power to increase earning potential by
compounding. If Trust distributions are reinvested into another investment, the
return would be higher than if distributions were merely taken out of the
investment as a source of income.
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 Funds 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.
Unitholders with an existing Guaranteed Reinvestment Option (GRO) Program
account (whereby a sales charge is imposed on distribution reinvestments) may
transfer their existing account into a new GRO account which allows purchases of
Reinvestment Fund shares at net asset value as described above.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund. A participant may at
any time prior to five days preceding the next succeeding distribution date, by
so notifying the Trustee in writing, elect to terminate his or her reinvestment
plan and receive future distributions 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 close of the New York Stock Exchange 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 Funds Inc., a Delaware corporation, is the Sponsor of
the Trust. The Sponsor is an indirect subsidiary of Van Kampen Investments Inc.
Van Kampen Investments Inc. is a wholly owned subsidiary of MSAM Holdings II,
Inc., which in turn is a wholly owned subsidiary of Morgan Stanley Dean Witter &
Co. ("MSDW").
MSDW, together with various of its directly and indirectly owned
subsidiaries, is engaged in a wide range of financial services through three
primary businesses: securities, asset management and credit services. These
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; asset
management; trading of futures, options, foreign exchange commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; global custody, securities clearance
services and securities lending; and credit card services.
Van Kampen Funds Inc. specializes in the underwriting and distribution of
unit investment trusts and mutual funds with roots in money management dating
back to 1926. The Sponsor is a member of the National Association of Securities
Dealers, Inc. and has offices at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, (630) 684-6000 and 2800 Post Oak Boulevard, Houston, Texas 77056, (713)
993-0500. As of November 30, 1997, the total stockholders' equity of Van Kampen
Funds Inc. was $132,381,000 (audited). (This paragraph relates only to the
Sponsor and not to the Trust or to any other Series thereof. The information is
included herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its contractual
obligations. More detailed financial information will be made available by the
Sponsor upon request.)
As of September 30, 1997, the Sponsor and its Van Kampen affiliates managed
or supervised approximately $65.3 billion of investment products, of which over
$10.85 billion is invested in municipal securities. The Sponsor and its Van
Kampen affiliates managed $54 billion of assets, consisting of $34.3 billion for
55 open-end mutual funds (of which 45 are distributed by Van Kampen Funds Inc.)
$14.2 billion for 37 closed-end funds and $5.5 billion for 106 institutional
accounts. The Sponsor has also deposited approximately $26 billion of unit
investment trusts. All of Van Kampen's open-end funds, closed-ended funds and
unit investment trusts are professionally distributed by leading financial firms
nationwide. Based on cumulative assets deposited, the Sponsor believes that it
is the largest sponsor of insured municipal unit investment trusts, primarily
through the success of its Insured Municipals Income Trust(R) or the IM-IT(R)
trust. The Sponsor also provides surveillance and evaluation services at cost
for approximately $13 billion of unit investment trust assets outstanding. Since
1976, the Sponsor has serviced over two million investor accounts, opened
through retail distribution firms.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or shall become bankrupt or its affairs
are taken over by public authorities, then the Trustee may (i) appoint a
successor Sponsor at rates of compensation deemed by the Trustee to be
reasonable and not exceeding amounts prescribed by the Securities and Exchange
Commission, (ii) terminate the Trust Agreement and liquidate the Trusts as
provided therein or (iii) continue to act as Trustee without terminating the
Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its 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 Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 8,482
Peacock, Hislop, Staley, & Given, Inc. 122 North Kirkwood Road, St. Louis, Missouri 63122 250
Gruntal & Company, L.L.C. 14 Wall Street, New York, New York 10005 100
Edward Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 100
Morgan Stanley Dean Witter & Co. 2 World Trade Center, 59th Floor, New York, New York 10048 100
Pershing DIV of DLJ Secs Corp. One Pershing Plaza, 7th Floor, Jersey City, New Jersey 07399 100
-----
9,132
=====
</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. Winston & Strawn 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.
