File No: 33-
CIK #
Securities and Exchange Commission
Washington, D.C. 20549-1004
Form S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: Van Kampen American Capital Emerging
Markets Income Trust, Series 2
B. Name of Depositor: Van Kampen American Capital
Distributors, Inc.
C. Complete address of Depositor's principal executive offices:
One Parkview Plaza
Oakbrook Terrace Illinois 60181
D. Name and complete address of agents for service:
Chapman And Cutler Van Kampen American Capital
Distributors, Inc.
Attention: Mark J. Kneedy Attention: Don G. Powell, Chairman
111 West Monroe Street One Parkview Plaza
Chicago, Illinois 60603 Oakbrook Terrace, Illinois 60181
E. Title and amount of securities being registered: Units of undivided
fractional beneficial interests
F. Proposed maximum offering price to the public of the securities being
registered: Indefinite
G. Amount of registration fee: $500.00
H. Approximate date of proposed sale to the public:
As Soon As Practicable After The Effective Date Of The Registration
Statement
____________________________________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a) may determine.
Van Kampen American Capital Emerging Markets Income Trust
Series 2
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C
under the Securities Act of 1933
(Form N-8B-2 Items Required by Instruction
1 as to Prospectus on Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Summary of Essential Financial
) Information
) Trust Administration
3. Name and address of Trustee ) Summary of Essential Financial
) Information
) Trust Administration
4. Name and address of principal ) *
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Trust Administration
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
II. General Description of the Trust and
Securities of the Trust
10. General information regarding ) The Trust
trust's securities and ) Federal Taxation
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Trust Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover
Page
) Summary of Essential Financial
) Information
) Trust Portfolio
)
) Trust Operating Expenses
) Public Offering
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
)
) Public Offering
) Rights of Unitholders
(d) Certain other fees, expenses or ) Trust Operating
Expenses
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering
by depositor, principal ) Trust Portfolio
underwriter, trustee or any )
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Trust Administration
17. Withdrawal or redemption ) Rights of Unitholders
) Trust Administration
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Trust Operating Expenses
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Trust Administration
20. Certain miscellaneous provisions ) Trust Administration
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Trust Portfolio
) Trust Administration
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. Organization, Personnel and Affiliated
Persons of Depositor
25. Organization of Depositor ) Trust Administration
26. Fees received by Depositor ) *
27. Business of Depositor ) Trust Administration
28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
41. (a) Business of principal ) Trust Administration
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Summary of Essential Financial
) Information
) Trust Operating Expenses
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Trust Administration
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Trust Administration
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of ) Trust Administration
Trustee )
49. Fees and expenses of Trustee ) Summary of Essential Financial
) Information
) Trust Operating Expenses
50. Trustee's lien ) Trust Operating Expenses
VI. Information Concerning Insurance of Holders of Securities
51. Insurance of holders of trust's )
securities ) *
52. (a) Provisions of trust agreement )
with respect to replacement ) Trust Administration
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Trust Administration
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Federal Taxation
VII. Financial and Statistical Information
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
Certified 1(c) to Form S-6) ) Public Accountants
) Statement of Conditions
______________________________________________
* Inapplicable, omitted, answer negative or not required
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
Preliminary Prospectus Dated July 24, 1995
Subject To Completion
August , 1995
Van Kampen American Capital
Van Kampen American Capital Emerging Markets Income Trust, Series 2
The Trust. The Trust initially consists of delivery statements relating to
contracts to purchase debt obligations and, thereafter, will consist of a $
aggregate principal amount portfolio comprised of debt obligations
issued by emerging market countries that have restructured sovereign debt
pursuant to the framework of the Brady Plan (the "Brady Bonds"or "Bonds"). The
Trust is comprised of Units.
Attention Foreign Investors. If you are not a United States citizen or
resident, your interest income from this Trust may not be subject to Federal
withholding taxes if certain conditions are met. See "Tax Status".
Investment Objectives of the Trust. The primary investment objective of the
Trust is to provide a high level of current income consistent with
preservation of capital through a diversified investment in a fixed portfolio
consisting of Brady Bonds, all of which are U.S. dollar-denominated, fully
collateralized as to principal by U.S. Treasury zero coupon bonds and certain
of which are partially collateralized as to income payments. A secondary
investment objective is capital appreciation. See "Investment Objectives and
Portfolio Selection"and "Trust Portfolio". Investors should be aware that only
issues (representing % based on principal amount) of the Brady
Bonds deposited in the Trust have been rated (in each case such rating is
by Moody's Investors Service, Inc.) while the remaining Bonds are unrated.
Bonds with such ratings are commonly referred to as "junk bonds"and are
considered speculative by the major rating agencies. See "Risk Factors"for
information relating to special risks of the Brady Bonds. There is no
assurance that the Trust will achieve its objectives. The payment of interest
and the preservation of principal are, of course, dependent upon the
continuing ability of the issuers and/or obligors of the securities in the
Trust.
Special Brady Bond Risks. High yield sovereign debt securities such as the
Brady Bonds are subject to certain risks including among other factors, the
inability of the issuer to pay the principal of or interest on a bond when
due, the lack of immediate availability of collateral securing principal
payments if not paid by the issuer, high and volatile interest rates in the
issuing countries, high rates of inflation in the issuing countries and
political instability. See "Risk Factors". Units of the Trust are not insured
by the FDIC, are not deposits or other obligations of, or guaranteed by, any
depository institution or any government agency and are subject to investment
risk, including possible loss of the principal amount invested.
Public Offering Price. The Public Offering Price of the Units during the
initial offering period is equal to the aggregate offering price of the
Securities in the portfolio divided by the number of Units outstanding, plus a
sales charge equal to 4.9% of the Public Offering Price (5.152% of the
aggregate offering price of the Securities) plus accrued interest, if any. For
sales charges in the secondary market, see "Public Offering-General". If the
Securities in the Trust were available for direct purchase by investors, the
purchase price of the Securities would not include the sales charge included
in the Public Offering Price of the Units. During the initial offering period,
the sales charge is reduced on a graduated scale for sales involving 100 or
more Units. If Units were available for purchase at the opening of business on
the Initial Date of Deposit, the Public Offering Price per Unit would have
been $ . See "Public Offering".
Estimated Current Return and Estimated Long-Term Return. The Estimated Current
Return and Estimated Long-Term Return to Unitholders were as set forth under
"Summary of Essential Financial Information"as of the Initial Date of Deposit.
The methods of calculating Estimated Current Return and Estimated Long-Term
Return are set forth in the footnotes to the "Summary of Essential Financial
Information"and under "Estimated Current Return and Estimated Long Term
Return".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. THESE ARE SPECULATIVE SECURITIES.
Distribution Options. Purchasers of Units who desire to receive distributions
on a monthly or semi-annual basis may elect to do so at the time of settlement
during the initial public offering period. See "Rights of Unitholders--Change
of Distribution Option". The plan of distribution selected by such purchasers
will remain in effect until changed. Those indicating no choice will be deemed
to have chosen the monthly distribution plan. The first monthly distribution
will be $ per Unit and will be made on 15, 1995 to Unitholders of
record on 1, 1995. Record dates for monthly distributions will be the
first day of each month and record dates for semi-annual distributions will be
the first day of the months indicated under "Per Unit Information".
Distributions will be made on the fifteenth day of the month subsequent to the
respective record dates. The first distribution of funds from the Principal
Account of the Trust, if any, will be made on December 15, 1995 to Unitholders
of record on December 1, 1995, and thereafter such distributions will be made
on a semi-annual basis, except under certain special circumstances (see
"Rights of Unitholders--Distributions of Interest and Principal"). While it is
not entirely clear, Unitholders should be aware that they may be required to
include in ordinary income, for Federal income tax purposes, income with
respect to the accrual of original issue discount on the Brady Bonds even
though such income will not be distributed currently. The Trust will furnish
to the Internal Revenue Service information relating to the original issue
discount accruing during the calendar year. Unitholders should consult their
own tax advisers regarding the Federal income tax consequences and accretion
of original issue discount in their personal circumstances. See "Tax Status".
Market for Units. Although not obligated to do so, the Sponsor, Van Kampen
American Capital Distributors Inc., intends to maintain a secondary market for
the Units at prices based upon the aggregate bid price of the Securities in
the portfolio of the Trust plus interest accrued to the date of settlement;
however, during the initial offering period such prices will be based upon the
aggregate offering price of the Securities. If such a market is not maintained
and no other over-the-counter market is available, a Unitholder will be able
to dispose of his Units only through redemption at prices based upon the bid
prices of the underlying Securities (see "Rights of Unitholders--Redemption of
Units").
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into an open-end, management investment company as
described herein. Foreign investors should note, however, that any interest
distributions resulting from such a reinvestment program will be subject to
U.S. Federal income taxes, including withholding taxes. See "Rights of
Unitholders--Reinvestment Option".
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME TRUST, SERIES 2
Summary of Essential Financial Information
As of the Opening of Business on the Initial Date of Deposit: August , 1995
Sponsor: Van Kampen American Capital Distributors, Inc.
Evaluator: Interactive Data Services, Inc.
Supervisor: Van Kampen American Capital Investment Advisory Corp.
(A division of a subsidiary of the Sponsor)
Trustee: The Bank of New York
<CAPTION>
<S> <C>
General Information......................................................................
Principal Amount (Par Value) of Securities............................................... $
Number of Units .........................................................................
Fractional Undivided Interest in the Trust per Unit...................................... 1/
Principal Amount (Par Value) of Securities per Unit...................................... $
Public Offering Price: ..................................................................
Aggregate Offering Price of Securities in Portfolio..................................... $
Aggregate Offering Price of Securities per Unit......................................... $
Sales Charge 4.9% (5.152% of the Aggregate Offering Price of the Securities) per Unit... $
Public Offering Price per Unit <F1>..................................................... $
Redemption Price per Unit................................................................ $
Secondary Market Repurchase Price per Unit............................................... $
Excess of Public Offering Price per Unit Over Redemption Price per Unit.................. $
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit..... $
Minimum Value of the Trust under which the Trust Agreement may be terminated............. $
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Principal Distribution.......................... $1.00 per Unit
First Settlement Date................................... August , 1995
Supervisor's Annual Supervisory Fee..................... Maximum of $0.25 per Unit
Estimated Annual Organizational Expenses per Unit<F2>... $
Evaluator's Evaluation Fee.............................. $10 per evaluation (approximately $2,520 annually)
</TABLE>
Evaluations for purpose of sale, purchase or redemption of
Units are made as of 4:00 P.M. Eastern time on days of
trading on the New York Stock Exchange next following
receipt of an order for a sale or purchase of Units or receipt
by The Bank of New York of Units tendered for redemption
<TABLE>
<CAPTION>
Semi-
Per Unit Information Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit $ $
Less: Estimated Annual Expense per Unit $ $
Estimated Net Annual Interest Income per Unit $ $
Calculation of Estimated Interest Earnings Per Unit:
Estimated Net Annual Interest Income per Unit $ $
Divided by 12 and 2, respectively $ $
Estimated Daily Rate of Net Interest Accrual per Unit $ $
Estimated Current Return Based on Public Offering Price <F3><F4> % %
Estimated Long-Term Return <F3><F4><F5> % %
Estimated Initial Monthly Distribution ( 1995) $ $
Estimated Initial Semi-Annual Distribution ( 1995) $ $
Estimated Normal Distribution per Unit <F6> $ $
Trustee's Annual Fee............$.91 and $.51 per $1,000 principal amount of Securities, respectively, for those portions of the
Trust under the monthly and semi-annual distribtuion plans.
Record and Computation Dates....FIRST day of the month as follows: monthly--each month; semi-annual--June and December
Distribution Dates..............FIFTEENTH day of the month as follows: monthly--each month; semi-annual--June and December
commencing December 15, 1995
<FN>
<F1>Anyone ordering Units for settlement after the First Settlement Date will pay
accrued interest from such date to the date of settlement (normally three
business days after order) less distributions from the Interest Account
subsequent to the First Settlement Date. For purchases settling on the First
Settlement Date, no accrued interest will be added to the Public Offering
Price.
<F2>The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration statement,
the trust indenture and other closing documents, registering Units with the
Securities and Exchange Commission and states, the initial audit of the Trust
portfolio and the initial fees and expenses of the Trustee but not including
the expenses incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses) as is common for mutual
funds. Total organizational expenses will be amortized over a five year
period. See "Trust Operating Expenses"and "Statement of
Condition."Historically, the sponsors of unit investment trusts have paid all
of the costs of establishing such trusts.
<F3>The Estimated Current Return and Estimated Long-Term Return are increased for
transactions entitled to a reduced sales charge (see "Public
Offering--General").
<F4>The 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 any scheduled changes in
the interest rates on the Securities, with changes in fees and expenses of the
Trustee and the Evaluator and with the principal prepayment, redemption,
maturity, exchange or sale of Securities while the Public Offering Price will
vary with changes in the offering price of the underlying Securities;
therefore, there is no assurance that the present Estimated Current Return
indicated above will be realized in the future. The Estimated Long-Term Return
is calculated using a formula which (1) takes into consideration, and
determines and factors in the relative weightings of, the market values,
yields (which takes into account the amortization of premiums, the accretion
of discounts and any scheduled changes in the interest rates) and estimated
retirements of all of the Securities in the Trust and (2) takes into account
the expenses and sales charge associated with each Trust Unit. Since the
market values and estimated retirements of the Securities and the expenses of
the Trust will change, there is no assurance that the present Estimated
Long-Term Return as indicated above will be realized in the future. The
Estimated Current Return and Estimated Long-Term Return are expected to differ
because the calculation of the Estimated Long-Term Return reflects the
estimated date and amount of principal returned while the Estimated Current
Return calculation includes only net annual interest income and Public
Offering Price. Several of the Securities in the Trust will have increased
coupon interest rates on the date or dates as set forth in "Portfolio."These
increased rates are, as of the Initial Date of Deposit, reflected in the
calculation of the Estimated Long-Term Returns but not in the Estimated
Current Returns.
