MEMORANDUM OF CHANGES
VAN KAMPEN FOCUS PORTFOLIOS INSURED INCOME TRUST, SERIES 76
The Prospectus filed with Amendment No. 1 of the Registration Statement
on Form S-6 has been revised to reflect information regarding the deposit of
bonds on November 16, 2000, and to set forth certain statistical data based
thereon. An effort has been made to set forth below each of the changes and also
to reflect the same by blacklining the marked counterparts of the Prospectus
submitted with the Amendment.
Cover Page. The Trust name, Estimated Current Return, Estimated Long-Term
Return, CUSIP number and date of the prospectus have been completed.
Page 2. The "Summary of Essential Financial Information" has been
completed.
Pages 3-4. The "Portfolio" and the notes thereto have been completed.
Page 5. The "Underwriting" section has been completed.
Page 6. The "Report of Certified Public Accountants" and "Statement of
Condition" has been completed.
Back Cover Page. The name of the Fund, Trust and date of the prospectus has
been completed.
FILE NO. 333-49542
CIK #897189
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
AMENDMENT NO. 1
TO
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact Name of Trust: VAN KAMPEN FOCUS PORTFOLIOS INSURED INCOME
TRUST, SERIES 76
B. Name of Depositor: VAN KAMPEN FUNDS INC.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
D. Name and complete address of agents for service:
CHAPMAN AND CUTLER VAN KAMPEN FUNDS INC.
Attention: Mark J. Kneedy Attention: A. Thomas Smith III, General Counsel
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title of securities being registered: Units of undivided
beneficial interest.
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT
/ X / Check box if it is proposed that this filing will become effective at
8:00 a.m. on November 16, 2000 pursuant to Rule 487.
VAN KAMPEN FOCUS PORTFOLIOS (SM)
A DIVISION OF VAN KAMPEN FUNDS INC.
INSURED INCOME TRUST, SERIES 76
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Van Kampen Focus Portfolios Insured Income Trust, Series 76 invests in a
portfolio of long-term taxable municipal bonds and public utility bonds. The
Trust seeks to provide a high level of current income and to preserve capital.
Monthly Semi-Annual
Distributions Distributions
------------- -------------
Estimated Current Return: 6.92% 6.97%
Estimated Long Term Return: 7.01% 7.06%
CUSIP: 92114K-18-8 92114K-19-6
Estimated current return shows the estimated cash you should receive each
year divided by the unit price. Estimated long term return shows the estimated
return over the estimated life of your Trust. We base this estimate on an
average of the bond yields over their estimated life. This estimate also
reflects the sales charge and estimated expenses. We derive the average yield
for your portfolio by weighting each bond's yield by its value and estimated
life. Unlike estimated current return, estimated long term return accounts for
maturities, discounts and premiums of the bonds. These estimates show a
comparison rather than a prediction of returns. No return calculation can
predict your actual return. Your actual return may vary from these estimates.
PROSPECTUS
NOVEMBER 16, 2000
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The Securities and Exchange Commission has not approved or disapproved of the
Trust units or passed upon the adequacy or accuracy of this prospectus.
Any contrary representation is a criminal offense.
SUMMARY OF ESSENTIAL FINANCIAL INFORMATION
GENERAL INFORMATION
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Date of Deposit November 16, 2000
Principal amount of bonds in Trust $6,020,000
Principal amount of bonds per unit (1) $991.11
Number of units 6,074
Weighted average maturity of bonds 26 years
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UNIT PRICE
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Aggregate offering price of bonds in Trust $ 5,776,400
Aggregate offering price of bonds per unit $ 951.00
Plus sales charge per unit $ 49.00
Public offering price per unit (2) $ 1,000.00
Redemption price per unit $ 946.05
PORTFOLIO DIVERSIFICATION (% OF PAR VALUE)
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Retail Electric/Gas/Telephone 46%
Public Building 21
General Obligation 20
Other Care 13
--------
Total 100%
========
ESTIMATED ANNUAL INCOME PER UNIT
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Semi-
Monthly Annual
Distributions Distributions
------------- -------------
Estimated interest income $ 71.70 $ 71.70
Less estimated expenses (4) $ 2.49 $ 2.00
Less estimated insurance expenses $ -- $ --
Estimated net interest income $ 69.21 $ 69.70
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EXPENSES
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Semi-
Monthly Annual
Distributions Distributions
------------- -------------
Sales Charge (% of Unit Price) 4.90% 4.90%
Estimated Annual Expenses per Unit
Trustee's fee (5) $ .91 $ .51
Evaluator's supervisory fee $ .25 $ .25
Evaluator's evaluation fee (5) $ .30 $ .30
Other operating expenses $ 1.03 $ .94
----------- -----------
Total annual expenses per unit $ 2.49 $ 2.00
=========== ===========
ESTIMATED DISTRIBUTIONS
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Semi-
Monthly Annual
Distributions Distributions
------------- -------------
Initial distribution $ 3.65 on $ 3.67 on
December 25, 2000 December 25, 2000
Normal distribution (3) $ 5.76 $ 34.85
Record dates 10th day of December 10 and
each month June 10
Distribution dates 25th day of December 25 and
each month June 25
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(1) Some bonds may mature or be called or sold during your Trust's life. This
could include a call or sale at a price below par value. We cannot
guarantee that the value of your units will equal the principal amount of
bonds per unit when you redeem them or when your trust terminates.
(2) After the first settlement date (November 21, 2000), you will pay accrued
interest from this date to your settlement date less interest
distributions.
(3) We base this amount on estimated cash flows per unit. This amount will vary
with changes in expenses, interest rates and maturity, call or sale of
bonds. The Information Supplement includes the estimated cash flows.
(4) This shows estimated expenses in the first year other than insurance
expenses. Estimated expenses are expected to fluctuate periodically.
(5) Your Trust assesses this fee per $1,000 principal amount of bonds. Your
Trust assesses other fees per unit.
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
OFFERING
AGGREGATE NAME OF ISSUER, TITLE, INTEREST RATE AS REDEMPTION PRICE TO
PRINCIPAL (1) AND MATURITY DATE OF BONDS (1)(2) RATING (3) INSURED (3) FEATURES (4) TRUST (2)
------------- ----------------------------------------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 215,000 Chelsea, Massachusetts, Urban Renewal, Series B,
Revenue Bonds (MBIA Insured) 2009 @ 101
6.35% Due 03/01/2019 AAA AAA 2015 @ 100 S.F. $ 189,669
280,000 Los Angeles, California, Convention & Exhibition
Center, Authority Lease Taxable Revenue Bonds,
Series A (MBIA Insured) 2008 @ 101
#7.125% Due 08/15/2024 AAA AAA 2019 @ 100 S.F. 265,426
1,000,000 National Fuel Gas Company, Revenue Bonds
(MBIA Insured)
7.375% Due 06/13/2025 AAA AAA 965,280
1,000,000 St. Paul, Minnesota, Sales Tax Revenue Taxable
Bonds (Rivercentre Arena Project) Series A
(FSA Insured) 2009 @ 103
7.09% Due 11/01/2025 AAA AAA 2020 @ 100 S.F. 952,080
775,000 Hudson County, New Jersey, Improvement Authority
Facilities, Lease Revenue Taxable Bonds (Hudson
County Lease Project) FSA Insured
7.40% Due 12/01/2025 AAA AAA 2017 @ 100 S.F. 766,878
1,000,000 Consolidated Edison, Inc., Corporate Bond
(MBIA Insured)
7.10% Due 02/01/2028 AAA AAA 2008 @ 103.37 925,450
750,000 Puget Sound Energy, Inc., Revenue Bond
(MBIA Insured)
7.00% Due 03/09/2029 AAA AAA 691,237
1,000,000 Bridgeport, Connecticut, Taxable Pension General
Obligation Bonds (FGIC Insured)
7.64% Due 01/15/2030 AAA AAA 2016 @ 100 S.F. 1,020,380
--------------- -----------
$ 6,020,000 $ 5,776,400
=============== ===========
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For an explanation of the footnotes used on this page, see "Notes to Portfolio".
</TABLE>
NOTES TO PORTFOLIO
(1) The bonds 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. Contracts to
acquire the bonds were entered into during the period from November 9, 2000
to November 15, 2000.
(2) Other information regarding the bonds is as follows:
COST TO PROFIT (LOSS)
SPONSOR TO SPONSOR
-------------- -------------
$ 5,712,714 $ 63,686
The Sponsor may have entered into contracts which hedge interest rate
fluctuations on certain bonds. The cost of any such contracts and the
corresponding gain or loss is included in the Cost to Sponsor. Bonds marked
by "##" following the maturity date have been purchased on a "when, as and
if issued" or "delayed delivery" basis. Interest on these bonds begins
accruing to the benefit of Unitholders on their respective dates of
delivery. Delivery is expected to take place at various dates after the
first settlement date.
"#" prior to the coupon rate indicates that the bond was issued at an
original issue discount. See "The Trust--Risk Factors". The tax effect of
bonds issued at an original issue discount is described in "Federal Tax
Status".
"^" indicates a bond that is insured by CapMac under a portfolio insurance
policy obtained by the Trust. See "Insurance on the Bonds" in the
Information Supplement.
(3) All ratings are by Standard & Poor's unless otherwise indicated. "*"
indicates that the rating of the bond is by Moody's. "o" indicates that the
rating is contingent upon receipt by the rating agency of a policy of
insurance obtained by the issuer of the bonds. "NR" indicates that the
rating service did not provide a rating for that bond. For a brief
description of the ratings see "Description of Ratings" in the Information
Supplement.
(4) This is the year in which each bond is initially or currently callable and
the call price for that year. Each bond 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 bonds. Certain bonds may be subject to redemption
without premium prior to the date shown pursuant to extraordinary optional
or mandatory redemptions if certain events occur. See "The Trust--Risk
Factors".
UNDERWRITING. The Underwriters named below have purchased Units in the
following amounts from the Sponsor. See "Public Offering--Sponsor and
Underwriter Compensation".