- --------------------------------------------------------------------------------
*As published by the rating companies.
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.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of
Van Kampen Insured Income Trust, Series 72: We have audited the accompanying
statement of condition and the related portfolio of Van Kampen Insured Income
Trust, Series 72 as of September 17, 1998. 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 Insured Income
Trust, Series 72 as of September 17, 1998, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
September 17, 1998
VAN KAMPEN INSURED INCOME TRUST,
SERIES 72
Statement of Condition
As of September 17, 1998
- --------------------------------------------------------------------------------
INVESTMENT IN SECURITIES
Contracts to purchase securities (1)(2)(4) ....................... $8,684,574
Accrued interest to the First Settlement Date (1)(4) ............. 73,980
----------
Total ................................................... $8,758,554
==========
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(4) .................... $ 73,980
Interest of Unitholders--
Units of fractional undivided interest outstanding:
Cost to investors (3) ................................... 9,132,000
Less: Gross underwriting commission (3) ....................... 447,426
----------
Net interest to Unitholders (3)(4) ...................... 8,684,574
----------
Total ................................................... $8,758,554
==========
- --------------------------------------------------------------------------------
(1)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 $8,756,780 which has
been deposited with the Trustee. Of this amount $8,684,574 relates to the
offering price on $9,135,000 principal amount of Obligations to be purchased,
and $72,206 relates to accrued interest on such Obligations to the expected
dates of delivery.
(2)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.
(3)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.
(4)The Trustee will advance to each Trust the amount of net interest accrued to
September 22, 1998, the First Settlement Date, for distribution to the
Sponsor as the Unitholder of record as of the First Settlement Date.
VAN KAMPEN INSURED INCOME TRUST
SERIES 72
PORTFOLIO as of September 17, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name of Issuer, Title, Interest Rate
and Maturity Date of either Offering
Aggregate Obligations Deposited or Obligations As Redemption Price to
Principal(1) Contracted for (1)(5) Rating(2) Insured(7) Features(3) Trust(4)
- ---------- ----------------------------------------- --------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
$ 995,000 La Grange, Georgia, Development Authority
Revenue Bonds, Communications Systems
Project, Series 1998 (AMBAC Assurance Insured)
#6.20% Due 02/01/2014...................... AAA AAA 2008 @ 102 $ 995,985
555,000 Harris County, Houston, Texas, Sports Authority,
Special Taxable Revenue Bonds, Junior Lien,
Series C (MBIA Insured) 2008 @ 101
#6.75% Due 11/15/2017...................... AAA AAA 2009 @ 100 S.F. 569,113
825,000 Pasco, Washington, Water and Sewer
Revenue Bonds, Taxable Series A (AMBAC
Assurance Insured) 2008 @ 100
#6.45% Due 06/01/2018...................... AAA AAA 2014 @ 100 S.F. 837,301
1,000,000 Emeryville, California, Public Building Financing
Authority, Taxable Revenue Bonds, Emeryville
Redevelopment, Series C (MBIA Insured)
6.625% Due 09/01/2019...................... AAA AAA 2008 @ 101 1,015,710
730,000 York, Pennsylvania, Capital Appreciation
Taxable General Obligation Bonds, Series A
(FGIC Insured)
#0.00% Due 02/01/2023...................... AAA AAA 164,535 (6)
1,000,000 New York Telephone Company (MBIA Insured)
#6.70% Due 11/01/2023...................... AAA AAA 2013 @ 100 1,030,210
30,000 New Jersey, Economic Development Authority,
State Pension Funding Revenue Bonds,
Series B (FSA Insured)
#0.00% Due 02/15/2025...................... AAA AAA 5,940 (6)
1,000,000 Union County Improvement Authority,
Guaranteed Lease Taxable Revenue Bonds,
Linden Airport Project, Series B (MBIA Insured) 2008 @ 101
#6.65% Due 03/01/2025##.................... AAA AAA 2019 @ 100 S.F. 997,560
1,000,000 Pacificorp Electric Utility Company (MBIA Insured)
6.71% Due 01/15/2026....................... AAA AAA 1,013,640
1,000,000 Tennessee, School Board Authority, Taxable
Revenue Bonds, Higher Education Facilities,
Series B (FSA Insured) 2008 @ 100
6.70% Due 05/01/2028##..................... AAA AAA 2019 @ 100 S.F. 1,016,540
1,000,000 U.S. West Communications (MBIA Insured)
#6.875% Due 09/15/2033..................... AAA AAA 2003 @ 101.95 1,038,040
- ------------ -------------
$ 9,135,000 $ 8,684,574
============ =============
</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 Assurance or CapMAC.