<F5>These figures are based on per Unit cash flows. Cash flows will vary with
changes in fees and expenses of the Trust, with changes in the coupon rates of
the Securities, with changes in current interest rates and with the principal
prepayment, redemption, maturity, call, exchange or sale of the underlying
Securities. The estimated cash flows for the Trust are set forth under
"Estimated Cash Flows to Unitholders."
<F6>Certain of the Securities in the Trust will have increased coupon interest
rates at predetermined times as indicated in "Portfolio."Assuming no other
changes, the estimated normal distribution per Unit will increase with such
coupon interest rate changes.
</TABLE>
THE TRUST
Van Kampen American Capital Emerging Markets Income Trust, Series 2 (the
"Trust") was created under the laws of the State of New York pursuant to a
Trust Agreement (the "Trust Agreement"), dated the Initial Date of Deposit,
between Van Kampen American Capital Distributors Inc., as Sponsor and The Bank
of New York, as Trustee.
The Trust may be an appropriate medium for investors who desire to participate
in a portfolio primarily consisting of Brady Bonds with greater
diversification than they might be able to acquire individually.
Diversification of the Trust's assets will not eliminate the risk of loss
always inherent in the ownership of securities. For a breakdown of the
portfolio, see "Trust Portfolio". In addition, securities of the type
initially deposited in the portfolio of the Trust are often not available in
small amounts and may be available only to institutional investors.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee the
Securities indicated under "Portfolio"herein, including delivery statements
relating to contracts for the purchase of certain such securities and an
irrevocable letter of credit issued by a financial institution in the amount
required for such purchases (the "Securities"). Thereafter, the Trustee, in
exchange for the Securities (and contracts) so deposited, delivered to the
Sponsor the certificates evidencing the ownership of those Units of the Trust
indicated under "Summary of Essential Financial Information". Unless otherwise
terminated as provided therein, the Trust Agreement will terminate at the end
of the calendar year prior to the fiftieth anniversary of its execution. All
of the Securities in the Trust are long term debt instruments with maturities
ranging from to . The dollar weighted average life of the
Securities in the Trust is years.
Additional Units of the Trust may be issued at any time by depositing in the
Trust additional Securities or contracts to purchase Securities together with
irrevocable letters of credit or cash. As additional Units are issued by the
Trust as a result of the deposit of additional Securities by the Sponsor, the
aggregate value of the Securities in the Trust will be increased and the
fractional undivided interest in the Trust represented by each Unit will be
decreased. The Sponsor may continue to make additional deposits of Securities
into the Trust for a period of up to one year following the initial Date of
Deposit, provided that such additional deposits will be in amounts which will
maintain the same percentage relationship among the principal amounts of each
Security in the Trust that existed immediately prior to such subsequent
deposit. Thus, although additional Units will be issued, each Unit will
continue to represent the same principal amount of each Security, and the
percentage relationship among the principal amounts of each Security in the
Trust will remain the same.
Each Unit initially offered represents that fractional undivided interest in
the Trust indicated under "Summary of Essential Financial Information."To the
extent that any Units are redeemed by the Trustee or additional Units are
issued as a result of additional Securities being deposited by the Sponsor,
the fractional undivided interest in the Trust represented by each unredeemed
Unit will increase or decrease accordingly, although the actual interest in
the Trust represented by such fraction will remain unchanged. Units will
remain outstanding until redeemed upon tender to the Trustee by Unitholders,
which may include the Sponsor or the Underwriters, or until the termination of
the Trust Agreement. For a discussion of the tax consequences of the Trust's
issuing additional Units or redeeming Units, see "Tax Status".
INVESTMENT OBJECTIVES AND PORTFOLIO SELECTION
The primary investment objective of the Trust is to provide a high level of
current income consistent with preservation of capital through a diversified
investment in a fixed portfolio consisting of Brady Bonds, all of which are
U.S. dollar-denominated, fully collateralized as to principal by U.S. Treasury
zero coupon bonds and certain of which are partially collateralized as to
interest payments. A secondary investment objective is capital appreciation.
For a brief description of the interest collateralization of each Brady Bond,
see "Notes to Portfolio".
In selecting Securities for the Trust, the following factors, among others,
were considered by the Sponsor: (a) whether the Securities were issued by
countries that have participated in the Brady Plan debt restructuring process,
(b) the prices of the Securities relative to other obligations of comparable
quality and maturity, (c) the diversification of Securities as to the
countries involved, (d) the extent to which the Securities are collateralized
as to interest payments, (e) whether the Securities are U.S.
dollar-denominated securities and (f) the creditworthiness of the issuing
countries.
The only Brady Bonds which have been rated are the
Bonds, each of which was rated by Moody's. The remaining
Bonds have not been rated. Moody's states that "fixed-income securities which
are rated are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate, and therefore not well safeguarded during both
good and bad times in the future. Uncertainty of position characterizes bonds
in this class."Securities so rated are commonly referred to as "junk bonds."
TRUST PORTFOLIO
Portfolio. The Trust consists of the following eight issues, each of which
represents approximately 12.5% of the aggregate principal amount of the
Securities in the Trust and each of which has been issued or guaranteed by the
indicated country: (1) United Mexican States; (2) Republic of Argentina; (3)
Republic of the Philippines; (4) Republic of Poland; (5) Republic of
Venezuela; (6) Republic of Nigeria; (7) Republic of Brazil and (8) Republic of
Ecuador.
Brady Bonds. All of the Securities in the Trust are Brady Bonds. In view of
this an investment in the Trust should be made with an understanding of the
characteristics of and the risks associated with such an investment. Brady
Bonds are debt securities issued under the framework of the Brady Plan, an
initiative announced by U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
indebtedness (commercial bank debt). In restructuring its external debt under
the Brady Plan framework, a debtor nation negotiates with its existing bank
lenders as well as multilateral institutions such as the International Bank
for Reconstruction and Development (the "World Bank") and the International
Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued bonds
(Brady Bonds). The World Bank and/or the IMF support the restructuring by
providing funds pursuant to loan agreements or other arrangements which enable
the debtor nation to collateralize the new Brady Bonds or to repurchase
outstanding bank debt at a discount. Under these arrangements with the World
Bank and/or the IMF, debtor nations have been required to agree to the
implementation of certain domestic monetary and fiscal reforms. Such reforms
have included the liberalization of trade and foreign investment, the
privatization of state-owned enterprises and the setting of targets for public
spending and borrowing. These policies and programs seek to promote the debtor
country's ability to service its external obligations and promote its economic
growth and development. Investors should recognize that the Brady Plan only
sets forth general guiding principles for economic reform and debt reduction,
emphasizing that solutions must be negotiated on a case-by-case basis between
debtor nations and their creditors.
To date, Argentina, Mexico, Costa Rica, the Philippines, Venezuela, Brazil,
Ecuador, Poland, Uruguay and Nigeria have issued Brady Bonds. Investors should
recognize that Brady Bonds have been issued only in recent years, and
accordingly do not have a long payment history. Agreements implemented under
the Brady Plan to date are designed to achieve debt and debt-service reduction
through specific options negotiated by a debtor nation with its creditors. As
a result, the financial packages offered to each country differ. The Brady
Bonds in the portfolio have been collateralized as to principal due at
maturity by U.S. Treasury zero coupon bonds with a maturity equal to the final
maturity of such Brady Bonds, although the collateral is not available to
investors until the stated maturity date of the Brady Bonds. Collateral
purchases are financed by the IMF, the World Bank and the debtor nations'
reserves. In addition, certain of the Brady Bonds in the Trust are
collateralized by cash and certain high quality permitted investments held in
an account maintained at the Federal Reserve Bank of New York sufficient to
cover at least 12 months of interest payments in the event of a missed
interest payment.
Replacement Securities. Because certain of the Securities in the Trust may
from time to time under certain circumstances be sold or redeemed or will
mature in accordance with their terms and because the proceeds from such
events will be distributed to Unitholders and will not be reinvested, no
assurance can be given that the Trust will retain for any length of time its
present size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Security. In the
event of a failure to deliver any Security that has been purchased for the
Trust under a contract, including those securities purchased on a "when, as
and if issued"basis ("Failed Securities"), the Sponsor is authorized under the
Trust Agreement to direct the Trustee to acquire other securities
("Replacement Securities") to make up the original corpus of the Trust.
The Replacement Securities 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 Securities. The Replacement Securities shall (i) be Brady Bonds of
emerging market countries, with fixed maturity dates substantially the same as
those of the Failed Securities; (ii) be payable in United States currency;
(iii) not be when, as and if issued obligations; (iv) not cause the percentage
of the aggregate principal amount of the obligations in the Trust issued or
guaranteed by any one country to exceed 25%; and (v) be purchased at a price
that results in a yield to maturity and in a current return, in each case as
of the Initial Date of Deposit, at least equal to that of the Failed
Securities. Whenever a Replacement Security has been acquired for the Trust,
the Trustee shall, within five days thereafter, notify all Unitholders of the
Trust of the acquisition of the Replacement Security and shall, on the next
monthly distribution date which is more than 30 days thereafter, make a pro
rata distribution of the amount, if any, by which the cost to the Trust of the
Failed Security exceeded the cost of the Replacement Security plus accrued
interest. Once the original corpus of the Trust is acquired, the Trustee will
have no power to vary the investment of the Trust; i.e., the Trust will have
no managerial power to take advantage of market variations to improve a
Unitholder's investment.
If the right of limited substitution described in the preceding paragraph
shall not be utilized to acquire Replacement Securities in the event of a
failed contract, the Sponsor will refund the sales charge attributable to such
Failed Securities to all Unitholders of the Trust and distribute the principal
and accrued interest (at the coupon rate of such Failed Securities to the date
the Failed Securities are removed from the Trust) attributable to such Failed
Securities not more than 30 days after such removal or such earlier time as
the Trustee in its sole discretion deems to be in the interest of the
Unitholders. In the event a Replacement Security should not be acquired by the
Trust, the estimated net annual interest income per Unit for the Trust would
be reduced and the Estimated Current Return and the Estimated Long-Term Return
thereon might be lowered. In addition, Unitholders should be aware that they
may not be able at the time of receipt of such principal to reinvest such
proceeds in other securities at a yield equal to or in excess of the yield
which such proceeds were earning to Unitholders in the Trust.
RISK FACTORS
Special Brady Bond Risks. All of the Brady Bonds in the Trust have been issued
in minimum denominations of $250,000 and all having maturities ranging from 24
to 30 years. All of the Brady Bonds are U.S. dollar-denominated with respect
to interest and principal payments and all payments are to be made free and
clear of any withholding taxes or other deductions by the issuing country.
Some of the Bonds provide for increased coupon interest rates on specified
future dates. See "Portfolio"and "Notes to Portfolio"for specific interest
rate adjustment information. Certain of such Bonds have detachable,
transferable warrants which provide future, potential benefits, depending on
various market conditions relating to specific commodities such as oil
exports. Because of the contingent nature of these benefits, the value, if
any, attributable to such warrants is included in the Bonds to which they
attach. All of the Brady Bonds are collateralized as to principal by zero
coupon U.S. Treasury bonds, payable upon the stated maturity of the related
Bonds. Certain Brady Bonds also have interest payments collateralized by cash
and certain high quality permitted investments for at least 12 months and such
collateralization continues for the life of the related Bonds. Investors,
however, should be aware that in the event of a default, the collateral
supporting the interest payments may not be immediately available to service
the defaulted Bonds (see "Brady Bond Collateral Risks"below). In addition, in
the event of a default on one issue of Brady Bonds there can be no assurance
that the value of other Brady Bonds will not be adversely impacted.
Sovereign Debt Securities. Investing in debt obligations of governmental
issuers in emerging countries involves certain economic and political risks
not typically associated with U.S. taxable debt investments. The issuers of
the Brady Bonds in the Trust (which are sovereign debt securities) have in the
past experienced substantial difficulties in servicing their external debt
obligations, which have led to defaults on certain obligations and the
restructuring of certain indebtedness. These countries have historically
experienced, and may continue to experience, high rates of inflation, high
interest rates, exchange rate fluctuations, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and
unemployment. Many of these countries are also characterized by political
uncertainty or instability. The value of the Brady Bonds will be affected by
commodity prices, inflation, interest rates, taxation, social instability, and
other political, economic or diplomatic developments in or affecting the
emerging countries which have issued these Bonds. In many cases, governments
of emerging countries continue to exercise a significant degree of control
over the economy, and government actions concerning the economy may adversely
effect issuers within that country. Government actions relative to the
economy, as well as economic developments generally, may also affect a given
country's international foreign currency reserves. Fluctuations in the level
of these reserves affect the amount of foreign exchange readily available for
external debt payments and thus could have a bearing on the capacity of
emerging country issuers to make payments on their debt obligations regardless
of their financial condition. In addition, there is a possibility of
expropriation or confiscatory taxation, imposition of withholding taxes on
dividend or interest payments, or other similar developments which could
affect investments in those countries. The governmental entity that controls
the servicing of obligations of those issuers may not be willing or able to
repay the principal and/or interest when due in accordance with the terms of
the obligations. A governmental entity's willingness or ability to repay
principal and interest when due in a timely manner may be affected by, among
other factors, its cash flow situation, the market value of the debt, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy toward the International Monetary Fund and the
political constraints to which the governmental entity may be subject. There
can be no assurance that the Brady Bonds in the Trust's portfolio will not be
subject to similar political and economic risks which may adversely affect the
value of such investments.
Unrated and Low-Rated Instruments. Only of the Securities in the Trust
have been rated (in each case such rating is by Moody's) while the
remaining Bonds are unrated (see "Investment Objectives and Portfolio
Selection"). These lower-rated and unrated securities, which are below
investment grade, involve greater risks than higher-rated securities. Under
rating agency guidelines, lower-rated securities and unrated securities will
likely have some quality and protective characteristics that are outweighed by
large uncertainties or major risk exposures to adverse conditions. Such
securities are considered speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. Although the principal of the Brady Bonds is adequately
collateralized at final maturity, the form of collateral may have adverse
consequences to Unitholders prior to final maturity as indicated under "Brady
Bonds Collateral Risks"below. Accordingly, these types of factors could, in
certain instances, reduce the value and liquidity of securities held by the
Trust with a commensurate effect on the value of the Trust's Units.