<TABLE>
NAME ADDRESS UNITS
-----
<S> <C> <C>
Van Kampen Funds Inc. One Parkview Plaza, Oakbrook Terrace, Illinois 60181 4,124
Edward Jones & Co. 201 Progress Parkway, Maryland Heights, Missouri 63043 1,000
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, Missouri 63103 250
Peacock, Hislop, Staley, & Given, Inc. 122 North Kirkwood Road, St. Louis, Missouri 63122 250
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, Texas 75270 250
Gruntal & Company, L.L.C. 1 Liberty Plaza, New York, New York 10006 100
Morgan Stanley Dean Witter & Co. 2 World Trade Center, 59th Floor, New York, New York 10048 100
-----
6,074
=====
</TABLE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen Funds Inc. and the Unitholders of
Van Kampen Focus Portfolios Insured Income Trust, Series 76:
We have audited the accompanying statement of condition and the portfolio of
Van Kampen Focus Portfolios Insured Income Trust, Series 76 as of November 16,
2000. 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 auditing standards generally
accepted in the United States of America. 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 bonds 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 Focus Portfolios
Insured Income Trust, Series 76 as of November 16, 2000, in conformity with
accounting principles generally accepted in the United States of America.
Chicago, Illinois GRANT THORNTON LLP
November 16, 2000
STATEMENT OF CONDITION
AS OF NOVEMBER 16, 2000
INVESTMENT IN BONDS
Contracts to purchase bonds (1)(2) ............................. $5,776,400
Accrued interest to the first settlement date (1)(2) ........... 109,227
----------
Total .................................................... $5,885,627
==========
LIABILITY AND INTEREST OF UNITHOLDERS
Liability--
Accrued interest payable to Sponsor (1)(2) ............... $ 109,227
Interest of Unitholders--
Cost to investors ........................................ 6,074,000
Less: Gross underwriting commission ...................... 297,600
----------
Net interest to Unitholders (1)(2) ....................... 5,776,400
----------
Total .................................................... $5,885,627
==========
--------------------------------------------------------------------------------
(1) The value of the bonds is determined by Interactive Data Corporation on the
bases set forth under "Public Offering--Offering Price". The contracts to
purchase bonds are collateralized by an irrevocable letter of credit in an
amount sufficient to satisfy such contracts.
(2) The Trustee will advance the amount of the net interest accrued to the
first settlement date to the Trust for distribution to the Sponsor as the
unitholder of record as of such date.
THE TRUST
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GENERAL. Your Trust was created under the laws of the State of New York
pursuant to a Trust Indenture and Agreement (the "Trust Agreement"), dated the
date of this Prospectus (the "Date of Deposit") among 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 Bonds. For a breakdown of
the portfolio, see "Portfolio". In addition, Bonds 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 Bonds, be available only to
institutional investors.
On the Date of Deposit, the Sponsor deposited with the Trustee the
aggregate principal amount of Bonds indicated in the "Summary of Essential
Financial Information". The Bonds initially consist of delivery statements
relating to contracts for their purchase and cash, cash equivalents and/or
irrevocable letters of credit issued by a financial institution. Thereafter, the
Trustee, in exchange for the Bonds, delivered to the Sponsor evidence of
ownership of the number of Units indicated under "Summary of Essential Financial
Information". Unless otherwise terminated as provided herein, the Trust
Agreement will terminate at the end of the calender year prior to the fiftieth
anniversary of its execution. All of the Bonds in the Trust are long-term debt
instruments.
Each Unit initially offered represents a fractional undivided interest in
the principal and net income of the Trust. To the extent that any Units are
redeemed by the Trustee, the fractional undivided interest in the Trust
represented by each Unit will increase, although the actual interest in the
Trust will remain unchanged. Units will remain outstanding until redeemed by
Unitholders or until the termination of the Trust Agreement.
OBJECTIVE AND BOND SELECTION. The objective of the Trust is to provide
income and conservation of capital by investing in a professionally selected
portfolio consisting of long-term taxable municipal bonds and public utility
bonds. There is, of course, no guarantee that the Trust will achieve its
objective. The Trust may be an appropriate investment vehicle for investors who
desire to participate in a portfolio of fixed income bonds with greater
diversification than they might be able to acquire individually.
Insurance guaranteeing the timely payment, when due, of all principal and
interest on the Bonds in the Trust has been obtained from a bond insurance
company. For information relating to insurance on the Bonds, see "Insurance on
the Bonds". 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 Bonds are in default in payment of
principal or interest or in significant risk of such default. See "Public
Offering--Offering Price". In addition, these bonds are often not available in
small amounts.
In order for Bonds 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 Ratings" in the Information Supplement). Insurance is
not a substitute for the basic credit of an issuer, but supplements the existing
credit and provides additional security. If an issue is accepted for insurance,
a non-cancellable policy for the prompt payment of interest and principal on the
Bonds, 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 a
Bond 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 Bond. Accordingly, any Bond in a Trust is
eligible to be sold on an insured basis. All Bonds insured by a Portfolio
Insurer or by a Preinsured Bond 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
Bonds".
In selecting Bonds for the Trust, the Sponsor considered the following
factors, among others: (a) the prices of the Bonds relative to other bonds of
comparable quality and maturity, (b) the diversification of Bonds 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 Bonds and (d) whether the
debt obligations were issued after July 18, 1984.
TAXABLE MUNICIPAL BONDS. Your Trust invests in taxable municipal bonds.
States, municipalities and public authorities issue these bonds to raise money
for a variety of purposes. In selecting bonds, we seek to diversify your
portfolio by bond purpose. This section briefly describes different bond types
to help you better understand your investment. We list the types of bonds in
your portfolio. We also describe these bonds in greater detail in the
Information Supplement.
General obligation bonds are backed by the general taxing power of the
issuer. The issuer secures these bonds by pledging its faith, credit and
unlimited taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenue of a specific project or
authority. They are not supported by the issuer's general power to levy taxes.
The risk of default in payment of interest or principal increases if the income
of the related project falters because that income is the only source of
payment. All of the following bonds are revenue bonds.
Airport bonds are obligations of issuers that own and operate airports. The
ability of the issuer to make payments on these bonds primarily depends on the
ability of airlines to meet their obligations under use agreements. Due to
increased competition, deregulation, increased fuel costs and other factors,
some airlines may have difficulty meeting these obligations.
Certificates of participation are generally a type of municipal lease
obligation. Lease payments of a governmental entity secure payments on these
bonds. These payments depend on the governmental entity budgeting appropriations
for the lease payments. A governmental body cannot obligate future governments
to appropriate for or make lease payments, but governments typically promise to
take action necessary to include lease payments in their budgets. If a
government fails to budget for or make lease payments, sufficient funds may not
exist to pay interest or principal on these bonds.
Health care bonds are obligations of issuers that derive revenue from
hospitals and hospital systems. The ability of these issuers to make payments on
bonds depends on factors such as facility occupancy levels, demand for services,
competition resulting from hospital mergers and affiliations, the need to reduce
costs, government regulation, cost of malpractice insurance and claims, and
government financial assistance (such as Medicare and Medicaid).
Public building bonds finance the cost of acquiring, leasing, building or
improving public buildings such as offices, recreation facilities, convention
centers, police stations, correctional institutions and parking garages. The
ability of the issuers to make payments on these bonds depends on factors such
as the government budgeting sufficient funds to make lease or mortgage payments
on the facility, user fees or rents, costs of maintenance and decreases in use
of the facility.
Tax district bonds are obligations secured by a pledge of taxing power by a
municipality, such as tax increment financing or tax allocation bonds. These
bonds are similar to general obligation bonds. Unlike general obligation bonds,
however, the municipality pledges revenues from a specific tax to pay these
bonds. If the tax cannot support payment or interest and principal, a
municipality may need to raise the related tax to pay these bonds. An inability
to raise the tax could have an adverse affect on these bonds.
Transportation bonds are obligations of issuers that own and operate public
transit systems, ports, highways, turnpikes, bridges and other transportation
systems. The ability of these issuers to make payments on these bonds depends on
variations in use, the degree of government subsidization, competition from
other forms of transportation and increased costs. Port authorities derive
revenues primarily from fees imposed on ships using the port facilities. These
fees can fluctuate depending on the local economy and competition from air, rail
and truck transportation. Increased fuel costs, alternative transportation modes
and competition from toll-free bridges and roads will impact revenues of issuers
that operate bridges, roads or tunnels.
PUBLIC UTILITY BONDS. Your Trust also invests in public utility bonds.
Utilities consist of gas, water, telephone and electricity. Some utilities may
own or operate nuclear generating facilities. Utilities are generally subject to
extensive regulation by state utility commissions which establish rates and the
appropriate rate of return on an approved asset base.
MORE ABOUT THE BONDS. In addition to describing the purpose of the bonds,
we also list other information about the bonds in the "Portfolio". This
information relates to other characteristics of the bonds. This section briefly
describes some of these characteristics.
Original issue discount bonds were initially issued at a price below their
face (or par) value. These bonds typically pay a lower interest rate than
comparable bonds that were issued at or above their par value. In a stable
interest rate environment, the market value of these bonds tends to increase
more slowly in early years and in greater increments as the bonds approach
maturity. The issuers of these bonds may be able to call or redeem a bond before
its stated maturity date and at a price less than the bond's par value.
Zero coupon bonds are a type of original issue discount bond. These bonds
do not pay any current interest during their life. If you own this type of bond,
you have the right to receive a final payment of the bond's par value at
maturity. The price of these bonds often fluctuates greatly during periods of
changing market interest rates compared to bonds that make current interest
payments. The issuers of certain of these bonds can call the bond at a price
below the bond's par value.
"When, as and if issued" bonds are bonds that trade before they are
actually issued. This means that we can only deliver them to your Trust "when,
as and if" the bonds are actually issued. Delivery of these bonds may be delayed
or may not occur. Interest on these bonds does not begin accruing to your Trust
until we deliver the bond to the Trust. You may have to adjust your tax basis if
we deliver any of these bonds after the expected delivery date. Any adjustment
would reflect interest that accrued between the time you purchased your units
and the delivery of the bonds to your Trust. This could lower your first year
estimated current return. You may experience gains or losses on these bonds from
the time you purchase units even though your Trust has not yet received them.
RISK FACTORS. All investments involve risk. This section describes the main
risks that can impact the value of bonds in your Trust. You should understand
these risks before you invest. If the value of the bonds falls, the value of
your units will also fall. We cannot guarantee that your Trust will achieve its
objective or that your investment return will be positive over any period.
Market risk is the risk that the value of the bonds in your Trust will
fluctuate. This could cause the value of your units to fall below your original
purchase price or below the par value. Market value fluctuates in response to
various factors. These can include changes in interest rates, inflation, the
financial condition of a bond's issuer or insurer, perceptions of the issuer or
insurer, or ratings on a bond. Even though we carefully supervise your
portfolio, you should remember that we do not manage your portfolio. Your Trust
will not sell a bond solely because the market value falls as is possible in a
managed fund.
Interest rate risk is the risk that the value of bonds will fall if
interest rates increase. Bonds typically fall in value when interest rates rise
and rise in value when interest rates fall. Bonds with longer periods before
maturity are often more sensitive to interest rate changes.