Obligations that are insured under a portfolio insurance policy obtained by the
Trust from CapMAC are marked by a "3". 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: September 17, 1998
- --------------------------------------------------------------------------------
(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 September 11,
1998 to September 17, 1998. These Obligations have expected settlement dates
from September 18, 1998 to October 1, 1998 (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. "(degree)" 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>
-- $8,616,188 $68,386 $554,965 $8,641,939
</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. Certain Securities in the Fund, if any, marked by ##, have been
purchased on a "when, as and if issued" or "delayed delivery" basis. 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 0.47% 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. Approximately 8% of the aggregate principal
amount of the Obligations in the Trust are "zero coupon" bonds.
(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 72
MONTHLY
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
------------------------------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
October 1998 $ 2.92 $ 2.92
November 1998 - September 2003 4.87 4.87
October 2003 4.36 $111.64 116.00
November 2003 - April 2008 4.26 4.26
May 2008 4.08 109.50 113.58
June 2008 3.52 90.34 93.86
July 2008 - August 2008 3.19 3.19
September 2008 3.01 110.60 113.61
October 2008 - November 2009 2.60 2.60
December 2009 2.32 60.78 63.10
January 2010 2.27 2.27
February 2010 2.10 108.95 111.05
March 2010 - October 2013 1.72 1.72
November 2013 1.54 109.51 111.05
December 2013 - January 2023 1.12 1.12
February 2023 1.12 79.94 81.06
March 2023 - February 2025 1.12 1.12
March 2025 .95 112.79 113.74
April 2025 - January 2026 .54 .54
February 2026 .04 109.50 109.54
<CAPTION>
SEMI-ANNUAL
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
------------------------------------ -------------- -------------- ------------
<S> <C> <C> <C> <C>
December 1998 $12.78 $ 12.78
June 1999 - June 2003 29.50 29.50
October 2003 $111.64 111.64
December 2003 27.75 27.75
June 2004 - December 2007 25.80 25.80
May 2008 109.50 109.50
June 2008 24.88 90.34 115.22
September 2008 110.60 110.60
December 2008 17.39 17.39
June 2009 15.79 15.79
December 2009 15.51 60.78 76.29
February 2010 108.95 108.95
June 2010 11.41 11.41
December 2010 - June 2013 10.47 10.47
November 2013 109.51 109.51
December 2013 9.69 9.69
June 2014 - December 2022 6.87 6.87
February 2023 79.94 79.94
June 2023 - December 2024 6.87 6.87
March 2025 112.79 112.79
June 2025 4.94 4.94
December 2025 3.33 3.33
February 2026 .61 109.50 110.11
</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.
- --------------------------------------------------------------------------------
TITLE PAGE
Summary Of Essential Financial Information 3
The Trust 5
Investment Objective and Portfolio Selection 5
Trust Portfolio 6
Risk Factors 7
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 30
Underwriting 34
Other Matters 35
Description of Obligation Ratings 35
Report of Independent Certified
Public Accountants 37
Statement of Condition 38
Portfolio 39
Notes to Portfolio 40
Estimated Cash Flows to Unitholders 42
- --------------------------------------------------------------------------------
This Prospectus contains information concerning the 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
- --------------------------------------------------------------------------------
September 17, 1998
Van Kampen Insured Income Trust Series 72
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