The Trust's net asset value will change with changes in the value of its
portfolio securities. Because the Trust will invest in fixed income
securities, the Trust's value can be expected to change as general levels of
interest rates fluctuate. When interest rates decline, the value of a
portfolio invested in fixed income securities can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in
fixed income securities can be expected to decline. Net asset value and market
value may be volatile due to the Trust's investment in lower grade and unrated
securities. Volatility may be greater during periods of general economic
uncertainty. Periods of economic uncertainty and changes in interest rates can
be expected to result in increased volatility of the market prices of the
lower grade and unrated securities in the Trust's portfolio and thus in the
value of the Trust.
Brady Bond Collateral Risks. The principal of the Brady Bonds in the Trust is
collateralized by zero coupon U.S. Treasury obligations which mature at the
same time the related Brady Bonds are scheduled to mature. In the event a
Brady Bond should default, the Sponsor anticipates that the value of such
defaulted Bond will reflect the value of the underlying zero coupon U.S.
Treasury obligations. Investors should not expect to receive any accelerated
principal payments prior to the stated maturity of such defaulted Bonds. In
view of this Unitholders should understand certain of the characteristics of
zero coupon U.S. Treasury obligations. These U.S. Treasury obligations
evidence the right to receive a fixed payment at a future date from the U.S.
government and are backed by the full faith and credit of the United States
government. Zero coupon U.S. Treasury obligations are purchased at a deep
discount because the buyer obtains only the right to a fixed payment at a
fixed date in the future 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 Treasury obligations) is that a fixed yield is earned
not only on the original investment, but also, in effect, on all earnings
during the life of the discount obligation. This implicit reinvestment of
earnings at the same time eliminates the risk of being unable to reinvest the
income on such obligations at a rate as high as the implicit yield on the
discount obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the U.S. Treasury
obligations are subject to substantially greater price fluctuations during
periods of changing interest rates than are securities of comparable quality
which make regular interest payments. In addition to the collateral supporting
the principal amount of the Brady Bonds, interest payments on certain Brady
Bonds are also collateralized for a period of at least 12 months of interest
payments. This collateral protection, which is comprised of cash and certain
high quality permitted short term investments, continues for the life of the
related Bond. Unitholders should realize, however, that once such collateral
has been exhausted through the payment of defaulted interest, no further
interest payments will be assured. Unitholders should also be aware that in
the event an issuer defaults in the payment of interest, with the exception of
the Philippines Bonds, investors holding at least 25% (50% in the case of
Nigeria Bonds) of the aggregate outstanding principal amount of the defaulting
Bond must act in concert to declare a default and thereby force a release of
such collateral. While it is the intention of the Trustee of the Trust to seek
the support of other investors in order to obtain the minimum number of
holders needed to force the liquidation of such collateral, there is no
assurance that Unitholders will be able to realize on such collateral. Only
with respect to the Philippines Bonds can the Trustee, acting alone, declare a
default and demand liquidation of the interest collateral. In the event a
default occurs with respect to an interest payment, as long as the market
continues to reflect interest accruals in the value of such Bonds, the Trust
will continue to accrue interest on such Bonds. If the market ceases to
recognize accruing interest, the Trust Units will cease to accrue interest on
such Bonds and accruals will not commence until the Trust is notified that
interest payments are again accruing on such Bonds or actual payments with
respect to such Bonds have been received by the Trust. In this latter case the
Trustee will not apply such payments to any period prior to such notice or
receipt of payments, as the case may be, unless it has received written notice
that such payments relate to some earlier period. Therefore, Unitholders
should be aware that they may be able to realize the benefits of the
collateral relating to defaulted interest payments only if they are
Unitholders at the time of receipt by the Trust of the proceeds from the
disposition of such collateral.
Liquidity. The Sponsor believes that all the Securities in the Trust are
liquid. The Brady Bonds are issued in various currencies (primarily the U.S.
dollar) and are actively traded in the over-the-counter secondary market for
debt of emerging markets issuers. Because of the large size of most Brady Bond
issues, the Brady Bonds are also generally liquid instruments. Brady Bonds
are, however, issued in minimum denominations of $250,000. Although the
Sponsor intends to maintain a secondary market for the Trust Units which
thereby would minimize redemption requests and while it is anticipated that
Trust revenues will be sufficient to cover Trust expenses, it is possible that
since the Trust from time to time may still be required to sell Securities to
meet redemption requests or sell Securities to meet Trust expenses, it is
possible that a Brady Bond would need to be sold to meet a fairly small
redemption request. If Brady Bonds were to be sold to meet a redemption of a
small number of Units or a series of such small redemptions, there could be a
significant return of principal to the non-redeeming Unitholders. As a
consequence, such non-redeeming Unitholders might be unable at the time of
receipt of such principal to reinvest such proceeds in other securities at a
yield equal to or in excess of the yield which such proceeds were earning to
Unitholders in the Trust. Further, if such sales were required in such
quantities so that the size of the Trust were to be reduced below the minimum
amount for which the Trust could be terminated, the Trust might be terminated
and a Unitholder's investment objectives might be adversely affected. See
"Trust Administration"and "Rights of Unitholders--Redemption of Units".
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
As of the opening of business on the Initial Date of Deposit, the Estimated
Current Returns and the Estimated Long-Term Returns each under the monthly and
semi-annual distribution plans were those indicated in the "Summary of
Essential Financial Information". The Estimated Current Returns are calculated
by dividing the estimated net annual interest income per Unit by the Public
Offering Price. The estimated net annual interest income per Unit will vary
with any scheduled changes in the interest rates on the Securities, with
changes in fees and expenses of the Trustee and the Evaluator and with the
principal prepayment, redemption, maturity, exchange or sale of Securities
while the Public Offering Price will vary with changes in the offering price
of the underlying Securities; therefore, there is no assurance that the
present Estimated Current Return will be realized in the future. Estimated
Long-Term Returns are calculated using a formula which (1) takes into
consideration, and determines and factors in the relative weightings of, the
market values, yields (which takes into account the amortization of premiums,
the accretion of discounts and any scheduled changes in the interest rates)
and estimated retirements of all the Securities in the Trust and (2) takes
into account the expenses and sales charge associated with each Trust Unit.
Since the market values and estimated retirements of the Securities and the
expenses of the Trust will change, there is no assurance that the present
Estimated Long-Term Returns will be realized in the future. Estimated Current
Returns and Estimated Long-Term Returns are expected to differ because the
calculation of Estimated Long-Term Returns reflects the estimated date and
amount of principal returned while Estimated Current Returns calculations
include only net annual interest income and Public Offering Price.
In order to acquire certain of the Securities contracted for by the Sponsor
for deposit in the Trust, it may be necessary for the Sponsor or Trustee to
pay on the settlement dates for delivery of such Securities amounts covering
accrued interest on such Securities which exceed the amounts which will be
made available through cash furnished by the Sponsor on the Initial Date of
Deposit, which amount of cash may exceed the interest which would accrue to
the First Settlement Date. The Trustee has agreed to pay for any amounts
necessary to cover any such excess and will be reimbursed therefor, without
interest, when funds become available from interest payments on the particular
Securities with respect to which such payments may have been made.
TRUST OPERATING EXPENSES
Compensation of Sponsor. The Sponsor will not receive any fees in connection
with its activities relating to the Trust. However, Van Kampen American
Capital Investment Advisory Corp. (the "Supervisor"), which is a wholly-owned
subsidiary of the Sponsor, will receive an annual supervisory fee, which is
not to exceed the amount set forth under "Summary of Essential Financial
Information", for providing portfolio supervisory services for the Trust. Such
fee (which is based on the number of Units outstanding on January 1 of each
year except during the initial offering period in which event the calculation
is based on the number of Units outstanding at the end of each month for which
the calculation relates) may exceed the actual costs of providing such
supervisory services for this Trust, but at no time will the total amount
received for portfolio supervisory services rendered to Series 1 and
subsequent series of Van Kampen Merritt Emerging Markets Income Trust or its
successors and to any other unit investment trusts sponsored by the Sponsor
for which the Supervisor provides portfolio supervisory services in any
calendar year exceed the aggregate cost to the Supervisor of supplying such
services in such year. Such fees may be increased without approval of the
Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter"in the Consumer Price Index
published by the United States Department of Labor or, if such category is no
longer published, in a comparable category. The Sponsor will receive sales
commissions and may realize other profits (or losses) in connection with the
sale of Units and the deposit of the Securities as described under "Public
Offering-Sponsor and Other Compensation".
Compensation of Evaluator. The Evaluator shall receive the evaluation fee set
forth under "Summary of Essential Financial Information"for regularly
evaluating the Trust's portfolio. Such fees may be increased without approval
of the Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter"in the Consumer Price Index
published by the United States Department of Labor or, if such category is no
longer published, in a comparable category.
Trustee's Fee. For its services, the Trustee will receive a fee based on the
aggregate outstanding principal amount of Securities as of the opening of
business on January 2 and July 2 of each year as set forth under "Per Unit
Information"except during the initial offering period in which event the
calculation is based on the largest aggregate amount of Securities in the
Trust each month for which the calculation relates. Such fee will be computed
at $0.51 and $0.91 per $1,000 principal amount, respectively, for those
portions of the Trust representing semi-annual and monthly distribution plans.
Based on the size of the Trust on the Initial Date of Deposit and assuming all
Unitholders had chosen the semi-annual distribution plan, the Trustee's
estimated annual fee for ordinary recurring services would initially amount to
$ . Assuming in the alternative that all Unitholders were in the
monthly distribution plan, such fee would initially amount to $ . The
Trustee's fees are payable monthly on or before the fifteenth day of each
month from the Interest Account to the extent funds are available and then
from the Principal Account. Such fees may be increased without approval of the
Unitholders by amounts not exceeding proportionate increases under the
category "All Services Less Rent of Shelter"in the Consumer Price Index
published by the United States Department of Labor or, if such category is no
longer published, in a comparable category. Since the Trustee has the use of
the funds being held in the Principal and Interest Accounts for future
distributions, payment of expenses and redemptions and since such Accounts are
non-interest bearing to Unitholders, the Trustee benefits thereby. Part of the
Trustee's compensation for its services to the Trust is expected to result
from the use of these funds. For a discussion of the services rendered by the
Trustee pursuant to its obligations under the Trust Agreement, see "Rights of
Unitholders-Reports Provided"and "Trust Administration".
Miscellaneous Expenses. Expenses incurred in establishing the Trust, including
the cost of the initial preparation of documents relating to the Trust
(including the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the Trustee, legal
and accounting expenses, payment of closing fees and any other out-of-pocket
expenses, will be paid by the Trust and amortized over a five year period. 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) expenditures incurred in
contacting Unitholders upon termination of the Trust and (g) costs incurred to
reimburse the Trustee for advancing funds to the Trust to meet scheduled
distributions (which costs may be adjusted periodically in response to
fluctuations in short-term interest rates).
The fees and expenses set forth herein are payable out of the Trust. When such
fees and expenses are paid by or owing to the Trustee, they are secured by a
lien on the portfolio of the 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 Securities to pay such amounts.
TAX STATUS
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 assets for Federal income tax purposes under Subpart E, Subchapter J
of Chapter 1 of the Internal Revenue Code of 1986 (the "Code"). Each
Unitholder will be considered to have received his pro rata share of interest
derived from each Trust asset when such interest is received by the Trust.
Each Unitholder will be required to include in taxable income for Federal
income tax purposes, income and original issue discount, if any, with respect
to his interest in any Securities 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 a Security is disposed of
(whether by sale, exchange, redemption, or payment at maturity) or when a
Unitholder redeems or sells his Units. The cost of the Units to a Unitholder
on the date such Units are purchased is allocated among the Securities held in
the Trust (in accordance with the proportion of the fair market values of such
Securities) in order to determine his tax basis for his pro rata portion in
each Security. Unitholders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Securities delivered after the
date the Unitholders pay for their Units and, consequently, such Unitholders
may have an increase in taxable gain or reduction in capital loss upon the
disposition of such Units. Gain or loss upon the sale or redemption of Units
is measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Securities, gain or
loss is recognized to the Unitholder. The amount of any such gain or loss is
measured by comparing the Unitholder's pro rata share of the total proceeds
from such disposition with his basis for his fractional interest in the asset
disposed of. The basis of each Unit and of any Security which was issued with
original issue discount must be increased by the amount of accrued original
issue discount and the basis of each Unit and of any Security 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 cost reduction requirements of the Code
relating to amortization of bond premium may, under some circumstances, result
in the Unitholder realizing a taxable gain when his Units are sold or redeemed
for an amount equal to or less than his original cost. Original issue
discount, if any, 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. In general, original issue discount accrues daily under a
constant interest rate method which takes into account the semi-annual
compounding of accrued interest. Because certain of the Securities provide for
increased coupon interest rates in the future and certain of the Securities
have warrants associated with them, the likelihood that they will be treated
as having been issued with original issue discount, which could be
substantial, is increased. To the extent that original issue discount exists,
Unitholders will be deemed to have received taxable income although they may
not receive cash payments until a later point in time. Unitholders should
consult their tax advisers regarding the Federal income and other tax
consequences and accretion of original issue discount.
Limitations on Deductibility of Trust Expenses by Unitholders. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as though the expense had been paid directly
by him, subject to the following limitation. It should be noted that as a
result of the Tax Reform Act of 1986 (the "Act"), 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. Regulations
have been issued which require Unitholders to treat certain expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Acquisition Premium. If a Unitholder's tax basis of his pro rata portion in
any Securities held by the Trust exceeds the amount payable by the issuer of
the Security with respect to such pro rata interest upon the maturity of the
Security, such excess would be considered "acquisition premium"(i.e., "bond
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 advisers regarding whether such election should be made and the
manner of amortizing acquisition premium.