Credit risk is the risk that a bond's issuer or insurer is unable to meet
its obligation to pay principal or interest on the bond.
Call risk is the risk that the issuer prepays or "calls" a bond before its
stated maturity. An issuer might call a bond if interest rates fall and the bond
pays a higher interest rate or if it no longer needs the money for the original
purpose. If an issuer calls a bond, your Trust will distribute the principal to
you but your future interest distributions will fall. You might not be able to
reinvest this principal at as high a yield. A bond's call price could be less
than the price your Trust paid for the bond and could be below the bond's par
value. This means that you could receive less than the amount you paid for your
units. If enough bonds in your Trust are called, your Trust could terminate
early. We list the first date that the issuer can call each bond in the
portfolio in Prospectus Part I along with the price the issuer would have to
pay.
Bond quality risk is the risk that a bond will fall in value if a rating
agency decreases the bond's rating.
Bond concentration risk is the risk that your Trust is less diversified
because it concentrates in a particular type of bond. When a certain type of
bond makes up 25% or more of a Trust, the Trust is considered to be
"concentrated" in that bond type. We describe the different bond types above.
Reduced diversification risk is the risk that your Trust will become
smaller and less diversified as bonds are sold, are called or mature. This could
increase your risk of loss and increase your share of Trust expenses.
Liquidity risk is the risk that the value of a bond will fall if trading in
the bond is limited or absent. No one can guarantee that a liquid trading market
will exist for any bond because these bonds generally trade in the
over-the-counter market (they are not listed on a securities exchange).
Litigation and legislation risk is the risk that future litigation or
legislation could affect the value of your Trust. Litigation could challenge an
issuer's authority to issue or make payments on bonds.
NO FDIC GUARANTEE. An investment in your Trust is not a deposit of any bank
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
ESTIMATED CURRENT AND LONG-TERM RETURNS
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The Estimated Current Returns and the Estimated Long-Term Returns as of the
Date of Deposit are set forth on the cover of this Prospectus. Estimated Current
Return is 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 Trust and with the
principal prepayment, redemption, maturity, exchange or sale of Bonds. The
Public Offering Price will vary with changes in the price of the Bonds.
Accordingly, there is no assurance that the present Estimated Current Return
will be realized in the future. Estimated Long-Term Return is calculated using a
formula which (1) takes into consideration, and determines and factors in the
relative weightings of, the market values, yields (which takes into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of the Bonds and (2) takes into account the expenses and sales
charge associated with Units. Since the value and estimated retirements of the
Bonds and the expenses of a Trust will change, there is no assurance that the
present Estimated Long-Term Return will be realized in the future. The Estimated
Current Return and Estimated Long-Term Return are expected to differ because the
calculation of 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.
In order to acquire certain Bonds, it may be necessary for the Sponsor or
Trustee to pay amounts covering accrued interest on the Bonds which exceed the
amounts which will be made available through cash furnished by the Sponsor on
the Date of Deposit. This 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 excess and will be reimbursed when funds become available from
interest payments on the related Bonds.
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 Bonds, the sales charge of 4.9% of the Public Offering Price, cash,
if any, in the Principal Account and accrued interest, if any. After the initial
public offering period, the secondary market public offering price is based on
the bid prices of the Bonds, the sales charge described below, cash, if any, in
the Principal Account and accrued interest, if any. The minimum purchase in the
primary and secondary market is one Unit. In connection with fully disclosed
transactions with the Sponsor, the minimum purchase is the number of Units
stated in the contract between the Sponsor and the related broker or agent.
The sales charge applicable to quantity purchases during the initial
offering period is reduced as follows:
AGGREGATE SALES CHARGE
NUMBER OF REDUCTION
UNITS PURCHASED* PER UNIT
------------------- -------------
100-249 Units $ 4.00
250-499 Units 6.00
500-999 Units 14.00
1,000 or more Units 19.00
-------------
* 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 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.
The secondary market sales charge is computed as described in the following
table based upon the estimated long-term return life of the Trust's portfolio:
YEARS TO MATURITY SALES CHARGE
------------------ --------------
1 1.010%
2 1.523
3 2.041
4 2.302
5 2.564
6 2.828
7 3.093
8 3.627
9 4.167
10 4.384
11 4.603
12 4.712
13 4.822
14 4.932
15 5.042
16 5.152
17 5.263
18 5.374
19 5.485
20 5.597
21 to 30 5.708
For purposes of computation of the estimated long-term return life, Bonds
will be deemed to mature on their expressed maturity dates unless: (a) the Bonds
have been called for redemption or are subject to redemption at an earlier call
date, in which case this call date will be deemed to be the maturity date; or
(b) the Bonds are subject to a "mandatory tender", in which case the mandatory
tender will be deemed to be the maturity date. The sales charges in the above
table are expressed as a percentage of the aggregate bid prices of the Bonds.
Expressed as a percent of the Public Offering Price, the sales charge on the
Trust consisting entirely of Bonds with 15 years to maturity would be 4.80%.
Any reduced sales charge is the responsibility of the selling Underwriter,
broker, dealer or agent. The Sponsor will, however, increase the concession or
agency commission for quantity purchases. The reduced sales charge structure in
the initial offering period sales charge table above will apply on all purchases
by the same person from any one Underwriter or dealer of units of Van Kampen
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 the units purchased are of a unit investment trust
purchased on the Initial Purchase 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 day 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 (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 Units for one
or more trust, estate or fiduciary accounts. If you purchased Units on more than
one day to achieve the discounts described in this paragraph, the discount
allowed on any single day will apply only to Units purchased on that day (a
retroactive discount is not given on all prior purchases).
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. 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.
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 initial offering period
sales charge table above.
A portion of the sales charge is waived for certain accounts described in
this paragraph. Purchases by these accounts are subject only to the portion of
the deferred sales charge that is retained by the Sponsor. Please refer to the
section called "Wrap Fee and Advisory Accounts" for additional information on
these purchases. 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 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
brokerage services, 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 Units will vary from the
amounts stated under "Summary of Essential Financial Information" in accordance
with fluctuations in the prices of the Bonds. The price of Units on the Date of
Deposit was determined by adding the applicable sales charge to the aggregate
offering price of the Bonds and dividing the sum by the number of Units
outstanding. This price determination was made on the basis of an evaluation of
the Bonds prepared by Interactive Data Corporation, a firm regularly engaged in
the business of evaluating, quoting or appraising comparable securities. During
the initial offering period, the Evaluator will value the Bonds as of the
Evaluation Time on days the New York Stock Exchange is open for business and
will adjust the Public Offering Price of Units accordingly. This Public Offering
Price will be effective for all orders received at or prior to the Evaluation
Time on each such day. The "Evaluation Time" is the close of trading on the New
York Stock Exchange on each day that the Exchange is open for trading. 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. The secondary market
Public Offering Price per Unit will be equal to the aggregate bid price of the
Bonds plus the applicable secondary market sales charge and dividing the sum by
the number of Units outstanding. For secondary market purposes, this computation
will be made by the Evaluator as of the Evaluation Time for each day on which
any Unit is tendered for redemption and as necessary. The offering price of
Bonds may be expected to average approximately 0.35-1% more than the bid price.
The aggregate price of the Bonds is determined on the basis of bid prices
or offering prices, as is appropriate, (a) on the basis of current market prices
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust; (b) if these prices are not available, on the basis of
current market prices for comparable bonds; (c) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation, quoting
or appraising comparable bonds; or (d) by any combination of the above. Market
prices of the Bonds will generally fluctuate with changes in market interest
rates. Unless Bonds are in default in payment of principal or interest or in
significant risk of default, the Evaluator will not attribute any value to the
insurance obtained by the Trust.
The Evaluator will consider in its evaluation of Bonds which are in default
in payment of principal or interest or, in the Sponsor's opinion, in significant
risk of default (the "Defaulted Bonds") the value of any insurance guaranteeing
interest and principal payments. The value of the insurance will be equal to the
difference between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance premiums and
related expenses attributable to the purchase of Permanent Insurance) and (ii)
the market value of Defaulted Bonds not covered by Permanent Insurance. In
addition, the Evaluator will consider the ability of a Portfolio Insurer to meet
its commitments under any insurance policy, including commitments to issue
Permanent Insurance. No value has been ascribed to insurance obtained by an
Insured Trust, if any, as of the date of this Prospectus.
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.
ACCRUED INTEREST. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although the Trust accrues
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 after the First Settlement Date, the proportionate share of
accrued interest to the settlement date is added to the Public Offering Price of
Units. Unitholders will receive the amount of accrued interest paid on their
Units on the next distribution date. In an effort to reduce the accrued interest
which would 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 accrued interest 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
after the First Settlement Date. Because of the varying interest payment dates
of the Bonds, accrued interest at any point in time will be greater than the
amount of interest actually received by the 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.
UNIT DISTRIBUTION. Units will be distributed to the public by Underwriters,
broker-dealers and others at the Public Offering Price, plus accrued interest.
The Sponsor intends to qualify Units for sale in a number of states. During the
initial offering period, the Sponsor and Underwriters will sell Units to
non-Underwriter broker-dealers and selling agents at the Public Offering Price
(net of any sales charge discount) less the concession or agency commission
shown in the following table.
CONCESSION VOLUME
OR AGENCY CONCESSION
TRANSACTION AMOUNT COMMISSION REBATE
--------------------- ---------- -----------
Less than 100 Units $ 30 $ 5
100 Units - 249 Units 32 1
250 Units - 499 Units 33 --
500 Units - 999 Units 26 --
1,000 Units or more 20 --
Non-Underwriter broker-dealers and other selling agents who purchase an
aggregate of 250 or more Units directly from the Sponsor during the initial
offering period will receive a net concession equal to the net concession
allowed to Underwriters described under "Sponsor and Underwriter Compensation"
below. For individual transactions of less than 250 Units, the Sponsor will
offer a rebate per Unit equal to the Volume Concession Rebate described in the
table above so that the broker-dealer or selling agent receives the appropriate
net concession or agency commission. The Sponsor will pay this rebate after the
end of the initial offering period.
Included in the concessions and agency commissions described in the table
are volume concessions or agency commissions of an additional $5.00 per Unit for
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.