Original Issue Discount. Each of the Securities of the Trust may have been
acquired with "original issue discount."In the case of any Securities of the
Trust acquired with "original issue discount"that exceeds a "de minimis"amount
as specified in the Code 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 Securities 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 Securities. 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
Security by the Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon its
issue price (its "adjusted issue price"). Unitholders should also consult
their tax advisers regarding these special rules. Similarly, these special
rules would apply to a Unitholder if the tax basis on his pro rata portion of
a Security issued with original issue discount exceeds his pro rata portion of
its adjusted issue price.
Market Discount. If a Unitholder's tax basis in his pro rata portion of
Securities is less than the allocable portion of such Security'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. Unitholders should consult their tax
advisers 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 Securities, on the sale, maturity or
disposition of such Securities by the Trust, and on the sale by a Unitholder
of Units, unless a Unitholder elects to include the accrued market discount in
taxable income as such discount accrues. If a Unitholder does not elect to
annually include accrued market discount in taxable income as it accrues,
deductions for any interest expense incurred by the Unitholder which is
incurred to purchase or carry his Units will be reduced by such accrued market
discount. In general, the portion of any interest expense which was not
currently deductible would ultimately be deductible when the accrued market
discount is included in income. Unitholders should consult their tax advisers
regarding whether an election should be made to include market discount in
income as it accrues and as to the amount of interest expense which may not be
currently deductible.
Computation of the Unitholder's Tax Basis. The tax basis of a Unitholder with
respect to his interest in a Security is increased by the amount of original
issue discount (and market discount, if the Unitholder elects to include
market discount, if any, on the Securities held by the Trust in income as it
accrues) thereon properly included in the Unitholder's gross income as
determined for Federal income tax purposes and reduced by the amount of any
amortized acquisition premium which the Unitholder has properly elected to
amortize under Section 171 of the Code. A Unitholder's tax basis in his Units
will equal his tax basis in his pro rata portion of all of the assets of the
Trust.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by the
Trust or Disposition of Units. A Unitholder will recognize taxable gain (or
loss) when all or part of his pro rata interest in a Security is disposed of
in a taxable transaction for an amount greater (or less) than his tax basis
therefor. Any gain recognized on a sale or exchange and not constituting a
realization of accrued "market discount,"and any loss will, under current law,
generally be capital gain or loss except in the case of a dealer or financial
institution. As previously discussed, gain realized on the disposition of the
interest of a Unitholder in any Security 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 a Security by
the Trust or the disposition of Units by a Unitholder will be short-term
capital gain or loss unless the Unitholder has held his Units for more than
one year in which case such capital gain or loss will be long-term. For
taxpayers other than corporations, net capital gains are subject to a maximum
marginal stated tax rate of 28 percent.
Earlier this year, President Clinton's tax bill, "The Revenue Reconciliation
Act of 1993"(the "Tax Bill") was released. The Tax Bill would raise tax rates
on ordinary income while capital gains would remain subject to a 28 percent
maximum stated rate. Because some or all capital gains would be taxed at a
comparatively lower rate under the Tax Bill, the Tax Bill includes a provision
that would recharacterize capital gains as ordinary income in the case of
certain financial transactions that are "conversion transactions"effective for
transactions entered into after April 30, 1993. Unitholders and prospective
investors should consult with their tax advisers regarding the potential
effect of this provision on their investment in Units. No prediction can be
made regarding whether this provision or a similar provision will be enacted
into law or the effective date of any such provision.
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 Securities represented by the Unit. This may result in a
portion of the gain, if any, on such sale being taxable as ordinary income
under the market discount rules (assuming no election was made by the
Unitholder to include market discount in income as it accrues) as previously
discussed. The tax cost reduction requirements of the Code relating to
amortization of bond premium may under some circumstances, result in the
Unitholder realizing taxable gain when his Units are sold or redeemed for an
amount equal to or less than his original cost.
Foreign Investors. A Unitholder who is a foreign investor (i.e., an investor
other than a U.S. citizen or resident or a U.S. corporation, partnership,
estate or trust) will not be subject to United States Federal income taxes,
including withholding taxes, on interest income (including any original issue
discount) on, or any gain from the sale or other disposition of, his pro rata
interest in any Security 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) (a) the interest income is not from
sources within the United States or (b) the interest is United States source
income (which is the case for most securities issued by United States
issuers), the Security is issued after July 18, 1984 (which is the case for
each Security 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 Security 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 Security, (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 should consult their tax advisers with respect to
United States tax consequences of ownership of Units.
It should be noted that the Tax Bill includes a provision which would
eliminate the exemption from United States taxation, including withholding
taxes, for certain "contingent interest."The Tax Bill provides that this
provision may apply on a retroactive basis in certain cases. No opinion is
expressed herein regarding the potential applicability of this provision and
whether, if enacted, 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.
No prediction can be made regarding whether this provision or a similar
provision will be enacted into law or the effective date of any such
provision.
General. Each Unitholder (other than a foreign investor who has properly
provided the certifications described in the preceding paragraph) will be
requested to provide the Unitholder's taxpayer identification number to the
Trustee and to certify that the Unitholder has not been notified that payments
to the Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder will be subject to
back-up withholding.
As discussed elsewhere herein, it was believed at the time the Securities were
issued that payments of interest and principal to the Trust would not be
subject to foreign withholding taxes. However, it is impossible to predict
whether changes in foreign laws or regulations could cause payments on the
Securities which are made to the Trust to be subject to taxes, including
withholding taxes.
In the opinion of Tanner Propp & Farber, special counsel to the Trust for New
York tax matters, the Trust is not an association taxable as a corporation and
the income of 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.
PUBLIC OFFERING
General. Units are offered at the Public Offering Price. During the initial
offering period the Public Offering Price is based on the offering prices of
the Securities in the Trust and includes a sales charge of 4.9% of the Public
Offering Price (5.152% of the aggregate offering price of the Securities).
After the initial public offering period, the secondary market Public Offering
Price is based on the bid prices of the Securities in the Trust and includes a
sales charge determined in accordance with the table set forth below, which is
based upon the dollar weighted average maturity of each Trust plus accrued
interest, if any. For purposes of computation, Securities will be deemed to
mature on their expressed maturity dates unless: (a) the Securities have been
called for redemption or funds or securities have been placed in escrow to
redeem them on an earlier call date, in which case such call date will be
deemed to be the date upon which they mature; or (b) such Securities are
subject to a "mandatory tender", in which case such mandatory tender will be
deemed to be the date upon which they mature.
The effect of this method of sales charge computation will be that different
sales charges rates will be applied to the Trust based upon the dollar
weighted average maturity of the Trust's portfolio, in accordance with the
following schedule:
<TABLE>
<CAPTION>
Years To Maturity Sales Charge Years To Maturity Sales Charge
<S> <C> <C> <C>
1 1.523% 9 4.712%
2 2.041 10 4.932
3 2.564 11 4.932
4 3.199 12 4.932
5 3.842 13 5.374
6 4.058 14 5.374
7 4.275 15 5.374
8 4.493 16 to 30 6.045
</TABLE>
The sales charges in the above table are expressed as a percentage of the net
amount invested. Expressed as a percent of the Public Offering Price, the
sales charge on the Trust consisting entirely of a portfolio of Securities
with 15 years to maturity would be 5.10%.
The sales charge applicable to quantity purchases is, during the initial
offering period, reduced on a graduated basis to any person acquiring 100 or
more Units as follows:
<TABLE>
<CAPTION>
Aggregate Number
of Units Purchased Dollar Amount of Sales Charge
Reduction Per Unit
<S> <C>
100-249 Units $2.00
250-499 Units $4.00
500-999 Units $6.00
1,000-1,499 Units $8.00
1,500 or more Units $10.00
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
broker, dealer or agent. See "Public Offering--Unit Distribution". This
reduced sales charge structure will apply on all purchases by the same person
from any one broker or dealer of units of Van Kampen American
Capital-sponsored unit investment trusts which are being offered in the
initial offering period (a) on any one day (the "Initial Purchase Date") or
(b) on any day subsequent to the Initial Purchase Date if (1) the units
purchased are of a unit investment trust purchased on the Initial Purchase
Date, and (2) the person purchasing the units purchased a sufficient amount of
units on the Initial Purchase Date to qualify for a reduced sales charge on
such date. In the event units of more than one trust are purchased on the
Initial Purchase Date, the aggregate dollar amount of such purchases will be
used to determine whether purchasers are eligible for a reduced sales charge.
Such aggregate dollar amount will be divided by the public offering price per
unit (on the 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 for units purchased in accordance with
(b) above, it is necessary to accumulate all purchases made on the Initial
Purchase Date and all purchases made in accordance with (b) above. Units
purchased in the name of the spouse of a purchaser or in the name of a child
of such purchaser under 21 years of age will be deemed for the purposes of
calculating the applicable sales charge to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a trustee or
other fiduciary purchasing securities for one or more trust estate or
fiduciary accounts.
Employees of Van Kampen American Capital Distributors Inc. and its
subsidiaries may purchase Units of the Trust at the current Public Offering
Price less the underwriting commission during the initial offering period, and
less the dealer's concession for secondary market transactions. Registered
representatives of selling brokers, dealers, or agents may purchase Units of
the Trust at the current Public Offering Price less the dealer's concession
during the initial offering period and for secondary market transactions.
Units may be purchased in the primary or secondary market at the Public
Offering Price (for purchases which do not qualify for a sales charge
reduction for quantity purchases) less the concession the Sponsor typically
allows to brokers and dealers for purchases (see "Public Offering---Unit
Distribution") by (1) investors who purchase Units through registered
investment advisers, certified financial planners and registered
broker-dealers who in each case either charge periodic fees for financial
planning, investment advisory or asset management 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.
Accrued Interest. Accrued interest is an accumulation of unpaid interest on
securities which generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason, with
respect to sales settling subsequent to the First Settlement Date, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. Unitholders will receive on the
next distribution date of the Trust the amount, if any, of accrued interest
paid on their Units.
In an effort to reduce the amount of accrued interest which would otherwise
have to be paid by Unitholders, the Trustee will advance the amount of accrued
interest to the Sponsor as the Unitholder of record as of the First Settlement
Date. Consequently, the amount of accrued interest to be added to the Public
Offering Price of Units will include only accrued interest from the First
Settlement Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. See "Rights of
Unitholders--Distributions of Interest and Principal".
Because of the varying interest payment dates of the Securities, accrued
interest at any point in time will be greater than the amount of interest
actually received by a Trust and distributed to Unitholders. If a Unitholders
sells or redeems all or a portion of his Units, he will be entitled to receive
his proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the funds held in the Interest Account
for distributions to Unitholders and since such Account is
non-interest-bearing to Unitholders, the Trustee benefits thereby.
Offering Price. The Public Offering Price of the Units will vary from the
amounts stated under "Summary of Essential Financial Information"in accordance
with fluctuations in the prices of the underlying Securities in the Trust.
As indicated above, the price of the Units as of the opening of business on
the date the Securities were deposited in the Trust was determined by adding
to the determination of the aggregate offering price of the Securities an
amount equal to 5.152% of such value and dividing the sum so obtained by the
number of Units outstanding. This computation produced a gross underwriting
profit equal to 4.9% of the Public Offering Price. Such price determination as
of the opening of business on the Initial Date of Deposit was made on the
basis of an evaluation of the Securities in the Trust prepared by the
Evaluator. Except on the Initial Date of Deposit during the period of initial
offering, the Evaluator will appraise or cause to be appraised daily the value
of the underlying Securities as of 4:00 P.M. Eastern time on days the New York
Stock Exchange is open and will adjust the Public Offering Price of the Units
commensurate with such appraisal. Such Public Offering Price will be effective
for all orders received at or prior to 4:00 P.M. Eastern time on each such
day. Orders received by the Trustee Sponsor for purchases, sales or
redemptions after that time, or on a day when the New York Stock Exchange is
closed, will be held until the next determination of price. For secondary
market sales the Public Offering Price per Unit will be equal to the aggregate
bid price of the Securities in the Trust plus an amount equal to the
applicable secondary market sales charge expressed as a percentage of the
aggregate bid price of such value and dividing the sum so attained by the
number of Units then outstanding. This computation produces a gross
underwriting profit equal to such sales charge expressed as a percentage of
the Public Offering Price. For secondary market purposes such appraisal and
adjustment will be made by the Evaluator as of 4:00 P.M. Eastern time on days
on which the New York Stock Exchange is open for each day on which any Unit of
the Trust is tendered for redemption, and it shall determine the aggregate
value of the Trust as of 4:00 P.M. Eastern time on such other days as may be
necessary.
The aggregate price of the Securities in the Trust has been and will be
determined on the basis of bid prices or offering prices, as appropriate, (a)
on the basis of current market prices for the Securities obtained from dealers
or brokers who customarily deal in bonds comparable to those held by the
Trust; (b) if such prices are not available for any particular Securities, on
the basis of current market prices for comparable bonds; (c) by causing the
value of the Securities to be determined by others engaged in the practice of
evaluation, quoting or appraising comparable bonds; or (d) by any combination
of the above.
The initial or primary Public Offering Price of the Units and the Sponsor's
initial repurchase price per Unit are based on the offering price per Unit of
the underlying Securities plus the applicable sales charge and interest
accrued but unpaid from the First Settlement Date to the date of settlement.
The secondary market Public Offering Price and the Redemption Price per Unit
are based on the bid price per Unit of the Securities in the Trust plus the
applicable sales charge and accrued interest. The offering price of Securities
in the Trust may be expected to range from .25% to 1% more than the bid price
of such Securities. On the Initial Date of Deposit, the offering side
evaluation of the Securities in the Trust was higher than the bid side
evaluation of such Obligations by the amount indicated in Note (5) to "Notes
to Portfolio".
Although payment is normally made three business days following the order for
purchase, payment may be made prior thereto. However, delivery of certificates
representing Units so ordered will be made three business days following such
order or shortly thereafter. A person will become the owner of Units on the
date of settlement provided payment has been received. Cash, if any, made
available to the Sponsor prior to the date of settlement for the purchase of
Units may be used in the Sponsor's business and may be deemed to be a benefit
to the Sponsor, subject to the limitations of the Securities Exchange Act of
1934.
Unit Distribution. During the initial offering period, Units will be
distributed to the public by the Sponsor, broker-dealers and others at the
Public Offering Price, plus interest accrued but unpaid from the First
Settlement Date to the date of settlement as described under "Public
Offering--Accrued Interest". Upon the completion of the initial offering,
Units repurchased in the secondary market, if any, may be offered by this
prospectus at the secondary Public Offering Price plus interest accrued to the
date of settlement in the manner described.
The Sponsor intends to qualify the Units for sale in a number of states.
Broker-dealers or others will be allowed a concession or agency commission in
connection with the distribution of Units during the initial offering period
of 3.70% per Unit. Any quantity discount provided to investors will be borne
by the selling dealer or agent as indicated under "Public
Offering--General"above. For secondary market transactions, such concession or
agency commission will amount to 70% of the sales charge applicable to the
transaction. See "Public Offering--General". Certain commercial banks are
making Units of the Trust available to their customers on an agency basis. A
portion of the sales charge (equal to the agency commission referred to above)
is retained by or remitted to the banks. Under the Glass-Steagall Act, banks
are prohibited from underwriting Trust Units; however, the Glass-Steagall Act
does permit certain agency transactions and the banking regulators have not
indicated that these particular agency transactions are not permitted under
such Act. In addition, state securities laws on this issue may differ from the
interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
To facilitate the handling of transactions during the initial offering period,
sales of Units shall normally be limited to transactions involving a minimum
of five Units (two Units for a tax-sheltered retirement plan). Further
purchases may be made in multiples of one Unit. The minimum purchase in the
secondary market will be one Unit.
The Sponsor reserves the right to reject, in whole or in part, any order for
the purchase of Units and to change the amount of the concession or agency
commission to dealers and others from time to time.
Sponsor and Other Compensation. The Sponsor will receive the gross sales
commission equal to 4.9% of the Public Offering Price (excluding any
transaction fees) of the Units (equivalent to 5.152% of the net amount
invested), less any reduced sales charge for quantity purchases (as described
under "Public Offering--General"above). In addition, the Sponsor will realize
a profit or will sustain a loss, as the case may be, as a result of the
difference between the price paid for the Securities by the Sponsor and the
cost of such Securities to the Trust (which is based on the determination of
the aggregate offering price of the Securities in the Trust on the Initial
Date of Deposit as prepared by Interactive Data Services, Inc.). See
"Portfolio". The Sponsor has not participated as sole underwriter or as
manager or as a member of any underwriting syndicates from which any of the
Securities in the portfolio of the Trust were acquired. Broker, dealers or
others ("Distributors") who distribute 5,000 or more Units during the initial
offering period will receive additional compensation from the Sponsor, after
the close of the initial offering period, of $.50 for each Unit they
distribute. Each Distributor who distributes 10,000 or more Units during the
initial offering period will receive additional compensation from the Sponsor,
after the close of the initial offering period, of $.75 for each Unit it
distributes. Each Distributor who distributes 15,000 or more Units during the
initial offering period will receive additional compensation from the Sponsor,
after the close of the initial offering period, of $1.00 for each Unit it
distributes.
Cash, if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934.
As stated under "Public Market"below, the Sponsor intends to maintain a
secondary market for the Units of the Trust. In so maintaining a market, the
Sponsor will also realize profits or sustain losses in the amount of any
difference between the price at which Units are purchased and the price at
which Units are resold (which price is based on the bid prices of the
Securities in the Trust and includes a sales charge). In addition, the Sponsor
will also realize profits or sustain losses resulting from a redemption of
such repurchased Units at a price above or below the purchase price for such
Units, respectively.
Public Market. During the initial public offering period, the Sponsor intends
to offer to purchase Units at a price based on the aggregate offering price
per Unit of the Securities in the Trust (plus accrued interest to the date of
settlement) less the related sales commission. Afterward, although they are
not obligated to do so, the Sponsor intends to maintain a market for the Units
offered hereby and to offer continuously to purchase such Units at prices,
subject to change at any time, based upon the aggregate bid price of the
Securities in the portfolio plus interest accrued to the date of settlement
plus any principal cash on hand, less any amounts representing taxes or other
governmental charges payable out of the Trust and less any accrued Trust
expenses. If the supply of Units exceeds demand or if some other business
reason warrants it, the Sponsor may either discontinue all purchases of Units
or discontinue purchases of Units at such prices. In the event that a market
is not maintained for the Units and the Unitholder cannot find another
purchaser, a Unitholder desiring to dispose of his Units may be able to
dispose of such Units only by tendering them to the Trustee for redemption at
the Redemption Price, which is based upon the aggregate bid price of the
Securities in the portfolio plus any accrued interest. The aggregate bid
prices of the underlying Securities in the Trust are expected to be less than
the related aggregate offering prices. See "Rights of Unitholders--Redemption
of Units". A Unitholder who wishes to dispose of his Units should inquire of
his broker as to current market prices in order to determine whether there is
in existence any price in excess of the Redemption Price and, if so, the
amount thereof.
RIGHTS OF UNITHOLDERS
Certificates. The Trustee is authorized to treat as the record owner of Units
that person who is registered as such owner on the books of the Trustee.
Ownership of Units of the Trust is evidenced by certificates unless a
Unitholder or the Unitholder's registered broker-dealer makes a written
request to the Trustee that ownership be in book entry form. Units are
transferable by making a written request to the Trustee and, in the case of
Units evidenced as a certificate, by presentation and surrender of such
certificate to the Trustee properly endorsed or accompanied by a written
instrument or instruments of transfer. A Unitholder must sign such written
request, and such certificate or transfer instrument, exactly as his name
appears on the records of the Trustee and on the face of the certificate
representing the Units to be transferred with the signature guaranteed by a
participant in the Securities Transfer Agents Medallion Program ("STAMP"), or
in such other signature guaranty program in addition to, or in substitution
for, STAMP as may be acceptable to the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to, trust
instruments, certificates of death, appointments as executor or administrator
or certificates of corporate authority. Certificates will be issued in
denominations of one Unit or any whole multiple thereof.
Although no such charge is now made or contemplated, the Trustee may require a
Unitholder to pay a reasonable fee for each certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or interchange. Destroyed, stolen,
mutilated or lost certificates will be replaced upon delivery to the Trustee
of satisfactory indemnity, evidence of ownership and payment of expenses
incurred. Mutilated certificates must be surrendered to the Trustee for
replacement.
Distributions of Interest and Principal. Interest received by the Trust,
including that part of the proceeds of any disposition of Securities which
represents accrued interest (other than original issue discount), is credited
by the Trustee to the Interest Account. Other receipts are credited to the
Principal Account. Interest received by the Trust after deduction of amounts
sufficient to reimburse the Trustee, without interest, for any amounts
advanced and paid to the Sponsor as the Unitholder of record as of the First
Settlement Date (see "Public Offering--Offering Price") will be distributed on
or shortly after the fifteenth day of each month on a pro rata basis to
Unitholders of record as of the preceding record date (which will be the first
day of the month) who are entitled to distributions at that time under the
plan of distribution chosen. All distributions will be net of applicable
expenses. The pro rata share of cash in the Principal Account will be computed
on the date indicated under "Distribution Options"on page 2, and thereafter as
of the semi-annual record date, and distributions to the Unitholders as of
such record date will be made on or shortly after the fifteenth day of such
month. Proceeds received from the disposition of any of the Securities after
such record date and prior to the following distribution date will be held in
the Principal Account and not distributed until the next distribution date.
The Trustee is not required to pay interest on funds held in the Principal or
Interest Accounts (but may itself earn interest thereon and therefore benefits
from the use of such funds) nor to make a distribution from the Principal
Account unless the amount available for distribution shall equal at least
$1.00 per Unit. However, should the amount available for distribution in the
Principal Account equal or exceed $10.00 per Unit, to the extent permissible
under the Investment Company Act of 1940, the Trustee will make a special
distribution from the Principal Account on the next succeeding monthly
distribution date to holders of record on the related monthly record date.
The distribution to the Unitholders as of each record date after the First
Settlement Date will be made on the following distribution date or shortly
thereafter and shall consist of an amount substantially equal to such portion
of the Unitholders' pro rata share of the estimated net annual unit income in
the Interest Account after deducting estimated expenses attributable as is
consistent with the distribution plan chosen. In connection with the
calculation of estimated net annual interest income, Unitholders should be
aware that in the event a Brady Bond should default in the payment of
interest, estimated net annual interest might only include interest accruing
from the time the issuer of the defaulting Brady Bond either gives notice to
the Trustee of the Trust that it intends to recommence accruing interest on
such defaulted Bonds or actually commences payments from funds derived from
the realization of the related collateral unless such entity shall have
designated in writing that such payments relate to accrued interest for some
earlier period. See "Risk Factors--Special Brady Bond Risks". Because interest
payments are not received by the Trust at a constant rate throughout the year,
such interest distribution may be more or less than the amount credited to the
Interest Account as of the record date. For the purpose of minimizing
fluctuation in the distributions from the Interest Account, the Trustee is
authorized to advance such amounts as may be necessary to provide interest
distributions of approximately equal amounts. The Trustee shall be reimbursed,
without interest, for any such advances from funds in the Interest Account on
the ensuing record date. Persons who purchase Units will commence receiving
distributions only after such person becomes a record owner. Notification to
the Trustee of the transfer of Units is the responsibility of the purchaser,
but in the normal course of business such notice is provided by the selling
broker-dealer.
As of the first day of each month, the Trustee will deduct from the Interest
Account and, to the extent funds are not sufficient therein, from the
Principal Account, amounts necessary to pay the expenses of the Trust (as
determined on the basis set forth under "Trust Operating Expenses"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of
the Trust. Amounts so withdrawn shall not be considered a part of the Trust's
assets until such time as the Trustee shall return all or any part of such
amounts to the appropriate accounts. In addition, the Trustee may withdraw
from the Interest and Principal Accounts such amounts as may be necessary to
cover purchases of Replacement Securities and redemption of Units by the
Trustee.
Distribution Options. Purchasers of Units who desire to receive distributions
on a semi-annual basis may elect to do so at the time of settlement during the
initial public offering period. The plan of distribution selected by such
purchasers will remain in effect until changed. Those indicating no choice
will be deemed to have chosen the monthly distribution plan. However, all
Unitholders purchasing Units during the initial public offering period and
prior to the first record date will receive the first distribution of
interest. Thereafter, record dates for monthly distributions will be the first
day of each month and record dates for semi-annual distributions will be the
first day of June and December. Distributions will be made on the fifteenth
day of the month subsequent to the respective record dates.
The plan of distribution selected by a Unitholder will remain in effect until
changed. Unitholders purchasing Units in the secondary market will initially
receive distributions in accordance with the election of the prior owner.
Unitholders may change the plan of distribution in which they are
participating. For the convenience of Unitholders, the Trustee will furnish a
card for this purpose; cards may also be obtained upon request from the
Trustee. Unitholders desiring to change their plan of distribution may so
indicate on the card and return it, together with their certificate and such
other documentation that the Trustee may then require, to the Trustee.
Certificates should only be sent by registered or certified mail to minimize
the possibility of their being lost or stolen. If the card and certificate are
properly presented to the Trustee, the change will become effective for all
subsequent distributions.
Reinvestment Option. Unitholders of the Trust may elect to have each
distribution of interest income, capital gains and/or principal on their Units
automatically reinvested in shares of any of the open-end mutual funds (except
for B shares) listed under "Trust Administration--Sponsor"which are registered
in the Unitholder's state of residence. Such mutual funds are hereinafter
collectively referred to as the "Reinvestment Funds".
Each Reinvestment Fund has investment objectives which differ in certain
respects from those of the Trust. The prospectus relating to each Reinvestment
Fund describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder may obtain a
prospectus for the respective Reinvestment Funds from Van Kampen American
Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, IL 60181.
Texas residents who desire to reinvest may request that a broker-dealer
registered in Texas send the prospectus relating to the respective fund.
After becoming a participant in a reinvestment plan, each distribution of
interest income, capital gains and/or principal on the participant's Units
will, on the applicable distribution date, automatically be applied, as
directed by such person, as of such distribution date by the Trustee to
purchase shares (or fractions thereof) of the applicable Reinvestment Fund at
a net asset value as computed as of the close of trading on the New York Stock
Exchange on such date, plus a sales charge of $1.00 per $100 of reinvestment
except if the participant selects the Van Kampen Merritt Money Market Fund or
the Van Kampen Merritt Tax Free Money Fund in which case no sales charge
applies. A minimum of one-half of such sales charge would be paid to Van
Kampen American Capital Distributors, Inc.
Confirmations of all reinvestments by a Unitholder into a Reinvestment Fund
will be mailed to the Unitholder by such Reinvestment Fund.
A participant may at any time prior to five days preceding the next succeeding
distribution date, by so notifying the Trustee in writing, elect to terminate
his or her reinvestment plan and receive future distributions on his or her
Units in cash. There will be no charge or other penalty for such termination.
Each Reinvestment Fund, its sponsor and its investment adviser shall have the
right to terminate at any time the reinvestment plan relating to such fund.