These additional concessions will be allowed at the time of purchase, provided,
however, the additional concession applicable to initial purchases totaling less
than 250 Units will be paid retroactively at the end of the initial offering
period. The breakpoint concessions or agency commissions 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 requirement that only whole
Units be issued. Certain commercial banks may be making Units available to their
customers on an agency basis. A portion of the sales charge paid by these
customers (equal to the agency commission referred to above) is retained by or
remitted to the banks. Any discount provided to investors will be borne by the
selling dealer or agent. For secondary market transactions, the concession or
agency commission will amount to 70% of the applicable sales charge. The Sponsor
reserves the right to reject, in whole or in part, any order for the purchase of
Units and to change the amount of the concession or agency commission to dealers
and others from time to time.
SPONSOR AND UNDERWRITER COMPENSATION. The Sponsor will sell Units to
Underwriters at the regular Public Offering Price per Unit less a gross
concession of $35 per Unit underwritten. The net concession earned by
Underwriters after giving effect to sales charge discounts will equal the
amounts shown in the table below. For a list of the Underwriters that have
purchased Units from the Sponsor, see "Underwriting".
REBATE ON
NET QUANTITY
UNDERWRITER DISCOUNT
TRANSACTION AMOUNT CONCESSION TRANSACTIONS
--------------------- ----------- ------------
Less than 100 Units $ 35 $ 0
100 Units - 249 Units 33 2
250 Units - 499 Units 33 4
500 Units - 999 Units 26 5
1,000 Units or more 20 4
In connection with Underwriter sales of Units to non-Underwriter
broker-dealers and other selling agents which Units in turn are sold to
investors in sufficient size to qualify for quantity discounts, Underwriters are
eligible to receive a rebate from the Sponsor. This rebate is intended to
reimburse Underwriters for discounts provided to such broker-dealers and agents,
and on these transactions will equal the amount by which the sum of the related
broker-dealer concession and the sales charge discount exceeds the regular
Underwriter concession. The amounts of these rebates are shown in the table
above. In addition, if a firm commits to act as an Underwriter for a Trust, the
concessions or agency commissions allowed will equal the amounts shown above on
all Units of the Trust distributed during the initial offering period and
purchased directly from the Sponsor rather than the broker-dealer concessions
described under "Unit Distribution."
Each Underwriter who underwrites 1,000 or more Units in the Trust will
receive additional compensation from the Sponsor of $1.00 for each Unit it
underwrites. The breakpoints listed herein will also be 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 certain Underwriters will realize a profit or
loss, as a result of the difference between the price paid for the Bonds by the
Sponsor and the cost of the Bonds to the Trust. See "Portfolio" and "Notes to
Portfolio" earlier in the Prospectus. The Sponsor and the Underwriters may also
realize profits or losses with respect to Bonds 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 the
underwriting syndicates from which the Bonds in the Trust were acquired.
Underwriters may further realize profit or loss during the initial offering
period as a result of possible fluctuations in the market value of the Bonds
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 commissions that are available to the Underwriter. In
addition to any other benefits Underwriters may realize from the sale of Units,
the Sponsor will share on a pro rata basis among senior Underwriters (those who
underwrite at least 250 Units) 50% of any gain (less deductions for accrued
interest and certain costs) represented by the difference between the cost of
the Bonds to the Sponsor and the evaluation of the Bonds on the Date of Deposit.
The Sponsor and certain of the other Underwriters will also realize profits or
losses in the amount of any difference between the price at which Units are
purchased and the price at which Units are resold in connection with maintaining
a secondary market for Units and will also realize profits or losses resulting
from a redemption of repurchased Units at a price above or below the purchase
price.
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 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 such firms may be eligible to win
other nominal awards for certain sales efforts, or under which the Sponsor will
reallow to any such firms 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 persons 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 firms 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.
MARKET FOR UNITS. Although not obligated to do so, the Sponsor intends to,
and certain of the other Underwriters may, maintain a market for Units and offer
to purchase Units at prices, subject to change at any time, based upon the
aggregate bid prices of the Bonds plus accrued interest and 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 Underwriters may either discontinue all purchases of Units or
discontinue purchases of Units at these prices. If a market is not maintained
and the Unitholder cannot find another purchaser, a Unitholder will be able to
dispose of Units by tendering them to the Trustee for redemption at the
Redemption Price. See "Rights of Unitholders--Redemption of Units". A Unitholder
who wishes to dispose of his Units should inquire of his broker as to current
market prices in order to determine whether there is in any price in excess of
the Redemption Price and, if so, the amount thereof. The Trustee will 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 the Units not later than the day on which the Units would
otherwise have been redeemed by the Trustee.
WRAP FEE AND ADVISORY ACCOUNTS
--------------------------------------------------------------------------------
Units may be available for purchase in connection with "wrap fee" accounts
and other similar accounts. You should consult your financial professional to
determine whether you can benefit from these accounts. For these purchases you
generally only pay the portion of the sales charge that is retained by your
Trust's Sponsor, Van Kampen Funds Inc. You should consult the "Public
Offering--General" section for specific information on this and other sales
charge discounts.
RIGHTS OF UNITHOLDERS
--------------------------------------------------------------------------------
DISTRIBUTIONS OF INTEREST AND PRINCIPAL. Interest received by the Trust,
pro rated on an annual basis, will be distributed monthly unless a Unitholder
elects to receive semi-annual distributions. The amount and time of the first
distribution is described under "Summary of Essential Financial Information".
The plan of distribution selected by a Unitholder will remain in effect until
changed. Unitholders who purchase Units in the secondary market will receive
distributions in accordance with the election of the prior owner. Unitholders
may change their distribution plan by indicating the change on a card which may
be obtained from the Trustee and return the card to the Trustee with their
certificates and other documentation required by the Trustee. Certificates
should be sent by registered or certified mail to avoid their being lost or
stolen. If the card and certificate are properly presented to the Trustee, the
change will become effective on the first day after the next semi-annual record
date and will remain effective until changed.
Interest received by the Trust, including that part of the proceeds of any
disposition of Bonds which represents accrued interest, is credited by the
Trustee to the Interest Account. Other receipts are credited to the Principal
Account. 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, interest received will be distributed on
each distribution date to Unitholders of record as of the preceding record date.
All distributions will be net of estimated expenses. Funds in the Principal
Account will be distributed on each semi-annual distribution date to Unitholders
of record as of the preceding semi-annual record date. The Trustee is not
required to pay interest on funds held in the Principal or Interest Account (but
may itself earn interest thereon and therefore benefits from the use of these
funds) nor to make a distribution from the Principal Account unless the amount
available for distribution therein 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 monthly distribution date to Unitholders of record
on the related monthly record date.
Because interest payments are not received by the Trust at a constant rate
throughout the year, interest distributions may be more or less than the amount
credited to the Interest Account as of the record date. For the purpose of
minimizing fluctuations in interest distributions, the Trustee is authorized to
advance amounts necessary to provide interest distributions of approximately
equal amounts. The Trustee is reimbursed for these advances from funds in the
Interest Account on the next 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 the purchase, under the applicable plan of
distribution.
REINVESTMENT OPTION. Unitholders may elect to have distributions on their
Units automatically reinvested in shares of certain Van Kampen mutual funds
which are registered in the Unitholder's state of residence (the "Reinvestment
Funds"). Each Reinvestment Fund has investment objectives that differ from those
of the Trust. The prospectus relating to each Reinvestment Fund describes its
investment policies and the procedures to follow to begin reinvestment. A
Unitholder may obtain a prospectus for the Reinvestment Funds from Van Kampen
Funds Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
After becoming a participant in a reinvestment plan, each Trust
distribution will automatically be applied on the applicable distribution date
to purchase shares of the applicable Reinvestment Fund at a net asset value
computed 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. Confirmations
of all reinvestments will be mailed to the Unitholder by the Reinvestment Fund.
A participant may elect to terminate his or her reinvestment plan and receive
future distributions in cash by notifying the Trustee in writing at least five
days before the next distribution date. Each Reinvestment Fund, its sponsor and
investment adviser have the right to terminate its reinvestment plan at any
time.
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, such
as in connection with lost, stolen or destroyed certificates) and by payment of
applicable governmental charges, if any. Redemption of Units cannot occur until
certificates representing the Units or satisfactory indemnity have been received
by the Trustee. No later than seven calendar days following satisfactory tender,
the Unitholder will receive an amount for each Unit equal to the Redemption
Price per Unit next computed after receipt by the Trustee of the 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 the Evaluation Time
on days of trading on the New York Stock Exchange, the date of tender is the
next day on which that Exchange is open and the Units will be deemed to have
been tendered to the Trustee on that day for redemption at the Redemption Price.
Under Internal Revenue Service regulations, the Trustee is required to
withhold a specified percentage of a Unit redemption if the Trustee has not
received the Unitholder's tax identification number as required by such
regulations. Any amount 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, the Unitholder should provide a tax identification number
to the Trustee in order to avoid this possible "back-up withholding".
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 Bonds as
of the Evaluation Time on days of trading on the New York Stock Exchange on the
date any such determination is made. The Evaluator determines the Redemption
Price per Unit on days Units are tendered for redemption. The Redemption Price
per Unit is the pro rata share of each Unit on the basis of (i) the cash on hand
in the Trust or moneys in the process of being collected, (ii) the value of the
Bonds based on the bid prices of the Bonds, except for cases in which the value
of insurance has been included, (iii) accrued interest, less (a) amounts
representing taxes or other governmental charges and (b) the accrued Trust
expenses. The Evaluator may determine the value of the Bonds 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 on the Bonds in the Trust unless the Bonds are in default in payment
of principal or interest or in significant risk of default. For a description of
the situations in which the Evaluator may value the insurance obtained by the
Trust, see "Public Offering--Offering Price". 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. Units so redeemed shall be cancelled.
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 Bonds represented by
the Units redeemed. The Trustee may sell Bonds to cover redemptions. When Bonds
are sold, the size and diversity of the Trust will be reduced. Sales may be
required at a time when Bonds would not otherwise be sold and might result in
lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than for
customary weekend and holiday closings, or during which the SEC determines that
trading on that Exchange is restricted or an emergency exists, as a result of
which disposal or evaluation of the Bonds is not reasonably practicable, or for
other periods as the SEC may by order permit. Under certain extreme
circumstances the Sponsor may apply to the SEC for an order permitting a full or
partial suspension of the right of Unitholders to redeem their Units.
CERTIFICATES. Ownership of Units is evidenced in book entry form unless a
Unitholder makes a written request to the Trustee that ownership be in
certificate form. Units are transferable by making a written request to the
Trustee and, in the case of Units in certificate form, by presentation and
surrender of the certificate to the Trustee properly endorsed or accompanied by
a written instrument or instruments of transfer. A Unitholder must sign the
written request, or certificate transfer instrument, exactly as his name appears
on the records of the Trustee and on the face of any certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or a signature guaranty program accepted by the
Trustee. 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, the Trustee may require a Unitholder to pay a reasonable fee
for each certificate re-issued or transferred and to pay any governmental charge
that may be imposed in connection with each 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.