Reports Provided. The Trustee shall furnish Unitholders in connection with
each distribution a statement of the amount of interest and, if any, the
amount of other receipts (received since the preceding distribution) being
distributed expressed in each case as a dollar amount representing the pro
rata share of each Unit outstanding. For as long as the Trustee deems it to be
in the best interests of the Unitholders, the accounts of the Trust shall be
audited, not less frequently than annually, by independent certified public
accountants and the report of such accountants shall be furnished by the
Trustee to Unitholders upon request. Within a reasonable period of time after
the end of each calendar year, the Trustee shall furnish to each person who at
any time during the calendar year was a registered Unitholder a statement (i)
as to the Interest Account: interest received (including amounts representing
interest received upon any disposition of the Securities), any accretion of
original issue discount, deductions for applicable taxes and for fees and
expenses of the Trust for purchases of Replacement Securities and for
redemptions of Units, if any, and the balance remaining after such
distributions and deductions, expressed in each case both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (ii) as to the
Principal Account: the dates of disposition of any Securities and the net
proceeds received therefrom, the amount paid for purchases of Replacement
Securities and for redemptions of Units, if any, deductions for payment of
applicable taxes, fees and expenses of the Trust and the balance remaining
after such distributions and deductions expressed both as a total dollar
amount and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (iii) a list of
the Securities held and the number of Units outstanding on the last business
day of such calendar year; (iv) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (v) amounts
actually distributed during such calendar year from the Interest and Principal
Accounts, separately stated, expressed both as total dollar amounts and as
dollar amounts representing the pro rata share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
Each distribution statement will reflect pertinent information in respect of
the other plan of distribution so that Unitholders may be informed regarding
the results of such other plan of distribution.
Redemption of Units. A Unitholder may redeem all or a portion of his Units by
tender to the Trustee at its Unit Investment Trust Division, 101 Barclay
Street, New York, New York 10286 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, duly endorsed or
accompanied by proper instruments of transfer with signature guaranteed (or by
providing satisfactory indemnity, as in connection with lost, stolen or
destroyed certificates) and by payment of applicable governmental charges, if
any. No redemption fee will be charged. On the third business day following
such tender the Unitholder will be entitled to receive in cash an amount for
each Unit equal to the Redemption Price per Unit next computed after receipt
by the Trustee of such tender of Units. The "date of tender"is deemed to be
the date on which Units are received by the Trustee, except that as regards
Units received after 4:00 P.M. Eastern time on days of trading on the New York
Stock Exchange, the date of tender is the next day on which such Exchange is
open for trading and such Units will be deemed to have been tendered to the
Trustee on such day for redemption at the redemption price computed on that
day.
Under regulations issued by the Internal Revenue Service, the Trustee will be
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished the redeeming Unitholder's
tax identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a return. Under normal
circumstances the Trustee obtains the Unitholder's tax identification number
from the selling broker. However, at any time a Unitholder elects to tender
Units for redemption, such Unitholder should provide a tax identification
number to the Trustee in order to avoid this possible "back-up withholding"in
the event the Trustee has not been previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account or, if the balance therein is insufficient, from the Principal
Account. All other amounts will be withdrawn from the Principal Account. The
Trustee is empowered to sell underlying Securities in order to make funds
available for redemption. Units so redeemed shall be cancelled.
The Redemption Price per Unit (as well as the secondary market Public Offering
Price) will be determined on the basis of the bid price of the Securities in
the Trust, while the initial and primary Public Offering Price of Units will
be determined on the basis of the offering price of the Securities, as of 4:00
P.M. Eastern time on days of trading on the New York Stock Exchange on the
date any such determination is made. On the Initial Date of Deposit, the
Public Offering Price per Unit (which is based on the offering prices of the
Securities and includes the sales charge) exceeded the value at which Units
could have been redeemed (based upon the current bid prices of the Securities
in the Trust) by the amount shown under "Summary of Essential Financial
Information". While the Trustee has the power to determine the Redemption
Price per Unit when Units are tendered for redemption, such authority has been
delegated to the Evaluator which determines the price per Unit on a daily
basis. The Redemption Price per Unit is the pro rata share of each Unit in the
Trust determined on the basis of (i) the cash on hand in the Trust or monies
in the process of being collected, (ii) the value of the Securities in the
Trust based on the bid prices of the Securities and (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental charges
payable out of the Trust and (b) the accrued expenses of the Trust. The
Evaluator may determine the value of the Securities in the Trust by employing
any of the methods set forth in "Public Offering--Offering Price".
The price at which Units may be redeemed could be less than the price paid by
the Unitholder.
As stated above, the Trustee may sell Securities to cover redemptions. When
Securities are sold, the size and diversity of the Trust will be reduced and
the quality of the Trust may diminish. Such sales may be required at a time
when Securities would not otherwise be sold and might result in lower prices
than might otherwise be realized. In the event Brady Bonds must be sold to
meet a redemption of a small number of Units or a series of such small
redemptions, there could be a significant return of principal to the
non-redeeming Unitholders. As a consequence, such non-redeeming Unitholders
might be unable at the time of receipt of such principal to reinvest such
proceeds in other securities at a yield equal to or in excess of the yield
which such proceeds were earning to Unitholders in the Trust. Further, if such
sales were required in such quantities so that the size of the Trust were to
be reduced below the minimum amount for which the Trust could be terminated,
the Trust might be terminated and a Unitholder's investment objectives might
be adversely affected. See "Trust Administration--Portfolio Administration"and
"Risk Factors".
The right of redemption may be suspended and payment postponed for any period
during which the New York Stock Exchange is closed, other than for customary
weekend and holiday closings, or during which the Securities and Exchange
Commission determines that trading on that Exchange is restricted or an
emergency exists, as a result of which disposal or evaluation of the
Securities in the Trust is not reasonably practicable, or for such other
periods as the Securities and Exchange Commission may by order permit. Under
certain extreme circumstances the Sponsor may apply to the Securities and
Exchange Commission for an order permitting a full or partial suspension of
the right of Unitholders to redeem their Units.
TRUST ADMINISTRATION
Sponsor Purchases of Units. The Trustee shall notify the Sponsor of any tender
of Units for redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before the close of business on the second
succeeding business day and by making payment therefor to the Unitholder not
later than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee for
redemption as any other Units.
The offering price of any Units acquired by the Sponsor will be in accord with
the Public Offering Price described in the then currently effective prospectus
describing such Units. Any profit resulting from the resale of such Units will
belong to the Sponsor which likewise will bear any loss resulting from a lower
offering or redemption price subsequent to its acquisition of such Units.
Portfolio Administration. The Trustee is empowered to sell, for the purpose of
redeeming Units tendered by any Unitholder, and for the payment of expenses
for which funds may not be available, such of the Securities designated by the
Supervisor as the Trustee in its sole discretion may deem necessary. The
Supervisor, in designating such Securities, will consider a variety of
factors, including (a) minimum denominations of the Securities and amount of
funds needed, (b) interest rates, (c) market value and (d) marketability. To
the extent Securities are sold in order to meet redemption requests, the
overall quality of the Securities remaining in the Trust's portfolio may tend
to diminish. See "Risk Factors". The Sponsor is empowered, but not obligated,
to direct the Trustee to dispose of Securities 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 Securities to issue new obligations in exchange or
substitution for any Security 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 Security or (2) in
the written opinion of the Sponsor the issuer will probably default with
respect to such Security in the reasonably foreseeable future. Any obligation
so received in exchange or substitution will be held by the Trustee subject to
the terms and conditions of the Trust Agreement to the same extent as
Securities originally deposited thereunder. Within five days after the deposit
of obligations in exchange or substitution for underlying Securities, the
Trustee is required to give notice thereof to each Unitholder, identifying the
Securities eliminated and the Securities substituted therefor. Except as
stated herein and under "Trust Portfolio--Replacement Securities"regarding the
substitution of Replacement Securities for Failed Securities, the acquisition
by the Trust of any obligations other than the Securities initially deposited
is not permitted.
If any default in the payment of principal or interest on any Security occurs
and no provision for payment is made therefor 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 Security within 30 days after notification by
the Trustee to the Sponsor of such default, the Trustee may in its discretion
sell the defaulted Security and not be liable for any depreciation or loss
thereby incurred.
Amendment or Termination. The Sponsor and the Trustee have the power to amend
the Trust Agreement without the consent of any of the Unitholders when such an
amendment is (a) to cure an ambiguity or to correct or supplement any
provision of the Trust Agreement which may be defective or inconsistent with
any other provision contained therein or (b) to make such other provisions as
shall not adversely affect the interest of the Unitholders (as determined in
good faith by the Sponsor and the Trustee), provided, however, that the Trust
Agreement may not be amended to increase the number of Units (other than as
provided in the Trust Agreement). The Trust Agreement may also be amended in
any respect by the Trustee and Sponsor, or any of the provisions thereof may
be waived, with the consent of the holders of 51% of the Units then
outstanding, provided that no such amendment or waiver will reduce the
interest in the Trust of any Unitholder without the consent of such Unitholder
or reduce the percentage of Units required to consent to any such amendment or
waiver without the consent of all Unitholders. The Trustee shall advise the
Unitholders of any amendment promptly after execution thereof.
The Trust may be terminated at any time by consent of Unitholders representing
51% of the Units of the Trust then outstanding or by the Trustee when the
value of the Trust, as shown by any semi-annual evaluation, is less than that
indicated under "Summary of Essential Financial Information". The 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 Security 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 thereof 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 Unitholders may surrender his certificate or certificates, if any,
for cancellation. Within a reasonable time thereafter the Trustee shall
liquidate any Securities 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 Securities in
the Trust upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. For this reason,
among others, the amount realized by a Unitholder upon termination may be less
than the principal amount of Securities represented by the Units held by such
Unitholder. The Trustee shall then distribute to each Unitholder his share of
the balance of the Interest and Principal Accounts. With such distribution the
Unitholders shall be furnished a final distribution statement of the amount
distributable. At such time as the Trustee in its sole discretion shall
determine that any amounts held in reserve are no longer necessary, it shall
make distribution thereof to Unitholders in the same manner.
Limitation on Liabilities. The Sponsor, the Evaluator and the Trustee shall be
under no liability to Unitholders for taking any action or for refraining from
taking any action in good faith pursuant to the Trust Agreement, or for errors
in judgment, but shall be liable only for their own willful misfeasance, bad
faith or negligence (gross negligence in the case of the Sponsor) in the
performance of their duties or by reason of their reckless disregard of their
obligations and duties hereunder. The Trustee shall not be liable for
depreciation or loss incurred by reason of the sale by the Trustee of any of
the Securities. In the event of the failure of the Sponsor to act under the
Trust Agreement, the Trustee may act thereunder and shall not be liable for
any action taken by it in good faith under the Trust Agreement.
The Trustee shall not be liable for any taxes or other governmental charges
imposed upon or in respect of the Securities or upon the interest thereon or
upon it as Trustee under the Trust Agreement or upon or in respect of the
Trust which the Trustee may be required to pay under any present or future law
of the United States of America or of any other taxing authority having
jurisdiction. In addition, the Trust Agreement contains other customary
provisions limiting the liability of the Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation furnished by
the Evaluator and shall have no responsibility for the accuracy thereof.
Determinations by the Evaluator under the Trust Agreement shall be made in
good faith upon the basis of the best information available to it, provided,
however, that the Evaluator shall be under no liability to the Trustee,
Sponsor or Unitholders for errors in judgment. This provision shall not
protect the Evaluator in any case of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Sponsor. Van Kampen American Capital Distributors, Inc., a Delaware
corporation, is the Sponsor of the Trust. Van Kampen American Capital
Distributors, Inc. is primarily owned by Clayton, Dubilier & Rice, Inc., a New
York-based private investment firm. Van Kampen American Capital Distributors,
Inc. management owns a significant minority equity position. Effective
December 20, 1994, the parent of Van Kampen Merritt Inc. acquired American
Capital Management & Research, Inc. As a result, Van Kampen Merritt Inc., has
changed its name to Van Kampen American Capital Distributors, Inc. Van Kampen
American Capital Distributors, Inc. specializes in the underwriting and
distribution of unit investment trusts and mutual funds. The Sponsor is a
member of the National Association of Securities Dealers, Inc. and has offices
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, (708) 684-6000 and
2800 Post Oak Boulevard, Houston, Texas, 77056, (713) 993-0500. It maintains a
branch office in Philadelphia and has regional representatives in Atlanta,
Dallas, Los Angeles, New York, San Francisco, Seattle and Tampa. As of
December 31, 1994 the total stockholders' equity of Van Kampen Merritt Inc.
was $117,357,000 (audited). (This paragraph relates only to the Sponsor and
not to the Trust. 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 March 31, 1995, the Sponsor and its affiliates managed or supervised
approximately $51.7 billion of investment products, of which over $24.7
billion is invested in municipal securities. The Sponsor and its affiliates
managed $38.9 billion of assets, consisting of $20.3 billion for 42 open end
mutual funds, $9.4 billion for 38 closed-end funds and $5.6 billion for 82
institutional accounts. The Sponsor has also deposited approximately $26
billion of unit investment trusts. Based on cumulative assets deposited, the
Sponsor believes that it is the largest sponsor of insured municipal unit
investment trusts, primarily through the success of its Insured Municipals
Income Trust(R)or the IM-IT(R) trust. The Sponsor also provides surveillance
and evaluation services at cost for approximately $13 billion of unit
investment trust assets outstanding. Since 1976, the Sponsor has serviced over
one million retail investor accounts, opened through retail distribution
firms. Van Kampen American Capital Distributors, Inc. is the sponsor of the
various series of the trusts listed below. Some of the mutual funds and
closed-end funds for which Van Kampen American Capital Distributors, Inc. acts
as distributor are also listed below. Only those mutual funds available for
reinvestment under the Reinvestment Option to Unitholders of unit investment
trusts are listed below. Unitholders may only invest in the trusts, mutual
funds and closed-end funds which are registered for sale in the state of
residence of such Unitholder. In order for a Unitholder to invest in the
trusts, mutual funds and closed-end funds listed below, such Unitholder must
obtain a prospectus relating to the trust or fund involved. A prospectus is
the only means by which an offer can be delivered to investors.
<TABLE>
<CAPTION>
Name of Trust Trust Investment Objective
<S> <C>
Insured Municipals Income Trust..................................... Tax-exempt income by investing in insured municipal securities
Double tax-exemption for California residents by investing in
California Insured Municipals Income Trust.......................... insured California municipal securities
Double and in certain cases triple tax-exemption for New York
residents by investing in insured New York municipal
New York Insured Municipals Income Trust............................ securities
Double and in certain cases triple tax-exemption for
Pennsylvania residents by investing in insured Pennsylvania
Pennsylvania Insured Municipals Income Trust........................ municipal securities
Insured Municipals Income Trust, Insured Multi-Series
(Premium Bond Series, National, Limited Maturity, Intermediate,
Short Intermediate, Discount, Alabama, Arizona, Arkansas,
California, California Intermediate, California Intermediate
Laddered Maturity, California Premium, Colorado, Connecticut,
Florida, Florida Intermediate, Florida Intermediate Laddered
Maturity, Georgia, Louisiana, Massachusetts, Massachusetts
Premium, Michigan, Michigan Intermediate, Michigan
Intermediate Laddered Maturity, Michigan Premium, Minnesota,
Missouri, Missouri Intermediate Laddered Maturity, Missouri
Premium, New Jersey, New Jersey Intermediate Laddered
Maturity, New Mexico, New York, New York Intermediate, New Tax-exempt income by investing in insured municipal
York Intermediate Laddered Maturity, New York Limited securities; all issuers of bonds in a state trust are located
Maturity, Ohio, Ohio Intermediate, Ohio Intermediate Laddered in such state or in territories or possessions of the United
Maturity, Ohio Premium, Oklahoma, Pennsylvania, Pennsylvania States-- providing exemptions from all state income tax for
Intermediate, Pennsylvania Intermediate Laddered Maturity, residents of such state (except for the Oklahoma IM-IT Trust
Pennsylvania Premium, Tennessee, Texas, Texas Intermediate where a portion of the income of the Trust may be subject to
Laddered Maturity, Washington, West Virginia)...................... the Oklahoma state income tax)
Insured Tax Free Bond Trust......................................... Tax-exempt income by investing in insured municipal securities
Tax-exempt income by investing in insured municipal
securities; all issuers of bonds in a state trust are located
Insured Tax Free Bond Trust, Insured Multi-Series in such state--providing exemptions from state income tax for
(National Limited Maturity, New York).............................. residents of such state
Investors' Quality Tax-Exempt Trust................................. Tax-exempt income by investing in municipal securities
Investors' Quality Tax-Exempt Trust, Multi-Series
(National, National AMT, Intermediate, Alabama, Arizona,
Arkansas, California, Colorado, Connecticut, Delaware, Tax-exempt income by investing in municipal securities; all
Florida, Georgia, Hawaii, Kansas, Kentucky, Maine, Maryland, issuers of bonds in a state trust are located in such state
Massachusetts, Michigan, Minnesota, Missouri, Nebraska, or in territories or possessions of the United
New Jersey, New York, North Carolina, Ohio, Oregon, States--providing exemptions from state income tax for
Pennsylvania, South Carolina, Virginia)............................ residents of such state
Tax-exempt income for investors not subject to the
alternative minimum tax by investing in municipal securities,
some or all of which are subject to the Federal alternative
Investors' Quality Municipals Trust, AMT Series......................minimum tax
Investors' Corporate Income Trust....................................Taxable income by investing in corporate bonds
Taxable income by investing in government-backed GNMA
Investors' Governmental Securities--Income Trust.................... securities
High current income through an investment in a diversified
portfolio of foreign currency denominated corporate debt
Van Kampen Merritt International Bond Income Trust...................obligations
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of
insured, long-term or intermediate-term corporate debt
Van Kampen Merritt Insured Income Trust..............................securities
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio of
insured, long-term or intermediate-term corporate debt
Van Kampen American Capital Insured Income Trust.....................securities
High dividend income and capital appreciation by investing in
Van Kampen Merritt Utility Income Trust..............................common stock of electric utilities
Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of the
Van Kampen Merritt Select Equity Trust...............................Dow Jones Industrial Average*
Protect Unitholders' capital and provide the potential for
capital appreciation and income by investing a portion of its
portfolio in "zero coupon"U.S. Treasury obligations and the
remainder of the trust's portfolio in the identical equity
Van Kampen Merritt Select Equity and Treasury Trust..................securities which comprise the Select Equity Trust
Provide the potential for capital appreciation and income by
investing in a portfolio of actively traded, New York Stock
Exchange listed equity securities which are components of the
Van Kampen Merritt Blue Chip Opportunity Trust.......................Dow Jones Industrial Average*
Protect Unitholders' capital and provide the potential for
capital appreciation and income by investing a portion of its
portfolio in "zero coupon"U.S. Treasury obligations and the
remainder of the trust's portfolio in actively traded, New
York Stock Exchange listed equity securities which at the
Van Kampen Merritt Blue Chip Opportunity and time of the creation of the trust were components of the Dow
Treasury Trust......................................................Jones Industrial Average*
High current income consistent with preservation of capital
through a diversified investment in a fixed portfolio
primarily consisting of Brady Bonds of emerging market
countries that have restructured sovereign debt pursuant to
Van Kampen Merritt Emerging Markets Income Trust.....................the framework of the Brady Plan
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities which provide
Van Kampen Merritt Global Telecommunications Trust...................equipment for or services to the telecommunications industry
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities diversified
Van Kampen Merritt Global Energy Trust...............................within the energy industry
Provide an above average total return through a combination
of potential capital appreciation and dividend income,
consistent with preservation of invested capital, by
investing in a portfolio of common stocks of the ten
Strategic Ten Trust companies in a recognized stock exchange index having the
(United States, United Kingdom, and Hong Kong Portfolios)...........highest dividend yields
Provide the potential for capital appreciation and income
consistent with the preservation of invested capital, by
investing in a portfolio of equity securities diversified
Van Kampen Merritt Brand Name Equity Trust...........................within the non-durable consumer products industry
Provide the potential for long-term capital appreciation by
investing in shares of Govett Smaller Companies Fund and to
protect Unitholders' capital by investing a portion of its
Govett Smaller Companies Fund and Treasury Trust.....................portfolio in "zero coupon"U.S. Treasury obligations
</TABLE>
*The Dow Jones Industrial Average is the property of Dow Jones & Company, Inc.
Dow Jones & Company, Inc. has not granted to the Trust or the Sponsor a
license to use the Dow Jones Industrial Average.
<TABLE>
Name of Mutual Fund
Fund Investment Objective
<CAPTION>
<S> <C>
Van Kampen Merritt U.S. Government Fund....................High current income by investing in U.S. Government securities
High current income exempt from Federal income taxes by investing in
Van Kampen Merritt Insured Tax Free Income Fund............insured municipal securities
High level of current income exempt from Federal income tax, consistent
Van Kampen Merritt Municipal Income Fund...................with preservation of capital
High current income exempt from Federal income taxes by investing in
Van Kampen Merritt Tax Free High Income Fund...............medium and lower grade municipal securities
High current income exempt from Federal and California income taxes by
Van Kampen Merritt California Insured Tax Free Fund........investing in insured California municipal securities
Provide a high level of current income by investing in medium and lower
grade domestic and foreign government and corporate debt securities.
Van Kampen Merritt High Yield Fund.........................The Fund will seek capital appreciation as a secondary objective
Long-term growth of both capital and dividend income by investing in
Van Kampen Merritt Growth and Income Fund..................dividend paying common stocks
High current income exempt from Federal and Pennsylvania state and
local income taxes by investing in medium and lower grade Pennsylvania
Van Kampen Merritt Pennsylvania Tax Free Income Fund.......municipal securities
High current income by investing in a broad range of money market
Van Kampen Merritt Money Market Fund.......................instruments that will mature within twelve months
High current income exempt from Federal income taxes by investing in a
broad range of municipal securities that will mature within twelve
Van Kampen Merritt Tax Free Money Fund.....................months
High current income by investing in a global portfolio of high quality
debt securities denominated in various currencies having remaining
Van Kampen Merritt Short-Term Global Income Fund...........maturities of not more than three years
High level of current income with a relatively stable net asset value
Van Kampen Merritt Adjustable Rate U.S. Government Fund....investing in U.S. Government securities
High level of current income exempt from Federal income tax, consistent
Van Kampen Merritt Limited Term Municipal Income Fund......with preservation of capital
Provide capital appreciation and current income by investing in a
diversified portfolio of common stocks and income securities issued by
Van Kampen Merritt Utility Fund............................companies engaged in the utilities industry
Provide shareholders with high current income. The Fund will seek
Van Kampen Merritt Strategic Income Fund...................capital appreciation as a secondary objective
High level of current income exempt from Federal income tax and Florida
intangible personal property taxes consistent with preservation of
Van Kampen Merritt Florida Insured Tax Free Income Fund....capital
High level of current income exempt from Federal income tax and New
Van Kampen Merritt New Jersey Tax Free Income Fund.........Jersey gross income tax consistent with preservation of capital
High level of current income exempt from Federal as well as New York
State and New York City income taxes, consistent with preservation of
Van Kampen Merritt New York Tax Free Income Fund...........capital
To provide shareholders current income while also seeking to provide
Van Kampen Merritt Balanced Fund...........................capital growth
</TABLE>
<TABLE>
Name of Closed-end Fund Fund Investment Objective
<CAPTION>
<S> <C>
High current income exempt from Federal income taxes with safety of
principal by investing in a diversified portfolio of investment grade
Van Kampen Merritt Municipal Income Trust...................municipal securities
High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt California Municipal Trust...............investment grade California municipal securities
High current income while seeking to preserve shareholders' capital by
investing in a diversified portfolio of high yield fixed income
Van Kampen Merritt Intermediate Term High Income Trust......securities
High current income while seeking to preserve shareholders' capital by
investing in a diversified portfolio of high yield fixed income
Van Kampen Merritt Limited Term High Income Trust...........securities
High current income, consistent with preservation of capital by
Van Kampen Merritt Prime Rate Income Trust..................investing in interests in floating or variable rate senior loans
High current income exempt from Federal income tax, consistent with
Van Kampen Merritt Investment Grade Municipal Trust.........preservation of capital
High level of current income exempt from Federal income tax,
Van Kampen Merritt Municipal Trust..........................consistent with preservation of capital
High current income exempt from Federal and California income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt California Quality Municipal Trust.......investment grade California municipal securities
High current income exempt from Federal income taxes and Florida
intangible personal property taxes with safety of principal by
investing in a diversified portfolio of investment grade Florida
Van Kampen Merritt Florida Quality Municipal Trust..........municipal securities
High current income exempt from Federal as well as New York State and
New York City income taxes with safety of principal by investing in a
Van Kampen Merritt New York Quality Municipal Trust.........diversified portfolio of investment grade New York municipal securities
High current income exempt from Federal and Ohio income taxes with
safety of principal by investing in a diversified portfolio of
Van Kampen Merritt Ohio Quality Municipal Trust.............investment grade Ohio municipal securities
High current income exempt from Federal and Pennsylvania income taxes
with safety of principal by investing in a diversified portfolio of
Van Kampen Merritt Pennsylvania Quality Municipal Trust.....investment grade Pennsylvania municipal securities
High level of current income exempt from Federal income tax,
Van Kampen Merritt Trust for Investment Grade Municipals....consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a diversified
portfolio of municipal securities which are covered by insurance with
Van Kampen Merritt Trust for Insured Municipals.............respect to timely payment of principal and interest
High level of current income exempt from Federal and California income
Van Kampen Merritt Trust for Investment Grade CA taxes, consistent with preservation of capital by investing in a
Municipals.................................................diversified portfolio of California municipal securities
High level of current income exempt from Federal income taxes,
consistent with preservation of capital. The Fund also seeks to offer
Van Kampen Merritt Trust for Investment Grade FL its Shareholders the opportunity to own securities exempt from Florida
Municipals.................................................intangible personal property taxes
Van Kampen Merritt Trust for Investment Grade NJ
Municipals High level of current income exempt from Federal income taxes and New
..........................................................Jersey gross income taxes, consistent with preservation of capital
High level of current income exempt from Federal as well as from New
Van Kampen Merritt Trust for Investment Grade NY York State and New York City income taxes, consistent with
Municipals.................................................preservation of capital
High level of current income exempt from Federal and Pennsylvania
Van Kampen Merritt Trust for Investment Grade PA income taxes and, where possible under local law, local income and
Municipals.................................................property taxes, consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a diversified
Van Kampen Merritt Municipal Opportunity Trust..............portfolio of municipal securities
High level of current income exempt from Federal income tax,
consistent with preservation of capital by investing in a diversified
Van Kampen Merritt Advantage Municipal Income Trust.........portfolio of municipal securities
High level of current income exempt from Federal and Pennsylvania
Van Kampen Merritt Advantage Pennsylvania Municipal income taxes and, where possible under local law, local income and
Income Trust...............................................property taxes, consistent with preservation of capital
Provide common shareholders with a high level of current income exempt
Van Kampen Merritt Strategic Sector Municipal Trust.........from Federal income taxes, consistent with preservation of capital
High level of current income exempt from Federal income taxes,
Van Kampen Merritt Value Municipal Income Trust.............consistent with preservation of capital
Van Kampen Merritt California Value Municipal High level of current income exempt from Federal and California income
Income Trust...............................................taxes, consistent with preservation of capital
High level of current income exempt from Federal income taxes and
Van Kampen Merritt Massachusetts Value Municipal Massachusetts personal income taxes, consistent with preservation of
Income Trust..............................................capital
Van Kampen Merritt New Jersey Value Municipal High level of current income exempt from Federal income taxes and New
Income Trust...............................................Jersey gross income tax, consistent with preservation of capital
High level of current income exempt from Federal as well as New York
Van Kampen Merritt New York Value Municipal State and New York City income taxes, consistent with preservation of
Income Trust...............................................capital
Van Kampen Merritt Ohio Value Municipal Income High level of current income exempt from Federal and Ohio income
Trust......................................................taxes, consistent with preservation of capital
Van Kampen Merritt Pennsylvania Value Municipal High level of current income exempt from Federal and Pennsylvania
Income Trust..............................................income taxes, consistent with preservation of capital
High level of current income exempt from Federal income tax,
Van Kampen Merritt Municipal Opportunity Trust II...........consistent with preservation of capital
High level of current income exempt from Federal income tax,
consistent with preservation of capital. The Fund seeks to offer its
common shareholders the opportunity to own securities exempt from
Van Kampen Merritt Florida Municipal Opportunity Trust .....Florida intangible personal property taxes
Provide common shareholders with a high level of current income exempt
Van Kampen Merritt Advantage Municipal Income Trust II......from Federal income tax, consistent with preservation of capital
To provide common shareholders with a high level of current income
Van Kampen Merritt Select Sector Municipal Trust............exempt from Federal income tax, consistent with preservation of capital
</TABLE>
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its affairs are
taken over by public authorities, then the Trustee may (i) appoint a successor
Sponsor at rates of compensation deemed by the Trustee to be reasonable and
not exceeding amounts prescribed by the Securities and Exchange Commission,
(ii) terminate the Trust Agreement and liquidate the Trust as provided therein
or (iii) continue to act as Trustee without terminating the Trust Agreement.