REPORTS PROVIDED. Unitholders will receive a statement of interest and
other receipts received for each distribution. For as long as the Sponsor deems
it to be in the best interest of Unitholders, the accounts of the Trust will be
audited annually by independent certified public accountants and the report of
the accountants will be furnished to Unitholders upon request. Within a
reasonable period of time after the end of each year, the Trustee will furnish
to each person who was a registered Unitholder during that year a statement
describing the interest and principal received on the Bonds, actual Trust
distributions, Trust expenses, a list of the Bonds and other Trust information.
Unitholders will be furnished the Evaluator's evaluations of the Bonds upon
request.
INSURANCE ON THE BONDS
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Insurance has been obtained guaranteeing prompt payment of interest and
principal, when due, in respect of the Bonds in the Trust. An insurance policy
obtained by the Trust is non-cancelable and will continue in force so long as
the Trust is in existence, the respective Portfolio Insurer is still in business
and the Bonds described in the policy continue to be held by the Trust. Any
portfolio insurance premium for an Insured Trust is paid by the Trust on a
monthly basis. The premium for any Preinsured Bond insurance has been paid by
the issuer, by a prior owner of the Bonds or the Sponsor and any policy is
non-cancelable and will continue in force so long as the Bonds so insured are
outstanding and the Preinsured Bond Insurer remains in business. The Portfolio
Insurers and the Preinsured Bond Insurers are described in "Portfolio" and the
notes thereto. More detailed information regarding insurance on the Bonds and
the Preinsured Bond and Portfolio Insurers is included in the Information
Supplement. See "Additional Information".
The portfolio insurance obtained by the Trust guarantees the timely payment
of principal and interest on the Bonds when they fall due. For this purpose,
"when due" generally means the stated maturity date for the payment of principal
and interest. However, in the event (a) an issuer defaults in the payment of
principal or interest, (b) an issuer enters into a bankruptcy proceeding or (c)
the maturity of the Bond is accelerated, the affected Portfolio Insurer has the
option to pay the outstanding principal amount of the Bond plus accrued interest
to the date of payment and thereby retire the Bond from the Trust prior to the
Bond's stated maturity date. The insurance does not guarantee the market value
of the Bonds or the value of the Units. The Trustee, upon the sale of a Bond
covered under a portfolio insurance policy has the right to obtain permanent
insurance with respect to the Bond (i.e., insurance to maturity of the Bond
regardless of the identity of the holder) (the "Permanent Insurance") upon the
payment of a single predetermined insurance premium and expenses from the
proceeds of the sale of the Bond. It is expected that the Trustee would exercise
the right to obtain Permanent Insurance only if upon exercise the Trust would
receive net proceeds in excess of the sale proceeds if the Bonds were sold on an
uninsured basis.
Because the Bonds are insured by Portfolio Insurers or Preinsured Bond
Insurers as to the timely payment of principal and interest, when due, 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. This 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 "Description of
Ratings" in the Information Supplement. This rating 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 Trust or of the Units.
Each Portfolio Insurer is subject to regulation by the department of
insurance in the state in which it is qualified to do business. Such regulation,
however, is no guarantee that each Portfolio Insurer will be able to perform on
its contract of insurance in the event a claim should be made. At the date
hereof, it is reported that no claims have been submitted or are expected to be
submitted to any of the Portfolio Insurers which would materially impair the
ability of any such company to meet its commitment pursuant to any contract of
insurance. The information relating to each Portfolio Insurer has been furnished
by such companies. The financial information with respect to each Portfolio
Insurer 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.
TRUST ADMINISTRATION
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THE SPONSOR. Van Kampen Funds Inc. is the Sponsor of your Trust. We are a
subsidiary of Van Kampen Investments Inc. (which is an indirect subsidiary of
Morgan Stanley Dean Witter & Co.). We specialize in underwriting and
distribution of investment companies with roots in money management dating back
to 1926. We are a Delaware corporation, a registered broker-dealer and a member
of the National Association of Securities Dealers, Inc. You can contact us by
calling (630) 684-6000 or at our offices listed on the back cover of this
prospectus. As of November 30, 1999, our total stockholders' equity was
$141,554,861 (audited). Van Kampen Funds Inc. and your Trust have adopted a code
of ethics requiring Van Kampen's employees who have access to information on
Trust transactions to report personal securities transactions. The purpose of
the code is to avoid potential conflicts of interest and to prevent fraud,
deception or misconduct with respect to your Trust. If we fail to or cannot
perform our duties under the trust agreement or become bankrupt, the Trustee may
appoint a new sponsor, continue to operate your Trust without a sponsor, or
terminate your Trust and distribute the liquidation proceeds.
TRUSTEE. The Trustee is The Bank of New York, a trust company organized
under the laws of New York. The Bank of New York has its unit investment trust
division offices at 101 Barclay Street, New York, New York 10286, telephone
(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. Additional
information regarding the Trustee is set forth in the Information Supplement,
including the Trustee's qualifications and duties, its ability to resign, the
effect of a merger involving the Trustee and the Sponsor's ability to remove and
replace the Trustee. See "Additional Information".
PORTFOLIO ADMINISTRATION. The Trust is not a managed fund and, except as
provided in the Trust Agreement, Bonds generally will not be sold or replaced.
The Sponsor may, however, direct that Bonds be sold in certain limited
situations to protect the Trust based on advice from the Evaluator. These
situations may include default in interest or principal payments on the Bonds or
other obligations of an issuer, an advanced refunding or institution of certain
legal proceedings. In addition, the Trustee may sell Bonds designated by the
Evaluator for purposes of redeeming Units or payment of expenses. The Evaluator
will consider a variety of factors in designating Bonds to be sold including
interest rates, market value and marketability. Except in limited circumstances,
the Trustee must reject any offer by an issuer to issue bonds in exchange or
substitution for the Bonds (such as a refunding or refinancing plan). The
Trustee will promptly notify Unitholders of any exchange or substitution. The
Information Supplement contains a more detailed description of circumstances in
which Bonds may be sold or replaced. See "Additional Information".
REPLACEMENT BONDS. No assurance can be given that a Trust will retain its
present size or composition because Bonds may be sold, redeemed or mature from
time to time and the proceeds will be distributed to Unitholders and will not be
reinvested. In the event of a failure to deliver any Bond that has been
purchased under a contract ("Failed Bonds"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other bonds ("Replacement
Bonds") to make up the original portfolio of the Trust. Replacement Bonds 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 Bonds. The Replacement Bonds
must (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 Bonds 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 the interest 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 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 Bonds; (vi) maintain the Standard & Poor's AAA rating;
and (vii) be eligible for (and when acquired be insured under) the insurance
obtained by the Trust. The Trustee shall notify all Unitholders of a Trust
within five days after the acquisition of a Replacement Bond and shall make a
pro rata distribution of the amount, if any, by which the cost of the Failed
Bond exceeded the cost of the Replacement Bond plus accrued interest. If Failed
Bonds are not replaced, the Sponsor will refund the sales charge attributable to
the Failed Bonds to all Unitholders of the Trust and distribute the principal
and accrued interest (at the coupon rate of the Failed Bonds to the date of
removal from the Trust) attributable to the Failed Bonds within 30 days after
removal. If Failed Bonds are not replaced, the Estimated Net Annual Interest
Income per Unit would be reduced and the Estimated Current Return and Estimated
Long-Term Return might be lowered. Unitholders may not be able to reinvest their
proceeds in other securities at a yield equal to or in excess of the yield of
the Failed Bonds.
AMENDMENT OF TRUST AGREEMENT. The Sponsor and the Trustee may amend the
Trust Agreement without the consent of Unitholders to correct any provision
which may be defective or to make other provisions that will not adversely
affect the interest of the Unitholders (as determined in good faith by the
Sponsor and the Trustee). The Trust Agreement may not be amended to increase the
number of Units or to permit the acquisition of Bonds in addition to or in
substitution for any of the Bonds initially deposited in the Trust, except for
the substitution of certain refunding Bonds. The Trustee will notify Unitholders
of any amendment.
TERMINATION OF TRUST AGREEMENT. A Trust will terminate upon the redemption,
sale or other disposition of the last Bond held in the Trust. A Trust may also
be terminated at any time by consent of Unitholders of 51% of the Units then
outstanding or by the Trustee when the value of the Trust is less than 40% of
the original principal amount of Bonds. The Trustee will notify each Unitholder
of any termination within a reasonable time and will then liquidate any
remaining Bonds. The sale of Bonds upon termination may result in a lower amount
than might otherwise be realized if the sale was not required at that time. For
this reason, among others, the amount realized by a Unitholder upon termination
may be less than the principal amount of Bonds per Unit or value at the time of
purchase. The Trustee will distribute to each Unitholder his share of the
balance of the Interest and Principal Accounts after deduction of costs,
expenses or indemnities. The Unitholder will receive a final distribution
statement with this distribution. When the Trustee in its sole discretion
determines that any amounts held in reserve are no longer necessary, it will
distribute these amounts to Unitholders. The Information Supplement contains
further information regarding termination of a Trust. See "Additional
Information".
LIMITATION ON LIABILITIES. The Sponsor, Evaluator and Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or gross negligence (negligence in the case of the Trustee) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of the
Bonds. 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 is not liable
for any taxes or governmental charges imposed on the Bonds, on it as Trustee
under the Trust Agreement or on a 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
and Sponsor may rely on any evaluation furnished by the Evaluator and have no
responsibility for the accuracy thereof. Determinations by the Evaluator 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.
FEDERAL 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:
The Trust is not an association taxable as a corporation for United States
Federal income tax purposes.
Each Unitholder will be considered the owner of a pro rata portion of each
of the Trust's assets for Federal income tax purposes under Subpart E,
Subchapter J of Chapter 1 of the Internal Revenue Code of 1986 (the "Code").
Each Unitholder will be considered to have received his pro rata share of income
derived from each such asset when such income is considered to be received by
the Trust. Each Unitholder will also be required to include in taxable income
for Federal income tax purposes, original issue discount with respect to his
interest in any Obligations held by the Trust at the same time and in the same
manner as though the Unitholder were the direct owner of such interest.
Each Unitholder will have a taxable event when an Obligation of the Trust is
disposed of (whether by sale, exchange, liquidation, redemption, 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 the Trust at a premium must be reduced by the
annual amortization of bond premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. The tax basis reduction requirements of
the Code relating to amortization of bond premium may, under some circumstances,
result in the Unitholder realizing a taxable gain when his Units are sold or
redeemed for an amount equal to or less than his original cost. The Treasury
Bonds held by the Trust are treated as bonds that were originally issued at an
original issue discount provided, pursuant to a Treasury Regulation (the
"Regulation") issued on December 28, 1992, that the amount of original issue
discount determined under Section 1286 of the Code is not less than a "de
minimis" amount as determined thereunder (as discussed below under "Original
Issue Discount"). Because the Treasury Bonds represent interests in "stripped"
bonds, a Unitholder's initial cost for his pro rata portion of each Treasury
Bond held by the Trust (determined at the time he acquires his Units, in the
manner described above) shall be treated as its "purchase price" by the
Unitholder. Original issue discount is effectively treated as interest for
Federal income tax purposes, and the amount of original issue discount in this
case is generally the difference between the bond's purchase price and its
stated redemption price at maturity. A Unitholder will be required to include in
gross income for each taxable year the sum of his daily portions of original
issue discount attributable to the Treasury Bonds held by the Trust as such
original issue discount accrues and will, in general, be subject to Federal
income tax with respect to the total amount of such original issue discount that
accrues for such year even though the income is not distributed to the
Unitholders during such year to the extent it is not less than a "de minimis"
amount as determined under the Regulation. To the extent the amount of such
discount is less than the respective "de minimis" amount, such discount shall be
treated as zero. In general, original issue discount accrues daily under a
constant interest rate method which takes into account the semi-annual
compounding of accrued interest. In the case of the Treasury Bonds, this method
will generally result in an increasing amount of income to the Unitholders each
year. Unitholders should consult their tax advisers regarding the Federal income
tax consequences 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 the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him. It should be noted that as a result of the Tax Reform Act of 1986,
certain miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses, will be deductible by an
individual only to the extent they exceed 2% of such individual's adjusted gross
income (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 Trust 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. 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, 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.
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.
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), 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-8BEN 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.
EXPENSES
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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, will receive the annual supervisory fee indicated under "Summary of
Essential Financial Information" in this Prospectus for providing portfolio
supervisory services for the Trust. In addition, the Evaluator will receive the
annual evaluation fee indicated under "Summary of Essential Financial
Information" in this Prospectus for evaluating the Trust's portfolio. These fees
may exceed the actual costs of providing these services for the Trust but the
total amount received by the Evaluator for providing these services to all Van
Kampen unit investment trusts will not exceed the total cost of providing the
services in any calendar year. For its services the Trustee will receive the fee
indicated under "Summary of Essential Financial Information" in this Prospectus
(which may be reduced as described therein). Part of the Trustee's compensation
for its services is expected to result from the use of the funds being held in
the Principal and Interest Accounts for future distributions, payment of
expenses and redemptions since these Accounts are non-interest bearing to
Unitholders. These fees are based on the outstanding principal amount of Bonds
and Units on the Date of Deposit for the first year and as of the close of
business on January 1 for each year thereafter.
Premiums for any portfolio insurance are obligations of the Trust and are
payable monthly by the Trustee on behalf of the Trust. As Bonds in the Trust are
redeemed by their respective issuers or are sold by the Trustee, the amount of
the premium will be reduced in respect of those Bonds. If the Trustee exercises
the right to obtain permanent insurance, the premiums payable for such permanent
insurance will be paid solely from the proceeds of the sale of the related
Bonds. The premiums for the permanent insurance will decline over the life of
the Bond.
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 of the Bonds in the 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 Trust will pay the
costs associated with updating its registration statement each year. Unit
investment trust sponsors have historically paid these costs. 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 of the applicable Trust. 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 Bonds to pay such amounts.
The Trustee will periodically 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. The Trustee also may withdraw from
these 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. 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 evaluation
fees and other out-of-pocket expenses have been borne by the Sponsor at no cost
to the Trust. Your Trust may pay the expenses of updating its registration
statement each year.
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
This Prospectus does not contain all the information set forth in the
Registration Statement filed by your Trust with the SEC. The Information
Supplement, which has been filed with the SEC, includes more detailed
information concerning the Securities, investment risks and general information
about the Trust. Information about your Trust (including the Information
Supplement) can be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. You may obtain information about the Public Reference Room by
calling 1-202-942-8090. Reports and other information about your Trust are
available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, after paying a
duplication fee, by electronic request at the following e-mail address:
[email protected] or by writing the SEC's Public Reference Section, Washington,
D.C. 20549-0102.
OTHER MATTERS
--------------------------------------------------------------------------------
LEGAL MATTERS. The legality of the Units offered hereby and certain matters
relating to Federal tax law have 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 to the Trustee and special counsel to 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.
FOCUS ON . . .
> YOUR PROSPECTUS
Summary of Essential Financial Information........2
Portfolio.........................................3
Notes to Portfolio................................4
Underwriting......................................5
Report of Certified Public Accountants............6
Statement of Condition............................6
The Trust.......................................A-1
Estimated Current and Long-Term Returns.........A-4
Public Offering.................................A-4
Wrap Fee and Advisory Accounts..................A-9
Rights of Unitholders..........................A-10
Insurance on the Bonds.........................A-12
Trust Administration...........................A-13
Federal Tax Status.............................A-15
Expenses.......................................A-19
Additional Information.........................A-20
Other Matters..................................A-20
> DAILY PRICES
o Call our 24-Hour Pricing Line
(800) 953-6785
o Visit our Focus Portfolios Internet Pricing Page
http://www.vankampen.com
> ACCOUNT QUESTIONS
o Contact the Trustee
(800) 221-7668
> LEARNING MORE ABOUT UNIT TRUSTS
o Contact Van KampeN
(630) 684-6000
o Visit our Focus Portfolios Internet Product Page
http://www.vankampen.com
> ADDITIONAL INFORMATION
You may obtain an Information Supplement that provides more details about
your trust and its policies.
o Visit the SEC Internet Site
http://www.sec.gov
o Contact the Trustee
(800) 221-7668
VIITPRO76
VAN KAMPEN
FOCUS
PORTFOLIOS
Prospectus
November 16, 2000
INSURED INCOME TRUST,
SERIES 76
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
VAN KAMPEN FOCUS PORTFOLIOS (SM)
A Division of Van Kampen Funds Inc.
INFORMATION SUPPLEMENT
INSURED INCOME TRUST, SERIES 76
--------------------------------------------------------------------------------
This Information Supplement provides additional information concerning the
risks and operations of the Fund which is not described in the Prospectus for
the Fund. This Information Supplement should be read in conjunction with the
Fund's prospectus. This Information Supplement is not a prospectus (but is
incorporated into the Prospectus by reference), does not include all of the
information that an investor should consider before investing in a Trust and may
not be used to offer or sell Units without the Prospectus. Copies of the
Prospectus can be obtained by contacting the Sponsor at 1 Parkview Plaza, P.O.
Box 5555, Oakbrook Terrace, Illinois 60181-5555 or by contacting your broker.
This Information Supplement is dated as of the date of Prospectus Part I and all
capitalized terms have been defined in the Prospectus.
TABLE OF CONTENTS
PAGE
Risk Factors............................................................ 2
Insurance on the Bonds.................................................. 5
Portfolio Administration................................................ 10
Sponsor Information..................................................... 11
Trustee Information..................................................... 12
Termination of the Trust Agreement...................................... 12
Description of Ratings.................................................. 13
Estimated Cash Flows to Unitholders..................................... 15
RISK FACTORS
The Trusts include certain types of bonds described below. Accordingly, an
investment in a Trust should be made with an understanding of the
characteristics of and risks associated with such bonds. Neither the Sponsor nor
the Trustee shall be liable in any way for any default, failure or defect in any
of the Bonds.
PUBLIC UTILITY ISSUES. The Trust contains bonds of public utility issuers.
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 Bonds in the
portfolio to make payments of principal and/or interest on such Bonds.
Utilities are generally subject to extensive regulation by state utility
commissions which, for example, establish the rates which may be charged and the
appropriate rate of return on an approved asset base, which must be approved by
the state commissions. Certain utilities have had difficulty from time to time
in persuading regulators, who are subject to political pressures, to grant rate
increases necessary to maintain an adequate return on investment and voters in
many states have the ability to impose limits on rate adjustments (for example,
by initiative or referendum). Any unexpected limitations could negatively affect
the profitability of utilities whose budgets are planned far in advance. Also,
changes in certain accounting standards currently under consideration by the
Financial Accounting Standards Board could cause significant write-downs of
assets and reductions in earnings for many investor-owned utilities. In
addition, gas pipeline and distribution companies have had difficulties in
adjusting to short and surplus energy supplies, enforcing or being required to
comply with long-term contracts and avoiding litigation from their customers, on
the one hand, or suppliers, on the other. Finally, utilities may be subject to
deregulation and competitive pressures from alternative providers. In this
environment, utilities may face costs which prevent them from earning a positive
rate of return, which will negatively impact the issues of the Bonds.
Certain of the issuers of the Bonds 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.
In addition, the ability of state and local joint action power agencies to
make payments on bonds they have issued is dependent in large part on payments
made to them pursuant to power supply or similar agreements.
Courts in Washington and Idaho have held that certain agreements between
Washington Public Power Supply System ("WPPSS") and the WPPSS participants are
unenforceable because the participants did not have the authority to enter into
the agreements. While these decisions are not specifically applicable to
agreements entered into by public entities in other states, they may cause a
reexamination of the legal structure and economic viability of certain projects
financed by joint action power agencies, which might exacerbate some of the
problems referred to above and possibly lead to legal proceedings questioning
the enforceability of agreements upon which payment of these bonds may depend.
Business conditions of the telephone industry in general may affect the
performance of the Trust. General problems of telephone companies include
regulation of rates for service by the FCC and various state or other regulatory
agencies. However, over the last several years regulation has been changing,
resulting in increased competition. The new approach is more market oriented,
more flexible and more complicated. For example, Federal and certain state
regulators have instituted "price cap" regulation which couples protection of
rate payers for basic services with flexible pricing for ancillary services.
These new approaches to regulation could lead to greater risks as well as
greater rewards for operating telephone companies such as those that may be
included in the Trust. Inflation has substantially increased the operating
expenses and cost of plant required for growth, service, improvement and
replacement of existing plant. Continuing cost increases, to the extent not
offset by improved productivity and revenues from increased business, would
result in a decrease in rate of return and a continuing need for rate increases.