Trustee. The Trustee is The Bank of New York, a trust company organized under
the laws of New York. The Bank of New York has its offices at 101 Barclay
Street, New York, New York 10286, (800) 221-7668. The Bank of New York is
subject to supervision and examination by the Superintendent of Banks of the
State of New York and the Board of Governors of the Federal Reserve System,
and its deposits are insured by the Federal Deposit Insurance Corporation to
the extent permitted by law.
The duties of the Trustee are primarily ministerial in nature. It did not
participate in the selection of Securities for the Trust portfolio.
In accordance with the Trust Agreement, the Trustee shall keep proper books of
record and account of all transactions at its office for the Trust. Such
records shall include the name and address of, and the number of Units of the
Trust held by every Unitholder of the Trust. Such books and records shall be
open to inspection by any Unitholder at all reasonable times during usual
business hours. The Trustee shall make such annual or other reports as may
from time to time be required under any applicable state or Federal statute,
rule or regulation (see "Rights of Unitholders--Reports Provided"). The
Trustee is required to keep a certified copy or duplicate original of the
Trust Agreement on file in its office available for inspection at all
reasonable times during the usual business hours by any Unitholder, together
with a current list of the Securities held in the Trust.
Under the Trust Agreement, the Trustee or any successor trustee may resign and
be discharged of the trust created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor. The Trustee or
successor trustee must mail a copy of the notice of resignation to all
Unitholders then of record, not less than 60 days before the date specified in
such notice when such resignation is to take effect. The Sponsor upon
receiving notice of such resignation is obligated to appoint a successor
trustee promptly. If, upon such resignation, no successor trustee has been
appointed and has accepted the appointment within 30 days after notification,
the retiring Trustee may apply to a court of competent jurisdiction for the
appointment of a successor. The Sponsor may remove the Trustee and appoint a
successor trustee as provided in the Trust Agreement at any time with or
without cause. Notice of such removal and appointment shall be mailed to each
Unitholder by the Sponsor. Upon execution of a written acceptance of such
appointment by such successor trustee, all the rights, powers, duties and
obligations of the original trustee shall vest in the successor. The
resignation or removal of a Trustee becomes effective only when the successor
trustee accepts its appointment as such or when a court of competent
jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which a Trustee shall be a party, shall be the successor trustee. The Trustee
must be a banking corporation organized under the laws of the United States or
any State and having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
OTHER MATTERS
Legal Opinions. The legality of the Units offered hereby has been passed upon
by Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, as
counsel for the Sponsor. Tanner Propp & Farber, 99 Park Avenue, New York, New
York 10016 has acted as counsel for the Trustee and as special counsel for the
Trust for New York tax matters.
Independent Certified Public Accountants. The statement of condition and the
related portfolio at the Initial 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 the Prospectus, and are included
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of Van Kampen American Capital Distributors, Inc.
and Unitholders of Van Kampen American Capital Emerging Markets Income Trust,
Series 2:
We have audited the accompanying statement of condition and the related
portfolio of Van Kampen American Capital Emerging Markets Income Trust, Series
2 as of August , 1995. The statement of condition and portfolio are the
responsibility of the Sponsor. Our responsibility is to express an opinion on
such financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of an irrevocable letter of credit deposited
to purchase securities by correspondence with the Trustee. An audit also
includes assessing the accounting principles used and significant estimates
made by the Sponsor, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Van Kampen American Capital
Emerging Markets Income Trust, Series 2 as of August , 1995, in conformity
with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
August , 1995
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME TRUST
SERIES 2
Statement of Condition
As of August , 1995
<CAPTION>
INVESTMENT IN SECURITIES
<S> <C>
Contracts to purchase securities <F1>................. $
Accrued interest to First Settlement Date <F1><F2>....
Organizational costs <F3>.............................
Total................................................. $
LIABILITIES AND INTEREST OF UNITHOLDERS
Liabilities--.........................................
Accrued interest payable to Sponsor <F1><F2>.......... $
Accrued organizational costs <F3>.....................
Interest of Unitholders-- ............................
Units of fractional undivided interest outstanding:...
Cost to investors <F4>................................
Less: Gross underwriting commission <F4>..............
Net interest to Unitholders <F4>......................
Total................................................. $
<FN>
<F1>The aggregate value of the Securities listed under "Portfolio"herein and their
cost to the Trust are the same. The value of the Securities is determined by
the Evaluator on the bases set forth under "Public Offering--Offering Price".
The contracts to purchase Securities are collateralized by an irrevocable
letter of credit of $ which has been deposited with the
Trustee. Of this amount, $ relates to the offering price on $
principal amount of Securities to be purchased, and $ relates
to accrued interest on such Securities to the expected dates of delivery.
<F2>The Trustee will advance to the Trust the amount of net interest accrued to
August , 1995, the First Settlement Date, for distribution to the Sponsor as
the Unitholder of record as of the First Settlement Date.
<F3>The Trust will bear all or a portion of its organizational costs, which will
be deferred and amortized over five years. Organizational costs have been
estimated based on a projected trust size of $ . To the extent the
Trust is larger or smaller, the estimate will vary.
<F4>The aggregate public offering price (exclusive of interest) and the aggregate
sales charge of 4.9% are computed on the bases set forth under "Public
Offering--Offering Price"and "Public Offering--Sponsor and Other
Compensation"and assume all single transactions involve less than 100 Units.
For single transactions involving 100 or more Units, the sales charge is
reduced (see "Public Offering--General") resulting in an equal reduction in
both the Cost to investors and the Gross underwriting commission while the Net
interest to Unitholders remains unchanged.
</TABLE>
<TABLE>
VAN KAMPEN AMERICAN CAPITAL EMERGING MARKETS INCOME TRUST
SERIES 2
PORTFOLIO as of August , 1995
<CAPTION>
Aggregate Name of Issuer, Title, Interest Rate and Maturity Date of either Securities Offering Price
Principal<F1> Deposited or Securities Contracted for<F1><F2><F3><F4> to Trust<F4>
<S> <C> <C>
$ $
$ $
</TABLE>
For an explanation of the footnotes used on this page, see "Notes to
Portfolio".
NOTES TO PORTFOLIO: As of the Initial Date of Deposit: August , 1995
All Securities are represented by "regular way"contracts for the performance
of which an irrevocable letter of credit, obtained from an affiliate of the
Trustee, has been deposited with the Trustee. At the Initial Date of Deposit,
Securities may have been delivered to the Sponsor pursuant to certain of these
contracts; the Sponsor has assigned to the Trustee all of its right, title and
interest in and to such Securities. Contracts to acquire Securities were
entered into on , 1995. These Securities are expected to settle prior to
the First Settlement Date. See "Trust Portfolio".
Each Security is currently callable at par. Distributions will generally be
reduced by the amount of the income which would otherwise have been paid with
respect to redeemed Securities and there will be distributed to Unitholders
the principal amount received on such redemption. The Estimated Current Return
and Estimated Long--Term Return in this event may be affected by such
redemptions. For the Federal tax effect on Unitholders of such redemptions and
resultant distributions, see "Tax Status"and "Estimated Current Return and
Estimated Long--Term Return".
Evaluation of Securities is made on the basis of current offering prices for
the Securities. The offering prices are greater than the current bid prices of
the Securities which is the basis on which Unit value is determined for
purposes of redemption of Units (see "Public Offering--Offering Price").
Other information regarding the Securities in the Trust, as of the Initial
Date of Deposit, is as follows:
<TABLE>
<CAPTION>
Cost to Profit (Loss) Annual Interest Bid Side Evaluation
Sponsor to Sponsor Income to Trust of Obligations
<S> <C> <C> <C>
$ $ $ $
</TABLE>
On the Initial Date of Deposit, the offering side evaluation of the Securities
in the Trust was higher than the bid side evaluation of such Securities by
% of the aggregate principal amount of such Securities. All contracts are
expected to be settled by the First Settlement Date for the purchase of Units.
All of the Securities may have been issued at an original issue discount. The
tax effect of Securities issued at an original issue discount is described in
"Tax Status". See "Distribution Options"on page 2 of this Prospectus for
additional information on the tax effects of original issue discount on
individual Unitholders.
The following indicates for each Security in the Trust the amount of
collateral (all of which are comprised of cash and certain high quality
permitted investments) available to cover defaults in the payment of interest:
(a) Philippines Bonds-14 months interest guaranteed at 6.5% with U.S. Treasury
obligations; (b) Mexico Bonds-18 months interest guaranteed; (c) Venezuela
Bonds-14 months interest at 9.75% per annum guaranteed; (d) Nigeria Bonds-12
months interest at 5.25% per annum guaranteed; (e) Ecuador Bonds- months
interest guaranteed and (f) Argentina Bonds-12 months interest at 6% per annum
guaranteed. The Poland Bonds do not provide collateral available to cover
defaults in the payment of interest. The Brazil Bonds included in the
portfolio as of the Initial Date of Deposit (the "Series Y Bonds") do not
provide collateral to cover defaults in the payment of interest; however,
within approximately two and a half years of the date of issuance of the
Brazil Bonds, the Series Y Bonds will be exchanged for another series of the
Brazil Bonds (the "Series Z Bonds") which will provide collateral in the form
of cash and certain high quality permitted investments covering defaults in
payments of interest amounting to 12 months of interest payments. The terms of
the Series Z Bonds are identical to the Series Y Bonds with the exception of
the addition of the collateral protecting interest payments. The Brazil Brady
Plan requires that upon such exchange no less than all of the Series Y Bonds
must be exchanged for Series Z Bonds and does not require a vote of Bond
holders (such as the Trust) to be taken to effect the exchange.
ESTIMATED CASH FLOWS TO UNITHOLDERS
The tables below set forth the per Unit estimated distributions of interest
and principal to Unitholders. The tables assume no changes in Trust expenses,
no changes in the current interest rates (other than scheduled changes), no
exchanges, redemptions, sales, prepayments or partial prepayments of the
underlying Securities 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.
Seri
es 2
Monthly
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Distribution Dates Interest Principal Total
(Each Month) Distribution Distribution Distribution
<S> <C> <C> <C>
</TABLE>
Semi-annual
<TABLE>
<CAPTION>
Distribution Dates Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
<S> <C> <C> <C>
</TABLE>
No person is authorized to give any information or to make any representations
not contained in this Prospectus; and any information or representation not
contained herein must not be relied upon as having been authorized by the
Trust, the Sponsor or the Underwriters. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, securities in any state
to any person to whom it is not lawful to make such offer in such state.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title
Page
<S> <C>
Summary of Essential Financial Information
The Trust
Investment Objectives and Portfolio Selection
Trust Portfolio
Risk Factors
Estimated Current Return and Estimated
Long-Term Return
Trust Operating Expenses
Tax Status
Public Offering
Rights of Unitholders
Trust Administration
Other Matters
Report of Independent Certified Public Accountants
Statement of Condition
Portfolio
Notes to Portfolio
Estimated Cash Flows to Unitholders
</TABLE>
This Prospectus contains information concerning the Trust and the Sponsor, but
does not contain all of the information set forth in the registration
statements and exhibits relating thereto, which the Trust has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, and to which reference is
hereby made.
PROSPECTUS
August , 1995
Van Kampen American
Capital Emerging
Markets Income Trust
Series 2
A Wealth of Knowledge A Knowledge of Wealthsm
VAN KAMPEN AMERICAN CAPITAL
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
2800 Post Oak Boulevard
Houston, Texas 77056
Please retain this Prospectus for future reference.
Contents Of Registration Statement
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants
and legal counsel
The following exhibits:
1.1 Proposed form of Trust Agreement between Van Kampen American
Capital Distributors, Inc., Depositor, American Portfolio Advisory
Service, a division of Van Kampen American Capital Investment
Advisory Corp., as Evaluator, and The Bank of New York, as Trustee
(to be supplied by amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be supplied by amendment).
3.2 Opinion and consent of counsel as to New York tax status of
securities being registered (to be supplied by amendment).
4.1 Consent of Interactive Data Services, Inc. (to be supplied by
amendment).
4.2 Consent of Grant Thornton LLP (to be supplied by amendment).
4.3 Financial Data Schedule (to be supplied by amendment).
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Van Kampen American Capital Emerging Markets Income Trust,
Series 2 has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Chicago and State of Illinois on the 24th day of July, 1995.
Van Kampen American Capital Emerging
Markets Income Trust, Series 2
(Registrant)
By Van Kampen American Capital
Distributors, Inc.
(Depositor)
Sandra A. Waterworth
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on July 24, 1995.
Signature Title
Don G. Powell Chairman, Chief Executive )
Officer )
William R. Rybak Senior Vice President and )
Chief Financial Officer )
Ronald A. Nyberg Director )
William R. Molinari Director )
Sandra A. Waterworth
(Attorney-in-fact)*
_____________________________________________________________________
*An executed copy of each of the related powers of attorney was filed
with the Securities and Exchange Commission in connection with the
Registration Statement on Form S-6 of Insured Municipals Income Trust and
Investors' Quality Tax-Exempt Trust, Multi-Series 203 (File No. 33-65744)
and and with the Registration Statement on Form S-6 of Insured Municipals
Income Trust, 170th Insured Multi-Series (File No. 33-55891) and the same
are hereby incorporated herein by this reference.