Although allowances are generally made in rate making proceedings for cost
increases, delays may be experienced in obtaining the necessary rate increases
and there can be no assurance that the regulatory agencies will grant rate
increases adequate to cover operating and other expenses and debt service
requirements. To meet increasing competition, telephone companies will have to
commit substantial capital, technological and marketing resources. Telephone
usage, and therefore revenues, could also be adversely affected by any sustained
economic recession. New technology, such as cellular service and fiber optics,
will require additional capital outlays. The uncertain outcomes of future labor
agreements may also have a negative impact on the telephone companies. Each of
these problems could adversely affect the ability of the telephone company
issuers of any Bonds in the Trust to make payments of principal and interest on
the Bonds.
TAXABLE MUNICIPAL ISSUES. Certain bonds in the Trust may consist of taxable
obligations of municipal issuers. 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 Bonds 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
bonds is not exempt from Federal income taxation under Section 103 of the Code.
Thus, owners of taxable municipal bonds generally must include interest on such
bonds in gross income for Federal income tax purposes and treat such interest as
ordinary income.
Certain of the Bonds 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.
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 Bonds may be health care revenue bonds. 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. Certain of the bonds in the Trust may be "zero coupon"
bonds. 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 the bond at a rate as high as the implicit yield on the discount bond,
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.
INSURANCE ON THE BONDS
Insurance has been obtained by the Trust, by the issuer of Bonds in the
Trust, by a prior owner of such Bonds, or by the Sponsor prior the deposit of
such Bonds guaranteeing prompt payment of interest and principal, when due, in
respect of the bonds in such Trust. See "The Trust--Objective and Bond
Selection" in the Prospectus. Each insurance policy obtained by the Trust, is
non-cancellable and will continue in force so long as such Trust is in
existence, the respective Portfolio Insurer is still in business and the Bonds
described in such policy continue to be held by such Trust (see "Portfolio" for
the Trust in the Prospectus). Non-payment of premiums on a policy obtained by
the Trust will not result in the cancellation of insurance but will force the
insurer to take action against the Trustee to recover premium payments due it.
The Trustee in turn will be entitled to recover such payments from such Trust.
Premium rates for each issue of Bonds 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 bonds has been paid by such issuer, and any
such policy or policies are non-cancellable and will continue in force so long
as the Bonds so insured are outstanding and the Portfolio Insurer 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 Bonds 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 a
Bond defaults in the payment of principal or interest on such Bond, (b) such
issuer enters into a bankruptcy proceeding or (c) the maturity of such Bond 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 Bond plus accrued interest to the date of
such payment and thereby retire the Bond from the Trust prior to such Bond's
stated maturity date. The insurance does not guarantee the market value of the
Bonds or the value of the Units. Insurance obtained by a Trust is only effective
as to Bonds owned by and held in such Trust. In the event of a sale of any such
Bond by the Trustee, such insurance terminates as to such Bond on the date of
sale.
Pursuant to an irrevocable commitment of the Portfolio Insurers, the
Trustee, upon the sale of a Bond covered under a portfolio insurance policy
obtained by the Trust, has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds 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 Bond. Accordingly, any Bond 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 Bond proceeds less the insurance
premium and related expenses attributable to the Permanent Insurance) from such
sale in excess of the sale proceeds if such Bonds were sold on an uninsured
basis.The insurance premium with respect to each Bond eligible for Permanent
Insurance would be determined based upon the insurability of each Bond as of the
Date of Deposit and would not be increased or decreased for any change in the
creditworthiness of each Bond.
The Sponsor believes that the Permanent Insurance option provides an
advantage to the Trust in that each Bond 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 Bond so sold (which is not the case in connection
with any value attributable to such Trust's portfolio insurance). See "Public
Offering--Offering Price" in the Prospectus. Because any such insurance value
may be realized in the market value of the Bond 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 Bonds 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--Redemption of Units" in the Prospectus) and (b) at the time of
termination of the Trust, if the Trust were holding defaulted Bonds or Bonds in
significant risk of default, the Trust would not need to hold such Bonds until
their respective maturities in order to realize the benefits of the Trust's
portfolio insurance. (See "Fund Administration--Termination of Trust Agreement"
in the Prospectus.)
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 Bonds 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 a Bond
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 Bond not covered by
Permanent Insurance. See "Public Offering--Offering Price" in the Prospectus for
a more complete description of the Trust's method of valuing defaulted Bonds
which have a significant risk of default.
Ambac Assurance Corporation ("Ambac Assurance"). Effective July 14, 1997,
AMBAC Indemnity Corporation changed its name to Ambac Assurance Corporation. The
Insurance Policy of Ambac Assurance obtained by a Trust is noncancellable and
will continue in force for so long as the Bonds described in the Insurance
Policy are held by a Trust. A monthly premium is paid by a Trust for the
Insurance Policy obtained by it. The Trustee will pay, when due, successively,
the full amount of each installment of the insurance premium. Pursuant to a
binding agreement with Ambac Assurance, in the event of a sale of a Bond covered
by the Ambac Assurance Insurance Policy, the Trustee has the right to obtain
permanent insurance for such Bond upon payment of a single predetermined premium
from the proceeds of the sale of such Bond.
Under the terms of the Insurance Policy, Ambac Assurance agrees to pay to the
Trustee that portion of the principal of and interest on the Bonds insured by
Ambac Assurance which shall become due for payment but shall be unpaid by reason
of nonpayment by the issuer of the Bonds. The term "due for payment" means, when
referring to the principal of a Bond so insured, its stated maturity date or the
date on which it shall have been called for mandatory sinking fund redemption
and does not refer to any earlier date on which payment is due by reason of call
for redemption (other than by mandatory sinking fund redemption), acceleration
or other advancement of maturity and means, when referring to interest on a
Bond, the stated date for payment of interest.
Ambac Assurance will make payment to the Trustee not later than thirty days
after notice from the Trustee is received by Ambac Assurance that a nonpayment
of principal or of interest on a Bond has occurred, but not earlier than the
date on which the Bonds are due for payment. Ambac Assurance will disburse to
the Trustee the face amount of principal and interest which is then due for
payment but is unpaid by reason of nonpayment by the issuer in exchange for
delivery of Bonds, not less in face amount than the amount of the payment in
bearer form, free and clear of all liens and encumbrances and uncancelled. In
cases where Bonds are issuable only in a form whereby principal is payable to
registered holders or their assigns, Ambac Assurance shall pay principal only
upon presentation and surrender of the unpaid Bonds uncancelled and free of any
adverse claim, together with an instrument of assignment in satisfactory form,
so as to permit ownership of such Bonds to be registered in the name of Ambac
Assurance or its nominee. In cases where Bonds are issuable only in a form
whereby interest is payable to registered holders or their assigns, Ambac
Assurance shall pay interest only upon presentation of proof that the claimant
is the person entitled to the payment of interest of the Bonds and delivery of
an instrument of assignment, in satisfactory form, transferring to Ambac
Assurance all right under such Bonds to receive the interest of which the
insurance payment was made.
Ambac Assurance Corporation ("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, the Territory of Guam and the Commonwealth of Puerto
Rico, with admitted assets of approximately $4,013,000,000 (unaudited) and
statutory capital of approximately $2,402,000,000 (unaudited) as of December 31,
1999. Statutory capital consists of Ambac Assurance's policyholder's surplus and
statutory pontingency reserve. Standard & Poor's Ratings Services, a Division of
The McGraw-Hill Companies, Moody's Investors Service and Fitch IBCA, Inc. have
each assigned a triple-A financial strength rating to Ambac Assurance.
The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the
"Company"), is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at 7 World Trade
Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D. C. 20549 at prescribed rates. In addition, the
aforementioned material may be inspected at the offices of the New York Stock
Exchange, Inc. (the "NYSE") at 20 Broad Street, New York, New York 10005. The
Company's Common Stock is listed on the NYSE.
Copies of Ambac Assurance's 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.
The information relating to Ambac Assurance contained above has been
furnished by Ambac Assurance. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any adverse
changes in such information, subsequent to the date hereof.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA Corporation" or
"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 Corporation. MBIA Corporation 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 Puerto Rico,
the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the
United States and the Territory of Guan. 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 rate 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.
As of December 31, 1999, MBIA had admitted assets of $7.0 billion (audited),
total liabilities of $4.6 billion (audited), and total capital and surplus of
$2.4 billion (audited) determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. As of
March 31, 2000, MBIA had admitted assets of $7.1 billion (unaudited), total
liabilities of $4.7 billion (unaudited), and total capital and surplus of $2.4
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. The telephone number of MBIA is (914) 273-4545.
Effective February 17, 1998 MBIA acquired all of the outstanding stock of
Capital Markets Assurance Corporation ("CMAC"), a New York domiciled financial
guarantee insurance compay, through a merger with its parent, CapMAC Holdings,
Inc. Pursuant to a reinsurance agreement, CMAC has ceded all of its net insured
risks (including any amounts due but unpaid from third party reinsurers), as
well as its unearned premiums and contingency reserves, to MBIA. MBIA is not
obligated to pay the debts of or claims against CMAC.
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 rates all bond issues insured by MBIA "Aaa."
Standard & Poor's rates all new issues insured by MBIA "AAA." Fitch IBCA, Inc.
rates the financial strength of MBIA "AAA"
In the event MBIA were to become insolvent, any claims arising under a policy
of financial guaranty insurance are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.4 (commencing
with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California
Insurance Code.
Financial Guaranty Insurance Company. 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 ("GE Capital"). Neither the
Corporation nor GE Capital 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, 2000, the total capital
and surplus of Financial Guaranty was $1.293 billion. 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. Financial Security Assurance Inc. ("Financial
Security") 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, Puerto Rico and the U.S. Virgin Islands.
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. Financial guaranty insurance provides 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, securites 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 compay.
Major shareholders of Holdings include XL Capital Ltd. and The Tokio Marine and
Fire Insurance Co. Ltd. On March 14, 2000, Holdings announced that it had
entered into a merger agreement pursuant to which Holdings would become a
wholly-owned subsidiary of Dexia S.A., a publicly held Belgian corporation,
subject to receipt of shareholder and regulatory approvals and satisfaction of
other closing conditions. Dexia S.A., through its bank subsidiaries, is
primarily engaged in the business of public finance in France, Belgium and other
European countries. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security. As of March 31, 2000, 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 $1,340,272,000 (unaudited) and $663,574,000
(unaudited), and the total shareholders' equity and the unearned premium
reserve, respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with accounting principles generally accepted in the United
States, approximately $1,360,722,000 (unaudited), and $547,872,000 (unaudited),
Copies of Financial Security's financial statements may be obtained by writing
to Financial Security at 350 Park Avenue, New York, 10022, Attention
Communications Department. Financial Security's 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 its
domestic or Bermuda operating insurance company subsidiaries are generally
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, Financial Security reinsures
a portion of its liabilities under certain various quota share treaties and on a
transaction-by-transaction basis. This reinsurance is used by Financial Security
as a risk management device and to comply with certain statutory and rating
agency requirements; it does not alter on limit the obligations of Financial
Security under any financial guaranty insurance policy.
Financial Security's insurance financial strength is rated "Aaa" by Moody's
Investors Service, Inc. Financial Security's insurer financial strength is rated
"AAA" by Standard & Poor's Ratings Services and Standard &Poor's (Australia)
Pty. Ltd. Financial Security's claims-paying ability is rated "AAA" by Fitch
IBCA, Inc. and Japan Rating and Investment Information, Inc. These ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, or sell or hold securities and are subject to revision
or withdrawal at any time by those rating agencies.
Capital Guranty Insurance Company. 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. On September 30, 1997, Financial Security Assurance Inc. assumed
all of the liabilities of FSA Maryland and sold the FSA Maryland "shell company"
to American Capital Access, a wholly-owned subsidiary of American Capital Access
Holdings, Incorporated.
Because the Bonds are insured 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. 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 Trust 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 Bonds 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 Bonds. 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 a Bond, 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.
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 Bonds designated by the Evaluator as the Trustee
in its sole discretion may deem necessary. The Evaluator, in designating such
Bonds, will consider a variety of factors, including (a) interest rates, (b)
market value and (c) marketability. To the extent that Bonds are sold which are
current in payment of principal and interest in order to meet redemption
requests and defaulted Bonds are retained in the portfolio in order to preserve
the related insurance protection applicable to said Bonds, the overall quality
of the Bonds remaining in the Trust's portfolio will tend to diminish. The
Sponsor is empowered, but not obligated, to direct the Trustee to dispose of
Bonds 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 Bonds to issue new bonds in exchange or substitution for
any Bond 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 Bond or (2) in the written opinion of the
Sponsor the issuer will probably default with respect to such Bond in the
reasonably foreseeable future. Any bond 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 Bonds originally deposited thereunder. Within
five days after the deposit of obligations in exchange or substitution for
underlying Bonds, the Trustee is required to give notice thereof to each
Unitholder, identifying the Bonds eliminated and the Bonds substituted therefor.
Except as stated herein and under "Fund Administration--Replacement Bonds" in
the Prospectus regarding the substitution of Replacement Bonds for Failed Bonds,
the acquisition by the Trust of any bonds other than the Bonds initially
deposited is not permitted.
If any default in the payment of principal or interest on any Bond 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 Bonds within 30 days after notification by the Trustee to the Sponsor of
such default, the Trustee may in its discretion sell the defaulted Bond and not
be liable for any depreciation or loss thereby incurred.
SPONSOR INFORMATION
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.
Morgan Stanley Dean Witter & Co., 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; credit services; asset management; trading of futures, options,
foreign exchange commodities and swaps (involving foreign exchange, commodities,
indices and interest rates); and real estate advice, financing and investing.
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 its principal offices at 1 Parkview Plaza, P.O. Box 5555,
Oakbrook Terrace, Illinois 60181-5555, (630) 684-6000. As of November 30, 1999,
the total stockholders' equity of Van Kampen Funds Inc. was $141,554,861
(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, 2000, the Sponsor and its Van Kampen affiliates managed
or supervised more than $100 billion of investment products. The Sponsor and its
Van Kampen affiliates offer more than 50 open-end mutual funds, 37 closed-end
funds and have sponsored over 2,700 series of fixed income and equity unit
investment trusts.
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 INFORMATION
The Trustee is The Bank of New York, a trust company organized under the laws
of New York. The Bank of New York has its unit investment trust division offices
at 101 Barclay Street, New York, New York 10286, telephone (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 Bonds for the portfolios of any of the Trusts.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Fund. Such records
shall include the name and address of, and the certificates issued by the Fund
to, every Unitholder of the Fund. Such books and records shall be open to
inspection by any Unitholder at all reasonable times during the usual business
hours. The Trustee shall make such annual or other reports as may from time to
time be required under any applicable state or Federal statute, rule or
regulation. 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 Bonds held in the Fund.
Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the trusts 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 Fund
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 bonds 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.
TERMINATION OF THE TRUST AGREEMENT
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 20% of the
original principal amount of Bonds.
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 Bond 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 Bonds 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 Bonds 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 Bonds
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.
DESCRIPTION OF RATINGS
STANDARD & POOR'S, A DIVISION OF THE MCGRAW-HILL COMPANIES. 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 bond. This
assessment of creditworthiness may take into consideration obligors such as
guarantors, insurers or lessees.
The bond rating is not a recommendation to purchase or sell a security,
inasmuch as it does not comment as to market price.
The ratings are based on current information furnished to Standard & Poor's
by the issuer and obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information.
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 bond in the
event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA--This is the highest rating assigned by Standard & Poor's to a debt bond
and indicates an extremely strong capacity to pay principal and interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
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
debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, 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: A provisional rating ("p") assumes the successful
completion of the project being financed by the issuance of 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,
makes no comment on the likelihood of, or the risk of default upon failure of,
such completion. Accordingly, 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 rating symbols and their meanings follows:
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 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.
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.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated monthly and semi-annual
distributions of interest and principal to Unitholders. The tables assume no
changes in expenses, no changes in the current interest rates, no exchanges,
redemptions, sales or prepayments of the underlying Bonds 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.
<TABLE>
<CAPTION>
VIIT
MONTHLY
ESTIMATED ESTIMATED ESTIMATED
DISTRIBUTION DATES INTEREST PRINCIPAL TOTAL
(EACH MONTH) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
December 2000 $ 3.65 $ 3.65
January 2001 - February 2019 5.76 5.76
March 2019 5.71 $ 35.39 41.10
April 2019 - August 2024 5.58 5.58
September 2024 5.36 46.10 51.46
October 2024 - June 2025 5.31 5.31
July 2025 4.42 164.64 169.06
August 2025 - October 2025 4.32 4.32
November 2025 4.04 164.63 168.67
December 2025 3.14 127.60 130.74
January 2026 - January 2028 2.61 2.61
February 2028 2.32 164.63 166.95
March 2028 - February 2029 1.65 1.65
March 2029 1.63 123.48 125.11
April 2029 - January 2030 .95 .95
February 2030 .10 164.63 164.73
SEMI-ANNUAL
DISTRIBUTION DATES
(EACH JUNE AND ESTIMATED ESTIMATED ESTIMATED
DECEMBER UNLESS INTEREST PRINCIPAL TOTAL
OTHERWISE SPECIFIED) DISTRIBUTION DISTRIBUTION DISTRIBUTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
December 2000 $ 3.67 $ 3.67
June 2001 - December 2018 34.85 34.85
March 2019 $ 35.39 35.39
June 2019 34.24 34.24
December 2019 - June 2024 33.74 33.74
September 2024 46.10 46.10
December 2024 32.71 32.71
June 2025 32.13 32.13
July 2025 164.64 164.64
November 2025 164.63 164.63
December 2025 24.79 127.60 152.39
June 2026 - December 2027 15.79 15.79
February 2028 164.63 164.63
June 2028 11.68 11.68
December 2028 10.05 10.05
March 2029 123.48 123.48
June 2029 7.91 7.91
December 2029 5.81 5.81
February 2030 1.07 164.63 165.70
</TABLE>
CONTENTS OF REGISTRATION STATEMENT
This Amendment to the Registration Statement comprises the following
papers and documents:
The facing sheet
The Prospectus
The signatures
The consents of independent public accountants,
ratings services and legal counsel
The following exhibits:
1.1 Copy of Trust Agreement.
1.4 Copy of Unit Investment Trust Portfolio Insurance Policy issued
by AMBAC Assurance Corporation, if applicable.
1.4(a) Copy of Unit Investment Trust Portfolio Insurance Policy issued
by Capital Markets Assurance Corporation, if applicable.
1.5 Form of Master Agreement Among Underwriters. Reference is made to
Exhibit 1.5 to the Registration Statement on Form S-6 for Van
Kampen Insured Income Trust, Series 72 (File No. 333-63387) as
filed on September 17, 1998.
3.1 Opinion and consent of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal tax status of securities being
registered.
3.3 Opinion and consent of counsel as to New York tax status of
securities being registered.
4.1 Consent of Interactive Data Corporation
4.2 Consent of Standard & Poor's.
4.3 Consent of Grant Thornton LLP.
SIGNATURES
The Registrant, Van Kampen Focus Portfolios Insured Income Trust,
Series 76 hereby identifies Van Kampen Merritt Insured Income Trust, Series 1,
Insured Municipals Income Trust and Investors' Quality Tax-Exempt Trust,
Multi-Series 189, Multi-Series 213 and Multi-Series 300, Van Kampen American
Capital Equity Opportunity Trust, Series 89, and Van Kampen Focus Portfolios,
Series 235 for purposes of the representations required by Rule 487 and
represents the following: (1) that the portfolio securities deposited in the
series as to the securities of which this Registration Statement is being filed
do not differ materially in type or quality from those deposited in such
previous series; (2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide essential financial
information for, the series with respect to the securities of which this
Registration Statement is being filed, this Registration Statement does not
contain disclosures that differ in any material respect from those contained in
the registration Statement for such previous series as to which the effective
date was determined by the Commission or the staff; and (3) that it has complied
with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen Focus Portfolios Insured Income Trust, Series 76 duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Chicago and State
of Illinois on the 16th day of November, 2000.
VAN KAMPEN FOCUS PORTFOLIOS
INSURED INCOME TRUST, SERIES 76
By VAN KAMPEN FUNDS INC.
By Christine K. Putong
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Assistant Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below on November 16,
2000 by the following persons who constitute a majority of the Board of
Directors of Van Kampen Funds Inc.
SIGNATURE TITLE
Richard F. Powers III Chairman and Chief Executive )
Officer )
John H. Zimmermann III President )
A. Thomas Smith III Executive Vice President, )
General Counsel and Secretary )
Michael H. Santo Executive Vice President and Chief )
Operations and Technology Officer )
Christine K. Putong
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(Attorney-in-fact*)
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*An executed copy of each of the related powers of attorney is filed
herewith or was filed with the Securities and Exchange Commission in connection
with the Registration Statement on Form S-6 of Van Kampen Focus Portfolios,
Series 136 (File No. 333-70897) and the same are hereby incorporated herein by
this reference.
